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 000-51122
EyePoint Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
480 Pleasant Street
Watertown, MA
(Address of principal executive offices)
26-2774444
(I.R.S. Employer
Identification No.)
02472
(Zip Code)
Registrant’s telephone number, including area code: (617) 926-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.001
Trading
Symbol(s)
EYPT
Name of each exchange on which registered
The Nasdaq Stock Market LLC (Nasdaq Global Market)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Securities registered pursuant to Section 12(g) of the Act: None
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, 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 new 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 ☒
The aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the closing price of the common stock on the Nasdaq Global Market
on June 30, 2023, the last trading day of the registrant’s most recently completed second fiscal quarter, was approximately $232.9 million.
There were 49,830,792 shares of the registrant’s common stock, $0.001 par value, outstanding as of March 1, 2024.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates certain information by reference from the registrant’s proxy statement for the 2024 annual meeting of stockholders to be filed
no later than 120 days after the end of the registrant’s fiscal year ended December 31, 2023.
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
FORM 10-K
FOR THE FISCAL 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
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ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
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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 MARKET RISK
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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 ACCOUNTING FEES AND SERVICES
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 16.
FORM 10-K SUMMARY
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Preliminary Note Regarding Forward-Looking Statements
Various statements made in this Annual Report on Form 10-K are forward-looking and involve risks and uncertainties. All statements that address
activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements give our current
expectations or forecasts of future events and are not statements of historical or current facts. These statements include, among others, statements about:
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insert of
the potential for EYP-1901, as an investigational sustained delivery intravitreal treatment deploying a bioerodible Durasert E™
vorolanib, a selective and patented tyrosine kinase inhibitor (TKI) targeting wet age-related macular degeneration (wet AMD), non-
proliferative diabetic retinopathy (NPDR), and diabetic macular edema (DME);
our expectations regarding the timing and outcome of our ongoing and planned clinical trials for EYP-1901 for the treatment of wet AMD,
NPDR, and DME;
our expectations regarding the timing and clinical development of our other product candidates, including EYP-2301, a promising TIE-2
agonist, razuprotafib, f/k/a AKB-9778, formulated in Durasert E™ to potentially improve outcomes in serious retinal diseases;
our strategic alliances with other companies;
our belief that our cash, cash equivalents, and investments in marketable securities of $331.0 million at December 31, 2023, will provide a
cash runway into 2026 through topline data for the EYP-1901 Phase 3 pivotal trials;
our ability to obtain additional capital in sufficient amounts and on terms acceptable to us, and the consequences of failing to do so;
our future expenses and capital expenditures;
our expectations regarding the timing and results of the August 2022 subpoena from the U.S. Attorney’s Office for the District of
Massachusetts (DOJ) seeking production of documents related to sales, marketing and promotional practices (DOJ Subpoena), including as
pertain to DEXYCU®;
our ability to manufacture EYP-1901 or any other products or product candidates, in sufficient quantities and quality;
our expectations regarding our ability to obtain and adequately maintain sufficient intellectual property protection for EYP-1901 and any
other products or product candidates, and to avoid claims of infringement of third-party intellectual property rights;
risks associated with global economic conditions, including inflation and rising interest rates, or uncertainty caused by geopolitical violence
and unrest, including the ongoing conflicts between Ukraine and Russia, and Israel and Hamas;
the effect of legal and regulatory developments, and;
our expectation that we will continue to incur significant expenses and that our operating losses and our net cash outflows to fund operations
will continue for the foreseeable future.
Forward-looking statements also include statements other than statements of current or historical fact, including, without limitation, all statements
related to any expectations of revenues, expenses, cash flows, earnings or losses from operations, cash required to maintain current and planned operations,
capital or other financial items; any statements of the plans, strategies and objectives of management for future operations; any plans or expectations with
respect to product research, development and commercialization, including regulatory approvals; any other statements of expectations, plans, intentions or
beliefs; and any statements of assumptions underlying any of the foregoing. We often, although not always, identify forward-looking statements by using
words or phrases such as “likely”, “expect”, “intend”, “anticipate”, “believe”, “estimate”, “plan”, “project”, “forecast”, and “outlook”.
The following are some of the factors that could cause actual results to differ materially from the anticipated results or other expectations expressed,
anticipated or implied in our forward-looking statements:
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the effectiveness and timeliness of our clinical trials, and the usefulness of the data;
the sufficiency of our existing cash resources into 2026;
our access to needed capital;
fluctuations in our operating results;
the duration, scope and outcome of any governmental inquiries or investigations;
the success of current and future license and collaboration agreements, including our agreements with Alimera Sciences, Inc. (Alimera),
Betta Pharmaceuticals Co., Ltd. (Betta), Equinox Science, LLC (Equinox) and Ocumension Therapeutics (Ocumension);
our dependence on contract research organizations, vendors and investigators;
our ability to manufacture clinical and commercial supply of our products and product candidates;
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the extent to which the global economic conditions, uncertainty caused by geopolitical violence and unrest and public health crises impact
our business, the medical community, and the global economy;
market acceptance of our product candidates, if approved;
protection of intellectual property and avoiding intellectual property infringement;
product liability; and
other factors described in our filings with the SEC.
We cannot guarantee that the results and other expectations expressed, anticipated or implied in any forward-looking statement will be realized. The
risks set forth under Item 1A of this Annual Report on Form 10-K describe major risks to our business, and you should read and interpret any forward-
looking statements together with these risks. A variety of factors, including these risks, could cause our actual results and other expectations to differ
materially from the anticipated results or other expectations expressed, anticipated or implied in our forward-looking statements. Should known or
unknown risks materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated,
estimated, or projected in the forward-looking statements. You should bear this in mind as you consider any forward-looking statements.
Our forward-looking statements speak only as of the dates on which they are made. We do not undertake any obligation to publicly update or revise
our forward-looking statements even if experience or future changes makes it clear that any projected results expressed or implied in such statements will
not be realized.
EYEPOINT®, DEXYCU®, YUTIQ®, DURASERT®, DELIVERING INNOVATION TO THE EYE® and WITH AN EYE ON PATIENTS® are our
trademarks. Retisert® and Vitrasert® are Bausch & Lomb’s trademarks. YUTIQ® is licensed to Alimera Sciences and Ocumension Therapeutics in their
respective territories. ILUVIEN® is Alimera Sciences Inc.’s trademark. The reports we file or furnish with the SEC, including this Annual Report on Form
10-K, also contain trademarks, trade names and service marks of other companies, which are the property of their respective owners.
Risk Factor Summary
The risk factors summarized below could materially harm our business, operating results and/or financial condition, impair our future prospects
and/or cause the price of our common stock to decline. For more information, see “Item 1A. Risk Factors” in this Annual Report on Form 10-K for the year
ended December 31, 2023.
Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, the following:
Risks Related To Our Financial Position And Our Capital Resources
• We will likely need additional capital to fund our operations. If we are unable to obtain sufficient capital, we will need to curtail and reduce our
operations and costs and modify our business strategy.
• We have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable future.
• We may never achieve profitability from future operations.
• We received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking production of documents related to sales,
marketing and promotional practices, including as pertain to DEXYCU®. If the DOJ commences an action against us, the action could have a
material adverse effect on our business, financial condition, results of operations and cash flows. In addition, we have expended and expect to
continue to expend significant financial and managerial resources responding to the DOJ Subpoena, which could also have a material adverse
effect on our business, financial condition, results of operations and cash flows.
• We will need to raise additional capital in the future, which may not be available on favorable terms and may be dilutive to stockholders or
impose operational restrictions.
The Company’s receipt of maximum consideration in conjunction with its sale of rights to our YUTIQ® franchise to Alimera for $82.5 million
cash plus royalties is dependent on Alimera’s effective sale and distribution of YUTIQ® outside of China, Hong Kong, Taiwan, Macau and
Southeast Asia.
Our ability to use our net operating loss carryforwards and other tax attributes may be limited.
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Risks Related To The Regulatory Approval And Clinical Development Of Our Product Candidates
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The outcomes of clinical trials are uncertain, and delays in the completion of or the termination of any clinical trial of EYP-1901 or our other
product candidates could harm our business, financial condition and prospects.
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Clinical trial results may fail to support continued clinical investigations and/or approval of EYP-1901 or our other product candidates.
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• We may expend significant resources to pursue our lead product candidate, EYP-1901 for the treatment of wet AMD, NPDR, and DME, and
fail to capitalize on the potential of EYP-1901, or our other product candidates, for the potential treatment of other indications that may be
more profitable or for which there is a greater likelihood of success.
Phase 1 or 2 results from a clinical trial do not ensure that the trial will be successful and success in early-stage clinical trials does not ensure
success in later-stage clinical trials.
Interim, “top-line” and preliminary data 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.
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• We may find it difficult to enroll patients in our clinical trials, which could delay or prevent clinical trials of our product candidates.
• We are largely dependent on the clinical and future commercial success of our lead product candidate, EYP-1901.
Risks Related To The Commercialization Of Our Products And Product Candidates
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Our business strategy relies in part on our ability to successfully commercialize our product candidates, if approved; however, the products
may not achieve market acceptance or be commercially successful.
Our product candidates, if approved and commercialized, may continue to be impacted by additional unfavorable pricing regulations, third-
party reimbursement practices or healthcare reform initiatives which could harm our business.
If we fail to comply with reporting and payment obligations under the Medicaid Drug Rebate program or other governmental pricing programs,
we could be subject to additional reimbursement requirements, penalties, sanctions, and fines which could have a material adverse effect on our
business, financial condition, results of operations and growth prospects.
Even though regulatory approvals for YUTIQ® and DEXYCU® have been obtained in the U.S., we will still face extensive FDA regulatory
requirements and may face future regulatory difficulties.
Our relationships with physicians, patients and payors in the U.S. are subject to applicable anti-kickback, fraud and abuse laws and regulations.
In addition, we are subject to patient privacy regulation by both the federal government and the states in which we conduct our business. Our
failure to comply with these laws could expose us to criminal, civil and administrative sanctions, reputational harm, and could harm our results
of operations and financial conditions.
If the market opportunities for our product candidates, including EYP-1901, are smaller than we believe they are, our results of operations may
be adversely affected and our business may suffer.
If any of our products have newly discovered or developed safety problems, our business would be seriously harmed.
Risks Related To Our Intellectual Property
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If we are unable to protect our intellectual property rights or if our intellectual property rights are inadequate to protect our product candidates,
our competitors could develop and commercialize technology and products similar to ours, and our competitive position could be harmed.
• We may become involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time
consuming and unsuccessful.
• We may not be able to protect our intellectual property rights throughout the world.
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Obtaining and maintaining our patent protection 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.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which could be
uncertain and could harm our business.
Our competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing
manner.
Changes in either U.S. or foreign patent law or interpretation of such laws could diminish the value of patents in general, thereby impairing our
ability to protect our products or product candidates.
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disclosed confidential information and/or alleged trade secrets of their current or former employers or claims asserting ownership of what we
regard as our own intellectual property.
Intellectual property rights do not prevent all potential threats to competitive advantages we may have.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
If our trademarks are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business
may be adversely affected.
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Risks Related To Our Reliance On Third Parties
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The development and commercialization of our lead product candidate, EYP-1901, is dependent on intellectual property we license from
Equinox Science and active pharmaceutical ingredient (API) supply of vorolanib. If we breach our agreement with Equinox or the agreement is
terminated, we could lose license rights or API supply of vorolanib that are material to our business.
The development of our lead product candidate, EYP-1901, is dependent on our supply of its API vorolanib, which we source from third-
parties. If any manufacturer or partner we rely upon fails to supply vorolanib in the amounts we require on a timely basis, or fails to comply
with stringent regulations applicable to pharmaceutical drug manufacturers, we may be unable to meet demand for our products and may lose
potential revenues.
If our CROs, vendors and investigators do not successfully carry out their responsibilities or if we lose our relationships with them, our
development efforts with respect to our product candidates could be delayed.
• We use our own facility for the manufacturing of YUTIQ®, and rely on third party suppliers for key components and any disruptions to our
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Our manufacturing operations currently depend on our Watertown, MA facility and we are currently developing an additional manufacturing
facility in Northbridge, MA. If our Watertown location is destroyed or out of operation, or, if the Northbridge development is delayed for a
substantial period of time, our business may be adversely impacted.
If we encounter issues with our CMOs or suppliers, we may need to qualify alternative manufacturers or suppliers, which could impair our
ability to sufficiently and timely manufacture and supply DEXYCU®.
Risks Related To Ownership Of Our Common Stock
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The trading price of the shares of our common stock has been highly volatile, and purchasers of our common stock could incur substantial
losses.
A small concentration of approximately ten stockholders beneficially own 65% of our total outstanding common stock, which gives certain
stockholders significant control over matters subject to stockholder approval, which would prevent new investors from influencing significant
corporate decisions.
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ITEM 1. BUSINESS
Overview
PART I
EyePoint Pharmaceuticals (Nasdaq: EYPT) is a clinical-stage biopharmaceutical company committed to developing and commercializing
therapeutics to help improve the lives of patients with serious retinal diseases. The Company's pipeline leverages its proprietary bioerodible Durasert E™
technology (Durasert E™) for sustained intraocular drug delivery. The Company’s lead product candidate, EYP-1901, is an investigational sustained
delivery treatment for anti-vascular endothelial growth factor (anti-VEGF) mediated retinal diseases combining vorolanib, a selective and patent-protected
tyrosine kinase inhibitor with Durasert E™. Additional pipeline programs include EYP-2301, a promising TIE-2 agonist, razuprotafib, f/k/a AKB-9778,
formulated in Durasert E™ to potentially improve outcomes in serious retinal diseases. The proven Durasert® drug delivery technology (Durasert®) has
been safely administered to thousands of patient eyes across four products approved by the U.S. Food and Drug Administration (FDA). EyePoint
Pharmaceuticals is headquartered in Watertown, Massachusetts.
The Durasert® technology (Durasert) provides for the development of a miniaturized solid cylinder of drug that can be delivered through a standard
intravitreal (IVT) injection in the physician office. A Durasert IVT insert can be designed to provide consistent, sustained “zero-order kinetics” release of
drug over a period of months to years and can generally be tailored for each drug and disease indication. Durasert® inserts can be developed in non-erodible
formulations or in bioerodible formulations using Durasert E™.
EYP-1901 has the potential to bring a new mechanism of action and treatment paradigm for anti-VEGF mediated serious eye diseases. Vorolanib
acts through intracellular binding of all vascular endothelial growth factor (VEGF) receptors thereby blocking all VEGF isoforms. Vorolanib has also
demonstrated encouraging neuroprotection data in preclinical in-vivo studies potentially bringing an additional treatment benefit.
EYP-1901 is presently in Phase 2 clinical trials as a sustained delivery treatment for wet age-related macular degeneration (wet AMD), non-
proliferative diabetic retinopathy (NPDR), and diabetic macular edema (DME). We expect to initiate pivotal Phase 3 clinical trials in wet AMD in the
second half of 2024.
In wet AMD, EYP-1901 is being developed as a six-month maintenance treatment and in December 2023, we reported positive topline six-month
safety and efficacy data from the Phase 2 clinical trial (DAVIO 2). DAVIO 2 is a non-inferiority, randomized controlled, three-arm clinical trial comparing
two doses of EYP-1901 (2mg and 3mg) against an aflibercept control arm. Data from the DAVIO 2 clinical trial demonstrated that EYP-1901 achieved all
primary and secondary endpoints including;
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Both EYP-1901 cohorts demonstrated a statistically non-inferior change in best corrected visual acuity BCVA versus aflibercept control with a
numerical difference of only -0.3 and -0.4 letters, respectively for the 2mg and 3mg dose at blended six-month endpoint.
Positive safety profile continued with no EYP-1901-related ocular or systemic serious adverse events (SAEs).
Key secondary endpoints were achieved with both EYP-1901 doses. These include an over 80% reduction in treatment burden, with nearly
two-thirds of eyes supplement-free up to six-months.
Strong anatomical control in both EYP-1901 cohorts documented by optical coherence tomography (OCT).
In NPDR, EYP-1901 is being developed as a potential nine-month treatment for this disease. We completed enrollment in the Phase 2 clinical trial
for NPDR (PAVIA) in May of 2023 and expect topline data in the second quarter of 2024.
In January 2024, we announced the first patient dosing in the Phase 2 clinical trial of EYP-1901 in DME and anticipate topline data in the first
quarter of 2025.
In May 2023, we completed our transition to a clinical-stage biopharmaceutical company with the license of our commercial product, YUTIQ®, to
Alimera Sciences Inc., for $82.5 million plus potential royalties on future revenues beginning in 2025. YUTIQ®
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is a once every three-year treatment for chronic non-infectious uveitis affecting the posterior segment of the eye that utilizes a non-erodible formulation of
Durasert®. YUTIQ® was launched in the U.S. in 2019.
We continue to evaluate potential pipeline product candidates through internal discovery efforts, research collaborations and in-licensing
arrangements to build our pipeline.
Pipeline
The following table describes the stage of each of our programs:
DEVELOPMENT PROGRAM
EYP-1901 – vorolanib in Durasert E
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STATUS
PARTNER
• wet AMD
• NPDR
• DME
Phase 2 clinical trials underway in wet
AMD, NPDR and DME
Partnered with Betta in China, Hong Kong,
Taiwan and Macau
EYP-2301 – razuprotafib in Durasert E
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Preclinical development
Unpartnered
Strategy
Our goal is to become a leader in the development and commercialization of innovative sustained delivery therapeutics to help improve the lives of
patients with serious eye disorders. The key elements of our strategy include:
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Advance EYP-1901 through Phase 3 clinical development for wet AMD, NPDR and DME
Advance EYP-1901 into clinical trials in additional indications, potentially including myopic choroidal neovascularization (CNV) and retinal
vein occlusion (RVO)
Advance EYP-2301 into clinical development for serious retinal diseases
Expand product pipeline through in-license, partnership or acquisition with initial focus on molecules that can be delivered using our
Durasert® technology.
Leverage our drug delivery technologies through research collaborations and out-licenses with other pharmaceutical and biopharmaceutical
companies, institutions and other organizations.
The Unmet Need in the Treatment of Eye Disease – Duration of Action
We are primarily focused on diseases affecting the posterior segment of the eye, with particular attention on retinal disease. We leverage our best-in-
class sustained delivery Durasert® technology to achieve improved outcomes with more convenient dosing regimens. Diseases of the retina and posterior
segment of the eye include wet AMD, DR, and DME and other indications including orphan diseases and certain cancers.
Our lead pipeline program, EYP-1901, is initially focused on improving the treatment of wet AMD, NPDR, and DME. These VEGF mediated
diseases share an underlying propensity to cause leakage from either pre-existing damaged blood vessels or new vessels (neovascularization), that, if
untreated, can lead to severe visual loss.
These conditions are generally treated locally with frequent large molecule anti-VEGF ligand blocking intravitreal injections. While these treatments
have a history of safety and initial efficacy, the need for frequent injections hampers long term visual outcomes. Many patients with retinal or other
posterior segment diseases require lifelong treatment and interruptions in therapy can result in disease reactivation and permanent visual loss. Accordingly,
monthly or bi-monthly injections are not an effective long term means of delivering a steady state dose to the site of disease for many patients. Finally, the
risk of patient non-compliance increases when treatment involves multiple products or complex or painful dosing regimens, as patients age or suffer
cognitive impairment or serious illness, or when the treatment is lengthy or expensive.
Drug delivery for treating ophthalmic diseases in posterior segments of the eye is a significant challenge. Due to the effectiveness of the blood-eye
barrier, it is difficult for systemically (orally or intravenously) administered drugs to reach the retina in sufficient quantities to have a beneficial effect
without causing adverse side effects to other parts of the body.
Due to the drawbacks of frequent intravitreal injections, we believe the delivery of drugs to patients in a more precise, zero order release kinetics
over longer periods of time with Durasert® can satisfy a large unmet medical need for both patients and physicians. Further, we are focused on bringing
new mechanisms of action to the treatment of disease in addition to the current
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standard of care. Unlike many chronic diseases that are treated with drugs addressing multiple mechanisms of action, most retinal diseases are currently
addressed using a single mechanism of action.
Durasert Technology
Our current Durasert® technology uses proprietary sustained release to deliver drugs in the eye over periods of months to years through a single
intravitreal (IVT) injection. To date, four products utilizing successive generations of the Durasert® technology have been approved by the FDA. These
products include YUTIQ® (fluocinolone acetonide intravitreal implant or FA 0.18 mg) and ILUVIEN (FA intravitreal implant) 0.19 mg, which are both
licensed to Alimera Sciences Inc. (Alimera), and Retisert® (FA intravitreal implant 0.59 mg) and Vitrasert® (ganciclovir intravitreal implant 4.5 mg), which
are both licensed to Bausch & Lomb. Earlier ophthalmic products that utilize the Durasert® technology, Retisert and Vitrasert, are surgically implanted;
while ILUVIEN and YUTIQ® were designed to be delivered IVT during a physician office visit.
The Durasert® technology allows for the production of a solid, injectable, sustained release insert of a drug compound. All four FDA-approved
Durasert® products utilize a non-erodible formulation of Durasert®. For these products, the drug core matrix is coated with one or more polymer layers, and
the permeability of those layers and other design aspects control the rate and duration of drug release. By changing elements of the design, we can alter
both the rate and duration of release to meet different therapeutic needs.
EYP-1901 deploys a bioerodible formulation of the Durasert technology, Durasert EÔ. In this formulation, the drug core matrix remains essentially
unchanged, however, the non-erodible polymer layers are not utilized. This allows the solid insert to potentially deliver higher doses of drug and for the
remaining core matrix to be fully bio eroded after the drug is fully released.
Our Durasert® technology platform is designed to provide sustained delivery of drugs for ophthalmic diseases and conditions with the following
features:
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Sustained Delivery. The delivery of drugs for predetermined periods of time ranging from months to years. We believe that uninterrupted,
sustained delivery offers the opportunity to develop products that reduce the need for repeated applications, thereby reducing the risks of
patient noncompliance and adverse effects from repeated administrations.
Controlled Release Rate. The release of therapeutics for sustained zero-order kinetics at a controlled rate. We believe that this feature allows us
to develop products that deliver optimal concentrations of therapeutics over time and eliminate excessive variability in dosing during treatment.
Local Delivery. The delivery of therapeutics directly to a target site. We believe this administration can allow the natural barriers of the body to
isolate and assist in maintaining appropriate concentrations at the target site to achieve the maximum therapeutic effect while minimizing
unwanted systemic effects.
Our Product Candidates
EYP-1901 for wet AMD, NPDR and DME
EYP-1901 is an investigational product deploying vorolanib, a selective and patent protected TKI, that potentially brings a new mechanism of action
and treatment paradigm for serious eye diseases beyond existing anti-VEGF large molecule ligand blocking therapies. EYP-1901 utilizes our bioerodible
Durasert EÔ technology. We have reported positive safety and efficacy data for EYP-1901 in our Phase 2 DAVIO clinical trial and we are currently
evaluating EYP-1901 in Phase 2 clinical trials for wet AMD (DAVIO 2) NPDR (PAVIA) and DME (VERONA). The Phase 2 clinical trial in DME enrolled
its first patient on January 9, 2024.
Vorolanib acts through intracellular binding of all VEGF receptors thereby blocking all VEGF isoforms, the main driver of the proliferation of blood
vessels that are the hallmark of wet AMD and other retinal diseases. In addition to the safety and efficacy demonstrated in the DAVIO clinical trial,
vorolanib has also demonstrated encouraging neuroprotection data in preclinical in-vivo studies potentially bringing an additional treatment benefit. Prior
to in-licensing by the Company, vorolanib was previously studied in Phase 1 and 2 clinical trials as an orally delivered therapy for the treatment of wet
AMD and data from these trials demonstrated a positive clinical signal and no ocular toxicity.
Market Opportunity in wet AMD
Wet AMD occurs when new, abnormal blood vessels grow under the retina. These vessels may leak blood or other fluids, causing scarring of the
macula. This form of AMD is less common but much more serious. AMD is one of the major causes of vision loss of the total vision impairment globally.
As the proportion of people in the U.S. age 65 and older grows larger, more people are developing age-related diseases such as AMD. From 2000-
2010, the number of people with AMD grew 18 percent, from 1.75 million to 2.07 million. By 2050, the estimated
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number of people with AMD is expected to more than double from 2.07 million to 5.44 million. White Americans are expected to continue to account for
the majority of cases. However, Hispanics are expected to account for the greatest rate of increase, with a nearly six-fold rise in the number of expected
cases from 2010 to 2050.
Age is the greatest risk factor for developing AMD and individuals aged 50+ are more prone to the disease. Among all AMD patients in the United
States, wet AMD accounts for only 10% of cases, yet it alone accounts for 90% of legal blindness.
There are several effective and safe treatments for wet AMD available on the market, including large molecule anti-VEGF intravitreal injectable
drugs marketed under the brands names Lucentis, Eylea, Eylea HD, Vabysmo, Beovu, and Avastin (off label use). However, these treatments must be
injected in a physician’s office either monthly, bi-monthly or in some patients every three to four months, which can cause inconvenience and discomfort
and often lead to reduced compliance and poor outcomes. The branded drug, SUSVIMO™, a port delivery technology for ranibizumab, was approved by
the FDA in 2021 and requires an initial surgical placement of the port. Genentech voluntarily recalled Susvimo in October 2022 and all new implants have
been paused. The issue is the septum dislodges preventing the PDS implant to be refilled. It is currently not known when Susvimo will be commercially
available again.
Separate published studies using real world data (one study in the U.S. and another that includes Canada, France, Germany, Ireland, Italy, the
Netherlands, UK, and Venezuela) indicate that despite initial efficacy, approved wet AMD treatments still result in vision loss over time.
We believe that EYP-1901, if approved as a potential six-month sustained delivery maintenance therapy, has the potential to offer wet AMD
patients a safe and effective treatment option with a unique mechanism of action.
Market Opportunity in Non-Proliferative Diabetic Retinopathy
Diabetic retinopathy (DR) is a frequent complication of diabetes mellitus. Slow but progressive changes in the small blood vessels of the retina may
cause no symptoms or only mild vision problems in early stages. The disease progresses from NPDR to proliferative diabetic retinopathy (PDR). At any
stage, retina bleeding and fluid accumulation leads to DME which can cause blindness. Both PDR and DME are common DR complications associated
with the progression of the disease. Diabetes is the leading cause of new cases of blindness in adults. This is a growing problem as the number of people
living with diabetes increases, so does the number of people with impaired vision due to NPDR.
The central retina area that is located between the main branches (superior and inferior arcades) of the central retinal vessels in the eye is known as
the “macular area”. The retina beyond this is considered “peripheral retina”. The central retinal area can develop abnormal findings. These findings can be
present in the non-proliferative or the proliferative forms of the disease. These changes in the macula include the presence of abnormally dilated small
vessel outpouchings (called microaneurysms), retinal bleeding (retinal hemorrhages) and yellow lipid and protein deposits (hard exudates). With DME, the
macula can get thicker than normal.
NPDR can be classified into mild, moderate or severe stages based upon the presence or absence of retinal bleeding, abnormal venous beading of
the vessel wall (venous beading) or abnormal vascular findings (intraretinal microvascular anomalies or IRMA). NPDR progresses to PDR and/or DME,
which is a major cause of vision loss in a diabetic eye. No treatment is typically administered at the NPDR stages. A treatment with a sustainable dosing
regimen that slows or prevents progression of NPDR to PDR or DME could help reduce the vision threatening effects of diabetic eye disease.
Market Opportunity in Diabetic Macular Edema
DME is triggered by DR, a well-known complication of diabetes. DR is caused by long-term damage to the retina’s small blood vessels. The leakage
of fluid into the retina may lead to swelling of the surrounding tissue, including the macula. If left untreated, fluid can leak into the macula’s center, called
the fovea, the part of the eye where sharp, straight-ahead vision occurs. The fluid makes the macula swell, blurring vision. This condition results in DME.
DME can occur at any stage of DR, although it is more likely to occur later with the disease’s progression.
Common signs and symptoms of DME include dark spots like a smudge on glasses or gaps that may appear in the vision, blurred vision, double
vision, faded colors, or the affected person may find bright light or glare difficult. The American Academy of Ophthalmology (AAO) estimates that nearly
80% of Type 1 diabetics and 50% of Type 2 diabetics will have developed DR after living with diabetes for 15 and 20 years, respectively.
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Per the March 3, 2022, Journal of American Medical Association of Ophthalmology, DR is the leading cause of incident blindness in US adults aged
20 to 74 years old and DME can occur with any stage of DR. DR and DME affect 28.5% and 3.8%, respectively, of US adults, 40 years and older, with
diabetes.
The most common treatments of DME are anti-VEGF drugs, corticosteroids, and laser photocoagulation. Topical nonsteroidal anti-inflammatory
drugs (NSAIDs), in the form of eye drops, are sometimes used either before or after cataract surgery to prevent the development of macular edema.
Currently, intravitreal anti-VEGF agents are the preferred first-line treatment for DME.
Clinical Development
The EYPT-1901 Phase 1 clinical trial (DAVIO) was a dose escalation trial that enrolled 17 wet AMD patients across four separate doses. The
primary endpoint of the trial was safety, and key secondary endpoints were best corrected visual acuity (BCVA) and central subfield thickness (CST)
measured by optical coherence tomography (OCT).
In November 2021, we reported positive interim six-month safety and efficacy data for the DAVIO clinical trial. There were no ocular SAEs
reported, no drug-related systemic SAEs reported, and all ocular adverse events (AEs) were ≤ grade 2; the only grade 3 AE was not drug-related.
Regarding efficacy, stable visual acuity (VA) and OCT and a clinically significant reduction in treatment burden of 75% was observed with a median time
to rescue of six months. The six-month interim data also reported that 53% of patients in the trial did not require a supplemental anti-VEGF treatment up-to
the six-month visit.
In July 2022, we updated the results of the DAVIO clinical trial through 12-months reporting continued positive safety and efficacy results. This
included a continuation of a clinically significant reduction in treatment burden of 73% at 12 months. The data also reported that 35% of patients in the trial
did not require a supplemental anti-VEGF treatment up-to the twelve-month visit.
DAVIO 2 is a multi-center randomized, double-masked controlled Phase 2 clinical trial of EYP-1901 in previously treated patients with wet AMD.
Originally designed to enroll 144 patients, the trial enrolled 160 patients in total due to strong investigator and patient interest. All enrolled patients were
previously treated with a standard-of-care anti-VEGF therapy and were randomly assigned to one of two doses of EYP-1901 (approximately 2 mg or 3 mg)
or an aflibercept control. EYP-1901 is delivered with a single intravitreal injection in the physician's office, similar to current FDA approved anti-VEGF
treatments. The primary non-inferiority efficacy endpoint was change in BCVA compared to the aflibercept control, approximately six-months after the
EYP-1901 injection. Secondary endpoints include safety, reduction in treatment burden, mean change in CST as measured by OCT, the percent of eyes that
remain free of supplemental anti-VEGF injections, and number of aflibercept injections in each group.
DAVIO 2 top line results at week 32 were released on December 4, 2023. In summary, the study indicated:
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Both EYP-1901 doses (2mg and 3mg) achieved all primary and secondary endpoints.
Statistical non-inferiority in change in BCVA (at a confidence interval of 95%) compared to aflibercept control, at weeks 28 and weeks 32
combined. The 2mg and 3mg doses were only -0.3 and -0.4 letters different, respectively, versus on-label aflibercept. The lower limit of the
non-inferiority margin is defined as a -4.5 letters by the FDA with 5 letters representing one line on the eye chart.
Continued positive safety and tolerability profile with no EYP-1901-related ocular or systemic SAEs.
89% and 85% reduction in treatment burden, respectively, for the 2mg and 3mg EYP-1901 doses, when comparing the injections in the 6
months prior to entry into the study vs. the injections administered during the study following EYP-1901 dosing.
65% and 64% of eyes were supplement free up to six-months, respectively, for the 2mg and 3mg doses of EYP-1901.
Both EYP-1901 doses demonstrated strong anatomic control with OCT difference below 10 microns at week 32 compared to the aflibercept
control.
Patient discontinuation up to week 32 was low at 4% with no EYP-1901 related discontinuation.
The DAVIO 2 study is ongoing with continued patient follow up through week 56:
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On February 2, 2024, in the sub-group of patients who were supplement-free up to six months, the EYP-1901 groups demonstrated numerical
superiority in change in BCVA along with strong anatomic control compared to the aflibercept control group. This result confirms that the
positive topline data from the Phase 2 DAVIO 2 trial were driven by EYP-1901 and not by study eyes requiring supplemental injection.
The PAVIA NPDR Phase 2 clinical trial is a three arm trial with two separate doses of EYP-1901, given as single injection on Day 1, and a sham
control. PAVIA is evaluating EYP-1901 as a potential nine-month treatment in NPDR and the trial completed enrollment of 77 patients. A summary of the
trial includes:
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•
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Moderately severe to severe NPDR patients enrolled
Primary endpoint: 2, or more, step diabetic retinopathy severity score (DRSS) improvement at week 36
Secondary endpoints include reduction in vision-threatening complications, DME occurrence and or proliferative disease, retinal ischemia
and safety
The PAVIA topline results are anticipated in the second quarter of 2024.
The VERONA DME Phase 2 clinical trial, is a three arm trial with two separate doses of EYP-1901 and an aflibercept control. VERONA is
evaluating EYP-1901 as a potential six-month treatment in previously treated DME patients. The two EYP-1901 doses are administered as a single
injection on Day 1 following the aflibercept injection on the same visit. The trial enrolled its first patient on Jan 9, 2024, and topline results are anticipated
in the first quarter of 2025. A summary of the trial includes:
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Evaluate the safety and efficacy of EYP-1901 in the DME patient population
Collect dose-ranging data to inform future clinical trials
Primary endpoint: time to supplemental anti-VEGF injection up to week 24
Secondary endpoints: change in BCVA vs. aflibercept control, stable anatomical outcome as measured by OCT, DRSS over time
Intellectual Property
EYP-1901
The Company’s lead product candidate, EYP-1901, is an investigational sustained delivery treatment for anti-VEGF-mediated retinal diseases
combining vorolanib, a selective and patent-protected tyrosine kinase inhibitor with Durasert EÔ.
In February 2020, we entered into an Exclusive License Agreement (Equinox License Agreement) with Equinox Science, LLC (Equinox), pursuant
to which Equinox granted us an exclusive, sublicensable, royalty-bearing right and license to certain patents and other Equinox intellectual property to
research, develop, make, have made, use, sell, offer for sale and import the compound vorolanib and any pharmaceutical products comprising the
compound for the prevention or treatment of wet AMD, DR and RVO (the Original Field) using our proprietary localized delivery technologies, in each
case, throughout the world except China, Hong Kong, Taiwan and Macau (the Territory). On May 2, 2022, we entered into Amendment #1 to the Equinox
License Agreement, pursuant to which the Original Field was expanded to cover the prevention or treatment of ophthalmology indications using the
Company’s proprietary localized delivery technologies.
In consideration for the rights granted by Equinox, we (i) made a one time, non-refundable, non-creditable upfront cash payment of $1.0 million to
Equinox in February 2020, and (ii) agreed to pay milestone payments totaling up to $50 million upon the achievement of certain development and
regulatory milestones, consisting of (a) completion of a Phase 2 clinical trial for the compound or a licensed product, (b) the filing of a new drug
application (NDA) or foreign equivalent for the compound or a licensed product in the United States, European Union, or United Kingdom and (c)
regulatory approval of the compound or a licensed product in the United States, European Union, or United Kingdom.
We also agreed to pay Equinox tiered royalties based upon annual net sales of licensed products in the Territory. The royalties are payable with
respect to a licensed product in a particular country in the Territory on a country-by-country and licensed product-by-licensed product basis until the later
of (i) twelve years after the first commercial sale of such licensed product in such country and (ii) the first day of the month following the month in which a
generic product corresponding to such licensed product is launched in such country. The royalty rates range from the high-single digits to low-double digits
depending on the level of annual net sales. The royalty rates are subject to reduction during certain periods when there is no valid patent claim that covers a
licensed product in a particular country.
On May 2, 2022, the Company entered into an Exclusive License Agreement (the Betta License Agreement) with Betta Pharmaceuticals Co., Ltd.
(Betta), an affiliate of Equinox. Under the Betta License Agreement, the Company granted to Betta an exclusive, sublicensable, royalty-bearing license
under certain of the Company’s intellectual property to develop, use (but not make or have made), sell, offer for sale, and import the Company’s product
candidate, EYP-1901, an investigational sustained delivery intravitreal anti-VEGF treatment that combines a bioerodible formulation of the Company’s
proprietary sustained-release technology with the compound vorolanib (the Licensed Product), in the field of ophthalmology (the Betta Field) in the Greater
Area of China, including China, the Hong Kong Special Administrative Region, the Macau Special Administrative Region, and Taiwan (the Betta
Territory). The Company retained rights under the Company’s intellectual property to, among other things, conduct clinical trials on the Licensed Product
in the Betta Field in the Betta Territory.
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In consideration for the rights granted by the Company, Betta agreed to pay the Company tiered, mid-to-high single-digit royalties based upon
annual net sales of Licensed Products in the Betta Territory. The royalties are payable on a Licensed Product-by-Licensed-Product and region-by-region
basis commencing on the first commercial sale of a Licensed Product in a region and continuing until the later of (i) the date that is twelve (12) years after
first commercial sale of such Licensed Product in such region, and (ii) the first day of the month following the month in which a generic product
corresponding to such Licensed Product is launched in the relevant region. The royalty rate is subject to reduction under certain circumstances, including
when there is no valid claim of a licensed patent that covers a Licensed Product in a particular region.
EYP-2301
The Company is advancing EYP-2301 into pre-clinical development. EYP-2301 delivers razuprotafib, f/k/a AKB-9778, formulated in Durasert EÔ
to potentially improve outcomes in serious retinal diseases.
In August 2021, we entered into an Asset Purchase Agreement with Aerpio Pharmaceuticals Inc. (Aerpio), pursuant to which we acquired all right
title and interest in and to certain U.S. and ex-U.S. patents and applications relating to certain Tie-2 activating molecules, including razuprotafib, for a one-
time cash payment of $450,000. The assets we acquired from Aerpio included hundreds of patents and applications.
Our Previously Commercialized Products
YUTIQ®
YUTIQ® (fluocinolone acetonide intravitreal implant or FA 0.18 mg) for intravitreal injection, was approved by the FDA in October 2018, and
commercially launched in the U.S. in February 2019. On May 17, 2023, and we licensed the U.S. rights to Alimera and also entered with Alimera into a
product rights agreement (the Product Rights Agreement). Pursuant to the Product Rights Agreement, we granted Alimera an exclusive and sublicensable
(in accordance with the terms of the Product Rights Agreement) right and license under the Company’s and its affiliates’ interest in certain of the
Company’s and its affiliates’ intellectual property to develop, manufacture, sell, commercialize, and otherwise exploit certain products, including YUTIQ®
(for the treatment and prevention of uveitis in the entire world except Europe, the Middle East, and Africa (the Licensed Territory). The Licensed Territory
excluded such territories because the Company had previously licensed to Alimera rights to certain products, which included YUTIQ® (known as
ILUVIEN® in Europe, the Middle East, and Africa (EMEA)) for the treatment and prevention of uveitis in EMEA pursuant to that certain Second Amended
and Restated Collaboration Agreement, dated as of July 10, 2017, by and between pSivida, US, Inc. (f/k/a Control Delivery Systems, Inc.) (n/k/a EyePoint
Pharmaceuticals U.S., Inc., an affiliate of Company) and Alimera. The license also excluded any rights to YUTIQ® for the treatment of chronic non-
infectious uveitis affecting the posterior segment of the eye in China and certain other countries and regions in Asia, which rights have been exclusively
licensed by the Company to Ocumension Therapeutics (“Ocumension”) pursuant to the Exclusive License Agreement, dated as of November 2, 2018, by
and between the Company and Ocumension. We licensed clinical development, regulatory, reimbursement, and distribution rights to YUTIQ® to
Ocumension for Mainland China, Hong Kong, Macau, Taiwan, South Korea, and other jurisdictions across Southeast Asia. YUTIQ® was approved and
sales commenced in China in 2022 and we are entitled to royalties on product sales by Ocumension. Alimera is now responsible for all commercial,
regulatory, and distribution activities related to YUTIQ®. YUTIQ® is a once every three-year treatment utilizing a non-erodible formulation of our
proprietary Durasert® technology that is administered during a physician office visit.
DEXYCU®
DEXYCU® (dexamethasone intraocular suspension) 9%, for intraocular administration, was approved by the FDA in February 2018 for the
treatment of post-operative ocular inflammation and commercially launched in the U.S. in March 2019 with a primary focus on its use immediately
following cataract surgery. DEXYCU® is administered as a single dose directly into the surgical site at the end of ocular surgery and is the first long-acting
intraocular product approved by the FDA for the treatment of post-operative inflammation. DEXYCU® allows for a single intraocular injection that
releases dexamethasone, a corticosteroid, for up to 22 days.
Due to the elimination of separate pass-through reimbursement by the Centers for Medicare and Medicaid Services (CMS) as described below, the
market opportunity for this product is significantly impacted and, accordingly, the Company has terminated promotion of this program in the U.S in 2023.
Manufacturing
The FDA carefully regulates the quality of pharmaceuticals. The main regulatory standard for ensuring pharmaceutical quality is the Current Good
Manufacturing Practice (cGMPs) regulation for human pharmaceuticals. Manufacturing of our clinical trial materials (CTM) and of our commercial
products is subject to these cGMPs which govern record-keeping, manufacturing processes
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and controls, personnel, quality control and quality assurance, among other activities. Incoming raw materials and components from suppliers are inspected
upon arrival according to pre-specified criteria prior to use in the CTM or the commercial product. During product manufacture, in-process tests are
conducted on intermediate products according to pre-specified criteria; testing is finally conducted on the finished product prior to its release. Our systems
and our contractors are required to comply with cGMP requirements, and we assess compliance regularly through performance monitoring and audits.
EYP-1901
Production, assembly, and packaging of EYP-1901 CTM is done in the Class 10,000 clean rooms located at our Watertown, MA facility. We source
the active pharmaceutical ingredient (API) vorolanib from Betta and various raw materials and components for both EYP-1901 and its injector from third-
party vendors. We established a relationship with a U.S.-based contract manufacturing supplier for vorolanib to transfer the process for manufacturing
vorolanib and to become the U.S. supplier of vorolanib for use in EYP-1901. Our agreements with Betta and these third parties include confidentiality,
intellectual property, and supply provisions to protect our proprietary rights related to EYP-1901. In January 2023, we announced that we entered into a
lease agreement to design and construct a 40,000-square-foot manufacturing facility in Northbridge, Massachusetts to support the global manufacturing of
our programs, including EYP-1901. The 40,000 square-foot standalone manufacturing facility will be GMP compliant to meet U.S. FDA and European
Medicines Agency (EMA) standards and support EYP-1901’s clinical supply and commercial readiness upon regulatory approval. In addition, the building
will have the capacity and capabilities to support our expanding pipeline. The new facility, customized for our requirements, will be constructed and
managed by V.E. Properties IX, LLC, and is expected to be operational in the second half of 2024.
YUTIQ®
Production, assembly, and packaging of YUTIQ® is done in the Class 10,000 clean rooms located at our Watertown, MA facility and we are
supplying such product to our partners pursuant to our respective agreements with them. We source the API and various raw materials and components for
YUTIQ® from third-party vendors.
DEXYCU®
We currently use a contract manufacturer for the commercial supply of DEXYCU®. A separate contract manufacturer provides kitting and
packaging of the finished product, and other vendors provide sterilization, testing, and storage services. Our agreements with these third parties include
confidentiality and intellectual property provisions to protect our proprietary rights related to DEXYCU®. We require our contract manufacturers to operate
in accordance with cGMPs and all other applicable laws and regulations. We employ personnel with extensive technical, manufacturing, analytical, and
quality experience to oversee contract manufacturing and testing activities, and to compile manufacturing and quality information for our regulatory
submissions.
U.S. Sales and Marketing
As of May, 2023, the commercial support of YUTIQ® was shut down due to the out-license of the product to Alimera. There are no internal
employees presently supporting YUTIQ® sales and marketing efforts.
In 2023, we terminated the promotion of DEXYCU® due to the elimination of separate pass-through reimbursement by CMS. DEXYCU® is not
commercially supported by the Company although it is still available through specialty distributors.
U.S. Market Access and Payer Reimbursement
Reimbursement for YUTIQ® was obtained using a permanent J code, established on October 1, 2019, which enables reimbursement from both
Medicare and commercial payers. In May 2023 we out-licensed YUTIQ® to Alimera. DEXYCU® had three-year pass through status with Medicare which
expired effective January 1, 2023. The Company made the decision to no longer commercially support DEXYCU® from a sales and marketing perspective
as of January 1, 2023, and therefore all patient assistance programs and support were also concluded concurrently. Accordingly, we now focus on
reimbursement matters related to our product candidates.
U.S. Product Distribution Channel
We previously established a distribution channel in the United States for the commercialization of YUTIQ® and DEXYCU® that provided
physicians with several options for ordering our products. This includes agreements with a nationally recognized third-party logistics provider (3PL),
several distributors, and a specialty pharmacy provider for physicians who prefer to use a traditional buy-and-bill model. The 3PL provides fee-based
services related to logistics, warehousing, order fulfilment, invoicing, returns and accounts receivable management. While DEXYCU® is still available
through this network, all YUTIQ® product responsibilities including distribution were turned over to Alimera effective May 2023.
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Research Agreements
From time to time, we enter into research agreements with third parties to evaluate our technology platforms for the treatment of ophthalmic and
other diseases. We intend to continue this activity with partner compounds that could be successfully delivered with our Durasert and, potentially, Verisome
technology platforms with the potential for future clinical and commercial milestones and royalties.
FDA Approved Products Licensed to Other Entities
YUTIQ® for posterior segment uveitis
YUTIQ® (fluocinolone acetonide intravitreal implant or FA 0.18 mg) for intravitreal injection, was approved by the FDA in October 2018 and
commercially launched in the U.S. in February 2019. YUTIQ® is indicated for the treatment of chronic non-infectious uveitis affecting the posterior
segment of the eye. YUTIQ® is a once every three-year treatment utilizing a non-erodible formulation of our proprietary Durasert technology that is
administered during a physician office visit. In May 2023 we licensed rights to YUTIQ® to Alimera for $82.5 million with $75 million paid up-front and
$7.5 million due in equal quarterly installments in 2024. We are also entitled to low to mid double-digit royalty on Alimera’s related U.S. net sales above
defined thresholds for the calendar years 2025-2028.
We have licensed clinical development, regulatory, reimbursement and distribution rights to YUTIQ® to Ocumension for Mainland China, Hong
Kong, Macau, Taiwan, South Korea, and other jurisdictions across Southeast Asia. YUTIQ® was approved in China in 2022 and we are entitled to royalties
on product sales by Ocumension.
ILUVIEN for DME
ILUVIEN is an injectable, sustained-release micro-insert based on our Durasert® technology platform which delivers 0.19 mg of FA to the back of
the eye for treatment of DME. DME is a disease suffered by diabetics where leaking capillaries cause swelling in the macula, the most sensitive part of the
retina. DME is a leading cause of blindness in the working-age population in most developed countries. The ILUVIEN micro-insert is substantially the
same micro-insert as YUTIQ®.
We originally licensed our Durasert® proprietary insert technology to Alimera for use in ILUVIEN for the treatment of all ocular diseases (excluding
uveitis). On July 10, 2017, we entered into an amended and restated collaboration agreement with Alimera (the Amended Alimera Agreement), pursuant to
which we (i) expanded the license to Alimera to our proprietary Durasert® sustained-release drug delivery technology platform to include uveitis, including
chronic non-infectious uveitis affecting the posterior segment of the eye, in EMEA and (ii) converted the net profit share arrangement for each licensed
product (including ILUVIEN) under the original collaboration agreement with Alimera (the Prior Alimera Agreement) to a sales-based royalty on a
calendar quarter basis commencing July 1, 2017, with payments from Alimera due 60 days following the end of each calendar quarter.
Sales-based royalties started at the rate of 2% and increased, commencing December 12, 2018, to 6% on aggregate calendar year net sales up to $75
million and 8% in excess of $75 million. Alimera’s share of contingently recoverable accumulated ILUVIEN commercialization losses under the Prior
Alimera Agreement, capped at $25 million, are to be reduced as follows: (i) $10.0 million was cancelled in lieu of an upfront license fee on the effective
date of the Amended Alimera Agreement; (ii) for calendar years 2019 and 2020, 50% of earned sales-based royalties in excess of 2% will be offset against
the quarterly royalty payments otherwise due from Alimera; (iii) in March 2020, another $5 million was cancelled upon Alimera’s receipt of regulatory
approval for ILUVIEN for the uveitis indication; and (iv) commencing in calendar year 2021, 20% of earned sales-based royalties in excess of 2% will be
offset against the quarterly royalty payments due from Alimera until such time as the balance of the original $25 million of recoverable commercialization
losses has been fully recouped. On December 17, 2020, we sold our interest in royalties payable to us under our license agreement with Alimera in
connection with Alimera’s sales of ILUVIEN® to SWK Funding, LLC (SWK) in exchange for a one-time $16.5 million payment from SWK.
Intellectual Property
We own or license patents in the U.S. and other countries. Our patents generally cover the design, formulation, manufacturing methods, and use of
our sustained release therapeutics, devices and technologies. For example, we own and/or license U.S. and foreign patents and patent applications for our
DURASERT® technology and our VERISOME® technology. In addition, we own U.S. and foreign patents and patent applications covering other
technologies, such as devices used to administer some of our products. Patents for individual products extend for varying periods according to the date of
patent filing or grant and legal term of patents in the various countries where patent protection is obtained. The actual protection afforded by a patent,
which can vary from country to country, depends upon the type of patent, the scope of its coverage, and the availability of legal remedies in the country.
Patent term
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extension may be available in various countries to compensate for a patent office delay or a regulatory delay in approval of the product.
The last expiring patent covering the vorolanib compound licensed to us by Equinox Science and used in EYP-1901 expires in September 2037,
but the Company has filed an additional patent application for EYP-1901 that, if issued, would extend coverage of EYP-1901 until at least 2041. In
addition, the Company has filed additional patent applications for technology relating to EYP-1901, that, if issued, could expire in 2043, and for a new
injector designed for administration of DURASERT®, that, if issued, could expire in 2042.
The acquired Aerpio patent portfolio now includes approximately 150 U.S. or ex-U.S. patents and pending applications that claim compositions
of matter, pharmaceutical compositions and/or methods of use for both small molecule and mono and bi-specific antibody inhibitors of the protein tyrosine
phosphatase (VE-PTP). One of the small molecules is razuprotafib. Some of the antibodies covered include both VE-PTP and VEGF binding domains. VE-
PTP is a negative Tie2 regulator that, when inhibited, can activate the Tie2 pathway leading to downstream signaling that promotes vascular health,
stability and decreases vascular permeability and inflammation associated with a number of posterior segment eye diseases. The patent claims for methods
of use relate primarily to disease indications where activation of Tie2 and associated vascular stabilization are potentially beneficial. The potential
expiration dates of the patents and applications in this portfolio range from 2027 to 2041. This date range is estimated and based on certain assumptions,
including that certain applications will be granted, all necessary fees will be paid and no terminal disclaimers or other limitations on expiration are required
for certain patents or applications.
The latest expiring U.S patent listed in the U.S. FDA Orange Book covering ILUVIEN® and YUTIQ® expires in August 2027 and the latest
expiring European counterpart expires in October 2024, although extensions have been obtained or applied for through May 2027 in various European
countries. The U.S. patent covering the YUTIQ® injector and administration with this injector expires in January 2028.
Our issued patents cover DEXYCU® until at least May 2034 and cover the injection dosing guides until at least June of 2039.
Human Capital Resources
To achieve our Company goals, it is critical to attract and retain top talent with experience in clinical development, regulatory, manufacturing and
other functional areas crucial to executing on our strategy. To facilitate talent attraction and retention, our Company ensures a safe and rewarding
workplace, providing opportunities for our employees to grow and develop in their careers. We offer compensation and incentives that include market-
competitive pay, equity grants, performance bonuses, healthcare benefits, retirement, and wellness programs, including paid time off and flexible work
schedules. We embrace our Company culture and strive to foster a collaborative, inclusive, and productive work environment.
As of February 29, 2024, we had 121 full-time employees all located in the United States. None of our employees are represented by a collective
bargaining agreement and none are represented by labor union. During fiscal 2023 our voluntary turnover rate was 7.6%, which is below the average
voluntary turnover rates for Boston-area biotech companies.
The success of our business is fundamentally connected to the well-being of our employees. Accordingly, we are committed to their health,
safety, and wellness. We provide our employees and their families with access to a variety of innovative, flexible and convenient health and wellness
programs, including benefits that provide protection and security so that they have peace of mind concerning events that may require time away from work,
or that impact their financial well-being. We support their physical and mental health by providing tools and resources to help them improve or maintain
their health status and encourage engagement in healthy behaviors. Depending on the nature of the work both remote and hybrid work arrangements are
available.
We also provide robust compensation to meet the needs of our employees. In addition to competitive base salaries, these programs include annual
discretionary bonuses, equity awards, a 401(k) plan and employer match, an employee stock purchase program, tax advantaged health savings and flexible
spending accounts, paid time off, family leave and flexible work schedules, among others. Our broad-based equity programs includes all employees. The
vesting conditions are set to facilitate the retention of employees with critical skills and experience and motivate employees to perform to the best of their
abilities, while we achieve our objectives.
In order to promote long-term retention and maximize the potential of our employees, we invest in their professional and personal development.
By offering needs-based supplemental training, management development and effective communications training our employee satisfaction scores have
increased. We survey our employees on a regular basis and report the results of those surveys back to management and our board of directors.
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As a company our success is rooted in the diversity of our teams and our commitment to inclusion. We value diversity at all levels and continue
to focus on extending our diversity and inclusion initiatives across our workforce – from working with managers to recruit diverse team members to the
advancement of leaders from different backgrounds.
Competition
The market for products treating eye diseases is highly competitive and is characterized by extensive research efforts and rapid technological
progress. Pharmaceutical, drug delivery, and biotechnology companies, as well as research organizations, governmental entities, universities, hospitals,
other nonprofit organizations, and individual scientists, have developed and are seeking to develop drugs, therapies, and novel delivery methods to treat
diseases targeted by our products and product candidates. Many of our competitors and potential competitors are larger, better established, more
experienced, and have substantially more resources than we or our partners have. Competitors may reach the market earlier, may have obtained or could
obtain patent protection that dominates or adversely affects our products and potential products, and may offer products with greater efficacy, lesser or
fewer side effects, and/or other competitive advantages. We believe that competition for treatments of eye diseases is based upon the effectiveness of the
treatment, side effects, time to market, reimbursement and price, reliability, ease of administration, dosing or injection frequency, patent position, and other
factors.
Many companies have or are pursuing products to treat eye diseases that are or would be competitive with EYP-1901 and other pipeline products.
Some of these products and product candidates include the following:
FDA-approved LUCENTIS® (ranibizumab), EYLEA® (aflibercept 2mg), EYLEA® HD (aflibercept 8mg), VABYSMO® (faricimab) and off-label
use of the cancer drug AVASTIN® (bevacizumab) are the leading treatments for wet AMD. Lucentis, Eylea, and Avastin are also used in the treatment of
DR and DME. There are also two FDA-approved Lucentis biosimilars mediations approved by the FDA.
In 2021, the FDA approved Susvimo, a first-of-its-kind port delivery system (PDS) with ranibizumab for the treatment of patients with wet AMD.
However, in the Fall of 2022, Susvimo was taken off the market by Genentech via a voluntary recall. In January 2022, the FDA approved VABYSMO®
(faricimab), a bispecific antibody Ang-2 and vascular endothelial growth factor-A inhibitor. Also in 2022, two ranibizumab biosimilars, Byooviz and
Cimerli entered the market. The FDA also approved Beovu® brolucizumab injection on October 8, 2019.
In August 2023, the FDA approved EYLEA® HD (aflibercept 8mg) for wet AMD, DME, and DR based on the pivotal PULSAR and PHOTON
trials in which EYLEA® HD demonstrated clinically equivalent vision gains to EYLEA® (aflibercept 2 mg) that were maintained with fewer injections.
In addition to FDA approved products, there are a number of investigational treatments in development including the following:
REGENXBIO Inc., Adverum Biotechnologies, Inc., 4D Molecular Therapeutics (4DMT), 4D Molecular Therapeutics (4DMT), as well as several
others in early development are developing gene therapy treatments for retinal diseases, such as wet AMD and DME. REGENXBIO is developing ABBV-
RGX-314, a gene therapy utilizing its NAV AAV8 vector containing a gene encoding for a monoclonal antibody fragment which inhibits VEGF. Adverum
is developing Ixo-vec (formerly ADVM-022), a gene therapy utilizing an AAV.7m8 vector containing a gene encoding for a protein that expresses
aflibercept. 4DMT is developing 4D-150 as an investigational genetic medicine using the intravitreal R100 vector for the treatment of neovascular age-
related macular degeneration (wet AMD) and diabetic macular edema (DME). 4D-150 is in the randomized Phase 2 stage of the Phase 1/2 PRISM study
for adults with wet AMD and in the Phase 2 SPECTRA study for adults with DME.
AXPAXLI (formerly OTX-TKI) – Ocular Therapeutix, Inc.
In February 2023, Ocular Therapeutix, Inc. (Ocular Therapeutix) presented 10-month data for OTX-TKI demonstrating a favorable safety and
efficacy profile in a controlled Phase 1 trial of patients that were measured dry at screening. OTX-TKI utilizes axitinib, a TKI, formulated in a hydrogel and
delivered through an intravitreal injection.
Ocular Therapeutix initiated the SOL trial and expects to enroll approximately 300 evaluable wet AMD subjects who are treatment naïve in the
study eye in the trial. The SOL trial is designed to be a multi-center, parallel-group trial. In February 2024, Ocular Therapeutix announced that it had
screened the first three subjects in the SOL trial in early 2024.
CLS-AX – Clearside Biomedical, Inc.
Clearside Biomedical, Inc. is developing CLS-AX (axitinib injectable suspension) for investigation in patients with neovascular wet AMD. A subset
of data was released in 2023 that appeared favorable. Clearside Biomedical announced that topline data results of their Phase 2b clinical trial are expected
in the third quarter of 2024.
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Tarcocimab Tedromer (formerly KSI-301) – Kodiak Sciences Inc.
Tarcocimab Tedromer is an investigational anti-VEGF therapy. In July 2023, Kodiak Sciences Inc. (Kodiak) announced its phase 3 wet AMD
GLEAM and GLIMMER studies did not meet their primary efficacy endpoints of showing non-inferior visual acuity gains for tarcocimab dosed every 8 to
24 weeks after 3 monthly loading doses compared to aflibercept.
In November 2023, Kodiak announced it was rebooting its Tarcocimab development program based on the strength of its phase 3 NPDR GLOW
study. In the study, six-month dosing of tarcocimab tedromer 5 mg in moderately severe to severe NPDR met its one-year primary endpoint. Kodiak plans
to conduct one additional NPDR pivotal study with a commercial formulation of tarcocimab.
OPT-302 - Opthea Limited
OPT-302 is an intravitreal agent that inhibits vascular endothelial growth factor-C and D. OPT-302 has been investigated in both DME and nAMD
patients in combination with IVI anti-vascular endothelial growth factor-A (anti-VEGF-A) therapy. In Opthea Limited's (Opthea) randomized, double-
masked, sham-controlled, phase 1b/2a trial, 153 patients with DME were treated with OPT-302 alone, in combination with intravitreal aflibercept
injections, or with aflibercept alone. OPT-302 and aflibercept combination therapy yielded the largest proportion of DME patients who gained ≥10 Early
Treatment Diabetic Retinopathy Study (ETDRS) letters from baseline to week 12.20 Opthea has initiated phase 3 trials for OPT-302 in combination with
and in comparison to ranibizumab and aflibercept for nAMD patients. According to Opthea, these trials are currently enrolling.
THR-149 – Oxurion NV
Plasma kallikrein (PKal) is independent of the VEGF pathway and is also thought to promote vascular permeability and neovascularization. THR-
149 is bicyclic peptide PKal inhibitor delivered via intravitreal injection currently in clinical trials for DME patients who demonstrated suboptimal
response to anti-VEGF therapy. KALAHARI is a 2-part, randomized, multicenter, phase 2 study that aims to assess the dosage levels of THR-149
intravitreal injection in addition to the efficacy and safety of THR-149 compared to aflibercept injections in 126 patients with DME. In May 2023, Oxurion
NV announced KALAHARI reached its enrollment target of 108 patients. At that time, Oxurion announced that it anticipated topline data in the fourth
quarter of 2023. Interim results presented in February 2022 revealed that over 80% of DME patients in the THR-149 high-dose arm gained ≥5 ETDRS
letters and 50% of patients gained >10 ETDRS letters four months after the final THR-149 injection. 24 central subfield thickness (CST) also remained
stable at the 6-month mark.
Integrins are transmembrane glycoprotein receptors that play a role in cell signaling, adhesion, migration, remodeling, and proliferation and are
thought to contribute to retinal pathology via modulation and integration of the VEGF and Ang/Tie2 pathways. Clinical trials exploring the efficacy of anti-
integrin therapy in DME are underway, including integrin inhibitors.
OCS-01 - Oculis Holding AG
OCS-01 1.5% ophthalmic suspension is a topical formulation of dexamethasone that utilizes novel solubilizing nanoparticle technology to enhance
bioavailability and durability of the dexamethasone solution. DIAMOND is a 2-stage, double-masked, randomized, multicenter phase 3 trial that will
evaluate the safety and efficacy of OCS-01 with 2 dosing regimens in comparison to vehicle alone in 482 DME patients for 52 weeks. In December 2023,
Oculis Holding AG announced the first patient first visit in phase 3 DIAMOND-1 trial of OCS-01 eye drop in diabetic macular edema.
UBX1325 – Unity Biotechnology, Inc.
UBX1325 is an inhibitor of Bcl-xl, a protein that senescent cells rely on for survival. UBX1325 demonstrated a favorable safety profile and
sustained improvements in visual acuity through 24 weeks in a phase 1 study of patients with advanced vascular eye disease.
In September, the company announced 48-week results from phase 2 ENVISION study of UBX1325 in patients with wet AMD. Patients on
combination treatment with UBX1325 and aflibercept from weeks 24-48 maintained vision gains achieved at week 24 on aflibercept alone. Then in
December 2023, Unity Biotechnology, Inc. announced the first patient dosed in phase 2 ASPIRE study of UBX1325 in DME with topline 16-week data
expected in the fourth quarter of 2024.
Government Regulation
We are subject to extensive regulation by the FDA and other federal, state, and local regulatory agencies. The Federal Food, Drug and Cosmetic Act
(the FD&C Act), and FDA’s implementing regulations set forth, among other things, requirements for the testing, development, manufacture, quality
control, safety, effectiveness, approval, labeling, storage, record-keeping, reporting, distribution, import, export, advertising, and promotion of our products
and product candidates. Although the discussion below
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focuses on regulation in the U.S., we currently out-license certain of our products and may seek approval for, and market, other products in other countries
in the future. Generally, our activities in other countries will be subject to regulation that is similar in nature and scope to that imposed in the U.S., although
there can be important differences. Additionally, some significant aspects of regulation in the EU are addressed in a centralized way through the EMA, and
the European Commission, but country-specific regulation remains essential in many respects. The process of obtaining regulatory marketing approvals
and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and
financial resources and may not be successful.
Development and Approval
Under the FD&C Act, FDA approval of an NDA is required before any new drug can be marketed in the U.S. NDAs require extensive studies and
submission of a large amount of data by the applicant.
Pre-clinical Testing. Before testing any compound in human patients in the U.S., a company must generate extensive pre-clinical data. Pre-clinical
testing generally includes laboratory evaluation of product chemistry and formulation, as well as toxicological and pharmacological studies in several
animal species to assess the toxicity and dosing of the product. Certain animal studies must be performed in compliance with the FDA’s Good Laboratory
Practice (GLP), regulations and the U.S. Department of Agriculture’s Animal Welfare Act.
Investigational New Drug (IND) Application. Human clinical trials in the U.S. cannot commence until an IND, application is submitted and
becomes effective. A company must submit pre-clinical testing results to the FDA as part of the IND, and the FDA must evaluate whether there is an
adequate basis for testing the drug in initial clinical studies in human volunteers. Unless the FDA raises concerns, the IND becomes effective 30 days
following its receipt by the FDA, and the clinical trial proposed in the IND may begin. Once human clinical trials have commenced, the FDA may stop a
clinical trial by placing it on “clinical hold” because of concerns about the safety of the product being tested, or for other reasons.
Clinical Trials. Clinical trials involve the administration of a drug to healthy human volunteers or to patients under the supervision of a qualified
investigator. The conduct of clinical trials is subject to extensive regulation, including compliance with the FDA’s bioresearch monitoring regulations and
Good Clinical Practice, or GCP, requirements, which establish standards for conducting, recording data from, and reporting the results of, clinical trials,
and are intended to assure that the data and reported results are credible and accurate, and that the rights, safety, and well-being of study participants are
protected. Clinical trials must be conducted under protocols that detail the study objectives, parameters for monitoring safety, and the efficacy criteria, if
any, to be evaluated. Each protocol is reviewed by the FDA as part of the IND. In addition, each clinical trial must be reviewed and approved by, and
conducted under the auspices of, an institutional review board (IRB), for each clinical site. Companies sponsoring the clinical trials, investigators, and IRBs
also must comply with, as applicable, regulations and guidelines for obtaining informed consent from the study patients, following the protocol and
investigational plan, adequately monitoring the clinical trial, and timely reporting of adverse events, or AEs. Foreign studies conducted under an IND must
meet the same requirements that apply to studies being conducted in the U.S. Data from a foreign study not conducted under an IND may be submitted in
support of an NDA if the study was conducted in accordance with GCP and the FDA is able to validate the data.
A study sponsor is required to publicly post specified details about certain clinical trials and clinical trial results on government or independent
websites (e.g., http://clinicaltrials.gov). Human clinical trials typically are conducted in three sequential phases, although the phases may overlap or be
combined:
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Phase 1 clinical trials involve the initial administration of the investigational drug to humans, typically to a small group of healthy human
subjects, but occasionally to a group of patients with the targeted disease or disorder. Phase 1 clinical trials generally are intended to evaluate
the safety, metabolism and pharmacologic actions of the drug, the side effects associated with increasing doses, and, if possible, to gain early
evidence of effectiveness.
Phase 2 clinical trials generally are controlled studies that involve a relatively small sample of the intended patient population and are designed
to develop initial data regarding the product’s effectiveness, to determine dose response and the optimal dose range, and to gather additional
information relating to safety and potential AEs.
Phase 3 clinical trials are conducted after preliminary evidence of effectiveness has been obtained and are intended to gather the additional
information about dosage, safety and effectiveness necessary to evaluate the drug’s overall risk-benefit profile, and to provide a basis for
regulatory approval. Generally, Phase 3 clinical development programs consist of expanded, large-scale studies of patients with the target
disease or disorder to obtain statistical evidence of the efficacy and safety of the drug at the proposed dosing regimen.
The sponsoring company, the FDA, or the IRB may suspend or terminate a clinical trial at any time on various grounds, including a finding that the
patients are being exposed to an unacceptable health risk. Further, success in early-stage clinical trials does
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not assure success in later-stage clinical trials. Data obtained from clinical activities are not always conclusive and may be subject to alternative
interpretations that could delay, limit or prevent regulatory approval.
NDA Submission and Review. The FD&C Act provides two pathways for the approval of new drugs through an NDA. An NDA under Section
505(b)(1) of the FD&C Act is a comprehensive application to support approval of a product candidate that includes, among other things, data and
information to demonstrate that the proposed drug is safe and effective for its proposed uses, that production methods are adequate to ensure its identity,
strength, quality, and purity of the drug, and that proposed labeling is appropriate and contains all necessary information. A 505(b)(1) NDA contains results
of the full set of pre-clinical studies and clinical trials conducted by or on behalf of the applicant to characterize and evaluate the product candidate.
Section 505(b)(2) of the FD&C Act provides an alternate regulatory pathway to obtain FDA approval that 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. The applicant may rely to some extent upon the FDA’s findings of safety and effectiveness for an approved product that acts as the
reference drug and submit its own product-specific data — which may include data from pre-clinical studies or clinical trials conducted by or on behalf of
the applicant — to address differences between the product candidate and the reference drug.
The submission of an NDA under either Section 505(b)(1) or Section 505(b)(2) generally requires payment of a substantial user fee to the FDA,
subject to certain limited deferrals, waivers and reductions. The FDA reviews applications to determine, among other things, whether a product is safe and
effective for its intended use and whether the manufacturing controls are adequate to assure and preserve the product’s identity, strength, quality, and purity.
For some NDAs, the FDA may convene an advisory committee to seek insights and recommendations on issues relevant to approval of the application.
Although the FDA is not bound by the recommendation of an advisory committee, the agency usually considers such recommendations carefully when
making decisions.
Our products and product candidates include products that combine drug and device components in a manner that meet the definition of a
"combination product" under FDA regulations. The FDA exercises significant discretion over the regulation of combination products, including the
discretion to require separate marketing applications for the drug and device components in a combination product. For YUTIQ®, FDA’s Center for Drug
Evaluation and Research (CDER) had primary jurisdiction for review of the NDA, and both the drug and device components were reviewed under one
marketing application. For a drug-device combination product for which CDER has primary jurisdiction, CDER typically consults with the Center for
Devices and Radiological Health in the NDA review process. Whether reviewed under one application or separately, both the drug and device components
of a drug-device combination product must satisfy the applicable regulatory requirements for marketing as if they were submitted for approval
independently.
The FDA may determine that a Risk Evaluation and Mitigation Strategy (REMS), is necessary to ensure that the benefits of a new product outweigh
its risks, and the product can therefore be approved. A REMS may include various elements, ranging from a medication guide or patient package insert to
limitations on who may prescribe or dispense the drug, depending on what the FDA considers necessary for the safe use of the drug. Under the Pediatric
Research Equity Act (PREA), certain applications for approval must also include an assessment, generally based on clinical study data, of the safety and
effectiveness of the subject drug in relevant pediatric populations.
Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured. 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.
The FDA conducts a preliminary review of a submitted NDA to ensure the application is sufficiently complete for substantive review. Once the
FDA accepts an NDA submission for filing — which occurs, if at all, within 60 days after submission of the NDA — the FDA’s goal for a non-priority
review of an NDA is ten months. The review process can be and often is significantly extended, however, by FDA requests for additional information,
studies, or clarification. The targeted action date can also be shortened to six months of the 60-day filing date for products that are granted priority review
designation because they are intended to treat serious or life-threatening conditions and demonstrate the potential to address unmet medical needs. 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.
After review of an NDA and the facilities where the product candidate is manufactured, the FDA either issues an approval letter or a complete
response letter (CRL), outlining the deficiencies in the submission. The CRL may require additional testing or information, including additional pre-clinical
or clinical data, for the FDA to reconsider the application. Even if such additional information and data are submitted, the FDA may decide that the NDA
still does not meet the standards for approval. Data from clinical trials are not always conclusive and the FDA may interpret data differently than the
sponsor. FDA approval of any application
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may include many delays or never be granted. If FDA grants approval, an approval letter authorizes commercial marketing of the product candidate with
specific prescribing information for specific indications.
Obtaining regulatory approval often takes a number of years, involves the expenditure of substantial resources, and depends on a number of factors,
including the severity of the disease in question, the availability of alternative treatments, and the risks and benefits demonstrated in clinical trials.
Additionally, as a condition of approval, the FDA may impose restrictions that could affect the commercial success of a drug or require post-approval
commitments, including the completion within a specified time period of additional clinical studies, which often are referred to as “Phase 4” or “post-
marketing” studies.
Post-approval modifications to the drug, such as changes in indications, labeling, or manufacturing processes or facilities, may require a sponsor to
develop additional data or conduct additional pre-clinical studies or clinical trials, to be submitted in a new or supplemental NDA, which would require
FDA approval.
Post-Approval Regulation
Once approved, drug products are subject to continuing regulation by the FDA. If ongoing regulatory requirements are not met, or if safety or
manufacturing problems occur after the product reaches the market, the FDA may at any time withdraw product approval or take actions that would limit or
suspend marketing. Additionally, the FDA may require post-marketing studies or clinical trials, changes to a product’s approved labeling, including the
addition of new warnings and contraindications, or the implementation of other risk management measures, including distribution-related restrictions, if
there are new safety information developments.
Good Manufacturing Practices. Companies engaged in manufacturing drug products or their components must comply with applicable cGMP
requirements and product-specific regulations enforced by the FDA and other regulatory agencies. Compliance with cGMP includes adhering to
requirements relating to organization and training of personnel, buildings and facilities, equipment, control of components and drug product containers and
closures, production and process controls, quality control and quality assurance, packaging and labeling controls, holding and distribution, laboratory
controls, and records and reports. The FDA regulates and inspects equipment, facilities, and processes used in manufacturing pharmaceutical products prior
to approval. If, after receiving approval, a company makes a material change in manufacturing equipment, location, or process (all of which are, to some
degree, incorporated in the NDA), additional regulatory review and approval may be required. The FDA also conducts regular, periodic visits to re-inspect
equipment, facilities, and processes following the initial approval of a product. Failure to comply with applicable cGMP requirements and conditions of
product approval may lead the FDA to take enforcement actions or seek sanctions, including fines, issuance of warning letters, civil penalties, injunctions,
suspension of manufacturing operations, operating restrictions, withdrawal of FDA approval, seizure or recall of products, and criminal prosecution.
Although we periodically monitor the FDA compliance of our third-party manufacturers, we cannot be certain that our present or future third-party
manufacturers will consistently comply with cGMP and other applicable FDA regulatory requirements.
In addition to cGMP requirements, drug-device combination products are also subject to certain additional manufacturing and safety reporting
regulations for devices. Specifically, the FDA requires that drug-device combination products comply with certain provisions of the Quality System
Regulation (QSR), which sets forth the FDA’s manufacturing quality standards for medical devices. In addition to drug safety reporting requirements, the
FDA also requires that we comply with some device safety reporting requirements for our drug-device combination product.
Advertising and Promotion. The FDA and other federal regulatory agencies closely regulate the marketing and promotion of drugs through, among
other things, standards and regulations for direct-to-consumer advertising, advertising and promotion to healthcare professionals, communications
regarding unapproved uses, industry-sponsored scientific and educational activities, and promotional activities involving the Internet. A product cannot be
promoted before it is approved. After approval, product promotion can include only those claims relating to safety and effectiveness that are consistent with
the labeling approved by the FDA. Healthcare providers are permitted to prescribe drugs for “off-label” uses — that is, uses not approved by the FDA and
not described in the product’s labeling — because the FDA does not regulate the practice of medicine. However, FDA regulations impose restrictions on
manufacturers’ communications regarding off-label uses. Broadly speaking, a manufacturer may not promote a drug for off-label use, but under certain
conditions may engage in non-promotional, balanced, scientific communication regarding off-label use. Failure to comply with applicable FDA
requirements and restrictions in this area may subject a company to adverse publicity and enforcement action by the FDA, the Department of Justice, or the
Office of the Inspector General of the Department of Health and Human Services, as well as state authorities. This could subject a company to a range of
penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a
company promotes or distributes a drug.
New Legislation. New legislation is passed periodically in Congress, or at the state level, that could significantly change the statutory provisions
governing the approval, manufacturing and marketing of products regulated by the FDA. For example, the Food and Drug Omnibus Reform Act, 2022,
enacted on December 29, 2022, confirms further authorities to FDA, such as:
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Enables R&D animal testing alternatives and allows earlier negotiation with payers during development;
Expands FDA authority during pre-approval inspection of clinical and non-clinical studies;
Builds on FDA’s framework governing accelerated approvals, including timing, conditions, and reporting for post-approval studies;
Addresses diversity in clinical trials with requirements of agreed diversity plan to implement major clinical studies; and
Confirms that contrast agents, radioactive drugs and over-the counter monographs drugs are drugs and not medical devices, restoring FDA’s
interpretation previously overturned by Genus Med. Techs. LLC v. FDA.
Further, FDA revises its regulations and guidance in light of new legislation in ways that may affect our business or products. It is impossible to
predict whether other changes to legislation, regulation, or guidance will be enacted, or what the impact of such changes, if any, may be.
Other Requirements. NDA holders must comply with other regulatory requirements, including submitting annual reports, reporting information
about adverse drug experiences, reporting marketing status notifications, and maintaining certain records.
Hatch-Waxman Act
The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, establishes two abbreviated approval pathways
for pharmaceutical products that are in some way follow-on versions of already approved products.
Generic Drugs. A generic version of an approved drug is approved by means of an abbreviated NDA, or ANDA, by which the sponsor demonstrates
that the proposed product is the same as the approved, brand-name drug, which is referred to as the reference listed drug (RLD). Generally, an ANDA must
contain data and information showing that the proposed generic product and RLD (i) have the same active ingredient, in the same strength and dosage
form, to be delivered via the same route of administration, (ii) are intended for the same uses, and (iii) are bioequivalent. This is instead of independently
demonstrating the proposed product’s safety and effectiveness, which are inferred from the fact that the product is the same as the RLD, which the FDA
previously found to be safe and effective.
505(b)(2) NDAs. As discussed previously, products may also be submitted for approval via an NDA under section 505(b)(2) of the FD&C Act.
Unlike an ANDA, this does not excuse the sponsor from demonstrating the proposed product’s safety and effectiveness. Rather, the sponsor is permitted to
rely to some degree on information from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right
of reference and must submit its own product-specific data of safety and effectiveness to an extent necessary because of the differences between the
products. An NDA approved under 505(b)(2) may in turn serve as an RLD for subsequent applications from other sponsors.
RLD Patents. In an NDA, a sponsor must identify patents that claim the drug substance or drug product or a method of using the drug. When the
drug is approved, those patents are among the information about the product that is listed in the FDA publication, Approved Drug Products with
Therapeutic Equivalence Evaluations, which is referred to as the Orange Book. The sponsor of an ANDA or 505(b)(2) application seeking to rely on an
approved product as the RLD must make one of several certifications regarding each listed patent. A “Paragraph I” certification is the sponsor’s statement
that patent information has not been filed for the RLD. A “Paragraph II” certification is the sponsor’s statement that the RLD’s patents have expired. A
“Paragraph III” certification is the sponsor’s statement that it will wait for the patent to expire before obtaining approval for its product. A “Paragraph IV”
certification is an assertion that the patent does not block approval of the later product, either because the patent is invalid or unenforceable or because the
patent, even if valid, is not infringed by the new product.
Regulatory Exclusivities. The Hatch-Waxman Act provides periods of regulatory exclusivity for products that would serve as RLDs for an ANDA or
505(b)(2) application. If a product is a “new chemical entity,” or NCE — generally meaning that the drug contains no active moiety that has been approved
by the FDA in any other NDA submitted under section 505(b) of the FD&C Act — there is a period of five years from the product’s approval during which
the FDA may not accept for filing any ANDA or 505(b)(2) application for a drug with the same active moiety. An ANDA or 505(b)(2) application may be
submitted after four years, however, if the sponsor of the application makes a Paragraph IV certification.
A product that is not an NCE may qualify for a three-year period of exclusivity if the NDA contains new clinical data (other than bioavailability
studies), derived from studies conducted by or for the sponsor, that were necessary for approval. In that instance, the exclusivity period does not preclude
filing or review of an ANDA or 505(b)(2) application; rather, the FDA is precluded from granting final approval to the ANDA or 505(b)(2) application
until three years after approval of the RLD. Additionally, the exclusivity applies only to the conditions of approval that required submission of the clinical
data.
Once the FDA accepts for filing an ANDA or 505(b)(2) application containing a Paragraph IV certification, the applicant must within 20 days
provide notice to the RLD NDA holder and patent owner that the application has been submitted and provide the
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factual and legal basis for the applicant’s assertion that the patent is invalid or not infringed. If the NDA holder or patent owner files suit against the ANDA
or 505(b)(2) applicant for patent infringement within 45 days of receiving the Paragraph IV notice, the FDA is prohibited from approving the ANDA or
505(b)(2) application for a period of 30 months or the resolution of the underlying suit, whichever is earlier. If the RLD has NCE exclusivity and the notice
is given and suit filed during the fifth year of exclusivity, the regulatory stay extends to 7.5 years after the RLD approval. The FDA may approve the
proposed product before the expiration of the regulatory stay if a court finds the patent invalid or not infringed or if the court shortens the period because
the parties have failed to cooperate in expediting the litigation.
Patent Term Restoration. A portion of the patent term lost during product development and FDA review of an NDA is restored if approval of the
application is the first permitted commercial marketing of a drug containing the active ingredient. The patent term restoration period is generally one-half
the time between the effective date of the IND or the date of patent grant (whichever is later) and the date of submission of the NDA, plus the time between
the date of submission of the NDA and the date of FDA approval of the product. The maximum period of restoration is five years, and the patent cannot be
extended to more than 14 years from the date of FDA approval of the product. Only one patent claiming each approved product is eligible for restoration
and the patent holder must apply for restoration within 60 days of approval. The U.S. Patent and Trademark Office (USPTO), in consultation with the FDA,
reviews and approves the application for patent term restoration.
European and Other International Government Regulation
In addition to regulations in the U.S., we are subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials
and any commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals
from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Some countries
outside of the U.S. have a similar process that requires the submission of a clinical trial application, or CTA, much like the IND prior to the commencement
of human clinical trials. In the EU, for example, similar to the FDA a CTA must be submitted for authorization to the competent national authority of each
EU Member State in which the clinical trial is to be conducted. Furthermore, the applicant may only start a clinical trial at a specific study site after the
competent ethics committee, much like the IRB, has issued a favorable opinion. Once the CTA is approved in accordance with the EU Clinical Trials
Directive 2001/20/EC (Clinical Trials Directive), and the related national implementing provisions of the relevant individual EU Member States’
requirements, clinical trial development may proceed.
In April 2014, the new Clinical Trials Regulation, (EU) No 536/2014, or Clinical Trials Regulation, was adopted. The Regulation entered into force
on January 31, 2022. The Clinical Trials Regulation is directly applicable in all the EU Member States, repealing the current Clinical Trials Directive. The
new Clinical Trials Regulation allowed parties to start and conduct a clinical trial in accordance with the Clinical Trials Directive during a transitional
period of one year which ended on January 31, 2023. Clinical trials authorized under the Clinical Trials Directive before January 31, 2023, can continue to
be conducted under the Clinical Trials Directive until January 31, 2025. An application to transition ongoing trials from the current Clinical Trials Directive
to the new Clinical Trials Regulation will need to be submitted and authorized in time before the end of the transitional period.
The new Clinical Trials Regulation is intended to simplify and streamline the approval of clinical trials in the EU. The main characteristics of the
regulation include: a streamlined application procedure through a single entry point, the Clinical Trials Information System (CTIS); a single set of
documents to be prepared and submitted for the application as well as simplified reporting procedures for clinical trial sponsors; and a harmonized
procedure for the assessment of applications for clinical trials, which is divided in two parts. The use of the CTIS became mandatory for new clinical trial
applications made in accordance with the Clinical Trials Regulation on January 31, 2023. Clinical trial sponsors can use CTIS to apply for authorization to
run a clinical trial in all 27 EU Member States and three of the four European Free Trade Association States, Iceland, Liechtenstein and Norway via a
single online application.
To obtain regulatory approval to commercialize a new drug under EU regulatory systems, we must submit a MAA, to the competent regulatory
authority. In the EU, marketing authorization for a medicinal product can be obtained through a centralized, mutual recognition, decentralized procedure, or
the national procedure of an individual EU Member State. A marketing authorization, irrespective of its route to authorization, may be granted only to an
applicant established in the EU.
The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid for all 27 EU
Member States and three of the four European Free Trade Association States, Iceland, Liechtenstein, and Norway. Under the centralized procedure, the
Committee for Medicinal Products for Human Use, or the CHMP, established at the EMA is responsible for conducting the initial assessment of a product.
The maximum timeframe for the evaluation of an MAA is 210 days. This period excludes clock stops during which additional information or written or
oral explanation is to be provided by the applicant in response to questions posed by the CHMP. Accelerated evaluation might be granted by the CHMP in
exceptional cases, when a medicinal product is expected to be of a major public health interest. A major public health interest defined by three cumulative
criteria: (i) the seriousness of the disease (for example, heavy disabling or life-threatening diseases) to be treated, (ii) the absence or insufficiency of
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an appropriate alternative therapeutic approach, and (iii) anticipation of high therapeutic benefit. If the CHMP accepts to review a medicinal product as a
major public health interest, the time limit of 210 days will be reduced to 150 days. It is, however, possible that the CHMP can revert to the standard time
limit for the centralized procedure if it considers that it is no longer appropriate to conduct an accelerated assessment.
Irrespective of the related procedure, at the completion of the review period the CHMP will provide a scientific opinion concerning whether or not a
marketing authorization should be granted in relation to a medicinal product. This opinion is based on a review of the quality, safety, and efficacy of the
product. Within 15 days of the adoption, the EMA will forward its opinion to the European Commission for its decision. Following the opinion of the
EMA, the European Commission makes a final decision to grant a centralized marketing authorization. The centralized procedure is mandatory for certain
types of medicinal products, including orphan medicinal products, medicinal products derived from certain biotechnological processes, advanced therapy
medicinal products and medicinal products containing a new active substance for the treatment of certain diseases. This route is optional for certain other
products, including medicinal products that are of significant therapeutic, scientific or technical innovation, or whose authorization would be in the interest
of public or animal health at EU level.
Unlike the centralized authorization procedure, the decentralized marketing authorization procedure requires a separate application to, and leads to
separate approval by, the competent authorities of each EU Member State in which the product is to be marketed. This application process is identical to the
application that would be submitted to the EMA for authorization through the centralized procedure and must be completed within 210 days, excluding
potential clock-stops, during which the applicant can respond to questions. The reference EU Member State prepares a draft assessment and drafts of the
related materials. The concerned EU Member States must decide whether to approve the assessment report and related materials. If a concerned EU
Member State cannot approve the assessment report and related materials due to concerns relating to a potential serious risk to public health, disputed
elements may be referred to the European Commission, whose decision is binding on all EU Member States.
The mutual recognition procedure is similarly based on the acceptance by the competent authorities of the EU Member States of the marketing
authorization of a medicinal product by the competent authorities of other EU Member States. The holder of a national marketing authorization may submit
an application to the competent authority of an EU Member State requesting that this authority recognize the marketing authorization delivered by the
competent authority of another EU Member State.
Marketing authorization holders are subject to comprehensive regulatory oversight by the EMA and the competent authorities of the individual EU
Member States both before and after grant of marketing authorization. This includes control of compliance by the entities with EU cGMP rules, which
govern quality control of the manufacturing process and require documentation policies and procedures.
For other countries outside of the EU, such as countries in Eastern Europe, Latin America, or Asia, the requirements governing the conduct of
clinical trials, product licensing, pricing, and reimbursement vary from country to country. Internationally, clinical trials are generally required to be
conducted in accordance with GCP, applicable regulatory requirements of each jurisdiction and the medical ethics principles that have their origin in the
Declaration of Helsinki.
Compliance
During all phases of development and in the post-market setting, failure to comply with applicable regulatory requirements may result in
administrative or judicial sanctions. These sanctions could include the FDA’s imposition of a clinical hold on trials, refusal to approve pending applications,
withdrawal of an approval, warning letters or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution,
product detention or refusal to permit the import or export of products, injunctions, fines, civil penalties or criminal prosecution. Third country authorities
can impose equivalent penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
Other Exclusivities
Pediatric Exclusivity. Section 505A of the FD&C Act provides for six months of additional exclusivity or patent protection 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 that the product is 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 FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or
Orange Book listed patent protection that cover the drug are extended by six months. This is not a patent term extension, but it effectively extends the
regulatory period during which the FDA cannot approve an ANDA or 505(b)(2) application owing to regulatory exclusivity or listed patents. When any
product is approved, we will evaluate seeking pediatric exclusivity as appropriate.
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In the EU, Regulation No 1901/2006 (Pediatric Regulation), requires that prior to obtaining a marketing authorization in the EU, applicants
demonstrate compliance with all measures included in an EMA, approved Pediatric Investigation Plan (PIP). This PIP covers all subsets in a pediatric
population, unless the EMA has granted either, a product-specific waiver, a class waiver, or a deferral for one or more of the measures included in the PIP.
Where all measures provided in the agreed PIP are completed, a six-month extension period of qualifying Supplementary Protection Certificates is granted.
Between May 2021 and July 2021, the European Commission organized a public consultation to revise, among others, the Pediatric Regulation, as part of
its Pharmaceutical Strategy for Europe.
Orphan Drug Exclusivity. The Orphan Drug Act provides incentives for the development of drugs intended to treat rare diseases or conditions,
which are diseases or conditions affecting less than 200,000 individuals in the U.S., or a disease or condition affecting more than 200,000 individuals in the
U.S. but there is no reasonable expectation that the cost of developing and making the drug product would be recovered from sales in the U.S. If a sponsor
demonstrates that a drug product qualifies for orphan drug designation, the FDA may grant orphan drug designation to the product for that use. The
benefits of orphan drug designation include research and development tax credits and exemption from user fees. A drug that is approved for the orphan
drug designated indication generally is granted seven years of orphan drug exclusivity. During that period, the FDA generally may not approve any other
application for the same product for the same indication, although there are exceptions, most notably when the later product is shown to be clinically
superior to the product with exclusivity. The FDA can revoke a product’s orphan drug exclusivity under certain circumstances, including when the product
sponsor is unable to assure the availability of sufficient quantities of the product to meet patient needs. Orphan drug exclusivity does not prevent the FDA
from approving a different drug for the same disease or condition, or the same biologic for a different disease or condition.
In the EU, medicinal products: (a) that are used to diagnose, treat or prevent life-threatening or chronically debilitating conditions that affect no
more than five in 10,000 people in the EU; or (b) that are used to treat or prevent life-threatening or chronically debilitating conditions and that, for
economic reasons, would be unlikely to be developed without incentives; and (c) where no satisfactory method of diagnosis, prevention or treatment of the
condition concerned exists, or, if such a method exists, the medicinal product would be of significant benefit to those affected by the condition, may be
granted an orphan designation in the EU. The application for orphan designation must be submitted to the EMA’s Committee for Orphan Medicinal
Products and approved by the European Commission before an application is made for marketing authorization for the product. Once authorized, orphan
medicinal product designation entitles an applicant to financial incentives such as reduction of fees or fee waivers. In addition, orphan medicinal products
are entitled to ten years of market exclusivity following authorization. During this ten-year period, with a limited number of exceptions, neither the
competent authorities of the EU Member States, the EMA, or the European Commission are permitted to accept applications or grant marketing
authorization for other similar medicinal products with the same therapeutic indication. However, marketing authorization may be granted to a similar
medicinal product with the same orphan indication during the ten-year period with the consent of the marketing authorization holder for the original orphan
medicinal product or if the manufacturer of the original orphan medicinal product is unable to supply sufficient quantities. Marketing authorization may
also be granted to a similar medicinal product with the same orphan indication if this latter product is safer, more effective or otherwise clinically superior
to the original orphan medicinal product. The period of market exclusivity may, in addition, be reduced to six years if it can be demonstrated on the basis of
available evidence that the original orphan medicinal product is sufficiently profitable not to justify maintenance of market exclusivity. On April 26, 2023,
the European Commission adopted its proposal for the revision of Regulation (EC) No 141/2000 on orphan medicinal products (OMP Regulation). Among
the changes proposed, the draft OMP Regulation reforms the validity of the orphan designation which will expire after seven years, amends the scope of
market exclusivity and introduces a new concept of modulated market exclusivity with orphan products addressing high unmet medical needs benefiting
from the longest market exclusivity of 10 years (with possible additional extensions), as well as introduces, among other changes, the power for the EMA
to propose new criteria for orphan designations. This proposal is currently being discussed and has not yet been adopted.
Data Exclusivity. In the EU, if a marketing authorization is granted for a medicinal product containing a new active substance, that product benefits
from eight years of data exclusivity, during which generic marketing authorization applications referring to the data of that product may not be accepted by
the regulatory authorities. The product also benefits from 10 years’ market exclusivity during which generic products, even if authorized, may not be
placed on the market. The overall ten-year period will be extended to a maximum of 11 years if, during the first eight years of those ten years, the
marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their
authorization, are held to bring a significant clinical benefit in comparison with existing therapies. On April 26, 2023, the European Commission adopted
its proposal for the revision of Regulation (EC) No 726/2004 laying down procedures for the authorization of medicinal products in the EU. Among the
changes, the proposal reduces the current data exclusivity period to a baseline 6-years. Additional regulatory data protection could be obtained upon
conditions, but with a maximum of 8-years data exclusivity. This proposal is currently being discussed and has not yet been adopted.
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U.S. Healthcare Reform
The Patient Protection and Affordable Care Act, as amended, which we refer to as the Affordable Care Act is a sweeping measure intended to
expand healthcare coverage within the U.S., primarily through the imposition of health insurance mandates on employers and individuals, the provision of
subsidies to eligible individuals enrolled in plans offered on the health insurance exchanges, and expansion of the Medicaid program. This law substantially
changed the way healthcare is financed by both governmental and private insurers and has significantly impacted the pharmaceutical industry. Changes that
may affect our business include those governing enrollment in federal healthcare programs, reimbursement changes, benefits for patients within a coverage
gap in the Medicare Part D prescription drug program (commonly known as the donut hole), rules regarding prescription drug benefits under the health
insurance exchanges, changes to the Medicaid Drug Rebate program, expansion of the Public Health Service Act’s 340B drug pricing discount program, or
340B program, fraud and abuse, and enforcement. The Affordable Care Act also requires pharmaceutical manufacturers of branded prescription drugs to
pay a branded prescription drug fee to the federal government. Each such manufacturer pays a prorated share of the branded prescription drug fee of $2.8
billion in 2019 and thereafter, based on the dollar value of its branded prescription drug sales to certain federal programs identified in the law. These
changes have impacted and will continue to impact existing government healthcare programs and have resulted in the development of new programs,
including Medicare payment for performance initiatives.
Some states have elected not to expand their Medicaid programs to individuals with an income of up to 133% of the federal poverty level, as is
permitted under the Affordable Care Act. For each state that does not choose to expand its Medicaid program, there may be fewer insured patients overall,
which could impact our sales of products and product candidates for which we receive regulatory approval, and our business and financial condition.
Where new patients receive insurance coverage under any of the new Medicaid options made available through the Affordable Care Act, the possibility
exists that manufacturers may be required to pay Medicaid rebates on drugs used under these circumstances, a decision that could impact manufacturer
revenues.
Certain provisions of the Affordable Care Act have been subject to judicial challenges as well as efforts to modify them or to alter their
interpretation and implementation. For example, Congress eliminated, starting January 1, 2019, the tax penalty for not complying with the Affordable Care
Act’s individual mandate to carry health insurance. Further, the Bipartisan Budget Act of 2018, among other things, amended the Medicare statute to
reduce the coverage gap in most Medicare drugs plans, commonly known as the “donut hole,” by raising the required manufacturer point-of-sale discount
from 50% to 70% off the negotiated price. The Inflation Reduction Act of 2022 (IRA) sunsets the existing coverage gap program and replaces it with a new
manufacturer discount program effective 2025. Additional legislative changes, regulatory changes, and judicial challenges related to the Affordable Care
Act remain possible, but the nature and extent of such potential changes or challenges are uncertain at this time. It is unclear how the Affordable Care Act
and its implementation, as well as efforts to modify or invalidate the Affordable Care Act, or portions thereof, or its implementation, will affect our
business, financial condition, and results of operations. It is possible that the Affordable Care Act, as currently enacted or as it may be amended in the
future, and other healthcare reform measures, including those that may be adopted in the future, could have a material adverse effect on our industry
generally and on our ability to maintain or increase sales of our products or product candidates for which we receive regulatory approval or to successfully
commercialize our products and product candidates.
Other legislative changes relating to reimbursement have been adopted in the U.S. since the Affordable Care Act was enacted. For example, the
Budget Control Act of 2011, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals for
spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction, which triggered the legislation’s automatic reductions. In
concert with subsequent legislation, this has resulted in aggregate reductions to Medicare payments to providers of, on average, 2% per fiscal year through
2031. Sequestration is currently set at 2% and will increase to 2.25% for the first half of fiscal year 2030, to 3% for the second half of fiscal year 2030, and
to 4% for the remainder of the sequestration period that lasts through the first six months of fiscal year 2031. As long as these cuts remain in effect, they
could adversely impact payment for any products we may commercialize in the future. We expect that additional federal healthcare reform measures will be
adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, and in turn
could significantly reduce the projected value of certain development projects and reduce our profitability.
Additional legislative changes, regulatory changes, or guidance could be adopted, which may impact the marketing approvals and reimbursement
for our product candidates. For example, there has been increasing legislative, regulatory, and enforcement interest in the United States with respect to drug
pricing practices. There have been several Congressional inquiries and proposed and enacted federal and state legislation and regulatory initiatives designed
to, among other things, bring more transparency to product pricing, evaluate the relationship between pricing and manufacturer patient programs, and
reform government healthcare program reimbursement methodologies for drug products. If healthcare policies intended to curb healthcare costs are
adopted or if we experience negative publicity with respect to pricing of our products or the pricing of pharmaceutical drugs generally, the prices that we
charge for any approved products may be limited, our commercial opportunity may be limited, and/or our revenues from sales of our products may be
negatively impacted.
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The IRA includes several drug pricing policies that are intended to reduce costs for the Medicare program and its beneficiaries, as well as a variety
of provisions on the environment and clean energy, corporate taxes, and other health care policies. The IRA contains a negotiation provision that requires
the Secretary of Health and Human Services to negotiate, with respect to Medicare units and subject to a specified cap, the price of a set number of high
Medicare spend drugs and biologicals per year starting in 2026. The IRA limits the negotiation eligibility for the 2026, 2027, and 2028 program years and
afford limited additional relief for “small biotech drugs” of certain small manufacturers which, among other things, represent a limited portion (as specified
in the text) of Medicare program spending. The IRA also penalizes manufacturers of certain Medicare Part B and D drugs for price increases above
inflation and makes several changes to the Medicare Part D benefit, including a limit on annual out-of-pocket costs, and a change in manufacturer liability
under the program.
Coverage and Reimbursement
Sales of any of our product candidates, if approved and once commercialized, depend, in part, on the extent to which the costs of the product will be
covered by Medicare and Medicaid, and private payors, such as commercial health insurers and managed care organizations. Third-party payors determine
which drugs they will cover and the amount of reimbursement they will provide for a covered drug. In the U.S., there is no uniform system among payors
for making coverage and reimbursement decisions. In addition, 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. Payors may limit
coverage to specific products on an approved list, or formulary, which might not include all of the FDA-approved products for a particular indication.
In order to secure coverage and reimbursement for our products, we may need to conduct expensive pharmacoeconomic studies in order to
demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costly studies required to obtain FDA or other comparable
regulatory approvals. Even if we conduct pharmacoeconomic studies, our products may not be considered medically necessary or cost-effective by payors.
Further, a payor’s decision to provide coverage for a product does not guarantee that an adequate reimbursement rate will be set, including because health
care providers (HCPs) negotiate their own reimbursement directly with commercial payors.
In the past, payors have implemented reimbursement metrics and periodically revised those metrics as well as the methodologies used as the basis
for reimbursement rates, such as ASP, average manufacturer price, or AMP, and actual acquisition cost. The existing data for reimbursement based on these
metrics is relatively limited, although certain states have begun to survey acquisition cost data for the purpose of setting Medicaid reimbursement rates.
CMS surveys and publishes retail pharmacy acquisition cost information in the form of National Average Drug Acquisition Cost files to provide state
Medicaid agencies with a basis of comparison for their own reimbursement and pricing methodologies and rates.
We have participated in and, if we obtain approval to commercialize additional products, we expect to participate in, and have certain price reporting
obligations to, the Medicaid Drug Rebate Program. This program requires us to pay a rebate for each unit of drug reimbursed by Medicaid. The amount of
the “basic” portion of the rebate for each product is set by law as the larger of: (i) 23.1% of quarterly AMP, or (ii) the difference between quarterly AMP
and the quarterly best price available from us to any commercial or non-governmental customer, or Best Price. AMP must be reported on a monthly and
quarterly basis and Best Price is reported on a quarterly basis only. In addition, the rebate also includes the “additional” portion, which adjusts the overall
rebate amount upward as an “inflation penalty” when the drug’s latest quarter’s AMP exceeds the drug’s AMP from the first full quarter of sales after
launch, adjusted for increases in the Consumer Price Index-Urban. The upward adjustment in the rebate amount per unit is equal to the excess amount of
the current AMP over the inflation-adjusted AMP from the first full quarter of sales. Rebates under the Medicaid Drug Rebate Program are no longer
subject to a cap as of January 1, 2024, which could increase our rebate liability. The rebate amount is computed each quarter based on our report to CMS of
current quarterly AMP and Best Price for our drug. We are required to report revisions to AMP or Best Price within a period not to exceed 12 quarters from
the quarter in which the data was originally due. Any such revisions could have the impact of increasing or decreasing our rebate liability for prior quarters,
depending on the direction of the revision. The Affordable Care Act made significant changes to the Medicaid Drug Rebate Program, and CMS issued a
final regulation to implement the changes to the Medicaid Drug Rebate program under the Affordable Care Act. CMS issued another final regulation that
modified existing Medicaid Drug Rebate Program regulations to permit reporting multiple Best Price figures with regard to value based purchasing
arrangements (beginning in 2022) and provided definitions for “line extension,” “new formulation,” and related terms with the practical effect of expanding
the scope of drugs considered to be line extensions (beginning in 2022). While the regulatory provisions that purported to affect the availability of the AMP
and Best Price exclusions of manufacturer-sponsored patient benefit programs in the context of pharmacy benefit manager “accumulator” programs were
invalidated by a court, accumulator, and other such programs may continue to negatively affect us in other ways.
Federal law requires that any manufacturer that participates in the Medicaid Drug Rebate Program also participate in the Public Health Service’s
340B drug pricing program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B program,
which is administered by the Health Resources and Services Administration, or HRSA, requires participating manufacturers to agree to charge statutorily
defined covered entities no more than the 340B “ceiling price” for
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the manufacturer’s covered outpatient drugs. These 340B covered entities include a variety of community health clinics and other entities that receive
health services grants from the Public Health Service, as well as hospitals that serve a disproportionate share of low-income patients. The 340B ceiling
price is calculated using a statutory formula, which is based on the AMP and rebate amount for the covered outpatient drug as calculated under the
Medicaid Drug Rebate Program. Any changes to the definition of AMP and the Medicaid rebate amount under the Affordable Care Act or other legislation
could affect our 340B ceiling price calculations and negatively impact our results of operations.
HRSA issued a final regulation regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers
that knowingly and intentionally overcharge covered entities, which became effective on January 1, 2019. It is currently unclear how HRSA will apply its
enforcement authority under this regulation. HRSA has also implemented a ceiling price reporting requirement related to the 340B program under which
we are required to report 340B ceiling prices to HRSA on a quarterly basis, and HRSA then publishes that information to covered entities. Moreover, under
a final regulation effective January 13, 2021, HRSA established an administrative dispute resolution (ADR), process for claims by covered entities that a
manufacturer has engaged in overcharging, and by manufacturers that a covered entity violated the prohibitions against diversion or duplicate discounts.
Such claims are to be resolved through an ADR panel of government officials rendering a decision that may be appealed to federal court. An ADR
proceeding could subject us to onerous procedural requirements and could result in additional liability. In addition, legislation may be introduced that, if
passed, would further expand the 340B program to additional covered entities or would require participating manufacturers to agree to provide 340B
discounted pricing on drugs used in an inpatient setting.
Federal law also requires that a company that participates in the Medicaid Drug Rebate program report ASP information each quarter to CMS for
certain categories of drugs that are paid under the Medicare Part B program. For calendar quarters beginning January 1, 2022, manufacturers are required to
report the average sales price for certain drugs under the Medicare program regardless of whether they participate in the Medicaid Drug Rebate Program.
Manufacturers calculate the ASP based on a statutorily defined formula as well as regulations and interpretations of the statute by CMS. CMS may use
these submissions to determine payment rates for drugs under Medicare Part B. Starting in 2023, manufacturers must pay refunds to Medicare for single
source drugs or biologicals, or biosimilar biological products, reimbursed under Medicare Part B and packaged in single-dose containers or single-use
packages, for units of discarded drug reimbursed by Medicare Part B in excess of 10 percent of total allowed charges under Medicare Part B for that drug.
Manufacturers that fail to pay refunds could be subject to civil monetary penalties of 125 percent of the refund amount. For more information about
Medicare Part B, refer to the risk factor entitled “Our products and product candidates, if approved and commercialized, may become subject to
unfavorable pricing regulations, third-party reimbursement practices, or healthcare reform initiatives which could harm our business” set forth under the
section titled “Risk Factors” in this Annual Report on Form 10-K.
Statutory or regulatory changes or CMS guidance could affect the pricing of our approved products, and could negatively affect our results of
operations. The IRA, which, among other things, requires the Secretary of Health and Human Services Secretary to negotiate, with respect to Medicare
units and subject to a specified cap, the price of a set number of certain high Medicare spend drugs and biologicals per year starting in 2026. The IRA
established a Medicare Part B inflation rebate scheme, under which, generally speaking, manufacturers will owe rebates if the average sales price of a Part
B drug increases faster than the pace of inflation. Failure to timely pay a Part B inflation rebate is subject to a civil monetary penalty. These or any other
public policy changes could impact the market conditions for our products. We further expect continued scrutiny on government price reporting and pricing
more generally from Congress, agencies, and other bodies. For more information about Medicare Part B, refer to the risk factor entitled “Our products and
product candidates, if approved and commercialized, may become subject to unfavorable pricing regulations, third-party reimbursement practices, or
healthcare reform initiatives which could harm our business” set forth under the section titled “Risk Factors” in this Annual Report on Form 10-K. In the
U.S. Medicare program, outpatient prescription drugs may be covered under Medicare Part D. Medicare Part D is a voluntary prescription drug benefit,
through which Medicare beneficiaries may enroll in prescription drug plans offered by private entities for coverage of outpatient prescription drugs. Part D
plans include both stand-alone prescription drug benefit plans and prescription drug coverage as a supplement to Medicare Advantage plans provided for
under Medicare Part C.
Coverage and reimbursement for covered outpatient drugs under Part D are not standardized. Part D prescription drug plan sponsors are not required
to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and at what tier or level.
Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee. Although Part D
prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, they have some flexibility to establish
those categories and classes and are not required to cover all of the drugs in each category or class. Medicare Part D prescription drug plans may use
formularies to limit the number of drugs that will be covered in any therapeutic class and/or impose differential cost sharing or other utilization
management techniques.
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Medicare Part D coverage may be available for any future product candidates for which we receive marketing approval and commercialize.
However, in order for the products that we market to be included on the formularies of Part D prescription drug plans, we likely will have to offer pricing
that is lower than the prices we might otherwise obtain. Changes to Medicare Part D that give plans more freedom to limit coverage or manage utilization,
and other cost reduction initiatives in the program, could decrease the coverage and price that we receive for any approved products and could seriously
harm our business.
In addition, manufacturers are currently required to provide to CMS a 70% discount on brand name prescription drugs utilized by Medicare Part D
beneficiaries when those beneficiaries are in the coverage gap phase of the Part D benefit design. The IRA sunsets the coverage gap discount program
starting in 2025 and replaces it with a new manufacturer discount program and makes other reforms to the Part D benefit, which could increase our liability
under Part D. Further, the IRA establishes a Medicare Part D inflation rebate scheme, under which, generally speaking, manufacturers will owe additional
rebates if the AMP of a Part D drug increases faster than the pace of inflation. Failure to timely pay a Part D inflation rebate is subject to a civil monetary
penalty.
In order to be eligible to have our products paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by certain
federal agencies and grantees, we must participate in the U.S. Department of Veterans Affairs, (VA), Federal Supply Schedule, (FSS), pricing program.
Under this program, we are obligated to make our “innovator” drugs available for procurement on an FSS contract and charge a price to four federal
agencies — the VA, U.S. Department of Defense, (DoD), Public Health Service and U.S. Coast Guard — that is no higher than the statutory Federal
Ceiling Price, (FCP). The FCP is based on the non-federal average manufacturer price, (Non-FAMP), which we calculate and report to the VA on a
quarterly and annual basis. We also may participate in the Tricare Retail Pharmacy program, under which we would pay quarterly rebates on utilization of
innovator products that are dispensed through the Tricare Retail Pharmacy network to Tricare beneficiaries. The rebates are calculated as the difference
between the annual Non-FAMP and FCP.
Pricing and rebate calculations vary across products and programs, are complex, and are often subject to interpretation by us, governmental or
regulatory agencies, and the courts. We could be held liable for errors associated with our submission of pricing data. In addition to retroactive Medicaid
rebates and the potential for issuing 340B program refunds, if we are found to have knowingly submitted false AMP, Best Price, or Non-FAMP information
to the government, we may be liable for significant civil monetary penalties per item of false information. If we are found to have made a misrepresentation
in the reporting of our ASP, the Medicare statute provides for significant civil monetary penalties for each misrepresentation for each day in which the
misrepresentation was applied. Our failure to submit monthly/quarterly AMP and Best Price data on a timely basis could result in a significant civil
monetary penalty per day for each day the information is late beyond the due date. Such conduct also could be grounds for CMS to terminate our Medicaid
drug rebate agreement, in which case federal payments may not be available under Medicaid or Medicare Part B for our covered outpatient drugs.
Significant civil monetary penalties also could apply to late submissions of Non-FAMP information. Civil monetary penalties could also be applied if we
are found to have charged 340B covered entities more than the statutorily mandated ceiling price or HRSA could terminate our agreement to participate in
the 340B program, in which case federal payments may not be available under Medicaid or Medicare Part B for our covered outpatient drugs. In addition,
claims submitted to federally-funded healthcare programs, such as Medicare and Medicaid, for drugs priced based on incorrect pricing data provided by a
manufacturer can implicate the federal civil False Claims Act. Civil monetary penalties could be due if we fail to offer discounts to beneficiaries under the
Medicare Part D coverage gap discount program. Furthermore, under the refund program for discarded drugs, manufacturers that fail to pay refunds could
be subject to civil monetary penalties of 125 percent of the refund amount.
The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of drugs have been a focus in
this effort. The U.S. government, state legislatures, and foreign governments 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. For example, there have been several recent U.S. Congressional inquiries and proposed federal and state
legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient
programs, reduce the cost of drugs, and reform government program reimbursement methodologies for drug products.
There likely will continue to be proposals by legislators at both the federal and state levels, regulators, and third-party payors to contain healthcare
costs. Thus, even if we obtain favorable coverage and reimbursement status for our products and any product candidates for which we receive regulatory
approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Different pricing and reimbursement schemes exist in other countries. In the EU, each EU Member State can restrict the range of medicinal products
for which its national health insurance system provides reimbursement and can control the prices of medicinal products for human use marketed on its
territory. As a result, following receipt of marketing authorization in an EU Member State, through any application route, the applicant is required to
engage in pricing discussions and negotiations with the competent pricing authority in the individual EU Member State. The governments of the EU
Member States influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national healthcare systems that
fund a large part of the cost of
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those products to consumers. Some EU Member States operate positive and negative list systems under which products may only be marketed once a
reimbursement price has been agreed upon. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical
trials that compare the cost-effectiveness of a particular product candidate to currently available therapies. Other EU Member States allow companies to fix
their own prices for medicines but monitor and control company profits. Others adopt a system of reference pricing, basing the price or reimbursement
level in their territories either on the pricing and reimbursement levels in other countries or on the pricing and reimbursement levels of medicinal products
intended for the same therapeutic indication. Further, some EU Member States approve a specific price for the medicinal product or may instead adopt a
system of direct or indirect controls on the profitability of the company placing the medicinal on the market. The downward pressure on healthcare costs in
general, particularly prescription drugs, has become more intense. As a result, increasingly high barriers are being erected to the entry of new products. In
addition, we may face competition for our product candidates from lower-priced products in foreign countries that have placed price controls on
pharmaceutical products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a
country.
Health Technology Assessment, or HTA, of medicinal products, however, is becoming an increasingly common part of the pricing and
reimbursement procedures in some EU Member States. These EU Member States include France, Germany, Ireland, Italy, and Sweden. HTA is the
procedure according to which the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given
medicinal product in the national healthcare systems of the individual country is conducted. HTA generally focuses on the clinical efficacy and
effectiveness, safety, cost, and cost-effectiveness of individual medicinal products as well as their potential implications for the healthcare system. Those
elements of medicinal products are compared with other treatment options available on the market.
The outcome of HTA regarding specific medicinal products will often influence the pricing and reimbursement status granted to these medicinal
products by the competent authorities of individual EU Member States. The extent to which pricing and reimbursement decisions are influenced by the
HTA of the specific medicinal product varies between EU Member States.
In addition, pursuant to Directive 2011/24/EU on the application of patients’ rights in cross-border healthcare, a voluntary network of national
authorities or bodies responsible for HTA in the individual EU Member States was established. The purpose of the network is to facilitate and support the
exchange of scientific information concerning HTAs. This may lead to harmonization of the criteria taken into account in the conduct of HTAs between EU
Member States and in pricing and reimbursement decisions and may negatively affect price in at least some EU Member States.
On January 31, 2018, the European Commission adopted a proposal for an HTA Regulation intended to set out an EU-wide framework for HTA and
boost cooperation among EU Member States in assessing health technologies, including new medicinal products. The HTA Regulation provides the basis
for permanent and sustainable cooperation at the EU level for joint clinical assessments in these areas and is therefore complementary to Directive
2011/24/EU. The HTA Regulation was finally adopted on December 13, 2021, and entered into force on January 11, 2022. The HTA Regulation will apply
to all EU Member States from January 12, 2025.
The HTA Regulation provides that EU Member States will be able to use common HTA tools, methodologies, and procedures across the EU.
Individual EU Member States will continue to be responsible for drawing conclusions on the overall value of a new health technology for their healthcare
system, and pricing and reimbursement decisions.
Healthcare Fraud and Abuse Laws
In addition to FDA restrictions on marketing of pharmaceutical products, if and when we commercialize our product candidates, our relationship
with customers and third party payors will be subject to applicable anti-kickback, fraud and abuse, and other laws and regulations. These laws include, but
are not limited to the following:
The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration,
directly or indirectly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or
order of any healthcare item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federally financed healthcare programs. This
statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary
managers on the other. A violation of the Anti-Kickback Statute may be established without proving actual knowledge of the statute or specific intent to
violate it. The government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a
false or fraudulent claim for purposes of the federal civil False Claims Act.
The federal civil False Claims Act prohibits any person from, among other things, knowingly presenting, or causing to be presented, a false or
fraudulent claim for payment of government funds, or knowingly making, using, or causing to be made or used, a false record or statement material to an
obligation to pay money to the government or knowingly concealing or knowingly and
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improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government. Actions under the False Claims Act may be brought
by private individuals known as qui tam relators in the name of the government and to share in any monetary recovery.
The Health Insurance Portability and Accountability Act of 1996 and its implementing regulations (collectively HIPAA) prohibits, among other
things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payors. HIPAA also prohibits
knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or
representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or
entry in connection with the delivery of or payment for healthcare benefits, items or services. We may obtain health information from third parties that are
subject to privacy and security requirements under HIPAA and we could potentially be subject to criminal penalties if we, our affiliates, or our agents
knowingly obtain individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by
HIPAA.
The majority of states also have statutes or regulations similar to the federal anti-kickback and false claims laws, which apply to items and services
reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Several states now require pharmaceutical
companies to report expenses relating to the marketing and promotion of pharmaceutical products in those states and to report gifts and payments to
individual HCPs in those states. Some of these states also prohibit certain marketing-related activities including the provision of gifts, meals, or other items
to certain HCPs. Other states have laws requiring pharmaceutical sales representatives to be registered or licensed, and still others impose limits on co-pay
assistance that pharmaceutical companies can offer to patients. In addition, several states require pharmaceutical companies to implement compliance
programs or marketing codes.
The Physician Payments Sunshine Act, implemented as the Open Payments program, and its implementing regulations, requires manufacturers of
drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with
certain exceptions) to report annually to CMS information related to direct or indirect payments and other transfers of value to physicians, physician
assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, certified nurse-midwives, and teaching hospitals, as well as ownership
and investment interests held in the company by physicians and their immediate family members. Many of the non-U.S. jurisdictions where we operate
also have equivalent laws requiring us to report transfers of value to healthcare professionals.
Compliance with such laws and regulations will require substantial resources. Because of the breadth of these various fraud and abuse laws, it is
possible that some of our business activities could be subject to challenge under one or more of such laws. Such a challenge could have material adverse
effects on our business, financial condition and results of operations. In the event governmental authorities conclude that our business practices do not
comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations, they may
impose sanctions under these laws, which are potentially significant and may include civil monetary penalties, damages, exclusion of an entity or
individual from participation in government health care programs, criminal fines and imprisonment, additional reporting requirements if we become subject
to a corporate integrity agreement or other settlement to resolve allegations of violations of these laws, as well as the potential curtailment or restructuring
of our operations. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure
of significant resources and generate negative publicity.
Healthcare Privacy Laws
We may be subject to federal, state, and foreign laws and regulations governing data privacy and security of health information, and the collection,
use, disclosure, and protection of health-related and other personal information, including state data breach notification laws, state health information
and/or genetic privacy laws, and federal and state consumer protection laws, such as Section 5 of the FTC Act, many of which differ from each other in
significant ways, thus complicating compliance efforts. Compliance with these laws is difficult, constantly evolving, and time consuming. Many of these
state laws enable a state attorney general to bring actions and provide private rights of action to consumers as enforcement mechanisms. There is also
heightened sensitivity around certain types of health information, such as sensitive condition information or the health information of minors, which may
be subject to additional protections. Federal regulators, state attorneys general, and plaintiffs’ attorneys, including class action attorneys, have been and will
likely continue to be active in this space.
The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and
data protection issues which may affect our business. Failure to comply with these laws and regulations could result in government enforcement actions
and create liability for us (including the imposition of significant civil and/or criminal penalties), private litigation and/or adverse publicity that could
negatively affect our business. We may obtain health information from third parties, such as HCPs who prescribe our products, and research institutions we
collaborate with, who are subject to privacy and security requirements under HIPAA. Although we are not directly subject to HIPAA, other than potentially
with respect to providing
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certain employee benefits, we could be subject to criminal penalties if we or our affiliates or agents knowingly obtain individually identifiable health
information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.
In California, the California Consumer Privacy Act (CCPA) establishes certain requirements for data use and sharing transparency and provides
California consumers (as defined in the law) certain rights concerning the use, disclosure, and retention of their personal data. In November 2020,
California voters approved the California Privacy Rights Act (CPRA) ballot initiative which introduced significant amendments to the CCPA and
established and funded a dedicated California privacy regulator, the California Privacy Protection Agency (CPPA). The amendments introduced by the
CPRA went effect on January 1, 2023, and new implementing regulations continue to be introduced by the CPPA. Failure to comply with the CCPA may
result in, among other things, significant civil penalties and injunctive relief, or statutory or actual damages. In addition, California residents have the right
to bring a private right of action in connection with certain types of incidents. These claims may result in significant liability and damages. Similarly, there
are a number of legislative proposals in the EU, the United States, at both the federal and state level, as well as other jurisdictions that could impose new
obligations or limitations in areas affecting our business. For example, other states, including Virginia, Colorado, Utah, Indiana, Iowa, Tennessee, Montana,
Texas, and Connecticut have enacted privacy laws similar to the CCPA that impose new obligations or limitations in areas affecting our business and we
continue to assess the impact of these state legislation, on our business as additional information and guidance becomes available. In addition, some
countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar
requirements that could increase the cost and complexity of delivering our services and research activities. These laws and regulations are evolving and
subject to interpretation, and may impose limitations on our activities or otherwise adversely affect our business. The obligations to comply with the CCPA
and evolving legislation may require us, among other things, to update our notices and develop new processes internally and with our partners. In addition,
we could be subject to regulatory actions and/or claims made by individuals and groups in private litigation involving privacy issues related to data
collection and use practices and other data privacy laws and regulations, including claims for misuse or inappropriate disclosure of data, as well as unfair or
deceptive acts or practices in violation of Section 5(a) of the Federal Trade Commission Act (FTC Act). The FTC expects a company’s data security
measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business,
and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that
merits stronger safeguards. With respect to privacy, the FTC also sets expectations that companies honor the privacy promises made to individuals about
how the company handles consumers’ personal information; any failure to honor promises, such as the statements made in a privacy policy or on a website,
may also constitute unfair or deceptive acts or practices in violation of the FTC Act. While we do not intend to engage in unfair or deceptive acts or
practices, the FTC has the power to enforce promises as it interprets them, and events that we cannot fully control, such as data breaches, may be result in
FTC enforcement. Enforcement by the FTC under the FTC Act can result in civil penalties or decades-long enforcement actions. These laws and
regulations, as well as any associated claims, inquiries, or investigations or any other government actions may lead to unfavorable outcomes including
increased compliance costs, delays or impediments in the development of new products, negative publicity, increased operating costs, diversion of
management time and attention, and remedies that harm our business, including fines or demands or orders that we modify or cease existing business
practices.
Outside the U.S., the legislative and regulatory landscape for privacy and data security continues to evolve. There has been increased attention to
privacy and data security issues that could potentially affect our business, including the EU General Data Protection Regulation including as implemented
in the UK (collectively, GDPR), which imposes penalties for the most serious breaches of up to EUR 20 million or 4% of a noncompliant company’s
annual global revenue, whichever is greater. The GDPR regulates the processing of personal data (including health data from clinical trials) and places
certain obligations on the processing of such personal data including ensuring the lawfulness of processing personal data (including obtaining valid consent
of the individuals to whom the personal data relates, where applicable), the processing details disclosed to the individuals, the adequacy, relevance and
necessity of the personal data collected, the retention of personal data collected, the sharing of personal data with third parties, the transfer of personal data
out of the European Economic Area/UK to third countries including the U.S., contracting requirements (such as with clinical trial sites and vendors), the
use of personal data in accordance with individual rights, the security of personal data and security breach/incident notifications. Data protection authorities
from the different European Member States and the UK may interpret the GDPR and applicable related national laws differently and impose requirements
additional to those provided in the GDPR and that sit alongside the GDPR, as set out under applicable local data protection law. In addition, guidance on
implementation and compliance practices may be issued, updated or otherwise revised. Enforcement by European and UK regulators is generally active,
and failure to comply with the GDPR or applicable Member State/UK local law may result in fines, amongst other things (such as notices requiring
compliance within a certain timeframe). Further, the UK Government may amend/update UK data protection law, which may result in changes to our
business operations and potentially incur commercial cost.
European/UK data protection laws, including the GDPR, generally restrict the transfer of personal data from the European Economic Area (EEA),
including the EU, United Kingdom and Switzerland, to the U.S. and most other countries (except those deemed to be adequate by the European
Commission/UK Secretary of State as applicable) unless the parties to the transfer have implemented specific safeguards to protect the transferred personal
data. On July 10, 2023, the European Commission adopted its
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adequacy decision for the EU-U.S. Data Privacy Framework, meaning that personal data can now flow freely from the E.U. to U.S. companies that
participate in the Data Privacy Framework. There are also recent developments regarding data transfers in the UK, which formally approved two
mechanisms for transferring UK data overseas and that came into force on March 21, 2022: the International Data Transfer Agreement or the International
Data Transfer Addendum to the SCCs. The UK Information Commissioner’s Office also issued guidance on how to approach undertaking risk assessments
for transfers of UK data to non-adequate countries outside the UK.
A lack of valid transfer mechanisms for GDPR-covered data could increase exposure to enforcement actions as described above, and may affect our
business operations and require commercial cost (including potentially limiting our ability to collaborate/work with certain third parties and/or requiring an
increase in our data processing capabilities in the EU/UK). Further, the European/UK data protection laws (including laws on data transfers as set out
above) may also be updated/revised, accompanied by new guidance and/or judicial/regulatory interpretations, which could entail further impacts on our
compliance efforts and increased cost.
Foreign Corrupt Practices Act
In addition, the U.S. Foreign Corrupt Practices Act of 1977, as amended, (FCPA), prohibits corporations and individuals from engaging in certain
activities to obtain or retain business or to influence a person working in an official capacity. It is illegal to pay, offer to pay or authorize the payment of
anything of value to any official of another country, government staff member, political party or political candidate in an attempt to obtain or retain
business or to otherwise influence a person working in that capacity.
Corporate Information
We were incorporated under the laws of the state of Delaware on March 19, 2008, under the name New pSivida, Inc. Our predecessor, pSivida
Limited, was formed in December 2000 as an Australian company incorporated in Western Australia. We subsequently changed our name to pSivida Corp.
in May 2008 and again to EyePoint Pharmaceuticals, Inc. in March 2018. Our principal executive office is located at 480 Pleasant Street, Suite C400,
Watertown, Massachusetts 02472, and our telephone number is (617) 926-5000.
Additional Information
Our website address is www.eyepointpharma.com. Information contained on, or connected to, our website is not incorporated by reference into this
Annual Report on Form 10-K. Copies of this Annual Report on Form 10-K, and our annual reports on Form 10-K, proxy statements, quarterly reports on
Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, are available free of charge through our website under “Investors – Financial Information – SEC Filings” as
soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the SEC. The SEC maintains an Internet site
that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.
ITEM 1A. RISK FACTORS
RISKS RELATED TO OUR FINANCIAL POSITION AND OUR CAPITAL RESOURCES
We will likely need additional capital to fund our operations. If we are unable to obtain sufficient capital, we will need to curtail and reduce our
operations and costs and modify our business strategy.
Our operations have consumed substantial amounts of cash. We are currently financing our operations through the sale of capital stock, the receipt
of license fees, milestone payments, and revenues from our sales of YUTIQ® and DEXYCU® to our commercialization partners. We are developing EYP-
1901 as a potential six-month sustained delivery treatment for wet AMD as well a treatment for non-proliferative diabetic retinopathy (NPDR), and diabetic
macular edema (DME). However, we have no expectation of revenues from our research and development programs, including EYP-1901, prior to the
successful completion of clinical trials for such programs. Therefore, we have no sufficient historical evidence to assert that it is probable that we will
receive sufficient revenues from our product sales to fund operations. As of December 31, 2023, our cash, cash equivalents, and investments in marketable
securities totaled $331.0 million. We believe that our cash, cash equivalents and investments in marketable securities, combined with anticipated net cash
inflows from net product sales, will fund our operating plan through topline data for the Phase 3 wet AMD clinical trials related to EYP-1901 into 2026,
under current expectations regarding the timing and outcomes of our Phase 3 clinical trial for EYP-1901 for the treatment of wet AMD, and through Phase
2 clinical trials for the treatment of NPDR and DME. Due to the difficulty and uncertainty associated with the design and implementation of clinical trials,
we will continue to assess our cash, cash equivalents, results from investments in marketable securities and future funding requirements. However, there is
no assurance that additional funding will be achieved and that we will succeed in our future operations. Actual cash requirements could differ from our
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projections due to many factors, including, the timing and results of our Phase 2 and Phase 3 clinical trials for EYP-1901, additional investments in
research and development programs such as EYP-2301, the costs associated with the ongoing efforts for responding to the subpoena from the U.S.
Attorney’s Office for the District of Massachusetts (DOJ) seeking production of documents related to sales, marketing and promotional practices, including
as pertain to DEXYCU® (DOJ Subpoena), higher interest rates, inflation, supply shortages, competing technological and market developments, and the
costs of any strategic acquisitions and/or development of complementary business opportunities.
If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will need to curtail and reduce our operations and
costs, and modify our business strategy, which may require us to, among other things:
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significantly delay, scale back or discontinue the development of one or more of our product candidates or one or more of our other research
and development initiatives;
seek partners or collaborators for one or more of our product candidates at an earlier stage than otherwise would be desirable or on terms that
are less favorable than might otherwise be available;
sell or license on unfavorable terms our rights to one or more of our technologies or product candidates that we otherwise would seek to
develop or commercialize ourselves; and/or
seek to sell our company at an earlier stage than would otherwise be desirable or on terms that are less favorable than might otherwise be
available.
We have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable future.
We have incurred significant losses since our inception and are not profitable. Investment in drug development is highly speculative because it
entails substantial upfront operating expenses and significant risk that a product candidate will fail to successfully complete clinical trials, gain regulatory
approval or become commercially viable. We continue to incur significant operating expenses due primarily to investments in clinical trials, sales and
marketing infrastructure, research and development, and other expenses related to our ongoing operations. For the years ended December 31, 2023 and
2022, we had losses from operations of $75.1 million and $99.6 million, respectively, and net losses of $70.8 million and $102.3 million, respectively, and
we had a total accumulated deficit of $742.1 million at December 31, 2023.
We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will continue to
be significant if, and as, we:
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continue the research and pre-clinical and clinical development of our product candidates, including EYP-1901 and EYP-2301;
initiate additional pre-clinical studies, clinical trials, or other studies or trials for EYP-1901, EYP-2301, and our other product candidates;
add additional operational, financial and management information systems, and personnel, including personnel to support our development and
commercialization planning efforts;
continue to perform tasks associated with the ongoing DOJ Subpoena;
hire additional commercial, clinical, manufacturing and scientific personnel, and engage third party commercial, clinical and manufacturing
organizations;
further develop the manufacturing process for our product candidates;
change or add additional manufacturers or suppliers;
seek regulatory approvals for our product candidates that successfully complete clinical trials;
seek to identify and validate additional product candidates;
acquire or in-license other products, product candidates, and technologies;
maintain, protect, and expand our intellectual property portfolio;
create additional infrastructure to support our product development and planned future commercial sale efforts; and
experience any delays or encounter issues with any of the above.
We may never achieve profitability from future operations.
Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully
complete the development of, and obtain the regulatory approvals necessary for, the manufacture and commercialization of our product candidates,
including EYP-1901. To become and remain profitable, we must succeed in developing and commercializing products that generate significant revenue.
This will require us to be successful in a range of challenging activities, including completing pre-clinical testing and clinical trials of our product
candidates, discovering additional product candidates, obtaining regulatory approval for these product candidates, manufacturing, marketing, and selling
any products for which we or our
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licensees may obtain regulatory approval, satisfying any post-marketing requirements and obtaining reimbursement for our products from private insurance
or government payors. We do not know the extent to which any of our product candidates, including EYP-1901, if approved, will generate significant
revenue for us, if at all. We may never succeed in these activities and, even if we do, we may never generate revenues significant enough to achieve
profitability. Because of the numerous risks and uncertainties associated with pharmaceutical product development and commercialization, we are unable to
accurately project when or if we will be able to achieve profitability from operations. Even if we do so, we may not be able to sustain or increase
profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our
ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings, or even continue our
operations. Our ability to generate revenue from our future products and product candidates will depend on a number of factors, including:
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the effectiveness and timeliness of our preclinical studies and clinical trials, and the usefulness of the data;
our ability to create an effective commercial infrastructure and enter into, and maintain, agreements for the commercialization of EYP-1901
and our other product candidates;
the size of the markets in the territories for which we gain regulatory approval;
our ability to develop our commercial organization capable of sales, marketing, and distribution for any of our product candidates for which we
may obtain marketing approval;
our ability to manufacture clinical and commercial supply of our products and product candidates;
our ability to enter into and maintain commercially reasonable agreements with wholesalers, distributors, and other third parties in our supply
chain;
the sufficiency of our existing cash resources until we present topline data for the EYP-1901 Phase 3 clinical trials into 2026;
our access to needed capital;
our success in establishing a commercially viable price for our product candidates;
our ability to manufacture commercial quantities of our product candidates at acceptable cost levels; and
our ability to obtain coverage and adequate reimbursement from third parties, including government payors.
We received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking production of documents related to sales, marketing
and promotional practices, including as pertain to DEXYCU®. If the DOJ commences an action against us, the action could have a material adverse
effect on our business, financial condition, results of operations, and cash flows. In addition, we have expended and expect to continue to expend
significant financial and managerial resources responding to the DOJ subpoena, which could also have a material adverse effect on our business,
financial condition, results of operations, and cash flows.
In August 2022, the Company received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts (DOJ) seeking production of
documents related to sales, marketing, and promotional practices, including as pertain to DEXYCU® (DOJ Subpoena).We are cooperating fully with the
government in connection with this matter. We cannot predict the outcome of the DOJ Subpoena, and there can be no assurance that the DOJ will not
commence an action against us, or as to what the ultimate outcome of any such DOJ Subpoena might be. Under applicable law, the DOJ has the ability to
impose sanctions on companies which are found to have violated the provisions of applicable laws, including civil monetary penalties and other remedies.
The resolution of any such enforcement action, should there be one, could have a material adverse effect on our business, financial condition, results of
operations, and cash flows. We have expended and expect to continue to expend significant financial and managerial resources responding to the DOJ
Subpoena, which could also have a material adverse effect on our business, financial condition, results of operations, and cash flows.
We will need to raise additional capital in the future, which may not be available on favorable terms and may be dilutive to stockholders or impose
operational restrictions.
We will need to raise additional capital in the future to help fund the development and commercialization of EYP-1901 and our other product
candidates, if approved. The amount of additional capital we will require will be influenced by many factors, including, but not limited to:
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our clinical development plans for EYP-1901 for the treatment of wet AMD, NPDR, and DME and our other product candidates, including
EYP-2301;
the outcome, timing and cost of the regulatory approval process for EYP-1901 and our other product candidates, including the potential for the
FDA to require that we perform more studies and clinical trials than those we currently expect;
whether and to what extent we internally fund, whether and when we initiate, and how we conduct other product development programs;
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whether and when we are able to enter into strategic arrangements for our products or product candidates and the nature of those arrangements;
the costs involved in preparing, filing, and prosecuting patent applications, and maintaining, and enforcing our intellectual property rights;
changes in our operating plan, resulting in increases or decreases in our need for capital;
our views on the availability, timing and desirability of raising capital; and
the costs of operating as a public company.
We do not know if additional capital will be available to us when needed or on terms favorable to us or our stockholders. Collaboration, licensing or
other commercial agreements may not be available on favorable terms, or at all. If we seek to sell our equity securities under our at-the-market (ATM)
program or in another offering, we do not know whether and to what extent we will be able to do so, or on what terms. Further, the rules and regulations of
the Nasdaq Stock Market LLC, (Nasdaq), require us to obtain stockholder approval for sales of our equity securities under certain circumstances, which
could delay or prevent us from raising additional capital from such sales. Also, the state of the economy and financial and credit markets at the time or
times we seek any additional financing may make it more difficult or more expensive to obtain. If available, additional equity financing may be dilutive to
stockholders, debt financing may involve restrictive covenants or other unfavorable terms and dilute our existing stockholders’ equity, and funding through
collaboration, licensing or other commercial agreements may be on unfavorable terms, including requiring us to relinquish rights to certain of our
technologies or products. If adequate financing is not available if and when needed, we may delay, reduce the scope of, or eliminate research or
development programs, postpone or cancel the pursuit of product candidates such as EYP-1901, including pre-clinical and clinical trials and new business
opportunities, or other new products, if any, reduce staff and operating costs, or otherwise significantly curtail our operations to reduce our cash
requirements and extend our capital.
The Company’s receipt of maximum consideration in conjunction with its sale of rights to our YUTIQ® franchise to Alimera for $82.5 million cash
plus royalties is dependent on Alimera’s effective sale and distribution of YUTIQ® outside of China, Hong Kong, Taiwan, Macau, and Southeast Asia.
Pursuant to our PRA with Alimera, the Company agreed to grant to Alimera an exclusive and sublicensable right and license under the
Company’s and its affiliates’ interest in certain of the Company’s and its affiliates’ intellectual property to develop, manufacture, sell, commercialize and
otherwise exploit certain products, including YUTIQ® (fluocinolone acetonide intravitreal implant or FA) 0.18 mg, for the treatment and prevention of
uveitis in the entire world except Europe, the Middle East and Africa. Pursuant to the agreement, Alimera paid the Company a $75 million cash upfront
payment (Upfront Payment). Alimera is required to make four quarterly Guaranteed Payments (as defined in the PRA) to the Company totaling $7.5
million during 2024. Alimera is also required to pay royalties to the Company from 2025 to 2028 at a percentage of low-to-mid double digits of Alimera’s
annual U.S. net sales of certain products (including YUTIQ®) in excess of certain thresholds, beginning at $70 million in 2025, increasing annually
thereafter (Royalties). Upon Alimera’s payment of the Upfront Payment and the Guaranteed Payments, the licenses and rights granted to Alimera will
automatically become perpetual and irrevocable. We cannot predict what success, if any, Alimera may have with respect to sales of YUTIQ® and, therefore,
it is uncertain as to when we may receive the royalties and if we will receive any royalties at all. In the event Alimera fails to execute the effective sale and
distribution of YUTIQ® in the specified regions the royalties contemplated under the PRA could be adversely impacted in total, or in part, and our business
could be harmed.
Our ability to use our net operating loss carryforwards and other tax attributes may be limited.
As of December 31, 2023, we had U.S. net operating loss (NOL) carryforwards of approximately $296.5 million for U.S. federal income tax and
approximately $254.7 million for state income tax purposes available to offset future taxable income, and U.S. federal and state research and development
tax credits of approximately $8.9 million, prior to consideration of annual limitations that may be imposed under Section 382 of the Internal Revenue Code
of 1986, as amended (Section 382). Our U.S. NOL carryforwards begin to expire in 2023 if not utilized.
Our U.S. NOL and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. Under Section 382, and
corresponding provisions of U.S. state law, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change, by value, in
its equity ownership over a three-year period, the corporation’s ability to use its pre-change U.S. NOLs and other pre-change tax attributes, such as research
and development tax credits, to offset its post-change income may be limited. The latest analysis performed under Section 382, performed through
September 30, 2018, confirmed that the exercise of certain warrants in late September 2018 resulted in a greater than 50% cumulative ownership change,
which will cause annual limitations on the use of our then existing NOL balances and other pre-change tax attributes. As a result, if we earn net taxable
income in future periods, our ability to use our pre-change U.S. NOL carryforwards to offset U.S. federal taxable income will be subject to limitations,
which could potentially result in increased future tax liabilities to us.
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In addition, we may experience additional ownership changes in the future as a result of subsequent shifts in our stock ownership, including through
completed or contemplated financings, some of which may be outside of our control. If we determine that a future ownership change has occurred and our
ability to use our historical net operating loss and tax credit carryforwards is materially limited, it would harm our future operating results by effectively
increasing our future tax obligations.
RISKS RELATED TO THE REGULATORY APPROVAL AND CLINICAL DEVELOPMENT OF OUR PRODUCT CANDIDATES
The outcomes of clinical trials are uncertain, and delays in the completion of or the termination of any clinical trial of EYP-1901 or our other product
candidates could harm our business, financial condition, and prospects.
Our research and development program for our lead product candidate, EYP-1901, and certain of our other product candidates, are still in
development. We must demonstrate EYP-1901’s and our other product candidates’ safety and efficacy in humans through extensive clinical testing. Such
testing is expensive and time-consuming and requires specialized knowledge and expertise.
Clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. The clinical
trial process is also time-consuming, and the outcome is not certain. We estimate that clinical trials of our product candidates will take multiple years to
complete. Failure can occur at any stage of a clinical trial, and we could encounter problems that cause us to abandon or repeat clinical trials. The
commencement and completion of clinical trials may be delayed or precluded by a number of factors, including:
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decisions not to pursue development of product candidates due to pre-clinical or clinical trial results or market factors;
lack of sufficient funding;
failure to reach agreement with the FDA or other regulatory agency requirements for clinical trial design or scope of the development program;
delays or inability to attract clinical investigators for trials;
clinical sites dropping out of a clinical trial;
time required to add new clinical sites;
delays or inability to recruit patients in sufficient numbers or at the expected rate;
decisions by licensees not to exercise options for products or not to pursue or promote products licensed to them;
adverse side effects;
failure of trials to demonstrate safety and efficacy;
patients’ delays or failure to complete participation in a clinical trial or inability to follow patients adequately after treatment;
changes in the design or manufacture of a product candidate;
failures by, changes in our (or our licensees’) relationship with, or other issues at, CROs, vendors, and investigators responsible for pre-clinical
testing and clinical trials;
imposition of a clinical hold following an inspection of our clinical trial operations or trial sites by the FDA or foreign regulatory authorities;
delays or failures in obtaining required IRB approval;
inability to obtain supplies and/or to manufacture sufficient quantities of materials for use in clinical trials, including vorolanib;
our inability to manufacture EYP-1901 to scale, necessary to execute our Phase 3 study in an acceptable time period;
stability issues with clinical materials;
failure to comply with GLP, GCP, cGMP or similar foreign regulatory requirements that affect the conduct of pre-clinical and clinical studies
and the manufacturing of product candidates;
requests by regulatory authorities for additional data or clinical trials;
governmental or regulatory agency assessments of pre-clinical or clinical testing that differ from our (or our licensees’) interpretations or
conclusions;
governmental or regulatory delays, or changes in approval policies or regulations; and
developments, clinical trial results and other factors with respect to competitive products and treatments, a process which may also create a
more competitive environment for patient accrual in clinical trials.
We, the FDA, other regulatory authorities outside the United States, or an IRB may suspend a clinical trial at any time for various reasons, including
if it appears that the clinical trial is exposing participants to unacceptable health risks or if the FDA or one or more other regulatory authorities outside the
United States find deficiencies in our investigational new drug application or similar application outside the United States or the conduct of the trial. If we
experience delays in the completion of, or the termination of, any clinical trial of any of our product candidates, including EYP-1901, the commercial
prospects of such product candidate will be
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harmed, and our ability to generate product revenues from such product candidate will be delayed. In addition, any delays in completing our clinical trials
will increase our costs, slow down our product candidate development and approval process, and jeopardize our ability to commence product sales and
generate revenues. Any of these occurrences may harm our business, financial condition, results of operations, cash flows and prospects significantly. In
addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of
regulatory approval of our product candidates.
Clinical trial results may fail to support continued clinical investigations and/or approval of EYP-1901 or our other product candidates.
Even if our clinical trials are successfully completed as planned, the results may not support approval of EYP-1901 or our other product candidates
under the laws and regulations of the FDA or other regulatory authorities outside the United States. The clinical trial process may fail to demonstrate that
our product candidates are both safe and effective for their intended uses. Pre-clinical and clinical data and analyses are often able to be interpreted in
different ways. Even if we view our results favorably, if a regulatory authority has a different view, we may still fail to obtain regulatory approval of our
product candidates. This, in turn, would significantly adversely affect our business prospects.
We may expend significant resources to pursue our lead product candidate, EYP-1901 for the potential treatment of wet AMD, NPDR and DME and
fail to capitalize on the potential of EYP-1901, or our other product candidates, for the potential treatment of other indications that may be more
profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on research programs and product candidates for specific indications.
Specifically, with regard to EYP-1901, we initially focused our efforts on the treatment of wet AMD, but have since expanded our efforts to include the
treatment of NPDR and DME. As a result, we may forego or delay pursuit of opportunities with EYP-1901 or other product candidates for the treatment of
other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable
commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for
specific indications may not yield any commercially viable products. Furthermore, until such time as we are able to build a broader product candidate
pipeline, if ever, any adverse developments with respect to our leading product candidate, EYP-1901, would have a more significant adverse effect on our
overall business than if we maintained a broader portfolio of product candidates.
We have historically based our research and development efforts primarily on our proprietary technologies for the treatment of chronic eye diseases.
As a result of pursuing the development of product candidates using our proprietary technologies, we may fail to develop product candidates or address
indications based on other scientific approaches that may offer greater commercial potential or for which there is a greater likelihood of success. Research
programs to identify new product candidates require substantial technical, financial and human resources. These research programs may initially show
promise in identifying potential product candidates, yet fail to yield product candidates for clinical development.
Phase 1 or 2 results from a clinical trial do not ensure that the trial will be successful and success in early stage clinical trials does not ensure success
in later-stage clinical trials.
Results from pre-clinical testing, early clinical trials, prior clinical trials, investigator-sponsored studies, and other data and information often do not
accurately predict final pivotal clinical trial results. EYP-1901 relies on vorolanib as its active pharmaceutical agent. Vorolanib is a small molecule TKI that
has been previously studied by Tyrogenex in Phase 1 and 2 clinical trials as an orally delivered therapy for the treatment of wet AMD. The Phase 2 clinical
trial was discontinued due to systemic toxicity. There can be no assurance that such systemic toxicities will not occur in our clinical trial for EYP-1901. In
addition, data from one pivotal clinical trial may not be predictive of the results of other pivotal clinical trials for the same product candidate, even if the
trial designs are the same or similar. Data obtained from pre-clinical studies and clinical trials are susceptible to varying interpretations, which may delay,
limit or prevent regulatory approval. Adverse side effects may be observed in clinical trials that delay, limit or prevent regulatory approval, and even after a
product candidate has received marketing approval, the emergence of adverse side effects in more widespread clinical practice may cause the product’s
regulatory approval to be limited or even rescinded. Additional trials necessary for approval may not be undertaken or may ultimately fail to establish the
safety and efficacy of our product candidates.
In addition, while the clinical trials of our product candidates, including our lead product candidate, EYP-1901, are designed based on the available
relevant information, in view of the uncertainties inherent in drug development, such clinical trials may not be designed with a focus on indications, patient
populations, dosing regimens, safety or efficacy parameters or other variables that will provide the necessary safety and efficacy data to support regulatory
approval to commercialize the product. In addition, the methods we select to assess particular safety or efficacy parameters may not yield statistically
significant results regarding our product candidates’ effects on patients. Even if we believe the data collected from clinical trials of our product candidates
are promising, these data may not be sufficient to support approval by the FDA or foreign regulatory authorities. Pre-clinical and clinical data can be
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interpreted in different ways. Accordingly, the FDA or foreign regulatory authorities could interpret these data in different ways from us or our partners,
which could delay, limit or prevent regulatory approval.
Interim, “top-line” and preliminary data 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 publicly disclose preliminary or top-line data from our preclinical studies and clinical trials, which is based on a
preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive
review of the data related to the particular study or trial. 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 and carefully evaluate all data. As a result, the top-line or preliminary results that we
report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been
received and fully evaluated. Top-line and preliminary data also remain subject to audit and verification procedures that may result in the final data being
materially different from the top-line or preliminary data we previously published. As a result, top-line and preliminary data should be viewed with caution
until the final data are available.
From time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data 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 or as patients from our clinical trials continue other treatments for their disease. Adverse differences between preliminary or interim data
and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the
price of our common stock. Further, 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 product and our company in general. In addition, the information we choose to
publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what
we determine is material or otherwise appropriate information to include in our disclosure. If the interim, top-line, or preliminary data that we report differ
from final 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.
We may not be successful in our efforts to identify and successfully develop additional product candidates. Part of our strategy involves
identifying product candidates. We may fail to identify and develop product candidates for clinical development for a number of reasons, including those
discussed in these risk factors and also:
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we may not be able to assemble sufficient resources to acquire or discover additional product candidates; competitors may develop
alternatives that render our potential product candidates obsolete or less attractive;
potential product candidates we develop may nevertheless be covered by third-parties’ patent or other intellectual property or exclusive
rights;
potential product candidates may, on further study, be shown to have harmful side effects, toxicities, or other characteristics that indicate that
they are unlikely to be products that will receive marketing approval or achieve market acceptance, if approved;
we may not be able to meet targeted pharmaceutical formulations of the product candidates that would allow us to initiate clinical trials in
patients on time and ahead of competing development programs;
potential product candidates may not be effective;
the market for a potential product candidate may change so that the continued development of that product candidate is no longer reasonable;
a potential product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; or
the regulatory pathway for a potential product candidate is highly complex and difficult to navigate successfully or economically.
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If we are unable to identify and successfully commercialize additional suitable product candidates, this would adversely impact our business
strategy and our financial position.
We may find it difficult to enroll patients in our clinical trials, which could delay or prevent clinical trials of our product candidates.
Identifying and qualifying patients to participate in clinical trials of our product candidates, including EYP-1901, is critical to our success. The
timing of our clinical trials depends in part on the speed at which we can recruit patients to participate in testing our product candidates. If patients are
unwilling to participate in our trials because of negative publicity from adverse events in the biotechnology industries, public perception of vaccine safety
issues or for other reasons, including competitive clinical trials for similar patient populations, the timeline for recruiting patients, conducting studies, and
obtaining regulatory approval of potential products may be delayed. These delays could result in increased costs, delays in advancing our product
development, delays in testing the effectiveness of our technology or termination of the clinical trials altogether.
We may not be able to identify, recruit, and enroll a sufficient number of patients, or those with required or desired characteristics to achieve
diversity in a clinical trial, or complete our clinical trials in a timely manner. Patient enrollment is affected by a variety of factors including, among others:
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severity of the disease under investigation;
design of the trial protocol and size of the patient population required for analysis of the trial’s primary endpoints;
size of the patient population;
eligibility criteria for the trial in question;
perceived risks and benefits of the product candidate being tested;
willingness or availability of patients to participate in our clinical trials;
proximity and availability of clinical trial sites for prospective patients;
our ability to recruit clinical trial investigators with the appropriate competencies and experience, and adequate research staffing to support
multiple, concurrent clinical trials;
availability of competing therapies and related clinical trials;
efforts to facilitate timely enrollment in clinical trials;
our ability to obtain and maintain patient consents;
the risk that patients enrolled in clinical trials will drop out of the trials before completion;
patient referral practices of physicians; and
ability to monitor patients adequately during and after treatment.
We may not be able to initiate or continue clinical trials if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials
required by regulatory agencies.
Even if we enroll a sufficient number of eligible patients to initiate our clinical trials, we may be unable to maintain participation of these patients
throughout the course of the clinical trial as required by the clinical trial protocol, in which event we may be unable to use the research results from those
patients. If we have difficulty enrolling and maintaining the enrollment of a sufficient number of patients to conduct our clinical trials as planned, we may
need to delay, limit, or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business.
We are largely dependent on the clinical and future commercial success of our lead product candidate, EYP-1901.
Our ability to generate revenues and become profitable will depend in large part on the future commercial success of our lead product candidate,
EYP-1901, if it is approved for marketing. If EYP-1901 or any other product that we commercialize in the future does not gain an adequate level of
acceptance among physicians, patients and third parties, we may not generate significant product revenues or become profitable. Market acceptance by
physicians, patients and third party payors of EYP-1901 or other products we may commercialize in the future will depend on a number of factors, some of
which are beyond our control, including:
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their efficacy, safety, and other potential advantages in relation to alternative treatments;
their relative convenience and ease of administration;
the availability of adequate coverage or reimbursement by third parties, such as insurance companies and other healthcare payors, and by
government healthcare programs, including Medicare and Medicaid;
the prevalence and severity of adverse events;
their cost of treatment in relation to alternative treatments, including generic products;
the extent and strength of our third party manufacturer and supplier support;
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the extent and strength of marketing and distribution support;
the limitations or warnings contained in a product’s approved labeling; and
distribution and use restrictions imposed by the FDA or other regulatory authorities outside the United States.
For example, even if EYP-1901 gains approval by the FDA, physicians and patients may not immediately be receptive to it and may be slow to
adopt it. If EYP-1901 does not achieve an adequate level of acceptance among physicians, patients and third party payors, we may not generate meaningful
revenues from EYP-1901 and we may not become profitable.
Future public health crises such as the COVID-19 pandemic may adversely impact, and pose risks to, certain elements of our business such as our
preclinical studies and clinical trials, the nature and extent of which are highly uncertain and unpredictable.
Our global operations expose us to risks associated with public health crises, including epidemics and pandemics such as the previous COVID-
19 pandemic. As it relates to EYP-1901 targeting wet AMD, we expect to start conducting Phase 3 clinical trials for EYP-1901 throughout the world in
2024. We also expect to continue with Phase 2 clinical trials for NPDR and for DME in 2024. Enrollment of patients in these clinical trials and future
clinical trials in these regions may be delayed due to the outbreak of the health epidemics and outbreaks, for example, the previous COVID-19 pandemic.
In addition, we rely on independent clinical investigators, contract research organizations and other third-party service providers to assist us in managing,
monitoring and otherwise carrying out our preclinical studies and clinical trials, and outbreaks may affect their ability to devote sufficient time and
resources to our programs. As a result, if a public health crisis were to occur in the future, the expected timeline for data readouts of our preclinical studies
and clinical trials and certain regulatory filings may be negatively impacted, which would adversely affect our business.
RISKS RELATED TO THE COMMERCIALIZATION OF OUR PRODUCTS AND PRODUCT CANDIDATES
Our business strategy relies in part on our ability to successfully commercialize our product candidates, if approved; however, the products may not
achieve market acceptance or be commercially successful.
Our ability to successfully commercialize our product candidates, if approved, is important to the execution of our business strategy. Such products
may not achieve broad market acceptance among retinal specialists and other doctors, patients, government health administration authorities and other
third-party payors, and may not continue to be commercially successful in the U.S. The degree of market acceptance and commercial success of our
product candidates will depend on a number of factors, including the following:
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the acceptance of our product candidates by patients and the medical community and the availability, perceived advantages and relative cost,
safety and efficacy of alternative and competing treatments;
the effectiveness and timeliness of our preclinical studies and clinical trials, and the usefulness of the data;
our ability to obtain reimbursement for our product candidates from third party payors at levels sufficient to support commercial success;
the sufficiency of our existing cash resources into 2026;
our access to needed capital;
the cost effectiveness of our products;
the effectiveness of our distribution strategies and operations;
our ability and the ability of our contract manufacturing organizations, or CMOs, as applicable, to manufacture commercial supplies of our
products, to remain in good standing with regulatory agencies, and to develop, validate and maintain commercially viable manufacturing
processes that are, to the extent required, compliant with cGMP regulations;
the degree to which the approved labeling supports promotional initiatives for commercial success;
a continued acceptable safety profile of our products;
results from additional clinical trials of our products or further analysis of clinical data from completed clinical trials of our products by us or
our competitors;
our ability to enforce our intellectual property rights;
our products’ potential advantages over other therapies;
our ability to avoid third-party patent interference or patent infringement claims; and
maintaining compliance with all applicable regulatory requirements.
As many of these factors are beyond our control, we cannot assure you that we will ever be able to generate meaningful revenues through product
sales. In particular, if governments, private insurers, governmental insurers, and other third-party payors do not provide adequate and timely coverage and
reimbursement levels for our products or limit the frequency of administration, the market acceptance of our product candidates will be limited.
Governments, governmental insurers, private insurers, and other third-party payors attempt to contain healthcare costs by limiting coverage and the level of
reimbursement for products and, accordingly, they may challenge the price and cost-effectiveness of our products or refuse to provide coverage for our
products. Any inability on
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our part to successfully commercialize our product candidates in the U.S. or any foreign territories where they may be approved, or any significant delay in
such approvals, could have a material adverse impact on our ability to execute upon our business strategy and our future business prospects.
Our product and product candidates, if approved and commercialized, may become subject to unfavorable pricing regulations, third-party
reimbursement practices, or healthcare reform initiatives which could harm our business.
The statutes and regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from country to
country. Some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after
marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing
governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product candidate in a particular country,
but then be subject to price regulations that delay our commercial launch of the product candidate, possibly for lengthy time periods, which could
negatively impact the revenues we are able to generate from the sale of the product candidate in that particular country. Adverse pricing limitations may
hinder our ability to recoup our investment in one or more of our products.
Our success also depends in part on the extent to which coverage and reimbursement for our product candidates, once commercialized, and related
treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and
third-party payors, such as private health insurers and health maintenance organizations, determine which medications they will cover and establish
reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors
have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are
requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products.
Third-party payors also may seek additional clinical evidence, beyond the data required to obtain marketing approval, demonstrating clinical benefits and
value in specific patient populations, before covering our products for those patients. We cannot be sure that coverage and reimbursement will be available
for any product candidate that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Coverage and reimbursement
may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If reimbursement is not available or is available
only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.
There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the
purposes for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement
does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacturing, selling and
distribution costs. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on
reimbursement levels already set for lower cost drugs 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 and by any future relaxation of laws that
presently restrict imports of products from countries where they may be sold at lower prices than in the U.S. Third-party payors often rely upon Medicare
coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable
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.
Once we commercialize any new products, we may participate in, and have certain price reporting obligations to, the Medicaid Drug Rebate
Program. This program requires us to pay a rebate for each unit of drug reimbursed by Medicaid. The amount of the “basic” portion of the rebate for each
product is set by law as the larger of: (i) 23.1% of quarterly average manufacturer price, or AMP, or (ii) the difference between quarterly AMP and the
quarterly best price available from us to any commercial or non-governmental customer, or Best Price. AMP must be reported on a monthly and quarterly
basis and Best Price is reported on a quarterly basis only. In addition, the rebate also includes the “additional” portion, which adjusts the overall rebate
amount upward as an “inflation penalty” when the drug’s latest quarter’s AMP exceeds the drug’s AMP from the first full quarter of sales after launch,
adjusted for increases in the Consumer Price Index-Urban. The upward adjustment in the rebate amount per unit is equal to the excess amount of the
current AMP over the inflation-adjusted AMP from the first full quarter of sales. The rebate amount is computed each quarter based on our report to the
Centers for Medicare and Medicaid Services (CMS) of current quarterly AMP and Best Price for our drug. Rebates under the Medicaid Drug Rebate
Program are no longer subject to a cap, effective January 1, 2024, which could increase our rebate liability. We are required to report revisions to AMP or
Best Price within a period not to exceed 12 quarters from the quarter in which the data was originally due. Any such revisions could have the impact of
increasing or decreasing our rebate liability for prior quarters, depending on the direction of the revision. The Affordable Care Act made significant
changes to the Medicaid Drug Rebate Program, and CMS issued a final regulation, to implement the changes to the Medicaid Drug Rebate program under
the Affordable Care Act. On December 21, 2020, CMS issued a final regulation that modified existing Medicaid Drug Rebate Program regulations to
permit reporting multiple Best Price figures with regard to value based purchasing arrangements (beginning in
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2022) and provided definitions for “line extension,” “new formulation,” and related terms with the practical effect of expanding the scope of drugs
considered to be line extensions (beginning in 2022). While the regulatory provisions that purported to affect the applicability of the AMP and Best Price
exclusions of manufacturer-sponsored patient benefit programs in the context of pharmacy benefit manager “accumulator” programs were invalidated by a
court, accumulator and other such programs may continue to negatively affect us in other ways.
Federal law also requires that any manufacturer that participates in the Medicaid Drug Rebate Program also participate in the Public Health
Service’s 340B drug pricing program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The
340B drug pricing program, which is administered by the Health Resources and Services Administration, or HRSA, requires participating manufacturers to
agree to charge statutorily-defined covered entities no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs. These 340B
covered entities include, but are not limited to, a variety of community health clinics and other entities that receive health services grants from the Public
Health Service, as well as hospitals that serve a disproportionate share of low-income patients. The 340B ceiling price is calculated using a statutory
formula, which is based on the AMP and rebate amount for the covered outpatient drug as calculated under the Medicaid Drug Rebate Program. Any
changes to the definition of AMP and the Medicaid rebate amount under the Affordable Care Act or other legislation could affect our 340B ceiling price
calculations and negatively impact our results of operations.
HRSA issued a final regulation regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers
that knowingly and intentionally overcharge covered entities, which became effective on January 1, 2019. It is currently unclear how HRSA will apply its
enforcement authority under this regulation. HRSA has also implemented a ceiling price reporting requirement related to the 340B program under which
we are required to report 340B ceiling prices to HRSA on a quarterly basis, and HRSA then publishes that information to covered entities. Moreover,
HRSA newly established an administrative dispute resolution (ADR) process for claims by covered entities that a manufacturer has engaged in
overcharging, and by manufacturers that a covered entity violated the prohibitions against diversion or duplicate discounts. Such claims are to be resolved
through an ADR panel of government officials rendering a decision that could be appealed in federal court. An ADR proceeding could subject us to
onerous procedural requirements and could result in additional liability. In addition, legislation may be introduced that, if passed, would further expand the
340B program to additional covered entities or would require participating manufacturers to agree to provide 340B discounted pricing on drugs used in an
inpatient setting.
Federal law also requires that a company that participates in the Medicaid Drug Rebate program report average sales price, or ASP, information each
quarter to CMS for certain categories of drugs that are paid under the Medicare Part B program. For calendar quarters effective January 1, 2022,
manufacturers are required to report the average sales price for certain drugs under the Medicare program regardless of whether they participate in the
Medicaid Drug Rebate Program. Manufacturers calculate the ASP based on a statutorily defined formula as well as regulations and interpretations of the
statute by CMS. CMS may use these submissions to determine payment rates for drugs under Medicare Part B. Starting in 2023, manufacturers must pay
refunds to Medicare for single source drugs or biologicals, or biosimilar biological products, reimbursed under Medicare Part B and packaged in single-
dose containers or single-use packages, for units of discarded drug reimbursed by Medicare Part B in excess of 10 percent of total allowed charges under
Medicare Part B for that drug. Manufacturers that fail to pay refunds could be subject to civil monetary penalties of 125 percent of the refund amount.
Statutory or regulatory changes or CMS guidance could affect the pricing of our product candidates, and could negatively affect our results of
operations. The IRA, among other things, requires the Secretary of Health and Human Services to negotiate, with respect to Medicare units and subject to a
specified cap, the price of a set number of certain high Medicare spend drugs and biologicals per year starting in 2026. Effective January 2023, the IRA
established a Medicare Part B inflation rebate scheme, under which, generally speaking, manufacturers will owe rebates if the average sales price of a Part
B drug increases faster than the pace of inflation. Failure to timely pay a Part B inflation rebate is subject to a civil monetary penalty. Further, starting
October 2022, the IRA established a Medicare Part D inflation rebate scheme, under which, generally speaking, manufacturers will owe additional rebates
if the AMP of a Part D drug increases faster than the pace of inflation. Failure to timely pay a Part D inflation rebate is subject to a civil monetary penalty.
In addition, manufacturers are currently required to provide a 70% discount on brand name prescription drugs utilized by Medicare Part D beneficiaries
when those beneficiaries are in the coverage gap phase of the Part D benefit design. The IRA sunsets the coverage gap discount program starting in 2025
and replaces it with a new manufacturer discount program and makes other reforms to the Part D benefit, which could increase our liability under Part D.
These or any other public policy change could impact the market conditions for our products. We further expect continued scrutiny on government price
reporting and pricing more generally from Congress, agencies, and other bodies.
In order to be eligible to have our products paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by certain
federal agencies and grantees, we must participate in the VA FSS pricing program. Under this program, we would be obligated to make our “innovator”
drugs available for procurement on an FSS contract and charge a price to four federal agencies—VA, DoD, Public Health Service and U.S. Coast Guard—
that is no higher than the statutory FCP. The FCP is based on the Non-FAMP, which we calculate and report to the VA on a quarterly and annual basis. We
do not currently participate in the Tricare
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Retail Pharmacy program, under which we would need to pay quarterly rebates on utilization of innovator products that are dispensed through the Tricare
Retail Pharmacy network to TRICARE beneficiaries. The rebates are calculated as the difference between the annual Non-FAMP and FCP. The
requirements under the 340B, FSS, and TRICARE programs will impact gross-to-net revenue for our current products and any product candidates that are
commercialized in the future and could adversely affect our business and operating results.
If we fail to comply with reporting and payment obligations under the Medicaid Drug Rebate program or other governmental pricing programs, we
could be subject to additional reimbursement requirements, penalties, sanctions, and fines which could have a material adverse effect on our business,
financial condition, results of operations, and growth prospects.
Our price reporting and other obligations under the Medicaid Drug Rebate Program, Medicare Part B, the 340B program, and the VA/FSS program
are described in the risk factor entitled “Our products and product candidates, if approved and commercialized, may become subject to unfavorable pricing
regulations, third-party reimbursement practices or healthcare reform initiatives which could harm our business”. Pricing and rebate calculations vary
across products and programs, are complex, and are often subject to interpretation by us, governmental or regulatory agencies, and the courts. In the case of
Medicaid pricing data, if we become aware that our reporting for a prior period was incorrect or has changed as a result of a recalculation of the pricing
data, we are obligated to resubmit the corrected data for up to three years after those data were originally due. Such restatements and recalculations will
increase our costs for complying with the laws and regulations governing the Medicaid Drug Rebate program and could result in an overage or underage in
our rebate liability for past quarters. Price recalculations also may affect the ceiling price at which we are required to offer our products under the 340B
program and may require us to offer refunds to covered entities.
We are liable for errors associated with our submission of pricing data. That liability could be significant. In addition to retroactive Medicaid rebates
and the potential for issuing 340B program refunds, if we are found to have knowingly submitted false AMP, Best Price, or Non-FAMP information to the
government, we may be liable for significant civil monetary penalties per item of false information. If we are found to have made a misrepresentation in the
reporting of our ASP, the Medicare statute provides for significant civil monetary penalties for each misrepresentation for each day in which the
misrepresentation was applied. Our failure to submit monthly/quarterly AMP and Best Brice data on a timely basis could result in a significant civil
monetary penalty per day for each day the information is late beyond the due date. Such conduct also could be grounds for CMS to terminate our Medicaid
drug rebate agreement, in which case federal payments may not be available under Medicaid or Medicare Part B for our covered outpatient drugs.
Significant civil monetary penalties also could apply to late submissions of Non-FAMP information. Civil monetary penalties could also be applied if we
are found to have charged 340B covered entities more than the statutorily mandated ceiling price or HRSA could terminate our agreement to participate in
the 340B program, in which case federal payments may not be available under Medicaid or Medicare Part B for our covered outpatient drugs. Moreover,
HRSA established an ADR process that has jurisdiction over claims by covered entities that a manufacturer has engaged in overcharging. An ADR
proceeding could subject us to onerous procedural requirements and could result in additional liability. In addition, claims submitted to federally-funded
healthcare programs, such as Medicare and Medicaid, for drugs priced based on incorrect pricing data provided by a manufacturer can implicate the federal
civil False Claims Act. Finally, civil monetary penalties could be due if we fail to offer discounts to beneficiaries under the Medicare Part D coverage gap
discount program. Furthermore, under the refund program for discarded drugs, manufacturers that fail to pay refunds could be subject to civil monetary
penalties of 125 percent of the refund amount.
If we overcharge the government in connection with our FSS contract or our anticipated Tricare Agreement, whether due to a misstated FCP or
otherwise, we are required to refund the difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges can
result in allegations against us under the False Claims Act and other laws and regulations. Unexpected refunds to the government, and responding to a
government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business,
financial condition, results of operations, and growth prospects. We cannot assure you that our submissions will not be found by CMS or another
governmental agency to be incomplete or incorrect.
There has been heightened governmental scrutiny in the U.S. of pharmaceutical pricing practices in light of the rising cost of prescription drugs.
Such scrutiny has resulted in several recent 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 products. At both the federal and 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. One significant example of recent legislative action is the IRA. The IRA contains a negotiation provision that requires the Secretary of
Health and Human Services to negotiate, with respect to Medicare units and subject to a specified cap, the price of a set number of high Medicare spend
drugs and biologicals per year starting in 2026. Under the drug price negotiation program, a drug may not be subjected to a negotiated price until at least
nine years post-approval, and a biologic may not be subjected to a negotiated price until at least 13 years post-licensure. The IRA limits the negotiation
eligibility for the 2026, 2027 and 2028 program years and afford
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limited additional relief for “small biotech drugs” of certain small manufacturers which, among other things, represent a limited portion (as specified in the
text) of Medicare program spending. The IRA also penalizes manufacturers of certain Medicare Part B and D drugs for price increases above inflation and
makes several changes to the Medicare Part D benefit, including a limit on annual out-of-pocket costs, and a change in manufacturer liability under the
program. The complete impact from the IRA is unknown because negotiated prices will not apply for Part D drugs until 2026, and two years later for Part
B drugs. In keeping with this timeline, and the recent passage, we cannot predict the implications the IRA provisions will have on our business.
Even though regulatory approvals for YUTIQ® and DEXYCU® have been obtained in the U.S., we will still face extensive FDA regulatory
requirements and may face future regulatory difficulties.
Even though regulatory approvals for YUTIQ® and DEXYCU® have been obtained in the U.S., the FDA and state regulatory authorities may still
impose significant restrictions on the indicated uses or marketing of YUTIQ® and DEXYCU®, or impose ongoing requirements for potentially costly post-
approval studies or post-marketing surveillance. For example, as part of its approval of DEXYCU® for the treatment of postoperative ocular inflammation,
the FDA required under the Pediatric Research Equity Act (PREA), that a Phase 3/4 prospective, randomized, active treatment-controlled, parallel-design
multicenter trial be conducted to evaluate the safety of DEXYCU® for the treatment of inflammation following ocular surgery for childhood cataract. This
pediatric study will likely require us to undergo a costly and time-consuming development process. If we do not meet our obligations under the PREA for
this pediatric study, the FDA may issue a non-compliance letter and may also consider DEXYCU® to be misbranded and subject to potential enforcement
action.
We were advised by the FDA to show diligence and enroll at least one patient in the protocolled trial before submitting a new Deferral Extension
Request. We submitted a pediatric study protocol to the FDA as required. We have identified clinical sites and continued study start-up activities with
dosing of a first patient in January 2022. In February 2022, we requested a PREA Deferral Extension because of the unavoidable delays in this program
due, among other things, to the Pandemic. The extension was granted by the FDA, extending the study deadline to June 30, 2025. As of December 31,
2023, the study remains ongoing.
We, and with respect to YUTIQ®, Alimera, is also subject to ongoing FDA requirements governing the labeling, packaging, storage, distribution,
safety surveillance, advertising, promotion, record-keeping and reporting of safety and other post-marketing information. The holder of an approved NDA
is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the NDA. The holder of an approved NDA must
also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing
process. Advertising and promotional materials must comply with FDA regulations and may be subject to other potentially applicable federal and state
laws. The applicable regulations in countries outside the U.S. grant similar powers to the competent authorities and impose similar obligations on
companies.
In addition, manufacturers of drug products and their facilities are subject to payment of substantial user fees and continual review and periodic
inspections by the FDA and other regulatory authorities for compliance with cGMP regulations and adherence to commitments made in the NDA. We also
need to comply with some of the FDA’s manufacturing regulations for devices with respect to YUTIQ®. We and our third-party providers are generally
required to maintain compliance with cGMP and other stringent requirements and are subject to inspections by the FDA and comparable agencies in other
jurisdictions to confirm such compliance. Any delay, interruption or other issues that arise in the manufacture, fill-finish, packaging, or storage of our
products as a result of a failure of our facilities or the facilities or operations of third parties to pass any regulatory agency inspection could significantly
impair our commercial partners' ability to commercialize our products. Significant noncompliance could also result in the imposition of monetary penalties
or other civil or criminal sanctions and damage our reputation.
In addition to cGMP, the FDA requires that YUTIQ® and DEXYCU® manufacturers comply with certain provisions of the Quality System
Regulation, or QSR, particularly in light of the D.C. Circuit Court of Appeals decision in Genus Medical Technologies LLC v. FDA. The QSR sets forth
the FDA’s manufacturing quality standards for medical devices, and other applicable government regulations and corresponding foreign standards. If we, or
a regulatory authority, discover previously unknown problems with YUTIQ® or DEXYCU®, such as adverse events of unanticipated severity or frequency,
or problems with a facility where the product is manufactured, a regulatory authority may impose restrictions relative to YUTIQ®, DEXYCU® or their
respective manufacturing facilities, including requiring recall or withdrawal of the product from the market, suspension of manufacturing, or other FDA
action or other action by foreign regulatory authorities.
If we, and with respect to YUTIQ®, Alimera, fail to comply with applicable regulatory requirements for YUTIQ® or DEXYCU®, a regulatory
authority may:
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issue a warning letter asserting that we are in violation of the law;
seek an injunction or impose civil or criminal penalties or monetary fines;
suspend, modify or withdraw regulatory approval;
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suspend any ongoing clinical trials;
refuse to approve a pending NDA or a pending application for marketing authorization or supplements to an NDA or to an application for
marketing authorization submitted by us;
seize our product; and/or
refuse to allow us to enter into supply contracts, including government contracts.
Our relationships with physicians, patients and payors in the U.S. are subject to applicable anti-kickback, fraud and abuse laws and regulations. In
addition, we are subject to patient privacy regulation by both the federal government and the states in which we conduct our business. Our failure to
comply with these laws could expose us to criminal, civil and administrative sanctions, reputational harm, and could harm our results of operations,
and financial conditions.
Our current and future operations with respect to the commercialization of new product candidates are subject to various U.S. federal and state
healthcare laws and regulations. These laws impact, among other things, our proposed sales, marketing, support and education programs and constrain our
business and financial arrangements and relationships with third-party payors, healthcare professionals and others who may prescribe, recommend,
purchase or provide our products, and other parties through which we may market, sell and distribute our product candidates. Finally, our current and future
operations are subject to additional healthcare-related statutory and regulatory requirements and enforcement by foreign regulatory authorities in
jurisdictions in which we conduct our business. Refer to “Healthcare Fraud and Abuse Laws” section of Government Regulation for a more in-depth
description of these laws, which include, but are not limited to, the following:
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The U.S. federal Anti-Kickback Statute prohibits persons or entities from, among other things, knowingly and willfully soliciting, offering,
receiving or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an
individual for, or the purchase, lease, order, or arranging for or recommending the purchase, lease or order of, any good or service, for which
payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid.
The federal civil False Claims Act (which can be enforced through “qui tam,” or whistleblower actions, by private citizens on behalf of the
federal government) prohibits any person from, among other things, knowingly presenting, or causing to be presented false or fraudulent
claims for payment of government funds, or knowingly making, using or causing to be made or used, a false record or statement material to an
obligation to pay money to the government, or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the
U.S. federal government. Pharmaceutical and other healthcare companies also are subject to other federal false claim laws, including federal
criminal healthcare fraud and false statement statutes that extend to non-government health benefit programs.
HIPAA imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to
defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any
materially false statement, in connection with the delivery of, or payment for healthcare benefits, items or services by a healthcare benefit
program, which includes both government and privately funded benefits programs; similar to the U.S. federal Anti-Kickback Statute, a person
or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
HIPAA, and its implementing regulations, impose certain obligations, including mandatory contractual terms, with respect to safeguarding the
privacy, security and transmission of individually identifiable health information and impose notification obligations in the event of a breach of
the privacy or security of individually identifiable health information.
Numerous federal and state laws and regulations that address privacy and data security, including state data breach notification laws, state
health information and/or genetic privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade
Commission Act, or FTC Act), govern the collection, use, disclosure and protection of health-related and other personal information, many of
which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Compliance
with these laws is difficult, constantly evolving, and time consuming, and companies that do not comply with these state laws may face civil
penalties.
The majority of states have adopted analogous laws and regulations, including state anti-kickback and false claims laws, that may apply to our
business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items
or services reimbursed by any third-party payer, including private insurers. Other states have adopted laws that, among other things, require
pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance
guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other
potential referral sources; and state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing
information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities. In
addition, some states have laws requiring pharmaceutical sales representatives to be registered or licensed, and still others impose limits on co-
pay assistance that pharmaceutical companies can offer to patients.
The Physician Payments Sunshine Act, implemented as the Open Payments program, and its implementing regulations, require certain
manufacturers of drugs, devices, biologics, and medical supplies that are reimbursable under Medicare,
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Medicaid, or the Children’s Health Insurance Program to report annually to the CMS information related to certain payments made in the
preceding calendar year and other transfers of value to physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified
nurse anesthetists, certified nurse-midwives, and teaching hospitals, as well as ownership and investment interests held by physicians and their
immediate family members.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve
substantial costs. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be
subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs,
such as Medicare and Medicaid, additional oversight and reporting requirements if we become subject to a corporate integrity agreement to resolve
allegations of non-compliance with these laws, and the curtailment or restructuring of our operations.
The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates in the U.S. and generate
revenues, which would have a material adverse effect on our business, financial condition, and results of operations.
If the market opportunities for our product candidates, including EYP-1901, are smaller than we believe they are, our results of operations may be
adversely affected and our business may suffer.
We focus our research and product development primarily on treatments for eye diseases. Our projections of both the number of people who have
these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our products and product
candidates, such as our projections of the number of patients with wet AMD, NPDR, and DME who may benefit from treatment with EYP-1901 if it is
approved for use, are based on estimates. These estimates may prove to be incorrect and new studies or clinical trials may change the estimated incidence
or prevalence of these diseases. The number of patients in the U.S. and elsewhere may turn out to be lower than expected, may not be otherwise amenable
to treatment with our products, or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our
results of operations and our business. For example, we are developing our leading product candidate, EYP-1901, for the treatment of wet AMD. Although
we believe wet AMD is a common condition and a leading cause of vision loss for people age 50 and older, our estimates of the potential market
opportunity for EYP-1901 may be incorrect.
If any of our products have newly discovered or developed safety problems, our business would be seriously harmed.
All of our approved products are and will be subject to continued oversight by the FDA or other foreign regulatory bodies, and we cannot assure you
that newly discovered or developed safety issues will not arise. Although there were no reported EYP-1901-related ocular or systematic serious adverse
events (SAEs) in our Phase 2 clinical data, we cannot rule out that issues may arise in the future. For example, with the use of any newly marketed drug by
a wider patient population, serious adverse events may occur from time to time that initially do not appear to relate to the drug itself. If such events are
subsequently associated with the drug, or if any other safety issue emerges, we or our collaboration partners may voluntarily, or FDA or other regulatory
authorities may require that we suspend or cease marketing of our approved products, or modify how we or they market our approved products. In addition,
newly discovered safety issues may subject us to substantial potential liabilities and adversely affect our financial condition and business.
The Affordable Care Act and any changes in healthcare laws may increase the difficulty and cost for us to commercialize our approved products in the
U.S. and affect the prices we may obtain.
The U.S. and state governments have enacted and proposed legislative and regulatory changes affecting the healthcare system that could prevent or
delay marketing of our product candidates and restrict or regulate post-approval activities. The U.S. and state 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 products.
For example, the Affordable Care Act was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending,
enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on
the health industry, and impose additional health policy reforms.
Among the provisions of the Affordable Care Act that have been implemented since enactment and are of importance to the commercialization of
our product candidates in the U.S. are the following:
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an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs or biologic agents;
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;
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expansion of healthcare fraud and abuse laws, including the U.S. civil False Claims Act and the Anti-Kickback Statute, new government
investigative powers, and enhanced penalties for noncompliance;
a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated
prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s outpatient drugs
to be covered under Medicare Part D (such manufacturer discounts were increased from 50% to 70% as required by the Bipartisan Budget Act
of 2018) (the IRA sunsets the coverage gap discount program effective 2025);
extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care
organizations;
price reporting requirements for drugs that are inhaled, infused, instilled, implanted, or injected;
expansion of eligibility criteria for Medicaid programs;
addition of entity types eligible for participation in the Public Health Service Act’s 340B drug pricing program;
a requirement to annually report certain information regarding drug samples that manufacturers and distributors provide to physicians; and
a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along
with funding for such research.
Certain provisions of the Affordable Care Act have been subject to judicial challenges as well as efforts to modify them or to alter their
interpretation or implementation. For example, Congress eliminated the tax penalty for not complying with the Affordable Care Act’s individual mandate to
carry health insurance Further, the Bipartisan Budget Act of 2018, among other things, amended the Medicare statute to reduce the coverage gap in most
Medicare drugs plans, commonly known as the “donut hole,” by raising the required manufacturer point-of-sale discount from 50% to 70% off the
negotiated price (the IRA sunsets the coverage gap discount program effective 2025). Additional legislative changes, regulatory changes, and judicial
challenges related to the Affordable Care Act remain possible. It is unclear how the Affordable Care Act and its implementation, as well as efforts to
modify or invalidate the Affordable Care Act, or portions thereof or its implementation, will affect our business, financial condition, and results of
operations. It is possible that the Affordable Care Act, as currently enacted or as it may be amended in the future, and other healthcare reform measures,
including those that may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to successfully
commercialize our product candidates in the U.S.
We also expect that the Affordable Care Act, as well as other healthcare reform measures that have been adopted and that may be adopted in the
future, may result in more rigorous coverage criteria and additional downward pressure on the price that we receive for our approved products in the U.S.,
and could seriously harm our future revenues. Any reduction in reimbursement from Medicare, Medicaid, or other government programs may result in a
similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from
being able to generate revenues, attain profitability, or successfully commercialize our approved products in the U.S.
There has been increasing legislative, regulatory, and enforcement interest in the United States with respect to drug pricing and
marketing practices. For example, in November 2020, the OIG issued a Special Fraud Alert to highlight certain inherent fraud and abuse risks associated
with speaker fees, honorariums and expenses paid by pharmaceutical and medical device companies to healthcare professionals participating in company-
sponsored events. The Special Fraud Alert sent a clear signal that speaker programs will be subject to potentially heightened enforcement scrutiny.
The Inflation Reduction Act of 2022 and other changes in healthcare law may impact the prices we are able to obtain for our products and our
obligations to make payments to the government.
At both the federal and state level, legislatures are increasingly passing legislation and implementing regulations designed to control
pharmaceutical product pricing, including price or patient reimbursement constraints. For example, the IRA includes a number of provisions that impact the
pricing of pharmaceutical products. Among the provisions of the IRA that are important to our commercialized products are the following:
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requires the U.S. Department of Health and Human Services Secretary to negotiate, with respect to Medicare units and subject to a specified
cap, the price of a set number of certain high Medicare spend drugs and biologicals for each year starting for Medicare Part D drugs with
“initial price applicability year” 2026 and for Medicare Part B drugs with “initial price applicability year” 2028, which prices are used to set
reimbursement rates for such drugs and biologicals under Medicare Part B and Part D;
penalizes manufacturers of certain Medicare Part B and Part D drugs for price increases above inflation; and
makes changes to the Medicare Part D benefit, including changes in manufacturer liability under the program through a new Medicare Part D
manufacturer discount program.
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Civil monetary penalties (CMPs) could accrue for a failure to comply with certain drug price negotiation program, inflation rebate program, or
Part D manufacturer discount program requirements. In addition, excise taxes could accrue for a failure to comply with certain drug price negotiation
program requirements.
With respect to the drug price negotiation program, if any of our products were selected for negotiation and, as a result, a “maximum fair price”
for such product were set, our Medicare revenue would materially decrease, and our Medicaid drug rebate program rebate and 340B drug pricing program
liability would materially increase in addition. We anticipate imposition of a maximum fair price also would generate downward pricing pressure in the
commercial market. As we anticipate that CMS’s implementation of the drug price negotiation program will evolve, and that there will be related
legislative, administrative, and legal developments, our understanding of whether our products are likely to be selected for negotiation under this program,
and whether they may be subject to additional downward pricing pressure, is likely to evolve as well, which could impact our understanding of our
business and financial condition.
With respect to the inflation rebate programs, we have at times increased the price of certain of our products. We may need to make similar price
adjustments to our products in the future and cannot guarantee that such price adjustments will not trigger an inflation rebate, which could negatively affect
our business. A manufacturer that does not timely pay a rebate is subject to a CMP in an amount at least equal to 125 percent of the rebate amount.
With respect to the Medicare Part D benefit redesign, we participate in the Medicare Part D program and thus expect to participate in the new
Part D manufacturer discount program starting in 2025. Changes to the manufacturer discount program could change our overall discount liability under
the Part D program, as participating manufacturers, as a general matter, will be required to offer discounts on the negotiated price of a drug on a larger
universe of units but at a lower discount rate. Reductions in patient out of pocket spending could lead to an improvement in patient medication adherence
and overall Part D utilization. It is unclear how these changes will affect our business as a whole, and whether they will have an overall positive or negative
impact. In addition, under the program, manufacturers that fail to provide a discounted price for an applicable drug can be subject to a CMP equal to 1.25
percent times the discount that the manufacturer should have paid under the program agreement.
We anticipate that there will be additional legislative and regulatory reforms that seek to address drug pricing in the U.S. As such, we expect the
impact of, not only the IRA, but also all other such public policies on our business to evolve in ways that we cannot fully anticipate.
Patient assistance programs for pharmaceutical products have come under increasing scrutiny by governments, legislative bodies and enforcement
agencies. These activities may result in actions that have the effect of harming our business or reputation, or subjecting us to fines or penalties.
We previously sponsored patient assistance programs, which were available to qualified patients for our products, including insurance premium and
copay assistance programs. We also made donations to third-party charities that provide such assistance. Recently, there has been enhanced scrutiny of such
company-sponsored programs and services. If we, our vendors or donation recipients, are deemed to have failed to comply with relevant laws, regulations
or government guidance in any of these areas, we could be subject to criminal and civil sanctions, including significant fines, civil monetary penalties and
exclusion from participation in government healthcare programs, including Medicare and Medicaid, and burdensome remediation measures. Actions could
also be brought against executives overseeing our business or other employees.
If competitive products are more effective, have fewer side effects, are more effectively marketed and/or cost less than our product candidates, or
receive regulatory approval or reach the market earlier, our product candidates may not be approved and may not achieve the sales we anticipate and
could be rendered noncompetitive or obsolete.
We believe that pharmaceutical, drug delivery and biotechnology companies, research organizations, governmental entities, universities, hospitals,
other nonprofit organizations, and individual scientists are seeking to develop drugs, therapies, products, approaches or methods to treat our targeted
diseases or their underlying causes. For our targeted diseases, competitors have alternate therapies that are already commercialized or are in various stages
of development, ranging from discovery to advanced clinical trials. Any of these drugs, therapies, products, approaches, or methods may receive
government approval or gain market acceptance more rapidly than our product candidates, may offer therapeutic or cost advantages, or may more
effectively treat our targeted diseases or their underlying causes, which could result in our product candidates not being approved, reduce demand for our
product candidates or render them noncompetitive or obsolete.
Many of our competitors and potential competitors for our leading product candidate, EYP-1901, and our commercialized products have
substantially greater financial, technological, research and development, marketing, and personnel resources than we
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do. Our competitors may succeed in developing alternate technologies and products that, in comparison to the product candidates we have, and are seeking
to, develop:
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are more effective and easier to use;
are more economical;
have fewer side effects;
offer other benefits; or
may otherwise render our products less competitive or obsolete.
Many of these competitors have greater experience in developing products, conducting clinical trials, obtaining regulatory approvals or clearances,
and manufacturing and marketing products than we do.
DEXYCU® is an intraocular suspension that delivers dexamethasone, a corticosteroid that is associated with certain adverse side effects in the eye,
which may affect the success of DEXYCU® for the treatment of post-operative inflammation.
DEXYCU® is an intraocular suspension that delivers dexamethasone, a corticosteroid, which is associated with certain adverse side effects in the
eye. The safety analyses from DEXYCU®’s clinical trials revealed that the most commonly reported adverse reactions were increases in intraocular
pressure (IOP), corneal edema and iritis, a type of uveitis affecting the front of the eye. These side effects may adversely affect sales of DEXYCU®.
If the FDA or other applicable regulatory authorities approve generic products that compete with any of our product candidates, it could reduce the
future sales of our product candidates.
In the U.S., after an NDA is approved, the product generally becomes a “listed drug” which can, in turn, be relied upon by potential competitors in
support of approval of an ANDA. The Federal Food, Drug, and Cosmetic Act, FDA regulations, and other applicable regulations and policies provide
incentives to manufacturers to create generic, non-infringing versions of a drug to facilitate the approval of an ANDA. These manufacturers might show
that their product has the same active ingredients, dosage form, strength, route of administration, conditions of use, and labeling as our product candidate
and might conduct a relatively inexpensive study to demonstrate that the generic product is absorbed in the body at the same rate and to the same extent as,
or is bioequivalent to, our product. These generic equivalents would be significantly less costly than ours to bring to market, and companies that produce
generic equivalents are generally able to offer their products at lower prices. Thus, after the introduction of a generic competitor, a significant percentage of
the sales of any branded product are typically lost to the generic product. Accordingly, competition from generic equivalents to our products would
substantially limit our ability to generate revenues and therefore to obtain a return on the investments we have made in our products.
Product liability lawsuits against us could cause us to incur substantial liabilities and to limit manufacturing or commercialization of YUTIQ® and
DEXYCU®, and any other product candidates that we may develop and commercialize, including EYP-1901.
We face the risk of product liability exposure as we manufacture YUTIQ® and DEXYCU® for our commercialization partners and other product
candidates that we may develop and commercialize. We also may face product liability claims from patients who are treated with any of our product
candidates in clinical trials. If we cannot successfully defend ourselves against claims that our products or product candidates caused injuries, we could
incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
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injury to our reputation and significant negative media attention;
termination of clinical trial sites or entire trial programs that we conduct in the future relating to EYP-1901 or our other product candidates;
withdrawal of clinical trial participants from any future clinical trial relating to EYP-1901, and EYP-2301or our other product candidates;
significant costs to defend the related litigation;
substantial money awards to patients;
loss of revenue;
diversion of management and scientific resources from our business operations; and
an increase in product liability insurance premiums or an inability to maintain product liability insurance coverage.
We currently carry product liability insurance with coverage up to $30.0 million in the aggregate, with a per incident limit of $30.0 million, which
may not be adequate to cover all liabilities that we may incur. Further, we may not be able to maintain insurance coverage at a reasonable cost or in an
amount adequate to satisfy any liability that may arise. Our inability to maintain sufficient product liability insurance at an acceptable cost could prevent or
inhibit the manufacture of YUTIQ® and our ability to meet our
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obligations to our commercialization partners, or could prevent or inhibit the development and commercialization of our other product candidates,
including EYP-1901.
Additionally, any agreements we have entered into, or we may enter into. in the future with collaborators in connection with the development or
commercialization of EYP-1901 or any of our other product candidates, may entitle us to indemnification against product liability losses, but such
indemnification may not be available or adequate should any claim arise. In addition, several of our agreements require us to indemnify third parties and
these indemnification obligations may exceed the coverage under our product liability insurance policy.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY
If we are unable to protect our intellectual property rights or if our intellectual property rights are inadequate to protect our product candidates, our
competitors could develop and commercialize technology and products similar to ours, and our competitive position could be harmed.
Our commercial success will depend in large part on our ability to obtain and maintain patent and other intellectual property protection in the U.S.
and other countries with respect to our proprietary technology and products. We rely on trade secret, patent, copyright and trademark laws, and
confidentiality and other agreements with employees and third parties, all of which offer only limited protection. We seek patent protection for many
different aspects of our product candidates, including their compositions, their methods of use, processes for their manufacture, and any other aspects that
we deem to be commercially important to the development of our business.
The patent prosecution process is expensive and time-consuming, and we and any licensors and licensees may not be able to apply for or prosecute
patents on certain aspects of our product candidates or delivery technologies at a reasonable cost, in a timely fashion, or at all. For technology licensed to
third parties, we may not have the right to control the preparation, filing and/or prosecution of the corresponding patent applications, or to maintain patent
rights corresponding to such technology. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best
interests of our business. It is also possible that we, or any licensors or licensees, will 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. 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, such as with respect to proper priority claims, inventorship, claim scope,
or patent term adjustments. If any licensors or licensees 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, and we might not be able to prevent third parties from making, using, and selling competing
products. If there are material defects in the form or preparation of our patents or patent applications, such patents or applications may be invalid or
unenforceable. Moreover, our competitors may independently develop equivalent knowledge, methods, and know-how. Any of these outcomes could
impair our ability to prevent competition from third parties, which may have an adverse impact on our business, financial condition, and operating results.
The patent positions of pharmaceutical companies generally are highly uncertain, involve complex legal and factual questions and have in recent
years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of any patents that issue, are highly
uncertain. For example, recent changes to the patent laws of the U.S. provide additional procedures for third parties to challenge the validity of issued
patents. Under the Leahy-Smith America Invents Act, or AIA, which was signed into law on September 16, 2011, patents issued from applications with an
effective filing date after March 15, 2013, may be challenged by third parties using the post-grant review procedure which allows challenges for a number
of reasons, including prior art, sufficiency of disclosure, and subject matter eligibility. Under the AIA, patents may also be challenged under the inter partes
review procedure. Inter partes review provides a mechanism by which any third party may challenge the validity of any issued U.S. Patent in the USPTO
on the basis of prior art. Because of a lower evidentiary standard necessary to invalidate a patent claim in USPTO proceedings as compared to the
evidentiary standard relied on in U.S. federal court, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to
hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a
third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third
party as a defendant in a district court action.
With respect to foreign jurisdictions, the laws of foreign countries may not protect our rights to the same extent as the laws of the U.S. or vice versa.
For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Also, patents granted by
the European Patent Office may be opposed by any person within nine months from the publication of their grant.
Our patents and patent applications, even if unchallenged by a third party, may not adequately protect our intellectual property or prevent others
from designing around our claims. The steps we have taken to protect our proprietary rights may not be adequate to
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preclude misappropriation of our proprietary information or infringement of our intellectual property rights, both inside and outside the U.S. Further, the
examination process may require us to narrow the claims of pending patent applications, which may limit the scope of patent protection that may be
obtained if these applications issue. The rights that may be granted under future issued patents may not provide us with the proprietary protection or
competitive advantages we are seeking. If we are unable to obtain and maintain patent protection for our technology and products, or if the scope of the
patent protection obtained is not sufficient, our competitors could develop and commercialize technology and products similar or superior to ours, and our
ability to successfully commercialize our technology and product candidates may be impaired.
As of March 1, 2024, we owned proprietary know-how and several patents and pending applications, including patents and pending applications
covering our Durasert®, EYP-1901,VERISOME® and other technologies. With respect to these patent rights, we do not know whether any of our patent
applications will result in issued patents or, if any of our patent applications do issue, whether such patents will protect our technology in whole or in part,
or whether such patents will effectively prevent others from commercializing competitive technologies and products. There is no guarantee that any of our
issued or granted patents will not later be found invalid or unenforceable. Furthermore, since patent applications in the U.S. and most other countries are
confidential for a period of time after filing, we cannot be certain that we were the first to either (i) file any patent application related to our product
candidates or (ii) invent any of the inventions claimed in our patents or patent applications. For applications with an effective filing date before March 16,
2013, or patents issuing from such applications, an interference proceeding can be provoked by a third party or instituted by the USPTO to determine who
was the first to invent any of the subject matter covered by the patent claims of our applications and patents. As of March 16, 2013, the U.S. transitioned to
a “first-to-file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the
same invention. A third party that files a patent application in the USPTO before us could therefore be awarded a patent covering an invention of ours even
if we had made the invention before it was made by the third party. This will require us to be cognizant going forward of the time from invention to filing
of a patent application. The change to “first-to-file” from “first-to-invent” is one of the changes to the patent laws of the U.S. resulting from the AIA.
Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other
jurisdictions are typically not published until 18 months after filing or in some cases not at all, until they are issued as a patent. Therefore, we cannot be
certain that we were the first to make the inventions claimed in our pending patent applications, that we were the first to file for patent protection of such
inventions, or that we have found all of the potentially relevant prior art relating to our patents and patent applications that could invalidate one or more of
our patents or prevent one or more of our patent applications from issuing. Even if patents do successfully issue and even if such patents cover our product
candidates, third parties may initiate oppositions, interferences, re-examinations, post-grant reviews, inter partes reviews, nullification or derivation actions
in court or before patent offices or similar proceedings challenging the validity, enforceability, or scope of such patents, which may result in the patent
claims being narrowed or invalidated. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our
intellectual property, provide exclusivity for our product candidates, or prevent others from designing around our claims. Any of these outcomes could
impair our ability to prevent competition from third parties.
Furthermore, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents
may be challenged in the courts or patent offices in the U.S. and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent
claims being narrowed, invalidated or held unenforceable, in whole or in part, 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. Given the amount of
time required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before
or shortly after such product candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights
to exclude others from commercializing products similar or identical to ours.
We may become involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming and
unsuccessful.
Competitors may infringe our patents or the patents of any party from whom we may license patents from in the future. To counter infringement or
unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In a patent litigation in the U.S., defendant
counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several
statutory requirements, for example, lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that
someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. The
outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. A court may decide that a patent of ours or of
any of our future licensors is not valid, or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our
patents do not cover the technology in question. In addition, to the extent that we have to file patent litigation in a federal court against a U.S. patent holder,
we would be required to initiate the proceeding in the state of incorporation or residency of such entity. With respect to the validity question, for example,
we cannot be certain that no invalidating
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prior art exists. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, found
unenforceable, or interpreted narrowly, and it could put our patent applications at risk of not issuing. Defense of these claims, regardless of their merit,
would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. If a defendant were to prevail
on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our products.
Such a loss of patent protection could compromise our ability to pursue our business strategy.
As noted above, interference proceedings brought by the USPTO for applications with an effective filing date before March 16, 2013, or for patents
issuing from such applications may be necessary to determine the priority of inventions with respect to our patents and patent applications or those of our
collaborators or licensors. An unfavorable outcome could require us to cease using the technology or to attempt to license rights to it from the prevailing
party. Our business could be harmed if a prevailing party does not offer us a license on terms that are acceptable to us. Litigation or interference
proceedings may fail and, even if successful, may result in substantial costs and distraction of our management and other employees. We may not be able to
prevent, alone or with any of our future licensors, misappropriation of our proprietary rights, particularly in countries where the laws may not protect those
rights as fully as in the U.S. 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 this type of litigation. In addition, there could 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 have a substantial adverse effect on the price of our common stock.
Moreover, we may be subject to a third-party pre-issuance submission of prior art to the USPTO or other foreign patent offices, or become involved
in opposition, derivation, reexamination, inter partes review, post-grant 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 invalidate or reduce the scope of, our patent rights, allow third
parties to commercialize our technology or drugs and compete directly with us, without payment to us, or result in our inability to manufacture or
commercialize drugs without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent
applications is threatened, it could dissuade companies from collaborating with us to license, develop, or commercialize current or future product
candidates.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting, and defending patents on our product candidates throughout the world would be prohibitively expensive, and our intellectual
property rights in some countries outside the U.S. may be less extensive than those in the U.S. In addition, the laws and practices of some foreign countries
do not protect intellectual property rights, especially those relating to life sciences, to the same extent as federal and state laws in the U.S. For example,
novel formulations of drugs and manufacturing processes may not be patentable in certain jurisdictions, and the requirements for patentability may differ in
certain countries, particularly developing countries. Also, some foreign countries, including EU countries, India, Japan, and China, have compulsory
licensing laws under which a patent owner may be compelled under certain circumstances to grant licenses to third parties. Consequently, we may have
limited remedies if patents are infringed or if we are compelled to grant a license to a third party, and we may not be able to prevent third parties from
practicing our inventions in all countries outside the U.S., or from selling or importing products made using our inventions into or within the U.S. or other
jurisdictions. This could limit our potential revenue opportunities. Competitors may use our technologies in jurisdictions where we have not obtained patent
protection to develop their own products, and may export otherwise infringing products to territories where we have patent protection, but where
enforcement is not as strong as that in the U.S., these products may compete with our product candidates in jurisdictions where we do not have any issued
patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from competing with us in these
jurisdictions. Accordingly, our efforts to enforce intellectual property rights around the world may be inadequate to obtain a significant commercial
advantage from our intellectual property. We may not prevail in any lawsuits that we initiate in these foreign countries and the damages or other remedies
awarded, if any, may not be commercially meaningful.
Further, the complexity and uncertainty of European patent laws have increased in recent years. In Europe, a new unitary patent system came into
force on June 1, 2023. Under the unitary patent system, upon grant of a European patent, a Unitary Patent may be elected, which will be affected in the EU
member states that have ratified the Unitary Patent Court (UPC). Agreement and will be subject to the jurisdiction of the UPC. As the UPC is a new court
system, there is no precedent for the court, increasing the uncertainty of any litigation. Patents granted before the implementation of the UPC will have the
option of opting out of the jurisdiction of the UPC and remaining as national patents in the UPC countries. Patents that remain under the jurisdiction of the
UPC will be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all countries who have
ratified the UPC. We cannot predict with certainty the long-term effects of any potential changes.
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Obtaining and maintaining our patent protection 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 U.S. 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.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which could be uncertain
and could harm our business.
Our commercial success depends upon our ability, and the ability of our partners and collaborators, to develop, manufacture, market, and sell our
products and product candidates, if approved, and use our proprietary technologies without infringing the proprietary rights of third parties. Although our
product candidates are in pre-clinical studies and clinical trials, we believe that the use of our product candidates in these pre-clinical studies and clinical
trials falls within the scope of the exemptions provided by 35 U.S.C. Section 271(e) in the U.S., which exempts from patent infringement liability activities
reasonably related to the development and submission of information to the FDA. As our other product candidates progress toward commercialization, the
possibility of a patent infringement claim against us increases. Accordingly, we may invest significant time and expense in the development of our product
candidates only to be subject to significant delay and expensive and time-consuming patent litigation before our product candidates may be
commercialized. There can be no assurance that our products or product candidates do not infringe other parties’ patents or other proprietary rights, and
competitors or other parties may assert that we infringe their proprietary rights in any event.
There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. We may become party to, or threatened
with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our product candidates, including interference or
derivation proceedings before the USPTO. Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the
fields in which we are developing our product candidates. Third parties may assert infringement claims against us based on existing patents or patents that
may be granted in the future.
If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue
commercializing our products or product candidates. However, we may not be able to obtain any required license on commercially reasonable terms or at
all. Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could give our competitors access to the same technology
or intellectual property rights licensed to us. If we fail to obtain a required license, we may be unable to effectively market products or product candidates
based on our technology, which could limit our ability to generate revenues or achieve profitability and possibly prevent us from generating revenues
sufficient to sustain our operations. Alternatively, we may need to redesign our infringing products, which may be impossible or require substantial time
and monetary expenditure. Under certain circumstances, we could be forced, including by court order, to cease commercializing our products or product
candidates. In addition, in any such proceeding or litigation, we could be found liable for substantial monetary damages, potentially including treble
damages and attorneys’ fees, if we are found to have willfully infringed. A finding of infringement could prevent us from commercializing our products or
product candidates or force us to cease some of our business operations, which could harm our business. Any claims by third parties that we have
misappropriated their confidential information or trade secrets could have a similar negative impact on our business.
The cost to us in defending or initiating any litigation or other proceeding relating to patent or other proprietary rights, even if resolved in our favor,
could be substantial, and litigation would divert our management’s attention. Some of our competitors may be able to sustain the costs of complex patent
litigation more effectively than we can because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of
patent litigation or other proceedings could compromise our commercialization efforts, delay our research and development efforts and limit our ability to
continue our operations. There could also be public announcements of the results of the hearing, motions, or other interim proceedings or developments. If
securities analysts or investors perceive those results to be negative, it could cause the price of shares of our common stock to decline.
Our competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner.
Our competitors may seek approval to market their own products that are the same as, similar to or otherwise competitive with our products or
product candidates. In these circumstances, we may need to defend or assert our patents by various means, including filing lawsuits alleging patent
infringement requiring us to engage in complex, lengthy and costly litigation, or other proceedings. In any of these types of proceedings, a court or
government agency with jurisdiction may find our patents invalid, unenforceable or not
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infringed. We may also fail to identify patentable aspects of our research and development before it is too late to obtain patent protection. Even if we have
valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business
objectives.
Changes in either U.S. or foreign patent law or interpretation of such laws could diminish the value of patents in general, thereby impairing our ability
to protect our products or product candidates.
As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and
enforcing patents in the pharmaceutical industry involve both technological and legal complexity, and it therefore is costly, time-consuming and inherently
uncertain. As noted above, the AIA has significantly changed U.S. patent law. In addition to transitioning from a “first-to-invent” to “first-to-file” system,
the AIA also limits where a patentee may file a patent infringement suit and provides opportunities for third parties to challenge issued patents in the
USPTO via post-grant review or inter partes review, for example. All of our U.S. patents, even those issued before March 16, 2013, may be challenged by
a third party seeking to institute inter partes review.
Depending on decisions by the U.S. Congress, the federal courts, the USPTO, or similar authorities in foreign jurisdictions, 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.
We may be subject to claims asserting that our employees, consultants, independent contractors and advisors have wrongfully used or disclosed
confidential information and/or alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own
intellectual property.
Although we try to ensure that our employees, consultants, independent contractors and advisors do not use the proprietary information or know-
how of others in their work for us, we may be subject to claims that these individuals or we have inadvertently or otherwise used or disclosed confidential
information and/or intellectual property, including trade secrets or other proprietary information, of the companies that any such individual currently or
formerly worked for or provided services to. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition
to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims,
litigation could result in substantial costs and be a distraction to our business.
In addition, while we require our employees and contractors who may be involved in the conception or 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,
conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing or the
assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to
determine the ownership of what we regard as our intellectual property.
Intellectual property rights do not prevent all potential threats to competitive advantages we may have.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and
intellectual property rights may not adequately protect our business or permit us to maintain our competitive advantage.
The following examples are illustrative:
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others may be able to make drug and device components that are the same as or similar to our product candidates but that are not covered by
the claims of the patents that we own or have exclusively licensed;
we or any of our licensors or collaborators might not have been the first to make the inventions covered by the issued patent or pending patent
application that we own or have exclusively licensed;
we or any of our licensors or collaborators might not have been the first to file patent applications covering certain of our inventions;
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual
property rights;
the prosecution of our pending patent applications may not result in granted patents;
granted patents that we own or have licensed may not cover our products or may be held not infringed, invalid or unenforceable, as a result of
legal challenges by our competitors;
with respect to granted patents that we own or have licensed, especially patents that we either acquire or in-license, if certain information was
withheld from or misrepresented to the patent examiner, such patents might be held to be unenforceable;
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patent protection on our product candidates may expire before we are able to develop and commercialize the product, or before we are able to
recover our investment in the product;
our competitors might conduct research and development activities in the U.S. and other countries that provide a safe harbor from patent
infringement claims for such activities, as well as in countries in which we do not have patent rights, and may then use the information learned
from such activities to develop competitive products for sale in markets where we intend to market our product candidates;
we may not develop additional proprietary technologies that are patentable;
the patents of others may have an adverse effect on our business; and
we may choose not to file a patent application for certain technologies, trade secrets or know-how, and a third party may subsequently file a
patent covering such intellectual property.
Should any of these events occur, they could significantly harm our business, financial condition, results of operations and prospects.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patent protection for certain aspects of our product candidates and technologies, we also consider trade secrets, including
confidential and unpatented know-how, important to the maintenance of our competitive position. We protect trade secrets and confidential and unpatented
know-how, in part, by customarily entering into non-disclosure and confidentiality agreements with parties who have access to such knowledge, such as our
employees, outside scientific and commercial collaborators, CROs, CMOs, consultants, advisors, and other third parties. We also enter into confidentiality
and invention or patent assignment agreements with our employees and consultants that obligate them to maintain confidentiality and assign their
inventions to us. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets,
and we may not be able to obtain adequate remedies for such breaches. In addition, our trade secrets may otherwise become known, including through a
potential cybersecurity breach, or may be independently developed by competitors.
Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is
unpredictable. In addition, some courts in the U.S. and certain foreign jurisdictions are less willing or unwilling to protect trade secrets. If any of our trade
secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them 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, our competitive position
would be harmed.
If our trademarks are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be
adversely affected.
We expect to rely on trademarks as one means to distinguish any of our approved products from the products of our competitors. We have
received registrations for EYEPOINT®, YUTIQ®, DEXYCU®, DELIVERING INNOVATION TO THE EYE®, DURASERT®, and WITH AN EYE ON
PATIENTS®. Retisert® and Vitrasert® are Bausch & Lomb’s trademarks. YUTIQ® is licensed to Alimera Sciences and Ocumension Therapeutics in their
respective territories. ILUVIEN® is Alimera Sciences Inc.’s trademark. The reports we file or furnish with the SEC, including this Annual Report on Form
10-K, also contain trademarks, trade names and service marks of other companies, which are the property of their respective owners.
RISKS RELATED TO OUR RELIANCE ON THIRD PARTIES
The development and commercialization of our lead product candidate, EYP-1901, is dependent on intellectual property we license from Equinox
Science and active pharmaceutical ingredient (API) supply of vorolanib. If we breach our agreement with Equinox Science, or the agreement is
terminated, we could lose license rights that are material to our business.
Pursuant to our license agreement with Equinox, we acquired exclusive rights to patents, patent applications and know-how owned or controlled by
Equinox relating to the compound vorolanib, a tyrosine kinase inhibitor. Our lead product candidate, EYP-1901, utilizes vorolanib in combination with our
proprietary Durasert E™ sustained release technology. At present, Betta, an affiliate of Equinox is a provider of the API supply of vorolanib to support our
clinical trials. Our license agreement with Equinox imposes various development, regulatory, commercial, financial, and other obligations on us. If we fail
to comply with our obligations under the agreement with Equinox, or otherwise materially breach the agreement with Equinox, and fail to remedy such
failure or cure such breach within 90 days, Equinox will have the right to terminate the agreement. If our agreement with Equinox is terminated by Equinox
for our uncured material breach, we would lose our license and all rights to the use of vorolanib, from Equinox, for EYP-1901. The loss of the license from
Equinox could prevent us from developing and commercializing EYP-1901 and could subject us to claims of breach of contract and patent infringement
from Equinox if any continued research, development, manufacture or commercialization of EYP-1901 is covered by the affected patents. Accordingly, the
loss of our license from Equinox would materially harm our business.
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The development of our lead product candidate, EYP-1901, is dependent on our supply of API vorolanib, which we source from third-parties. If any
manufacturer or partner we rely upon fails to supply vorolanib in the amounts we require on a timely basis, or fails to comply with stringent
regulations applicable to pharmaceutical drug manufacturers, we may be unable to meet demand for our products and may lose potential revenues.
We currently source vorolanib, the API in EYP-1901, from Betta, and have plans to source vorolanib from additional third parties, and we also
source various raw materials and components for both EYP-1901 and its injector from third-party vendors. We are also working with a third party
manufacturer to develop the process for manufacturing vorolanib and become the U.S. supplier of vorolanib for use in EYP-1901. We do not manufacture
any of our supply of vorolanib, and we do not currently plan to develop any capacity to do so. Our dependence upon third parties for the manufacture of our
vorolanib could adversely affect our profit margins or our ability to develop and deliver products on a timely and competitive basis. If for any reason we are
unable to obtain or retain third-party manufacturers on commercially acceptable terms, we may not be able to sell EYP-1901 as planned. Furthermore, if we
encounter delays or difficulties with manufacturers in producing vorolanib, the distribution, marketing and subsequent sales of EYP-1901 could be
adversely affected. A long-term inability to meet demand for our products could result in impairment of our brands overall future and the carrying value of
the assets associated with our brands.
If our CROs, vendors and investigators do not successfully carry out their responsibilities or if we lose our relationships with them, our development
efforts with respect to our product candidates could be delayed.
We are dependent on CROs, vendors, and investigators for pre-clinical testing and clinical trials related to our product development programs,
including for EYP-1901. These parties are not our employees, and we cannot control the amount or timing of resources that they devote to our programs. If
they do not timely fulfill their responsibilities or if their performance is inadequate, the development and commercialization of our product candidates
could be delayed. The parties with which we contract for execution of clinical trials play a significant role in the conduct of the trials and the subsequent
collection and analysis of data. Their failure to meet their obligations could adversely affect clinical development of our product candidates. In addition, if
we or our CROs fail to comply with applicable current Good Clinical Practices (GCP), the clinical data generated in our clinical trials may be deemed
unreliable and the FDA may require us to perform additional clinical trials before approving any marketing applications. Upon inspection, the FDA may
determine that our clinical trials did not comply with GCP.
Switching or adding additional CROs involves additional cost and requires management time and focus. Identifying, qualifying and managing
performance of third-party service providers can be difficult, time-consuming and cause delays in our development programs. In addition, there is a natural
transition period when a new CRO commences work and the new CRO may not provide the same type or level of services as the original provider. Though
we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these
delays or challenges will not have a material adverse impact on our business, financial condition and prospects. If any of our relationships with our CROs
terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. As a result, delays may
occur, which can materially impact our ability to meet our desired clinical development timelines.
Because we have relied on third parties, our internal capacity to perform these functions is limited. Outsourcing these functions involves risks
that third parties may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. In addition, the use of third-
party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be
misappropriated. We currently have a small number of employees, which limits the internal resources we have available to identify and monitor our third-
party providers. To the extent we are unable to identify and successfully manage the performance of third-party service providers in the future, our ability
to advance our product candidates through clinical trials will be compromised. Though we carefully manage our relationships with our CROs, there can be
no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact
on our business, financial condition, and prospects.
We use our own facility for the manufacturing of YUTIQ® and rely on third party suppliers for key components, and any disruptions to our suppliers’
operations could adversely affect YUTIQ®’s commercial viability.
Pursuant to our agreements with our commercialization partners, we currently manufacture commercial supplies of YUTIQ® ourselves at our
Watertown, MA facility and rely on third party suppliers for key components of YUTIQ®. We have, and will continue, to perform extensive audits of our
suppliers, vendors and contract laboratories. The cGMP requirements govern, among other things, recordkeeping, production processes and controls,
personnel and quality control. To ensure that we continue to meet these requirements, we have and will continue to expend significant time, money, and
effort.
The commercial manufacture of medical products is complex and requires significant expertise and capital investment, including the development of
advanced manufacturing techniques and process controls. Manufacturers of medical products often encounter difficulties in production, particularly in
scaling out and validating initial production and ensuring the absence of
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contamination. These problems include difficulties with production costs and yields, quality control, including stability of the product, quality assurance
testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, state, and foreign regulations. We cannot
assure you that any issue relating to the manufacture of YUTIQ® will not occur in the future.
The FDA also may, at any time following approval of a product for sale, audit our manufacturing facilities. If any such inspection or audit identifies
a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulation occurs independent of such an
inspection or audit, FDA may issue a Form FDA-483 and/or an untitled or warning letter, or we or the FDA may require remedial measures that may be
costly and/or time consuming for us to implement and that may include the temporary or permanent suspension of commercial sales, recalls, market
withdrawals, seizures or the temporary or permanent closure of a facility. In addition, although we could contract with other third parties to manufacture
YUTIQ®, we would need to qualify and obtain FDA approval for a contract manufacturer or supplier as an alternative source for YUTIQ®, which could be
costly and cause significant delays.
Our manufacturing operations currently depend on our Watertown, MA facility and we are currently developing an additional manufacturing facility
in Northbridge, MA. If our Watertown location is destroyed or out of operation, or, if the Northbridge development is delayed for a substantial period of
time, our business may be adversely impacted.
We currently conduct our manufacturing operations related to YUTIQ® in our facility located in Watertown, MA. If regulatory, manufacturing or
other problems, require us to suspend or discontinue production at our Watertown, MA facility, we will not be able to have or maintain adequate
commercial supply of YUTIQ®, which would adversely impact our business. If the facility or the equipment in it is significantly damaged or destroyed by
fire, flood, power loss, or similar events, we may not be able to quickly or inexpensively replace our facility. In the event of a temporary or protracted loss
of either facility or equipment, we might not be able to transfer manufacturing to a third party. Even if we could transfer manufacturing to a third party, the
shift would likely be expensive and time-consuming, particularly since the new facility would need to comply with necessary regulatory requirements. On
January 23, 2023, the Company entered into a lease agreement for its new standalone manufacturing facility, including office and lab space located at 600
Commerce Drive, Northbridge, Massachusetts. The facility will be Good Manufacturing Practice (GMP) compliant to meet U.S. FDA and European
Medicines Agency (EMA) standards and support EYP-1901’s clinical supply and commercial readiness upon regulatory approval. In addition, the building
will have the capacity and capabilities to support our commercial business and expanding pipeline. The new facility, customized for our requirements, is
expected to be operational in the second half of 2024. If the new facility is delayed for a substantial period of time, then we may not be able to accelerate
future production for EYP-1901, as well as support global demand for our U.S. FDA and China NMPA approved therapy, YUTIQ, as currently planned.
If we encounter issues with our CMOs or suppliers, we may need to qualify alternative manufacturers or suppliers, which could impair our ability to
sufficiently and timely manufacture and supply DEXYCU®.
We currently depend on CMOs and suppliers for DEXYCU®. Although we could obtain the drug product and other components for DEXYCU®
from other CMOs and suppliers, we would need to qualify and obtain FDA approval for such CMOs or suppliers as alternative sources, which could be
costly and cause significant delays. In addition, the manufacturer of the drug product in DEXYCU® conducts its manufacturing operations for us at a single
facility. Unless and until we qualify additional facilities, we may face limitations in our ability to respond to manufacturing issues. For example, if
regulatory, manufacturing or other problems require this manufacturer to discontinue production at its facility, or if the equipment used for the production
of the drug product in this facility is significantly damaged or destroyed by fire, flood, earthquake, power loss or similar events, the ability of such
manufacturer to manufacture DEXYCU® may be significantly impaired. In the event that this party suffers a temporary or protracted loss of its materials,
facility or equipment, we would still be required to obtain FDA approval to qualify a new manufacturer as an alternate manufacturer for the drug product
before any drug product manufactured by such manufacturer could be sold or used. Any production shortfall that impairs the supply of DEXYCU® could
adversely affect our ability to satisfy demand for DEXYCU®, which could have a material adverse effect on our product sales, results of operations and
financial condition.
Our employees, collaborators, service providers, independent contractors, principal investigators, consultants, co-promotion partners, vendors and
CROs may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk that our employees, collaborators, independent contractors, principal investigators, consultants, co-promotion partners,
vendors, and CROs may engage in fraudulent or other illegal activity with respect to our business. Misconduct by these employees could include
intentional, reckless and/or negligent conduct or unauthorized activity that violates:
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FDA regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA;
manufacturing standards;
federal and state healthcare fraud and abuse laws and regulations; or
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laws that require the true, complete, and accurate reporting of financial information or data.
In particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended 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, sales commission, customer incentive programs and other business arrangements. Misconduct by these parties could also involve
individually identifiable information, including, without limitation, the improper use of information obtained in the course of clinical trials, or illegal
misappropriation of drug product, which could result in regulatory sanctions and serious harm to our reputation. Any incidents or any other conduct that
leads to an employee receiving an FDA debarment could result in a loss of business from third parties and severe reputational harm.
Although we have adopted a Code of Business Conduct to govern and deter such behaviors, 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 be in compliance with such laws or 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 civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from
participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings,
additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-
compliance with these laws, and curtailment of our operations.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
The trading price of the shares of our common stock has been highly volatile, and purchasers of our common stock could incur substantial losses.
The price of our common stock is highly volatile and may be affected by developments directly affecting our business, as well as by developments
out of our control or not specific to us. The pharmaceutical and biotechnology industries, in particular, and the stock market generally, are vulnerable to
abrupt changes in investor sentiment. Prices of securities and trading volumes of companies in the pharmaceutical and biotechnology industries, including
ours, can swing dramatically in ways unrelated to, or that bear a disproportionate relationship to, our performance. The price of our common stock and their
trading volumes may fluctuate based on a number of factors including, but not limited to:
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clinical trials and their results, and other product and technological developments and innovations;
the timing, costs and progress of our commercialization efforts;
FDA and other domestic and international governmental regulatory actions, receipt and timing of approvals of our product candidates, and any
denials and withdrawal of approvals;
the duration, scope, and outcome of any governmental inquiries or investigations;
competitive factors, including the commercialization of new products in our markets by our competitors;
advancements with respect to treatment of the diseases targeted by our product candidates;
developments relating to, and actions by, our collaborative partners, including execution, amendment and termination of agreements,
achievement of milestones and receipt of payments;
the success of our collaborative partners in marketing any approved products and the amount and timing of payments to us;
availability and cost of capital and our financial and operating results;
actions with respect to pricing, reimbursement and coverage, and changes in reimbursement policies or other practices relating to our products
or the pharmaceutical or biotechnology industries generally;
meeting, exceeding or failing to meet analysts’ or investors’ expectations, and changes in evaluations and recommendations by securities
analysts;
the use of social media platforms by customers or investors;
the issuance of additional shares upon the exercise of currently outstanding options or warrants or upon the settlement of stock units;
future sales of substantial amounts of shares of our common stock in the market;
economic, industry and market conditions, changes or trends; and
other factors unrelated to us or the pharmaceutical and biotechnology industries.
In addition, low trading volume in our common stock may increase their price volatility. Holders of our common stock may not be able to liquidate
their positions at the desired time or price.
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A small concentration of approximately ten stockholders beneficially own 65% of our total outstanding common stock, which gives certain stockholders
significant control over matters subject to stockholder approval, which would prevent new investors from influencing significant corporate decisions.
Approximately ten stockholders beneficially own an aggregate of 65% of our outstanding shares of common stock, as of February 23, 2024. These
stockholders have the ability to significantly influence the outcome of matters submitted to our stockholders for approval, including the election and
removal of directors, and any merger, consolidation or sale of all or substantially all of our assets. In addition, the concentration of voting power in these
certain stockholders may: (i) delay, defer or prevent a change in control; (ii) entrench our management and Board; or (iii) delay or prevent a merger,
consolidation, takeover, or other business combination involving us on terms that other stockholders may desire.
Substantial future sales or other issuances of our common stock could depress the market for our common stock.
Sales of a substantial number of shares of our common stock, or the perception by the market that those sales could occur, could cause the market
price of our common stock to decline or could make it more difficult for us to raise funds through the sale of equity in the future.
In addition, certain of our employees, executive officers, and directors have entered or may enter into Rule 10b5-1 trading plans providing for sales
of shares of our common stock from time to time. Under a Rule 10b5-1 trading plan, a broker executes trades pursuant to parameters established by the
employee, director, or officer when entering into the plan, without further direction from the employee, officer, or director. A Rule 10b5-1 trading plan may
be amended or terminated in some circumstances. Our employees, executive officers, and directors also may buy or sell additional shares outside of a Rule
10b5-1 trading plan when they are not in possession of material, nonpublic information, subject to the expiration of lock-up agreements, if applicable.
Future issuances of our common stock or our other equity securities could further depress the market for our common stock. We expect to continue
to incur commercialization, drug development and selling, general and administrative costs, and to satisfy our funding requirements, we may need to sell
additional equity securities. The sale or the proposed sale of substantial amounts of our common stock or our other equity securities may adversely affect
the market price of our common stock and our stock price may decline substantially. Our stockholders may experience substantial dilution and a reduction
in the price that they are able to obtain upon sale of their shares. New equity securities issued may have greater rights, preferences, or privileges than our
existing common stock.
We do not currently intend to pay dividends on our common stock, and any return to investors is expected to come, if at all, only from potential
increases in the price of our common stock.
We have never declared or paid cash dividends on our capital stock, and you should not rely on an investment in our common stock to provide
dividend income. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business and do not
anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of our common stock will be your sole
source of gain for the foreseeable future.
Provisions in our charter documents could prevent or delay stockholders’ attempts to takeover our company.
Our board of directors is authorized to issue “blank check” preferred stock, with designations, rights and preferences as they may determine.
Accordingly, our board of directors may in the future, without stockholder approval, issue shares of preferred stock with dividend, liquidation, conversion,
voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock. This type of preferred stock could
also be issued to discourage, delay, or prevent a change in our control. The ability to issue “blank check” preferred stock is a traditional anti-takeover
measure. This provision in our charter documents makes it difficult for a majority stockholder to gain control of our company. Provisions like this may be
beneficial to our management and our board of directors in a hostile tender offer and may have an adverse impact on stockholders who may want to
participate in such a tender offer.
Provisions in our bylaws provide for indemnification of officers and directors, which could require us to direct funds away from our business and the
development of our product candidates.
Our bylaws provide for the indemnification of our officers and directors. We may in the future be required to advance costs incurred by an officer or
director and to pay judgments, fines and expenses incurred by an officer or director, including reasonable attorneys’ fees, as a result of actions or
proceedings in which our officers and directors are involved by reason of being or having been an officer or director of our company. Funds paid in
satisfaction of judgments, fines, and expenses may be funds we need for the operation of our business and the development of our product candidates,
thereby affecting our ability to attain profitability.
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GENERAL RISK FACTORS
We will need to grow the size of our organization, and we may experience difficulties in managing this growth.
Development and commercialization of our product candidate strategies will require additional managerial, operational, sales, marketing, financial,
and other resources. Our current management, personnel, and systems may not be adequate to effectively manage the expansion of our operations, which
may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, employee turnover, and reduced
productivity. Future growth could require significant capital expenditures and may divert financial resources from other projects, such as the development
of our existing or future product candidates. Future growth would impose significant added responsibilities on members of management, including:
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overseeing our clinical trials for EYP-1901 effectively;
identifying, recruiting, maintaining, motivating and integrating additional employees, including any research and development personnel
engaged in our clinical trials for EYP-1901;
managing our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors and
other third parties; and improving our managerial, development, operational and financial systems, and procedures.
As our operations expand, we will need to manage additional relationships with various strategic collaborators, suppliers, and other third parties.
Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to
manage any future growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively and hire, train and
integrate additional management, administrative, and sales and marketing personnel. Failure to accomplish any of these activities could prevent us from
successfully growing our company.
Our business and operations would suffer in the event of computer system failures, cyberattacks or a deficiency in our cybersecurity.
Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to
damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures, cyberattacks or cyber-
intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a
security breach or disruption, particularly through cyber-attacks 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.
Such an event could cause interruption of our operations. As part of our business, we and our vendors maintain large amounts of confidential information,
including non-public personal information on patients and our employees. Breaches in security could result in the loss or misuse of this information, which
could, in turn, result in potential regulatory actions or litigation, including material claims for damages, interruption to our operations, damage to our
reputation or otherwise have a material adverse effect on our business, financial condition and operating results. We expect to have appropriate information
security policies and systems in place in order to prevent unauthorized use or disclosure of confidential information, including non-public personal
information, but there can be no assurance that such use or disclosure will not occur.
If we fail to comply with data protection laws and regulations, we could be subject to government enforcement actions, which could include civil or
criminal penalties, as well as private litigation and/or adverse publicity, any of which could negatively affect our operating results and business.
We may be subject to laws and regulations that address privacy and data security in the U.S. and in states in which we conduct our business. The
legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data
protection issues which may affect our business. In the U.S., numerous federal and state laws and regulations govern the collection, use, disclosure, and
protection of health-related and other personal information, including state data breach notification laws, state health information privacy laws, state genetic
privacy laws, and federal and state consumer protection and privacy laws (including, for example, Section 5 of the FTC Act and the CCPA). Compliance
with these laws is difficult, constantly evolving, and time consuming. In addition, state laws govern the privacy and security of health, research and genetic
information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating
compliance efforts. Failure to comply with these laws and regulations could result in government enforcement actions and create liability for us, which
could include civil and/or criminal penalties, as well as private litigation and/or adverse publicity that could negatively affect our operating results and
business.
For instance, HIPAA imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and
transmission of individually identifiable health information and imposes notification obligations in the event of a breach of the privacy or security of
individually identifiable health information on entities subject to HIPAA and their business
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associates that perform certain activities that involve the use or disclosure of protected health information on their behalf. We may obtain health
information from third parties (e.g., research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements
under HIPAA. Although we are not directly subject to HIPAA – other than potentially with respect to providing certain employee benefits – we could
potentially be subject to criminal penalties if we, our affiliates, or our agents knowingly obtain, use, or disclose individually identifiable health information
maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.
In addition, the CCPA establishes certain requirements for data use and sharing transparency and provides California consumers (as defined in the
law) certain rights concerning the use, disclosure, and retention of their personal data. In November 2020, California voters approved the California Privacy
Rights Act (CPRA) ballot initiative which introduced significant amendments to the CCPA and established and funded a dedicated California privacy
regulator, the California Privacy Protection Agency (CPPA). The amendments introduced by the CPRA went into effect on January 1, 2023, and new
implementing regulations are expected to be introduced by the CPPA. Failure to comply with the CCPA may result in, among other things, significant civil
penalties and injunctive relief, or statutory or actual damages. In addition, California residents have the right to bring a private right of action in connection
with certain types of incidents. These claims may result in significant liability and damages. Similarly, there are a number of legislative proposals in the
United States, at both the federal and state level, that could impose new obligations or limitations in areas affecting our business. For example, other states,
including Virginia, Colorado, Utah, Indiana, Iowa, Tennessee, Montana, Texas, and Connecticut have enacted privacy laws similar to the CCPA that impose
new obligations or limitations in areas affecting our business. These laws and regulations are evolving and subject to interpretation and may impose
limitations on our activities or otherwise adversely affect our business. The obligations to comply with the CCPA and evolving legislation may require us,
among other things, to update our notices and develop new processes internally and with our partners. We may be subject to fines, penalties, or private
actions in the event of non-compliance with such laws. In addition, we could be subject to regulatory actions and/or claims made by individuals and groups
in private litigation involving privacy issues related to data collection and use practices and other data privacy laws and regulations, including claims for
misuse or inappropriate disclosure of data, as well as unfair or deceptive acts or practices in violation of Section 5(a) of the Federal Trade Commission Act
(FTC Act). The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer
information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually
identifiable health information is considered sensitive data that merits stronger safeguards. With respect to privacy, the FTC also sets expectations that
companies honor the privacy promises made to individuals about how the company handles consumers’ personal information; any failure to honor
promises, such as the statements made in a privacy policy or on a website, may also constitute unfair or deceptive acts or practices in violation of the FTC
Act. Enforcement by the FTC under the FTC Act can result in civil penalties or decades-long enforcement actions.
If we, our agents, or our third party partners fail to comply or are alleged to have failed to comply with these or other applicable data protection and
privacy laws and regulations, or if we were to experience a data breach involving personal information, we could be subject to government enforcement
actions or private lawsuits. Any associated claims, inquiries, or investigations or other government actions could lead to unfavorable outcomes that have a
material impact on our business including through significant penalties or fines, monetary judgments or settlements including criminal and civil liability for
us and our officers and directors, increased compliance costs, delays or impediments in the development of new products, negative publicity, increased
operating costs, diversion of management time and attention, or other remedies that harm our business, including orders that we modify or cease existing
business practices.
Outside the U.S., the legislative and regulatory landscape for privacy and data security continues to evolve. There has been increased attention to
privacy and data security issues that could potentially affect our business, including the EU General Data Protection Regulation including as implemented
in the UK, (collectively, GDPR), which imposes penalties for the most serious breaches of up to EUR 20 million or 4% of a noncompliant company’s
annual global revenue, whichever is greater. The GDPR regulates the processing of personal data (including health data from clinical trials) and places
certain obligations on the processing of personal data including ensuring the lawfulness of processing personal data (including obtaining valid consent of
the individuals to whom the personal data relates, where applicable), the processing details disclosed to the individuals, the adequacy, relevance and
necessity of the personal data collected, the retention of personal data, the sharing of personal data with third parties, the transfer of personal data out of the
European Economic Area/UK to third countries including the U.S., contracting requirements (such as with clinical trial sites and vendors), the use of
personal data in accordance with individual rights, the security of personal data and security breach/incident notifications. Data protection authorities from
the different European Member States and the UK may interpret the GDPR and applicable related national laws differently and impose requirements
additional to those provided in the GDPR and that sit alongside the GDPR, as set out under applicable local data protection law. In addition, guidance on
implementation and compliance practices may be issued, updated or otherwise revised. Enforcement by European and UK regulators is generally active,
and failure to comply with the GDPR or applicable Member State/UK local law may result in fines, amongst other things (such as notices requiring
compliance within a certain timeframe). Further, the UK Government may amend/update UK data protection law, which may result in changes to our
business operations and potentially incur commercial cost.
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European/UK data protection laws, including the GDPR, generally restrict the transfer of personal data from the European Economic Area (EEA),
including the EU, United Kingdom, and Switzerland, to the U.S. and most other countries (except those deemed to be adequate by the European
Commission/UK Secretary of State as applicable) unless the parties to the transfer have implemented specific safeguards to protect the transferred personal
data. Some available lawful transfer mechanisms are under scrutiny and in flux, such as the European Commission’s Standard Contractual Clauses (SCCs).
On July 10, 2023, the European Commission adopted its adequacy decision for the EU-U.S. Data Privacy Framework, meaning that personal data can now
flow freely from the EEA to U.S. companies that participate in the Data Privacy Framework. There are also recent developments regarding data transfers in
the UK, which formally approved two mechanisms for transferring UK data overseas and that came into force on March 21, 2022: the International Data
Transfer Agreement or the International Data Transfer Addendum to the SCCs. The UK Information Commissioner’s Office also issued guidance on how
to approach undertaking risk assessments for transfers of UK data to non-adequate countries outside the UK.
A lack of valid transfer mechanisms for GDPR-covered data could increase exposure to enforcement actions as described above, and may affect our
business operations and require commercial cost (including potentially limiting our ability to collaborate/work with certain third parties and/or requiring an
increase in our data processing capabilities in the EU/UK). Further, the European/UK data protection laws (including laws on data transfers as set out
above) may also be updated/revised, accompanied by new guidance and/or judicial/regulatory interpretations, which could entail further impacts on our
compliance efforts and increased cost.
Additionally, other countries outside of Europe/UK have enacted or are considering enacting similar cross-border data transfer restrictions and laws
requiring local data residency, which could increase the cost and complexity of delivering our services and operating our business. The type of challenges
we face in Europe/UK will likely also arise in other jurisdictions that adopt laws similar in construction to the GDPR or regulatory frameworks of
equivalent complexity.
Furthermore, following the UK’s exit from the EU, the UK became a third country to the EU in terms of personal data transfers. The European
Commission has adopted an Adequacy Decision concerning the level of personal data protection in the UK under which personal data may now flow freely
from the EU to the UK. However, personal data transfers from the EU to the UK may nevertheless be at a greater risk than before because the Adequacy
Decision may be suspended.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
We are increasingly dependent on sophisticated software applications and computing infrastructure to conduct key operations. We depend on both
our own systems, networks, and technology as well as the systems, networks and technology of our contractors, consultants, vendors, and other business
partners.
Cybersecurity Program
Given the importance of cybersecurity to our business, we maintain a robust cybersecurity program to support both the effectiveness of our systems
and our preparedness for information security risks. This program includes a number of administrative, physical, and technical safeguards with regular
evaluations of our cybersecurity program, including periodic internal and external audits, penetration tests, and incident response simulations. We also
require cybersecurity training when onboarding new employees and contractors, as well as required cybersecurity awareness training for our employees and
contractors/other workforce members. Our program leverages industry frameworks, including the National Institute of Standards and Technology (NIST)
Cybersecurity Framework (CSF) to strengthen our program effectiveness and reduce cybersecurity risks.
We use a risk-based approach with respect to our use and oversight of third-party service providers. We use a number of means to assess cyber risks
related to our third-party service providers, including maintaining vendor questionnaires/conducting due diligence in connection with onboarding new
vendors and engaging in periodic reviews thereafter as appropriate.
Process for Assessing, Identifying and Managing Material Risks from Cybersecurity Threats
In the event of a cybersecurity incident, we maintain a regularly tested incident response program. Pursuant to the program and its escalation
protocols, designated personnel are responsible for assessing the severity of an incident and associated threat, and handling it in accordance with that
severity level. We have relationships with a number of third-party service providers to assist with cybersecurity containment and remediation efforts.
61
Governance
Upon a notification of concerning factors which may be indicative that a notable cybersecurity incident has occurred, the Cyber Security
Subcommittee (Cyber Security Subcommittee) consisting of the Chief Legal Officer, Chief People Officer & SVP of IT, Associate General Counsel, Head
of Information Technology, and a member of the Financial Reporting team, meets to make an initial assessment. If the Cyber Security Subcommittee
determines there is a reasonable likelihood a notable cybersecurity incident has occurred, then notice will promptly be given to certain members of the
Company Executive Team including our President/Chief Executive Officer, Chief Financial Officer, Chief Legal Officer & Corporate Secretary, and Chief
People Officer/SVP of IT.
Our team leverages over 25 years of experience in various cyber security functions. Our SVP of IT, and her team, is responsible for the day-to-day
management of the cybersecurity program.
The SVP of IT provides periodic briefings for our senior management team on cybersecurity matters, including the prevention, detection, mitigation,
and remediation of cybersecurity incidents and cybersecurity threats.
Board Oversight
While the Board of Directors has overall responsibility for risk oversight, our Audit Committee oversees cybersecurity risk matters. The Audit
Committee is responsible for reviewing, discussing with management, and overseeing the Company’s cybersecurity and privacy risk exposures and
policies. On a quarterly basis, the SVP of IT reports to the Audit Committee on information technology and cybersecurity matters, including key
information technology risks. The SVP of IT also apprises the Audit Committee and full Board of Cyber Security Incidents consistent with our incident
response program, promptly.
Cybersecurity Risks
Our cybersecurity risk management processes are integrated into our overall Enterprise Risk Management (“ERM”) process. As part of our ERM
process, department leaders identify, assess, and evaluate risks impacting our operations across the Company, including those risks related to cybersecurity.
Department leaders are asked to consider the severity and likelihood of certain risk factors, drawing upon their company knowledge and past business
experience. While we maintain a robust cybersecurity program, the techniques used to infiltrate information technology systems continue to evolve.
Accordingly, we may not be able to timely detect threats or anticipate and implement adequate security measures. For additional information, see “Item 1A
—Risk Factors.” To date, we have not experienced any material cybersecurity incidents or threats.
ITEM 2. PROPERTIES
We do not own any real property. We are headquartered in Watertown, Massachusetts, where we rent office, laboratory and manufacturing
operations space. We entered into the original lease agreement on November 1, 2013, which included approximately 13,650 square feet of combined office
and laboratory space for a term of five years, and was set to expire in April 2019. On May 17, 2018, we entered into an amendment to rent an additional
6,590 square feet of space and extend the term of the lease through May 31, 2025. We took occupancy of the additional space on September 10, 2018. On
April 5, 2021, we further amended the lease by renting an additional 1,409 square feet of space and extending the term of the lease through May 31, 2025.
We took occupancy of the additional space on July 1, 2021.
On March 8, 2022, we entered into an amendment (i) to extend the term of the lease to May 31, 2028 for 13,650 square feet of laboratory and
manufacturing operations space; (ii) to rent an additional 11,999 square feet of office space through May 31, 2028, which commenced during the third
quarter of 2022; and (iii) to terminate a portion of the lease comprising 7,999 square feet of office space in accordance with its existing contractual term on
May 31, 2025. The amendment also reinstated our right to extend the lease for the space we occupy after May 31, 2025, for one additional period of five
years. Rent for the extension period would be at the fair market rent for comparable space in comparable properties in the Watertown area.
On January 23, 2023, we entered into a lease agreement with V.E. Properties IX, LLC for a new standalone manufacturing facility, including office
and lab space located at 600 Commerce Drive, Northbridge, Massachusetts. The new leased premises will consist of approximately 40,000 square feet. The
lease includes a lease term of fifteen years and four months, with two options to extend the lease term for either five years or ten years at 95% of the then-
prevailing fair market rent. The lease term will commence upon the substantial completion of construction to prepare the premises for our intended use,
which is currently expected to occur in the second half of 2024 (the “Lease Commencement Date”). Our obligation to pay base rent will begin four months
following the Lease Commencement Date. We have the option to extend the lease for one additional 5-year term.
We believe our leased facilities are adequate for our present and anticipated needs. Please refer to Note 8 to the Consolidated Financial Statements,
included under Item 15, "Exhibits and Financial Statement Schedules," for further details.
62
ITEM 3. LEGAL PROCEEDINGS
We are subject to various routine legal proceedings and claims incidental to our business, which management believes will not have a material effect
on our financial position, results of operations or cash flows.
U.S. Department of Justice Subpoena
We previously disclosed that in August 2022, we received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking
production of documents related to sales, marketing and promotional practices, including as pertain to DEXYCU®. We are cooperating fully with the
government in connection with this matter. At this time, we are unable to predict the duration, scope, or outcome of this matter or whether it could have a
material impact on our financial condition, results of operation or cash flow.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
63
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Our common stock is traded on the Nasdaq Global Market under the trading symbol “EYPT.” As of February 29, 2024, we had approximately 38
holders of record of our common stock. This number does not include beneficial owners whose shares are held by nominees in street name.
Equity Compensation Plan Information
Information required by Item 5 of Form 10-K regarding our equity compensation plans is incorporated herein by reference to Item 12 of Part III of
this Annual Report on Form 10-K.
Recent Sales of Unregistered Securities
Other than as previously disclosed in our Current Reports on Form 8-K or Quarterly Reports on Form 10-Q filed with the SEC, we did not issue any
unregistered equity securities during the 12 months ended December 31, 2023.
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 OPERATIONS
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our audited Consolidated
Financial Statements and related Notes beginning on page F-1 of this Annual Report on Form 10-K. This discussion contains forward-looking statements,
based on current expectations and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results
may differ significantly from those anticipated or implied in these forward-looking statements as a result of many important factors, including, but not
limited to, those set forth under Item 1A, “Risk Factors,” and elsewhere in this report.
The following Management’s Discussion and Analysis (MD&A) provides a narrative of our results of operations for the year ended December 31,
2023, and the comparable period ended December 31, 2022, respectively, and our financial position as of December 31, 2023 and 2022, respectively. The
MD&A should be read together with our consolidated financial statements and related notes included on pages F-1 through F-29 of this Annual Report on
Form 10-K.
Overview
We are a company committed to developing and commercializing innovative therapeutics to help improve the lives of patients with serious retinal
diseases. Our pipeline leverages our proprietary Durasert E™ technology for sustained intraocular drug delivery. The Company’s lead product candidate,
EYP-1901, is an investigational sustained delivery treatment for anti-vascular endothelial growth factor (anti-VEGF) -mediated retinal diseases combining
vorolanib, a selective and patent-protected tyrosine kinase inhibitor with Durasert E™. EYP-1901 is presently in Phase 2 clinical trials as a sustained
delivery treatment for wet age-related macular degeneration (wet AMD), the leading cause of vision loss among people 50 years of age and older in the
United States, non-proliferative diabetic retinopathy (NPDR), and diabetic macular edema (DME). We expect to initiate pivotal Phase 3 clinical trials in
wet AMD in the second half of 2024.
Fiscal 2023 Overview
The fiscal year ended December 31, 2023, was highlighted by the following events:
•
•
•
•
•
•
•
In January 2023, we announced that Jay S. Duker, M.D., who served as the Company’s Chief Operating Officer (COO) since November 2021,
had been promoted to the additional role of President. In addition to continuing to oversee his duties as COO, in his expanded role, Dr. Duker
has also been overseeing regulatory affairs.
In January 2023, we entered into a lease agreement to design and construct a 40,000-square-foot manufacturing facility in Northbridge,
Massachusetts to support the global manufacturing of programs, including EYP-1901 and YUTIQ®.
In May 2023, we entered into a definitive agreement pursuant to which we granted an exclusive license and rights to YUTIQ® to Alimera
Sciences, Inc. (Alimera). Under the terms of the agreement, Alimera received global rights to YUTIQ® outside of China, Hong Kong, Taiwan,
Macau and Southeast Asia, where YUTIQ® is exclusively licensed to Ocumension Therapeutics (Ocumension) and we will continue to receive
royalties from Ocumension for its YUTIQ® sales. In exchange for the rights granted to Alimera under the agreement, we received a $75 million
upfront cash payment at closing and will receive an additional $7.5 million in equal $1.875 million quarterly installments in 2024. In addition,
commencing in 2025, we will receive a low to mid double-digit royalty on Alimera’s related U.S. net sales above defined thresholds for the
calendar years 2025-2028.
In May 2023, we received confirmation from the FDA that the September 2021 inspection of our Watertown, MA facility had been classified
as Voluntary Action Indicated (VAI) and was no longer considered Official Action Indicated. A VAI classification means that the agency is not
prepared to take or recommend further regulatory action.
In July 2023, we announced the appointment of Jay S. Duker, M.D. as President and Chief Executive Officer (CEO). Dr. Duker transitioned
from his most recent role as President and Chief Operating Officer (COO). Dr. Duker was also appointed to the Board of Directors of the
Company (Board), effective July 10, 2023. Nancy S. Lurker transitioned to the role of Executive Vice Chair from the position of CEO.
In October 2023, we announced the promotion of George O. Elston, our Chief Financial Officer, to Executive Vice President and Chief
Financial Officer.
In October 2023, we announced the appointment of Stuart Duty to the Company’s Board of Directors. Mr. Duty is an experienced financial
executive with over 30 years of experience in finance and investment banking. Mr. Duty has focused primarily on biotechnology and specialty
pharmaceuticals clients for much of his career, advising senior executives and boards on a range of financing activities and strategic
transactions.
65
•
On December 8, 2023, we announced the closing of an underwritten public offering of 13,529,411 shares of our common stock, which included
the exercise in full by the underwriters of their option to purchase an additional 1,764,705 shares of common stock, at the public offering price
of $17.00 per share. Gross proceeds to the Company in the offering, before underwriting discounts and estimated expenses of the offering,
were approximately $230.0 million.
R&D Highlights
•
•
•
•
•
•
•
In February 2023, we entered into a research collaboration with Rallybio Corporation to evaluate sustained delivery of their inhibitor of
complement component 5 (C5) using our proprietary Durasert E™ technology for sustained intraocular drug delivery. The initial focus will be
on geographic atrophy, an advanced form of age-related macular degeneration that leads to irreversible vision loss.
In March 2023, we completed enrollment in the Phase 2 "Durasert E™ and Vorolanib in Ophthalmology 2" (DAVIO 2) clinical trial evaluating
EYP-1901 as a potential six-month maintenance treatment for wet AMD. The trial enrolled a total of 160 patients. All patients were previously
treated with a standard-of-care anti-VEGF therapy and were randomly assigned to one of two doses of EYP-1901 or to an aflibercept on-label
control.
In June 2023, we completed enrollment in the Phase 2 clinical trial evaluating EYP-1901 as a potential nine-month treatment for moderately
severe to severe NPDR. The trial enrolled 77 patients randomly assigned to one of two doses of EYP-1901 (approximately 2 mg or 3 mg), or to
the control group receiving a sham injection. EYP-1901 is delivered with a single intravitreal injection at the physician's office. The primary
efficacy endpoint of the trial is improvement of at least two diabetic retinopathy severity scale (DRSS) levels as of week 36 after the EYP-1901
injection. Secondary endpoints include reduction in vision-threatening complications, occurrence of diabetic macular edema and/or
proliferative disease, retinal ischemia/nonperfusion and safety.
In July 2023 we presented the interim safety and patient demographics of the DAVIO 2 clinical trial in wet AMD at the OIS Retina Innovation
Summit. As of July 1, 2023, there were no reported drug related ocular serious adverse events (SAEs) or drug related systemic SAEs. An
analysis of the reported patient demographics suggests that Phase 2 DAVIO 2 patients have, on average, better starting visual acuity and less
central subfield thickness than the Phase 1 DAVIO cohort.
In September 2023 we announced positive interim masked safety data for our lead product candidate EYP-1901 from the ongoing Phase 2
PAVIA trial evaluating EYP-1901 as a potential nine-month treatment for moderately severe to severe NPDR, and DAVIO 2 trial as a potential
six-month maintenance treatment for wet AMD. All treatment arms in the PAVIA trial have reached at least three-months post-dosing follow-
up as of September 1, 2023. Approximately 170 patients have received EYP-1901 with a minimum of three months of follow-up post injection
from the ongoing Phase 2 PAVIA and DAVIO 2 clinical trials and the completed DAVIO 1 trial with no reported drug-related ocular severe
adverse events (SAEs) and no reported drug-related systemic SAEs.
In September 2023, we disclosed the advancement of pipeline program EYP-2301 into pre-clinical development. EYP-2301 delivers
razuprotafib, a small molecule inhibitor of vascular endothelial protein tyrosine phosphatase (VE-PTP) with potential vasculature stabilizing
activity, utilizing Durasert E™.
On December 4, 2023, we announced positive topline data for our lead product candidate, EYP-1901, from our Phase 2 DAVIO 2 clinical trial
in wet age-related macular degeneration. Data from the DAVIO 2 clinical trial demonstrated that EYP-1901 achieved all primary and
secondary endpoints.
Recent Developments
•
•
•
In January 2024, we announced that the first patient had been dosed in the Phase 2 VERONA clinical trial of EYP-1901 for DME.
In February 2024, we announced two presentations of topline data with additional subgroup analyses from the Phase 2 DAVIO 2 clinical trial
of EYP-1901 for the treatment of wet age-related macular degeneration.
In March 2024, we announced the appointment of Ramiro Ribeiro, M.D., Ph.D. as Chief Medical Officer to succeed Dario Paggiarino, M.D.
who has served as EyePoint’s Chief Medical Officer since 2016. Dr. Ribeiro is a trained retinal specialist and joins EyePoint from Apellis
Pharmaceuticals, where he served as Vice President, Head of Clinical Development.
Summary of Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have
been prepared in accordance with U.S. generally accepted accounting principles, (U.S. GAAP). The preparation of these financial statements requires that
we make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience, anticipated results and trends
and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily available from other sources. By their nature, these estimates, judgments and assumptions are subject
66
to an inherent degree of uncertainty, and management evaluates them on an ongoing basis for changes in facts and circumstances. Changes in estimates are
recorded in the period in which they become known. Actual results may differ from our estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note 2 in the accompanying Notes to the Consolidated Financial Statements
contained in this Annual Report on Form 10-K, we believe that the following accounting policies are critical to understanding the judgments and estimates
used in the preparation of our financial statements. It is important that the discussion of our operating results that follows be read in conjunction with the
critical accounting policies discussed below.
Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity
expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the
scope of ASC 606, Revenue from Contracts with Customers (ASC 606), we perform the following five steps: (i) identify the contract(s) with a customer;
(ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance
obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to
contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract,
determines those that are performance obligations and assesses whether each promised good or service is distinct. We then recognize as revenue the amount
of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales, value add, and
other taxes collected on behalf of third parties are excluded from revenue.
Product sales, net — We sold YUTIQ® and DEXYCU® to a limited number of specialty distributors and specialty pharmacies (collectively the
Distributors) in the U.S., with whom we had entered into formal agreements, for delivery to physician practices for YUTIQ® and to hospital outpatient
departments and ambulatory surgical centers (ASCs) for DEXYCU®. We recognized revenue on sales of our products when Distributors obtained control of
the products, which occurred at a point in time, typically upon delivery. In addition to agreements with Distributors, we also entered into arrangements with
healthcare providers, ASCs, and payors that provided for government mandated and/or privately negotiated rebates, chargebacks, and discounts with
respect to their purchase of our products from Distributors.
Reserves for variable consideration — Product sales were recorded at the wholesale acquisition costs, net of applicable reserves for variable
consideration. Components of variable consideration included trade discounts and allowances, provider chargebacks and discounts, payor rebates, product
returns, and other allowances that were offered within contracts between us and our Distributors, payors, and other contracted purchasers relating to our
product sales. These reserves were based on the amounts earned, or to be claimed on the related sales, and were classified either as reductions of product
revenue and accounts receivable or a current liability, depending on how the amount was to be settled. Overall, these reserves reflected our best estimates
of the amount of consideration to which it was entitled based on the terms of the respective underlying contracts. The actual amounts of consideration
ultimately received may differ from our estimates. If actual results in the future vary from the estimates, we adjust these estimates, which would affect
product revenue and earnings in the period such variances become known.
License and collaboration agreement revenue — We analyze each element of our license and collaboration arrangements to determine the
appropriate revenue recognition. The terms of the license agreement may include payment to us of non-refundable upfront license fees, milestone payments
if specified objectives are achieved, and/or royalties on product sales. We recognize revenue from upfront payments at a point in time, typically upon
fulfilling the delivery of the associated intellectual property to the customer. For licenses that are combined with other promises, we determine whether the
combined performance obligation is satisfied over time or at a point in time, when (or as) the associated performance obligation in the contract is satisfied.
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that
contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the
promised products or services underlying each performance obligation. We determine standalone selling prices based on the price at which the performance
obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into
account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
We recognize sales-based milestone payments as revenue upon the achievement of the cumulative sales amount specified in the contract in
accordance with ASC 606-10-55-65. For those milestone payments which are contingent on the occurrence of particular future events, we determine that
these need to be considered for inclusion in the calculation of total consideration from the contract as a component of variable consideration using the most-
likely amount method. As such, we assess each milestone to determine the
67
probability and substance behind achieving each milestone. Given the inherent uncertainty associated with these future events, we will not recognize
revenue from such milestones until there is a high probability of occurrence, which typically occurs near or upon achievement of the event.
When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or
significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph 606-10-32-18, we do not
assess whether a significant financing component exists if the period between when we perform our obligations under the contract and when the customer
pays is one year or less. None of our contracts contained a significant financing component as of December 31, 2023.
Reimbursement of costs — We may provide research and development services and incur maintenance costs of licensed patents under collaboration
arrangements to assist in advancing the development of licensed products. We act primarily as a principal in these transactions and, accordingly,
reimbursement amounts received are classified as a component of revenue to be recognized consistent with the revenue recognition policy summarized
above. We record the expenses incurred and reimbursed on a gross basis.
Royalties — We recognize revenue from license arrangements with our commercial partners’ net sales of products. Such revenues are included as
royalty income. In accordance with ASC 606-10-55-65, royalties are recognized when the subsequent sale of the commercial partner’s products occurs.
Our commercial partners are obligated to report their net product sales and the resulting royalty due to us typically within 60 days from the end of each
quarter. Based on historical product sales, royalty receipts and other relevant information, we recognize royalty income each quarter and subsequently
determine a true-up when we receive royalty reports and payment from our commercial partners. Historically, these true-up adjustments have been
immaterial.
Please refer to Note 3 for further details on the license and collaboration agreements into which we have entered and corresponding amounts of
revenue recognized during the current and prior year periods.
Deferred Revenue
Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue on the accompanying consolidated
balance sheets. Amounts not expected to be recognized within one year following the balance sheet date are classified as non-current deferred revenue.
Please refer to Note 3 for further details on the license and collaboration agreements into which we have entered and corresponding amounts of
revenue recognized for the years ended December 31, 2023 and 2022.
Recognition of Expense in Outsourced Clinical Trial Agreements
We recognize research and development expense with respect to outsourced agreements for clinical trials with contract research organizations
(CROs) as the services are provided, based on information provided by CROs and our assessment of the services performed. We make our assessments of
the services performed based on various factors, including reporting from third-party CROs and internal tracking of work performed during the period,
which are subject to management’s judgment. Our financial obligations under the agreements are determined by the services that we request from time to
time under the agreements. The actual amounts owed under the agreements and the timing of those obligations will depend on various factors, including
changes to the protocols and/or services requested, the number of patients to be enrolled and the rate of patient enrollment, achievement of pre-defined
direct cost milestone events, and other factors relating to the clinical trials. We can terminate the agreements at any time without penalty, and if terminated,
we would be liable only for services through the termination date plus non-cancellable CRO obligations to third parties.
68
Results of Operations
Years Ended December 31, 2023 and 2022 (in thousands except percentages)
Year Ended December 31,
2022
2023
Change
Amounts
%
Revenues:
Product sales, net
License and collaboration agreements
Royalty income
Total revenues
Operating expenses:
Cost of sales, excluding amortization of acquired intangible assets
Research and development
Sales and marketing
General and administrative
Amortization of acquired intangible assets
Impairment of acquired intangible assets
Total operating expenses
Loss from operations
Other income (expense):
Interest and other income, net
Interest expense
Gain (loss) on extinguishment of debt
Total other income (expense), net
Net loss before income taxes
Provision for income taxes
Net loss
Net loss per share - basic and diluted
Weighted average shares outstanding - basic and diluted
Net loss
Product Sales, net
$
14,232 $
30,797
989
46,018
39,905 $
362
1,137
41,404
4,632
64,662
11,689
40,102
—
—
121,085
(75,067 )
6,949
(1,247 )
(1,347 )
4,355
(70,712 ) $
(83 ) $
(70,795 ) $
(1.82 ) $
38,904
8,326
49,642
25,507
34,817
2,050
20,699
141,041
(99,637 )
2,131
(3,189 )
(1,559 )
(2,617 )
(102,254 ) $
— $
(102,254 ) $
(2.74 ) $
37,317
$
$
$
$
(25,673 )
30,435
(148 )
4,614
(3,694 )
15,020
(13,818 )
5,285
(2,050 )
(20,699 )
(19,956 )
24,570
4,818
1,942
212
6,972
31,542
(83 )
31,459
0.92
1,587
$
(70,795 ) $
(102,254 ) $
31,459
-64 %
8407 %
-13 %
11 %
-44 %
30 %
-54 %
15 %
-100 %
-100 %
-14 %
-25 %
226 %
-61 %
-14 %
-266 %
-31 %
-31 %
-34 %
4 %
-31 %
Product sales, net represents the gross sales of YUTIQ® and DEXYCU® less provisions for product sales allowances. Product sales, net decreased
by $25.7 million, or 64%, to $14.2 million for 2023 compared to $39.9 million for the prior year. This decrease was driven by license and rights for
YUTIQ® to Alimera in May 2023 and de minimis DEXYCU® sales in 2023 due to the loss of pass-through reimbursement as of January 1, 2023. During
the year ended December 31, 2023, the Company recognized $2.1 million of revenue from sales of product supply to Alimera under the commercial supply
agreement (CSA).
Customer demand had a direct impact on product orders from our specialty distributors that we recorded as net product sales. Net product revenue
represented product purchased by our distributors whereas customer demand represented purchases of product by physician practices and ASCs from our
specialty distributors.
License and collaboration agreement
License and collaboration agreement revenues increased by $30.4 million, to $30.8 million in 2023 compared to $0.4 million in 2022. This increase
was driven by revenue recognized as the combined performance obligations under the Alimera license and supply agreement are fulfilled.
Royalty Income
Royalty income decreased by $0.1 million, or 13%, to $1.0 million in 2023 compared to $1.1 million in 2022. The decrease was primarily
attributable to Ocumension Royalties.
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Cost of Sales, Excluding Amortization of Acquired Intangible Assets
Cost of sales, excluding amortization of acquired intangible assets, decreased by $3.7 million to $4.6 million for fiscal 2023 from $8.3 million in the
prior year. This decrease was primarily attributable to reduced revenue driven by a significant reduction in DEXYCU® units shipped due to the loss of pass-
through reimbursement as of January 1, 2023, as well as the license and rights for YUTIQ® to Alimera on May 17, 2023, and associated costs for costs of
goods, royalties, and distribution fees, partially offset by a $0.5 million inventory reserve for DEXYCU® finished goods and components. These decreases
were partially offset by additional distribution costs passed back to Alimera as part of the transition services agreement. Revenue related to these costs
passed back to Alimera are included in license and collaboration revenues.
Research and Development
Research and development expenses increased by $15.0 million, or 30%, to $64.7 million for 2023 from $49.6 million in the prior year. This
increase was attributable primarily to (i) $11.8 million in increased clinical trial costs, related to the ongoing Phase 2 DAVIO2 and PAVIA clinical trials,
and (ii) $3.5 million of increased personnel related costs for investment in new employees across the research and clinical organizations. These increases
were partially offset by a $0.2 million decrease in other administrative costs.
Sales and Marketing
Sales and marketing expenses decreased by $13.8 million, or 54%, to $11.7 million for 2023 from $25.5 million in the prior year. This decrease was
primarily driven by (i) $10.5 million related to the discontinuation of YUTIQ® commercialization activities due to the agreement that granted the license
and rights to YUTIQ® to Alimera in May 2023, (ii) discontinuation of promotional activities for DEXYCU® in 2023 of $3.9 million, and (iii) $0.4 million
of other marketing activities. These reductions were offset by a restructuring charge in the second quarter 2023 of $0.9 million for restructuring resulting
from the license of the YUTIQ® franchise.
General and Administrative
General and administrative expenses increased by $5.3 million, or 16%, to $40.1 million for 2023 from $34.8 million in the prior year. This increase
was attributable primarily to a (i) $3.4 million increase in personnel and related expenses, including a $0.7 million increase of stock-based compensation,
and a (ii) $2.2 million increase in professional fees. These increases were partially offset by a $0.3 million decrease in other administrative costs.
Amortization and Impairment of Acquired Intangible Assets
Impairment of acquired intangible assets was $20.7 million for 2022. This amount was attributable to the impairment of the DEXYCU® product
intangible asset that resulted from impairment test related to the termination of pass-through payment by CMS on November 1, 2022 (see Note 6).
Amortization of acquired intangible assets totaled $2.1 million for 2022. This amount was attributable to the DEXYCU® product intangible asset that
resulted from our acquisition of Icon Bioscience, Inc. (Icon) in March 2018 (the Icon Acquisition). There was no amortization or impairment of acquired
intangible assets for 2023 due to the write-off of the DEXYCU® intangible asset in the fourth quarter of 2022.
Interest (Expense) Income
Interest income from investments in marketable securities and institutional money market funds increased $4.8 million, to $6.9 million for 2023
compared to $2.1 million for the prior year. This increase was due primarily to an increase in cash invested in marketable securities and higher interest rates
in 2023.
Interest expense decreased $1.9 million, or 61%, to $1.2 million for 2023, compared to $3.2 million in the prior year. We incurred lower interest
expense due to the repayment of the SVB Loan (as the term is defined below) on May 17, 2023.
Loss on Extinguishment of Debt
Loss on extinguishment of debt in 2023 was for the early repayment of the loan made to the Company by Silicon Valley Bank (SVB) on March 9,
2022 (SVB Loan) resulting in a $1.3 million non-cash write-off of the remaining balance of unamortized debt discount.
Loss on extinguishment of debt in 2022 was for the early repayment of the loan made to the Company by CRG Servicing LLC on February 13, 2019
(CRG Loan) resulting in a $1.6 million non-cash write-off of the remaining balance of unamortized debt discount.
70
Recently Adopted and Recently Issued Accounting Pronouncements
For a full discussion of recently adopted and recently issued accounting pronouncements, see Note 2, "Significant Accounting Policies" to the
Consolidated Financial Statements included under Item 15, "Exhibits and Financial Statement Schedules."
Liquidity and Capital Resources
We have had a history of operating losses and an absence of significant recurring cash inflows from revenue, and at December 31, 2023, we had a
total accumulated deficit of $742.1 million. Our operations have been financed primarily from public and private offerings of our common stock, issuance
of debt and a combination of license fees, milestone payments, royalty income and other fees received from collaboration partners.
Financing Activities
On March 9, 2022, we entered into a loan and security agreement (the SVB Loan) among us, as borrower, and Silicon Valley Bank, as lender (SVB),
providing for (i) a senior secured term loan facility of $30 million (the Term Facility) and (ii) a senior secured revolving credit facility of up to $15.0
million (the Revolving Facility). The SVB Loan under an agreement (the SVB Loan Agreement) with First Citizens BancShares, as successor to Silicon
Valley Bank (SVB), as lender (the Lender) was originally due and payable on January 1, 2027. On May 17, 2023, we utilized a portion of the Upfront
Payment from the Alimera PRA (see Note 3) to repay in full all outstanding amounts under the SVB Loan Agreement. The SVB Loan Agreement was
terminated, and all security interests and other liens granted to or held by the Lender were terminated and released. This payment included (i) the remaining
$30.0 million principal portion of the SVB Loan, (ii) a $0.6 million prepayment fee equal to 2.00% of the aggregate principal amount of the Term Facility,
(iii) a $0.6 million exit fee, (iv) accrued and unpaid interest of $0.1 million through the pay-off date, and (v) $0.2 million of other related fees. As a result
of the early repayment of the SVB Loan, we recorded a loss on extinguishment of debt of $1.4 million related to the write-off of the remaining balance of
unamortized debt discount. At December 31, 2023, there are no remaining obligations relating to the SVB Loan.
During the fiscal year ended December 31, 2023, we sold 15,294,116 shares in the December 2023 underwritten stock offering for gross proceeds of
$230.0 million, and we sold 902,769 shares of our Common Stock utilizing our at-the-market facility (ATM) at a weighted average price of $11.05 per
share for gross proceeds of approximately $10.0 million.
Future Funding Requirements
At December 31, 2023, we had cash, cash equivalents, and investments in marketable securities of $331.0 million. We expect that our cash and
investments in marketable securities will fund our operating plan through topline data for the planned Phase 3 wet AMD pivotal trials into 2026. Due to the
difficulty and uncertainty associated with the design and implementation of clinical trials, we will continue to assess our cash and cash equivalents,
investments in marketable securities, and future funding requirements. However, there is no assurance that additional funding will be achieved and that we
will succeed in our future operations.
Actual cash requirements could differ from management’s projections due to many factors including additional investments in research and
development programs, clinical trial expenses for EYP-1901and potentially EYP-2301, competing technological and market developments and the costs of
any strategic acquisitions and/or development of complementary business opportunities.
The amount of additional capital we will require will be influenced by many factors, including, but not limited to:
1.
the scope, progress, results, and costs of clinical trials of EYP-1901, as a sustained delivery intravitreal VEGF treatment for wet AMD, NPDR,
and DME
our expectations regarding the timing and clinical development of our product candidates, including EYP-1901 and EYP-2301;
the duration, scope and outcome of the DOJ Subpoena and its impact on our financial condition, results of operations, or cash flows;
2.
3.
4. whether and to what extent we internally fund, whether and when we initiate, and how we conduct additional pipeline product development
programs;
payments we receive under any new collaboration agreements or payments expected from existing agreements;
5.
6. whether and when we are able to enter into strategic arrangements for our products or product candidates and the nature of those arrangements;
7.
8.
9.
the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing any patent claims;
changes in our operating plan, resulting in increases or decreases in our need for capital; and
our views on the availability, timing, and desirability of raising capital.
71
We do not know if additional capital will be available when needed or on terms favorable to us or our stockholders. Collaboration, licensing, or
other agreements may not be available on favorable terms, or at all. If we seek to sell our equity securities, we do not know whether and to what extent we
will be able to do so, or on what terms. If available, additional equity financing may be dilutive to stockholders, debt financing may involve restrictive
covenants or other unfavorable terms and dilute our existing stockholders’ equity, and funding through collaboration, licensing, or other commercial
agreements may be on unfavorable terms, including requiring us to relinquish rights to certain of our technologies or products. If adequate financing is not
available if and when needed, we may delay, reduce the scope of, or eliminate research or development programs, or other new products, if any, postpone
or cancel the pursuit of product candidates, or otherwise significantly curtail our operations to reduce our capital requirements and extend our cash runway.
Our consolidated statements of historical cash flows are summarized as follows (in thousands):
Cash flows from operating activities:
Net loss
Changes in operating assets and liabilities
Other adjustments to reconcile net loss to cash flows from
operating activities:
Net cash (used in) provided by operating activities
Net cash (used in) provided by investing activities
Net cash (used in) provided by financing activities
Year Ended December 31,
2023
2022
Change
$
$
$
$
(70,795 )
58,882
13,788
1,875
(3,315 )
187,070
$
$
$
$
(102,254 ) $
(3,023 )
40,272
(65,005 ) $
(17,265 ) $
(690 ) $
31,459
61,905
(26,484 )
66,880
13,950
187,760
Operating cash inflows for the year ended December 31, 2023, totaled $1.9 million, primarily due to our net loss of $70.8 million reduced by $13.8
million of non-cash expenses, which included $12.1 million of stock-based compensation, $1.3 million of loss on extinguishment of debt, and $0.7 million
for the provision of excess and obsolete inventory. This was further offset by changes in working capital of $58.9 million, including $44.5 million of
deferred revenue related to the agreement to license YUTIQ® product rights to Alimera, and $14.4 million of other working capital changes.
Operating cash outflows for the year ended December 31, 2022 totaled $65.0 million, primarily due to our net loss of $102.3 million, reduced by
$40.3 million of non-cash expenses, which included $20.7 million of impairment of the DEXYCU® finite-lived intangible asset, $14.2 million of stock-
based compensation, $2.1 million of amortization of intangible assets, $1.9 million of provision for excess and obsolete inventory, and $1.6 million of loss
on extinguishment of debt. This was partially offset by increases of $3.0 million in changes in operating assets and liabilities, primarily in accounts
receivable and other current assets.
Net cash used in investing activities for the year ended December 31, 2023, consisted of $3.5 million for the purchase of property and equipment,
partially offset by $0.2 million of net cash provided by the sale of marketable securities.
Net cash used in investing activities for the year ended December 31, 2022, consisted of $15.1 million of net cash used to purchase marketable
securities, as well as $2.2 million for the purchase of property and equipment.
Net cash provided by financing activities for fiscal 2023 totaled $187.1 million and consisted of the following:
$215.9 million of net proceeds from the issuance of 15,294,116 shares of our common stock;
(i)
(ii) $40.5 million used to pay off the SVB loan;
(iii) $1.4 million used to pay debt extinguishment costs related to the SVB loan;
(iv) $9.6 million of net proceeds from the issuance of 902,769 shares of our common stock sold utilizing our ATM
(v) $3.4 million of proceeds from exercise of employee stock options and stock issued under our employee stock purchase plan
Net cash used in financing activities for fiscal 2022 totaled $0.7 million and consisted of the following:
$38.2 million used to pay off the CRG loan;
(i)
(ii) $2.3 million used to pay debt extinguishment costs related to the CRG loan;
(iii) $30.0 million of proceeds from the issuance for long-term debt related to the SVB loan; and
(iv) $10.5 million of net proceeds from the revolving facility.
72
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that would be material to
investors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the
information under this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item may be found on pages F-1 through F-29 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our
disclosure controls and procedures as of December 31, 2023. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer
in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the
Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's
management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
Management recognizes that any control or procedure, no matter how well designed and operated, can provide only reasonable assurance of
achieving its desired objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and
procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2023, our principal executive officer and principal
financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
(a) Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The term "internal control over
financial reporting," as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, means a process designed by, or under the supervision of, the
issuer's principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer's board of directors,
management and other personnel, 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 and includes those policies and procedures that:
(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the
issuer;
(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.
GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of
the issuer; and
(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer's assets that
could have a material effect on the financial statements.
Management recognizes that all internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect
misstatements. Projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
73
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated
Framework (2013). Based on this assessment, our management concluded that, as of such date, our internal control over financial reporting was effective
based on those criteria.
(b)
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the last quarter of the period covered by this Annual Report on Form
10-K that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
On December 8, 2023, Michael Pine, the Company’s Chief Business Officer, terminated a 10b5-1 trading plan. Mr. Pine’s 10b5-1 plan was
originally adopted on June 12, 2023, and was designed to be in effect until June 12, 2024. The aggregate number of shares of common stock to be sold
pursuant to Mr. Pine’s 10b5-1 plan was 93,634, including the potential exercise of vested stock options and the associated sale. Mr. Pine’s 10b5-1 plan was
intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.
On December 21, 2023, Michael Pine, the Company’s Chief Business Officer, adopted a 10b5-1 trading plan, which is designed to be in effect until
December 21, 2024. The aggregate number of shares of common stock to be sold pursuant to Mr. Pine’s 10b5-1 plan, which provides for the potential
exercise of vested stock options and the associated sale, is 40,625. Mr. Pine’s 10b5-1 plan is intended to satisfy the affirmative defense conditions of Rule
10b5-1(c) under the Exchange Act.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
74
Certain information required by Part III is omitted from this Annual Report on Form 10-K and is incorporated herein by reference from our
definitive proxy statement relating to our 2024 annual meeting of stockholders, pursuant to Regulation 14A of the Exchange Act of 1934, also referred to in
this Annual Report on Form 10-K as our 2024 Proxy Statement, which we expect to file with the SEC no later than April 30, 2024.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Corporate Governance
We have adopted a written Code of Business Conduct that applies to all of our employees, officer,s and directors. This Code of Business Conduct is
designed to ensure that our business is conducted with integrity and in compliance with SEC regulations and Nasdaq listing standards. The Code of
Business Conduct covers adherence to laws and regulations as well as professional conduct, including employment policies, conflicts of interest, and the
protection of confidential information. The Code of Business Conduct is available under “Governance Overview” within the “Investors – Corporate
Governance” section of our website at www.eyepointpharma.com.
We intend to disclose any future amendments to, or waivers from, the Code of Business Conduct that affect our directors or senior financial and
executive officers within four business days of the amendment or waiver by posting such information on the website address and location specified above.
Other Information
The other information required to be disclosed in Item 10 is hereby incorporated by reference to our 2024 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required to be disclosed in Item 11 is hereby incorporated by reference to our 2024 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The information required to be disclosed in Item 12 is hereby incorporated by reference to our 2024 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required to be disclosed in Item 13 is hereby incorporated by reference to our 2024 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required to be disclosed in Item 14 is hereby incorporated by reference to our 2024 Proxy Statement.
75
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS
(a)(1) Financial Statements
PART IV
The financial statements filed as part of this report are listed on the Index to Consolidated Financial Statements on page F-1.
(a)(2) Financial Statement Schedules
Schedules have been omitted because of the absence of conditions under which they are required or because the required information is included in
our Consolidated Financial Statements or Notes thereto.
76
(a)(3) Exhibits
Exhibit No.
Exhibit Description
Articles of Incorporation and By-Laws
Incorporated by Reference to SEC Filing
SEC Filing
Date
Form
Exhibit No.
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
4.1
4.2
Certificate of Incorporation of pSivida Corp.
8-K12G3
06/19/08
Certificate of Amendment of the Certificate of Incorporation of pSivida Corp.
10-K
09/13/17
Certificate of Correction to Certificate of Amendment of the Certificate of Incorporation of
pSivida Corp.
Certificate of Amendment of Certificate of Incorporation, as amended of EyePoint
Pharmaceuticals, Inc.
By-Laws of EyePoint Pharmaceuticals, Inc.
Amendment No. 1 to the By-Laws of EyePoint Pharmaceuticals, Inc.
Certificate of Amendment of the Certificate of Incorporation, as amended, of EyePoint
Pharmaceuticals, Inc.
Certificate of Amendment of the Certificate of Incorporation, as amended, of EyePoint
Pharmaceuticals, Inc.
Instruments Defining the Rights of Security Holders
8-K
04/02/18
8-K
10-K
8-K
06/27/18
09/18/18
11/06/18
8-K
06/23/20
8-K
12/08/20
Form of Specimen Stock Certificate for Common Stock
8-K12G3
06/19/08
Warrant to Purchase Common Stock of pSivida Corp., issued March 28, 2018, to SWK
Funding, LLC
8-K
03/29/18
3.1
3.2
3.1
3.1
3.5
3.1
3.1
3.1
4.1
4.1
4.3(a)
Description of Securities of EyePoint Pharmaceuticals, Inc.
4.4
Form of Pre-Funded Warrant to Purchase Common Stock
8-K
11/19/21
4.1
10.1
10.2+
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Material Contracts - Management Contracts and Compensatory Plans
2008 Equity Incentive Plan, as amended on November 19, 2009
10-K
09/10/15
10.6
Form of Stock Option Certificate for grants to executive officers under the pSivida Corp.
2008 Incentive Plan
8-K
09/10/08
10.1
EyePoint Pharmaceuticals, Inc. Amended and Restated 2016 Long Term Incentive Plan, as
amended
8-K
11/14/22
10.1
Form of Stock Option Certificate for grants to executive officers under the EyePoint
Pharmaceuticals, Inc. 2016 Long Term Incentive Plan, as amended
10-Q
02/08/18
10.1
Form of Stock Option Award Agreement for Inducement grants to executive officers under
the EyePoint Pharmaceuticals, Inc. Amended and Restated 2016 Long Term Incentive Plan
EyePoint Pharmaceuticals, Inc. 2019 Employee Stock Purchase Plan, as amended
EyePoint Pharmaceuticals Inc. 2023 Long-Term Incentive Plan
Employment Agreement between pSivida Corp. and Nancy Lurker, dated September 15,
2016
10-K
09/18/18
10.15
8-K
8-K
06/24/21
06/21/23
10.2
10.1
10-Q
11/08/16
10.1
First Amendment to Employment Letter Agreement, dated January 3, 2023, by and between
EyePoint Pharmaceuticals, Inc. and Nancy Lurker
8-K
01/06/23
10.2
10.10
Nonstatutory Stock Option Inducement Award granted to Nancy Lurker, subject to
shareholder approval, with effect from September 15, 2016
10-Q
11/08/16
10.3
77
Exhibit No.
Exhibit Description
10.11
Amended and Restated Employment Agreement, dated January 3, 2023, by and between
Incorporated by Reference to SEC Filing
SEC Filing
Date
Form
Exhibit No.
EyePoint Pharmaceuticals, Inc. and Dario Paggiarino
10-K
03/10/23
10.14
10.12
Employment Agreement, effective November 1, 2021, between EyePoint Pharmaceuticals,
Inc. and Jay S. Duker, M.D.
8-K
11/01/21
10.1
10.13
First Amendment to Employment Agreement, dated January 3, 2023, by and between
EyePoint Pharmaceuticals, Inc. and Jay S. Duker
8-K
01/06/23
10.1
10.14
Amended and Restated Employment Agreement, dated January 3, 2023, by and between
EyePoint Pharmaceuticals, Inc. and George O. Elston
8-K
01/06/23
10.3
10.15
Amended and Restated Employment Agreement, dated January 3, 2023, by and between
EyePoint Pharmaceuticals, Inc. and Scott Jones
8-K
01/06/23
10.4
10.16
Amended and Restated Employment Agreement, dated January 3, 2023, by and between
EyePoint Pharmaceuticals, Inc. and Michael C. Pine
10-K
03/10/23
10.19
10.17(a)
Form of Indemnification Agreement between EyePoint Pharmaceuticals, Inc. and its officers
and directors
10.18
Second Amendment to Employment Agreement, dated July 10, 2023, by and between
EyePoint Pharmaceuticals, Inc. and Nancy S. Lurker
8-K
07/10/23
10.1
10.19
Second Amendment to Employment Agreement, dated July 10, 2023, by and between
EyePoint Pharmaceuticals, Inc. and Jay S. Duker
8-K
07/10/23
10.2
10.20(a)+
Form of Stock Option Award for Inducement Grants to executive officer pursuant to the 2023
LTIP
10.21(a)#
Consulting Agreement dated December 18, 2023 by and between Eyepoint Pharmaceuticals,
Inc. and John Landis, PhD
Material Contracts - Leases
10.22
Lease Agreement between pSivida Corp. and Farley White Aetna Mills, LLC dated
November 1, 2013
10-Q
11/13/13
10.1
10.23
First Amendment of Lease, dated February 6, 2014, between Farley White Aetna Mills and
pSivida Corp.
10-K
09/18/18
10.24
10.24
Second Amendment of Lease, dated May 17, 2018, between Whetstone Riverworks
Holdings, LLC and EyePoint Pharmaceuticals, Inc.
10-K
09/18/18
10.25
10.25
Third Amendment to Lease, dated April 5, 2021, between GRE Riverworks, LLC and
EyePoint Pharmaceuticals, Inc.
10-Q
05/05/21
10.1
10.26
Fourth Amendment to Lease, dated March 8, 2022, between GRE Riverworks, LLC and
EyePoint Pharmaceuticals, Inc.
10-K
03/14/22
10.28
10.27
Lease Agreement, dated January 23, 2023, between V.E. Properties IX, LLC and EyePoint
Pharmaceuticals, Inc.
10-K
03/10/23
10.26
Material Contracts - License and Collaboration Agreements
10.28
Exclusive License Agreement between EyePoint Pharmaceuticals, Inc. and Equinox Science,
LLC
10-K
03/16/20
10.32
10.29
Amendment #1 to Exclusive License Agreement, dated May 2, 2022, by and between
EyePoint Pharmaceuticals, Inc. and Equinox Sciences, LLC
10-Q
08/05/22
10.1
10.30
Exclusive License Agreement, dated May 2, 2022, by and between EyePoint
Pharmaceuticals, Inc. and Betta Pharmaceuticals, Co., Ltd.
10-Q
08/05/22
10.2
78
Exhibit No.
Exhibit Description
Incorporated by Reference to SEC Filing
SEC Filing
Date
Form
Exhibit No.
10.31
Product Rights Agreement, dated May 17, 2023, by and between EyePoint Pharmaceuticals,
Inc. and Alimera Sciences, Inc.
8-K
05/18/23
2.1
10.32
Commercial Supply Agreement, dated May 17, 2023, by and between EyePoint
Pharmaceuticals, Inc. and Alimera Sciences, Inc.
8-K
05/18/23
10.1
Material Contracts - Other Agreements
10.33
Agreement and Plan of Merger, dated March 28, 2018, by and among pSivida Corp., Oculus
Merger Sub, Inc., Icon Bioscience, Inc. and Shareholder Representative Services LLC
8-K
03/29/18
10.5
10.34
Controlled Equity OfferingSM Sales Agreement, dated August 5, 2020, by and between
EyePoint Pharmaceuticals, Inc. and Cantor Fitzgerald & Co.
8-K
08/05/20
1.1
10.35
Royalty Purchase Agreement, dated December 17, 2020, by and between EyePoint
Pharmaceuticals, Inc. and SWK Funding, LLC
10-K
03/12/21
10.36
21.1(a)
Subsidiaries of EyePoint Pharmaceuticals, Inc.
23.1(a)
Consent of Independent Registered Public Accounting Firm, Deloitte & Touche LLP
31.1(a)
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of
the Securities Exchange Act, as amended
31.2(a)
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of
the Securities Exchange Act, as amended
32.1(b)
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2(b)
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1(a)
EyePoint Pharmaceuticals, Inc. Incentive Compensation Recovery Policy, dated September
17, 2023
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded
within the Inline XBRL document.
101.SCH
104
Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document
Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101).
# Portions of this exhibit have been omitted in compliance with Item 601 of Regulation S-K.
+ The final versions of documents denoted as “form of” have been omitted pursuant to Rule 12b-31. Such final versions are substantially identical in all
material respects to the filed versions of such documents, provided that the name of the investor, and the investor’s and/or the Company’s signatures are
included in the final versions.
(a) Filed herewith
(b) Furnished herewith
ITEM 16. FORM 10-K SUMMARY
Not applicable.
79
Pursuant to the requirements of Section 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
EYEPOINT PHARMACEUTICALS, INC.
By:
/s/ Jay S. Duker
Jay S. Duker, M.D.
President and Chief Executive Officer
(Principal Executive Officer)
Date: March 8, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
Name
/S/ GÖRAN ANDO
Göran Ando, M.D.
Chair of the Board of Directors
March 8, 2024
Title
Date
/S/ NANCY LURKER
Executive Vice Chair of the Board of Directors
March 8, 2024
Nancy Lurker
/S/ JAY S. DUKER
Jay S. Duker, M.D.
President, Chief Executive Officer and Director
(Principal Executive Officer)
/S/ GEORGE O. ELSTON
George O. Elston
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
/S/ WENDY DICICCO
Wendy DiCicco
/S/ YE LIU
Ye Liu
/S/ JOHN LANDIS
John Landis
/S/ DAVID R. GUYER
David R. Guyer, M.D.
Director
Director
Director
Director
/S/ ANTHONY P. ADAMIS
Anthony P. Adamis, M.D.
Director
/S/ KAREN ZADEREJ
Karen Zaderej
/S/ STUART DUTY
Stuart Duty
Director
Director
80
March 8, 2024
March 8, 2024
March 8, 2024
March 8, 2024
March 8, 2024
March 8, 2024
March 8, 2024
March 8, 2024
March 8, 2024
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm on the Financial Statements (PCAOB ID No. 34)
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-1
F-2
F-4
F-5
F-6
F-7
F-8
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of EyePoint Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of EyePoint Pharmaceuticals, Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the
related consolidated statements of comprehensive loss, stockholders' equity, and cash flows, for the years then ended, 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 the years then ended, in conformity with accounting principles generally accepted in the United States of
America.
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 audit 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
The critical audit matters communicated below 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. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we
are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.
Prepaid and Accrued Clinical Trial Expenses — Refer to Notes 2, 4, and 7 to the financial statements
Critical Audit Matter Description
As disclosed in Note 2 to the financial statements, the Company records accrued expenses and prepaid expenses associated with ongoing research and development costs,
including costs associated with outsourced agreements for clinical trials with contract research organizations (CROs). Estimates of expenses incurred are determined by
analyzing progress of the studies, including phase or completion of events, invoices received, payments made, communication with third-party CROs, and internal tracking
of work completed to date. Expenses incurred in excess of amounts invoiced are recorded as accrued expenses. Payments made in excess of expenses incurred are recorded
as prepaid costs. As of December 31, 2023, the Company has recorded accrued clinical trial costs of $3.3 million and prepaid clinical trial expenses of $6.3 million.
We identified auditing the estimates of the progress to completion of events performed by CROs as a critical audit matter due to the (i) the level of judgment required by
management and (ii) the high degree of auditor judgment, subjectivity, and an increased extent of effort in performing procedures to evaluate the reasonableness of
management’s estimates of progress to completion.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to accrued and prepaid clinical trial costs included the following, among others:
•
•
We tested the design and implementation of relevant controls over the estimation of accrued and prepaid clinical trial costs.
For a sample of contracts with third-party CROs performing research and development, we performed the following:
o
Evaluated the appropriateness of the method used by management to develop its estimates of progress to completion of specific events.
F-2
o
o
Tested the completeness and accuracy of the underlying data used in the estimates of progress to completion through inspection of the terms of
contracts and statements of work between the Company the third-party CROs and testing of actual billed expenses under the contracts.
Performed corroborating inquiries with Company personnel responsible for overseeing the activities performed by the Company’s contract research
service providers, which may include the CROs’ estimate of completed tasks or progress of completion of certain tasks within the arrangement.
License Revenue Recognition – Alimera License Agreement – Refer to Note 2 and 3 to the financial statements
Critical Audit Matter Description
In May 2023, the Company granted an exclusive license and rights to its YUTIQ product to Alimera Sciences, inc. (“Alimera”) for $82.5 million, consisting of a $75.0
million upfront cash payment and an additional $7.5 million payment in equal quarterly installments in 2024. The Company and Alimera also entered into a commercial
supply agreement (“supply agreement”), during the term of the product rights agreement the Company agreed to manufacture and exclusively supply to Alimera agreed-
upon quantities of YUTIQ necessary for Alimera to commercialize YUTIQ. Referred together herein as “the transaction”.
The Company accounts for the revenue under license and supply arrangements under ASC 606, Revenue from Contracts with Customers, or ASC 606. Management has
identified a single, combined performance obligation for the license and supply agreements. The combined performance obligation will be satisfied over the term of the
supply agreement using the units delivered output method.
We identified auditing the Company’s accounting treatment for the identification of performance obligations under the Alimera agreement as a critical audit matter due to
the (i) the level of judgment required by management and (ii) the high degree of auditor judgment, subjectivity, and an increased extent of effort in performing procedures to
evaluate the nature of performance obligations within the agreements.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Alimera Agreement included the following, among others:
•
•
•
We tested the design and implementation of relevant controls over management’s review of the accounting conclusions for the transaction, including the
identification of the performance obligation.
We obtained and read the license agreement, the supply agreement and other relevant contracts and documents related to the transaction.
We read the Company’s accounting analysis for conclusions reached related to the transaction and performed procedures, including the following:
o
o
We evaluated the Company’s conclusions regarding the identification of a single performance obligation and considered the relevant authoritative
guidance.
With the assistance of professionals in our firm having expertise in revenue recognition, we evaluated the conclusion regarding the identification of a
single performance obligation.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
March 8, 2024
We have served as the Company's auditor since 2008.
F-3
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
December 31,
2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Accounts and other receivables, net
Prepaid expenses and other current assets
Inventory
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Restricted cash
Total assets
Liabilities and stockholders' equity
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenue
Short-term borrowings
Other current liabilities
Total current liabilities
Long-term debt
Deferred revenue – noncurrent
Operating lease liabilities – noncurrent
Other long-term liabilities
Total liabilities
Contingencies (Note 17)
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued and outstanding
Common stock, $.001 par value, 300,000,000 shares authorized at December 31, 2023
and 2022, respectively; 49,043,074 and 34,082,934 shares issued and outstanding at
December 31, 2023 and 2022, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Total stockholders' equity
Total liabilities and stockholders' equity
See notes to consolidated financial statements.
F-4
$
$
$
$
$
281,263
49,787
805
9,039
3,906
344,800
5,251
4,983
150
355,184 $
$
6,504
17,521
38,592
—
646
63,263
—
20,692
4,906
—
88,861
95,633
48,928
15,503
9,858
2,886
172,808
1,360
6,038
150
180,356
5,919
16,359
1,205
10,475
579
34,537
29,310
13,557
5,984
600
83,988
—
—
49
1,007,556
(742,146 )
864
266,323
355,184 $
—
34
766,899
(671,351 )
786
96,368
180,356
—
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands except per share data)
Revenues:
Product sales, net
License and collaboration agreements
Royalty income
Total revenues
Operating expenses:
Cost of sales, excluding amortization of acquired intangible assets
Research and development
Sales and marketing
General and administrative
Amortization of acquired intangible assets
Impairment of acquired intangible assets
Total operating expenses
Loss from operations
Other income (expense):
Interest and other income, net
Interest expense
Loss on extinguishment of debt
Total other income (expense), net
Net loss before income taxes
Provision for income taxes
Net loss
Net loss per share:
Basic and diluted
Weighted average common shares outstanding:
Basic and diluted
Net loss
Other comprehensive gain (loss):
Unrealized gain (loss) on available-for-sale
securities, net of tax of $0 for periods presented
Comprehensive loss
See notes to consolidated financial statements.
F-5
Year Ended
December 31,
2023
Year Ended
December 31,
2022
$
$
$
$
$
14,232 $
30,797
989
46,018
4,632
64,662
11,689
40,102
—
—
121,085
(75,067 )
6,949
(1,247 )
(1,347 )
4,355
(70,712 ) $
(83 ) $
(70,795 ) $
(1.82 ) $
38,904
39,905
362
1,137
41,404
8,326
49,642
25,507
34,817
2,050
20,699
141,041
(99,637 )
2,131
(3,189 )
(1,559 )
(2,617 )
(102,254 )
—
(102,254 )
(2.74 )
37,317
$
(70,795 ) $
(102,254 )
$
78
(70,717 ) $
(55 )
(102,309 )
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands except share data)
Balance at January 1, 2022
Net loss
Other comprehensive loss
Issuance of stock, net of issue costs
Employee stock purchase plan
Exercise of stock options
Vesting of stock units
Stock-based compensation
Balance at December 31, 2022
Net loss
Other comprehensive gain
Issuance of stock, net of issue costs
Employee stock purchase plan
Exercise of stock options
Vesting of stock units
Stock-based compensation
Balance at December 31, 2023
Common Stock
Number of
Shares
Par Value
Amount
33,905,826
$
—
—
—
47,787
4,479
124,842
—
34,082,934
$
—
—
14,432,180
107,056
260,321
160,583
—
49,043,074
$
See notes to consolidated financial statements.
34 $
—
—
—
—
—
—
—
34 $
—
—
15
—
—
—
—
49 $
F-6
Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Total
Stockholders’
Equity
752,602 $
—
—
20
354
41
(295 )
14,177
766,899 $
—
—
225,392
422
2,955
(169 )
12,057
1,007,556 $
(569,097 ) $
(102,254 )
—
—
—
—
—
—
(671,351 ) $
(70,795 )
—
—
—
—
—
—
(742,146 ) $
841 $
—
(55 )
—
—
—
—
—
786 $
—
78
—
—
—
—
—
864 $
184,380
(102,254 )
(55 )
20
354
41
(295 )
14,177
96,368
(70,795 )
78
225,407
422
2,955
(169 )
12,057
266,323
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to cash flows used in
operating activities:
Amortization of intangible assets
Impairment of intangible assets
Depreciation of property and equipment
Amortization of debt discount and premium and discount on
available-for-sale marketable securities
Loss on extinguishment of debt
Provision for excess and obsolete inventory
Stock-based compensation
Deferred income tax
Changes in operating assets and liabilities:
Accounts receivable and other current assets
Inventory
Accounts payable and accrued expenses
Right-of-use assets and operating lease liabilities
Deferred revenue
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchases of marketable securities
Sales and maturities of marketable securities
Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of stock
Proceeds from issuance of long-term debt
Payment of equity and debt issue costs
Payment of long-term debt
Payment of extinguishment of debt costs
Borrowings under revolving facility
Repayment under revolving facility
Net settlement of stock units to satisfy statutory tax withholding
Proceeds from exercise of stock options and employee stock purchase plan
Principal payments on finance lease obligations
Net cash provided by (used in) financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
Supplemental cash flow information:
Cash interest paid
Supplemental disclosure of non-cash investing and financing activities:
Accrued term loan exit fee
Stock issuance costs
See notes to consolidated financial statements.
F-7
Year Ended
December 31,
2023
Year Ended
December 31,
2022
$
(70,795 ) $
(102,254 )
—
—
464
(856 )
1,347
693
12,057
83
14,432
(1,553 )
1,519
(39 )
44,523
1,875
(55,116 )
55,284
(3,483 )
(3,315 )
226,174
—
(451 )
(30,000 )
(1,350 )
5,300
(15,775 )
(169 )
3,377
(36 )
187,070
185,630
95,783
281,413 $
281,263 $
150 $
281,413 $
1,405 $
— $
325 $
2,050
20,699
396
(558 )
1,559
1,949
14,177
—
(2,662 )
(760 )
1,198
69
(868 )
(65,005 )
(139,115 )
124,000
(2,150 )
(17,265 )
—
30,000
(599 )
(38,235 )
(2,294 )
43,875
(33,400 )
(295 )
395
(137 )
(690 )
(82,960 )
178,743
95,783
95,633
150
95,783
2,600
600
—
$
$
$
$
$
$
$
1.
Operations
EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EyePoint Pharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, the Company), is a clinical-stage biopharmaceutical
company committed to developing and commercializing therapeutics to help improve the lives of patients with serious retina diseases. The Company’s
pipeline leverages its proprietary bioerodible DURASERT E™ technology (Durasert E™) for sustained intraocular drug delivery. The Company’s lead
product candidate, EYP-1901, is an investigational sustained delivery treatment for anti-vascular endothelial growth factor (anti-VEGF) mediated retinal
diseases combining vorolanib, a selective and patent-protected tyrosine kinase inhibitor with Durasert E™, currently in Phase 2 clinical trials for wet age-
related macular degeneration (wet AMD), the leading cause of vision loss among people 50 years of age and older in the United States and non-
proliferative diabetic retinopathy (NPDR), a largely untreated disease due to limitations of available therapies, and diabetic macular edema (DME). The
Company is also advancing EYP-2301, a promising TIE-2 agonist, razuprotafib, f/k/a AKB-9778, formulated in Durasert E™ to potentially improve
outcomes in serious retinal diseases.
In May 2023, the Company granted an exclusive license and rights to its YUTIQ® (fluocinolone acetonide intravitreal implant 0.18 mg) product to
Alimera Sciences, Inc. (Alimera) for $82.5 million, consisting of a $75.0 million upfront cash payment (Upfront Payment) and an additional $7.5 million
payment in equal quarterly installments in 2024. In addition, commencing in 2025, the Company will receive a low-to-mid double-digit royalty on
Alimera's related U.S. net sales above defined thresholds for the calendar years 2025-2028.
The Company plans to identify and advance additional pipeline product candidates through clinical and regulatory development for its pipeline. This
may be accomplished through internal discovery efforts, research collaborations, and/or in-licensing arrangements with partner molecules and potential
acquisitions of additional ophthalmic products, product candidates, or technologies.
Liquidity
The Company had cash, cash equivalents and investments in marketable securities of $331.0 million at December 31, 2023. The Company has a
history of operating losses and has not had significant recurring cash inflows from revenue. The Company’s operations have been financed primarily from
sales of its equity securities, issuance of debt, and a combination of license fees, milestone payments, royalty income and other fees received from its
collaboration partners. The Company anticipates that it will continue to incur losses as it continues the research and development of its product candidates,
and the Company does not expect revenues from its product sales to generate sufficient funding to sustain its operations in the near-term. The Company
expects to continue fulfilling its funding needs through cash inflows from revenues, licensing and research collaboration transactions, additional equity
capital raises and other arrangements. The Company believes that its cash, cash equivalents and investments in marketable securities of $331.0 million at
December 31, 2023, will enable the Company to fund its current and planned operations for at least the next twelve months from the date these
consolidated financial statements were issued. Actual cash requirements could differ from management’s projections due to many factors, the timing and
results of the Company’s clinical trials for EYP-1901, additional investments in research and development programs, competing technological and market
developments, and the costs of any strategic acquisitions, and/or development of complementary business opportunities.
2.
Significant Accounting Policies
Basis of Presentation
The consolidated financial statements are presented in U.S. dollars in accordance with U.S. generally accepted accounting principles (U.S. GAAP)
and include the accounts of EyePoint Pharmaceuticals, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been
eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and
assumptions that affect the reported amounts and disclosure of assets and liabilities at the date of the consolidated financial statements and the reported
amounts and disclosure of revenues and expenses during the reporting periods. Significant management estimates and assumptions include, among others,
those related to reserves for variable consideration related to product sales, revenue recognition for multiple-deliverable arrangements, recognition of
expense in outsourced clinical trial agreements, recording of excess or obsolete inventory write-offs and reserves, recoverability of acquired intangible
assets, and realization of deferred tax assets, and determining grant date fair value of stock options and other equity awards. Actual results could differ from
these and other estimates and there may be changes to the Company’s estimates in future periods.
F-8
Foreign Currency
The functional currency of the Company and each of its subsidiaries is the currency of the primary economic environment in which each such entity
operates—the U.S. dollar or the Pound Sterling.
Assets and liabilities of the Company’s foreign subsidiary are translated at period-end exchange rates. Amounts included in the consolidated
statements of comprehensive loss and cash flows are translated at the weighted average exchange rates for the period. Gains and losses from currency
translation are included in accumulated other comprehensive income as a separate component of stockholders’ equity on the consolidated balance sheets.
The balance of accumulated other comprehensive income attributable to foreign currency translation was $0.9 million and $0.8 million at December 31,
2023 and 2022, respectively. Foreign currency gains or losses arising from transactions denominated in foreign currencies, whether realized or unrealized,
are recorded in interest and other income, net in the consolidated statements of comprehensive loss and were not material for all periods presented.
Cash Equivalents
Cash equivalents represent highly liquid investments with maturities of three months or less at the date of purchase, principally consisting of
institutional money market funds and investment-grade commercial paper and U.S. Treasury securities.
Marketable Securities
Marketable securities consist of investments with an original or remaining maturity of greater than three months but less than one year at the date of
purchase. The Company has historically classified its marketable securities as available-for-sale. Accordingly, the Company records these investments at
fair value, with unrealized gains and losses excluded from earnings and reported, net of tax, in accumulated other comprehensive income, which is a
component of stockholders’ equity. If the Company determines that a decline of any investment is other-than-temporary, the investment is written down to
fair value. Marketable securities consisted of investment-grade commercial paper, U.S. Treasury securities, and U.S. Agency securities at December 31,
2023. Marketable securities consisted of investment-grade commercial paper and U.S. Treasury securities at December 31, 2022. The Company’s
investment policy, approved by the Board of Directors, includes guidelines relative to diversification and maturities designed to preserve principal and
liquidity.
The fair value of marketable securities is determined based on quoted market prices at the balance sheet date of the same or similar instruments. The
amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts through to the earlier of sale or maturity. Such
amortization and accretion amounts are included in interest and other income, net in the consolidated statements of comprehensive loss. The cost of
marketable securities sold is determined by the specific identification method.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, investments
in marketable securities, and accounts receivable. The Company deposits its cash in financial institutions. At times, such deposits may be in excess of
insured limits.
At December 31, 2023, the Company’s interest-bearing cash equivalent balances were concentrated in one institutional money market fund that has
investments consisting primarily of Repurchase Agreements, U.S Treasuries, and U.S. Government Agency Debts. At December 31, 2022, the Company’s
interest-bearing cash equivalent balances were concentrated in one institutional money market fund that has investments consisting primarily of certificates
of deposit, commercial paper, time deposits, Treasury repurchase agreements and investment-grade U.S. Treasury securities. Generally, these investments
may be sold upon demand and, therefore, the Company believes they have minimal risk.
The Company’s investment policy, approved by the Company’s Board of Directors, includes guidelines relative to diversification and maturities
designed to preserve principal and liquidity.
As of December 31, 2023, accounts receivable from Alimera and Ocumension Therapeutics accounted for 67.8% and 15.7% of total accounts
receivable, respectively. For the year ended December 31, 2023, revenues from Alimera and Besse Medical accounted for 73.2% and 17.2% of total
revenues, respectively.
As of December 31, 2022, accounts receivable from ASD Specialty Healthcare LLC and McKesson Specialty Care Distribution LLC accounted for
57.1% and 30.2% of total accounts receivable, respectively. For the year ended December 31, 2022, revenues from ASD Specialty Healthcare LLC and
McKesson Specialty Care Distribution LLC accounted for 51.1% and 39.5% of total revenues, respectively.
F-9
Fair Value Measurements
The Company accounts for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which
inputs used in measuring fair value are observable in the market. The Company categorizes each of its fair value measurements in one of these three levels
based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
•
•
•
Level 1 – Inputs are quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets and liabilities.
Level 2 – Inputs are directly or indirectly observable in the marketplace, such as quoted prices for similar assets or liabilities in active markets
or quoted prices for identical assets or liabilities with insufficient volume or infrequent transaction (less active markets).
Level 3 – Inputs are unobservable estimates that are supported by little or no market activity and require the Company to develop its own
assumptions about how market participants would price the assets or liabilities.
The Company’s cash equivalents and marketable securities are classified within Level 1 or Level 2 on the basis of valuations using quoted market
prices or alternative pricing sources and models utilizing market observable inputs, respectively. The marketable securities have been valued on the basis of
valuations provided by third-party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to,
reported trades, executable bid and ask prices, broker/dealer quotations, prices or yields of securities with similar characteristics, benchmark curves or
information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information
regarding securities with similar characteristics to determine the valuation for a security, and have been classified as Level 2.
The carrying amounts of accounts receivable, accounts payable and accrued expenses approximate fair value because of their short-term maturity.
Accounts and Other Receivables, Net
Receivables arise primarily from the Company’s products sold in the U.S. The balance in accounts and other receivables, net consists primarily of
amounts due from customers, net of applicable revenue reserves. The majority of the Company’s accounts receivable have standard payment terms that
require payment within 30-60 days. The Company performs ongoing credit evaluations of its customers’ financial condition and continuously monitor
collections and payments from its customers and analyzes accounts that are past due for collectability. The allowance for credit losses is estimated based on
the Company’s analysis of trends in overall receivables aging, specific identification of certain receivables that are at risk of not being paid, past collection
experience and current economic trends. Given the nature and limited history of collectability of the Company’s accounts receivable, the Company
recorded no allowance for credit losses as of December 31, 2023 and 2022.
Inventory
Inventory is stated at the lower of cost or net realizable value, net on a first-in, first-out (FIFO) basis.
Capitalization of inventory costs begins after FDA approval of a product. Prior thereto, inventory costs of products and product candidates are
recorded as research and development expense, even if this inventory may later be sold as commercial product.
The Company assesses the recoverability of inventory and writes down any excess and obsolete inventories to their estimated realizable value in the
period in which the impairment is first identified. Write-downs are based on the age of the inventory, lower of cost or market, along with significant
management judgments concerning future demands for the inventory. Such impairment charges, should they occur, are recorded within cost of sales,
excluding amortization of acquired intangible assets. The determination of whether inventory costs will be realizable requires estimates by management. If
actual market conditions are less favorable than management's projections, additional write-downs of inventory might be recorded in future periods.
Cost of sales, excluding amortization of acquired intangible assets, consists of costs associated with the manufacture of YUTIQ® and DEXYCU®,
certain period costs for DEXYCU® product revenue, product shipping, and, as applicable, royalty expense. The inventory costs for YUTIQ® include
purchases of various components, the active pharmaceutical ingredient (API) and direct labor and overhead for the product manufactured in the Company’s
Watertown, Massachusetts facility. The inventory costs for DEXYCU® include purchased components, the API and third-party manufacturing and
assembly. On November 1, 2022, the CMS published in the Federal Register the Calendar Year (CY) 2023 Medicare Hospital Outpatient Prospective
Payment System and ASC Payment System Final Rule (Final Rule). The Final Rule terminated the pass-through related separate payment for DEXYCU,
which was no longer separately reimbursed by Medicare as of January 1, 2023, when furnished in hospital outpatient departments and ASC settings. In
connection with the change in CMS reimbursement rules on November 1, 2022, the Company recorded impairment charge of $0.5
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million and $1.4 million for the years ended December 31, 2023 and 2022, respectively, associated with the write-off of excess DEXYCU® units.
Debt and Equity Instruments
Debt and equity instruments are classified as either liabilities or equity in accordance with the substance of the contractual arrangement.
Property and Equipment
Property and equipment are recorded at cost and depreciated over their estimated useful lives (generally three to five years) using the straight-line
method. Leasehold improvements are amortized on a straight-line basis over the shorter of the remaining non-cancellable lease term or their estimated
useful lives. Repair and maintenance costs are expensed as incurred. When assets are retired or sold, the assets and accumulated depreciation are
derecognized from the respective accounts and any gain or loss is recognized.
Capitalized Software Development Cost
The Company purchases cloud computing arrangements, such as software business applications that are used in the normal course of business, and
as a result, capitalizes certain implementation costs incurred in a cloud computing agreement that is a service contract. Eligible implementation costs
associated with cloud computing arrangements are capitalized in accordance with ASC 350, Intangibles – Goodwill and Other, and classified as a prepaid
asset on the consolidated balance sheets. These costs are recognized on a straight-line basis on the same line of the consolidated statements of
comprehensive loss as the fees for the associated cloud computing arrangement, over the term of the arrangement, plus renewal and termination periods the
Company is reasonably certain to exercise.
Leases
The Company is a party to one operating lease for its headquarters in Watertown, Massachusetts, in which it leases office, laboratory, and
manufacturing operations facilities. In January 2023, the Company entered into a lease agreement for its new standalone manufacturing facility, including
office and lab space located at 600 Commerce Drive, Northbridge, Massachusetts (see Note 8).
The Company determines whether an arrangement is or contains a lease at inception. Leases are recognized on the consolidated balance sheets as
ROU assets, current lease liabilities and, if applicable, noncurrent lease liabilities. ROU assets represent the Company’s right to use an underlying asset for
the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease liabilities and their
corresponding ROU assets are recorded based on the present value of lease payments over the expected remaining lease term. For this purpose, the
Company considers only payments that are fixed and in-substance fixed at lease commencement. ROU assets may also be adjusted for items such as
prepayments and lease incentives. The interest rate implicit in a lease contract is typically not readily determinable. As a result, the Company utilizes its
incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a
similar economic environment. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will
exercise that option. For operating leases, lease expense is recognized on a straight-line basis over the lease term. For finance leases, amortization expense
and interest expense are recognized over the lease term.
Impairment of Intangible Assets
The Company assesses potential impairments to its intangible asset when there is evidence that events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable or that the useful life of the asset is no longer appropriate. An impairment loss is recognized when the
future undiscounted net cash flows expected to result from the use of an asset are less than its carrying value. If the Company considers an asset to be
impaired, the impairment charge to be recognized is measured as the amount by which the carrying value of the asset exceeds its estimated fair value. In
connection with a change in CMS reimbursement rules on November 1, 2022, the Company determined that the DEXYCU® intangible asset was not
recoverable and recorded a $20.7 million impairment charge.
Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity
expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the
scope of ASC 606, Revenue from Contracts with Customers (ASC 606), the Company performs the following five steps: (i) identify the contract(s) with a
customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance
obligations in the contract; and (v)
F-11
recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable
that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the
contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within the contract, determines those that
are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the
transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales, value-add and other
taxes collected on behalf of third parties are excluded from revenue.
Product sales, net — Effective January 2023 and May 2023, the Company is no longer commercially selling DEXYCU and YUTIQ, respectively.
The Company continues to sell YUTIQ under a commercial supply agreement with Alimera and Ocumension (see Note 3).
Prior to the above dates, the Company sold YUTIQ® and DEXYCU® primarily to a limited number of specialty distributors and specialty
pharmacies (collectively the Distributors) in the U.S., with whom the Company had entered into formal agreements, for delivery to physician practices for
YUTIQ® and to hospital outpatient departments and ambulatory surgical centers (ASCs) for DEXYCU®. The Company recognized revenue on sales of its
products when Distributors obtained control of the products, which occurred at a point in time, typically upon delivery. In addition to agreements with
Distributors, the Company also entered into arrangements with healthcare providers, ASCs, and payors that provided for government mandated and/or
privately negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s products from Distributors.
Reserves for variable consideration — Product sales were recorded at the wholesale acquisition costs, net of applicable reserves for variable
consideration. Components of variable consideration included trade discounts and allowances, provider chargebacks and discounts, payor rebates, product
returns, and other allowances that were offered within contracts between the Company and its Distributors, payors and other contracted purchasers relating
to the Company’s product sales. These reserves were based on the amounts earned, or to be claimed on the related sales, and were classified either as
reductions of product revenue and accounts receivable or a current liability, depending on how the amount was to be settled. Overall, these reserves
reflected the Company’s best estimates of the amount of consideration to which it was entitled based on the terms of the respective underlying contracts.
The actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the estimates,
the Company adjusts product revenue and earnings in the period such variances become known.
Distribution fees — The Company compensated its Distributors for services explicitly stated in the Company’s contracts and were recorded as a
reduction of revenue in the period the related product sale was recognized.
Provider chargebacks and discounts — Chargebacks were discounts that represented the estimated obligations resulting from contractual
commitments to sell products at prices lower than the list prices charged to the Company’s Distributors. These Distributors charged the Company for the
difference between what they paid for the product and the Company’s contracted selling price. These reserves were established in the same period that the
related revenue was recognized, resulting in a reduction of product revenue and the establishment of a current liability. Reserves for chargebacks consisted
of amounts that the Company expected to pay for units that remained in the distribution channel inventories at each reporting period-end that the Company
expected to be sold under a contracted selling price, and chargebacks that Distributors had claimed, but for which the Company had not yet settled.
Government rebates— The Company was subject to discount obligations under state Medicaid programs and Medicare. These reserves were
recorded in the same period the related revenue was recognized, resulting in a reduction of product revenue and the establishment of a current liability
which was included in accrued expenses and other current liabilities on the consolidated balance sheets. The Company’s liability for these rebates consisted
of invoices received for claims from prior quarters that had not been paid or for which an invoice had not yet been received, estimates of claims for the
current quarter, and estimated future claims that would be made for product that had been recognized as revenue, but which remained in the distribution
channel inventories at the end of each reporting period.
Payor rebates — The Company contracted with certain private payor organizations, primarily insurance companies, for the payment of rebates with
respect to utilization of its products. The Company estimated these rebates and recorded such estimates in the same period the related revenue was
recognized, resulting in a reduction of product revenue and the establishment of a current liability.
Co-Payment assistance — The Company offered co-payment assistance to commercially insured patients meeting certain eligibility requirements.
The calculation of the accrual for co-pay assistance was based on an estimate of claims and the cost per claim that the Company expected to receive
associated with product that had been recognized as revenue.
Product returns — The Company generally offered a limited right of return based on its returned goods policy, which included damaged product and
remaining shelf life. The Company estimated the amount of its product sales that may be returned and recorded
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this estimate as a reduction of revenue in the period the related product revenue was recognized, as well as reductions to trade receivables, net on the
consolidated balance sheets.
License and collaboration agreement revenue — The Company analyzes each element of its license and collaboration arrangements to determine
the appropriate revenue recognition. The terms of the license agreement may include payment to the Company of non-refundable upfront license fees,
milestone payments if specified objectives are achieved, and/or royalties on product sales. The Company recognizes revenue from upfront payments at a
point in time, typically upon fulfilling the delivery of the associated intellectual property to the customer. For licenses that are combined with other
promises, the Company determines whether the combined performance obligation is satisfied over time or at a point in time, when (or as) the associated
performance obligation in the contract is satisfied.
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that
contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the
promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the
performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone
selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance
obligations.
The Company recognizes sales-based milestone payments as revenue upon the achievement of the cumulative sales amount specified in the contract
in accordance with ASC 606-10-55-65. For those milestone payments which are contingent on the occurrence of particular future events, the Company
determines that these need to be considered for inclusion in the calculation of total consideration from the contract as a component of variable consideration
using the most-likely amount method. As such, the Company assesses each milestone to determine the probability and substance behind achieving each
milestone. Given the inherent uncertainty associated with these future events, the Company will not recognize revenue from such milestones until there is a
high probability of occurrence, which typically occurs near or upon achievement of the event.
When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or
significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph 606-10-32-18, the Company
does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and
when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component as of December 31, 2023 and
2022, respectively, nor during the respective years then ended.
Royalties — The Company recognizes revenue from license arrangements with its commercial partners’ net sales of products. Such revenues are
included as royalty income. In accordance with ASC 606-10-55-65, royalties are recognized when the subsequent sale of the commercial partner’s products
occurs. The Company’s commercial partners are obligated to report their net product sales and the resulting royalty due to the Company typically within
60-days from the end of each quarter. Based on historical product sales, royalty receipts, and other relevant information, the Company recognizes royalty
income each quarter and subsequently determines a true-up when it receives royalty reports and payment from its commercial partners. Historically, these
true-up adjustments have been immaterial.
Sale of Future Royalties — The Company has sold its rights to receive certain royalties on product sales. In the circumstance where the Company
has sold its rights to future royalties under a royalty purchase agreement (RPA) and also maintains limited continuing involvement in the arrangement (but
not significant continuing involvement in the generation of the cash flows that are due to the purchaser), the Company defers recognition of the proceeds it
receives for the sale of royalty streams and recognizes such unearned revenue as revenue under the units-of-revenue method over the life of the underlying
license agreement. Under the units-of-revenue method, amortization for a reporting period is calculated by computing a ratio of the proceeds received from
the purchaser to the total payments expected to be made to the purchaser over the term of the agreement, and then applying that ratio to the period’s cash
payment.
Estimating the total payments expected to be received by the purchaser over the term of such arrangements requires management to use subjective
estimates and assumptions. Changes to the Company’s estimate of the payments expected to be made to the purchaser over the term of such arrangements
could have a material effect on the amount of revenues recognized in any particular period.
Please refer to Note 3 for further details on the license and collaboration agreements into which the Company has entered and corresponding
amounts of revenue recognized during the current and prior year periods.
F-13
Deferred Revenue
Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue on the accompanying consolidated
balance sheets. Amounts not expected to be recognized within one year following the balance sheet date are classified as non-current deferred revenue.
Research and Development
Research and development costs are charged to operations as incurred. These costs include all direct costs, including cash and stock-based
compensation and benefits for research, clinical development, quality assurance, quality control, operations and medical affairs personnel, amortization of
intangible assets, third-party costs and services for clinical trials, clinical materials, pre-clinical programs, regulatory and medical affairs, external
consultants, and other operational costs related to the Company’s research and development of its product candidates.
The Company records accruals for estimated ongoing research and development costs, including costs with respect to outsourced agreements for
clinical trials with contract research organizations (CROs). When recording these prepaid and accrued expenses, the Company analyzes progress of the
studies, including the phase or completion of events, invoices received, payments made, contracted costs, communications with third-party vendors, and
internal tracking of the work performed to date. Judgments and estimates are made in determining the prepaid and accrued balances at the end of any
reporting period. Payments made in advance of services provided are recorded as prepaid research and development costs and recognized as expense in the
period the expense is incurred. In determining the prepaid and accrued balances, management makes its assessments of the services performed based on
various factors, including reporting from third-party CROs and internal tracking of work performed during the period, which are subject to management’s
judgment. Actual results could differ from the Company’s estimates.
Stock-Based Compensation
Compensation cost related to share-based payment awards is based on the fair value of the instrument on the grant date and is recognized on a
graded vesting basis over the requisite service period for each separately vesting tranche of the awards.
The Company may also grant share-based payment awards that are subject to objectively measurable performance and service criteria.
Compensation expense for performance-based awards begins at such time as it becomes probable that the respective performance conditions will be
achieved. The Company continues to recognize the grant date fair value of performance-based awards through the vesting date of the respective awards so
long as it remains probable that the related performance conditions will be satisfied.
The Company estimates the fair value of stock option awards using the Black-Scholes option valuation model and the fair value of performance
stock units, restricted stock units, and deferred stock units based on the observed grant date fair value of the underlying common stock.
Net Loss per Share
Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. For
periods in which the Company reports net income, diluted net income per share is determined by adding to the basic weighted average number of common
shares outstanding the total number of dilutive common equivalent shares using the treasury stock method, unless the effect is anti-dilutive.
The Company issued 3,272,727 shares of Pre-Funded Warrants (PFW) to purchase common stock, in connection with the November 2021
underwritten public offering. The PFWs were included in the basic and diluted net loss per share calculation during the years ended December 31, 2023 and
2022, respectively.
F-14
Potential common stock equivalents excluded from the calculation of diluted earnings per share because the effect would have been anti-dilutive
were as follows:
Stock options
ESPP
Warrants
Restricted stock units
Total
Comprehensive Loss
December 31,
2023
2022
6,304,767
21,000
48,683
1,333,192
7,707,642
4,082,555
30,174
48,683
509,170
4,670,582
Comprehensive loss is comprised of net loss, foreign currency translation adjustments and unrealized gains and losses on available-for-sale
marketable securities.
Income Tax
The Company accounts for income taxes under the asset and liability method. Deferred income tax assets and liabilities are computed for the
expected future impact of differences between the financial reporting and income tax bases of assets and liabilities and for the expected future benefit to be
derived from tax credits and loss carry forwards. Such deferred income tax computations are measured based on enacted tax laws and rates applicable to
the years in which these temporary differences are expected to be recovered or settled. A valuation allowance is provided against net deferred tax assets if,
based on the available evidence, it is more likely than not that some or all of the net deferred tax assets will not be realized.
The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If it is not more likely than not
that a position will be sustained, none of the benefit attributable to the position is recognized. The tax benefit to be recognized for any tax position that
meets the more likely than not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of the
uncertainty. The Company accounts for interest and penalties related to uncertain tax positions as part of its income tax provision.
Recently Adopted and Recently Issued Accounting Pronouncements
New accounting pronouncements are issued periodically by the Financial Accounting Standards Board (FASB) and are adopted by the Company as
of the specified effective dates. Unless otherwise disclosed below, the Company believes that recently issued and adopted pronouncements will not have a
material impact on the Company’s financial position, results of operations and cash flows or do not apply to the Company’s operations.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07—Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU
was issued to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU
applies to all public entities that are required to report segment information in accordance with Topic 280, Segment Reporting. ASU 2023-07 is effective
for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted
and the standard should be applied retrospectively. ASU 2023-07 will be effective for the Company for the annual period of its fiscal year ending December
31, 2024. The Company does not anticipate the adoption of this ASU will have a material impact on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU was issued to
address investor requests for more transparency about income tax information through improvements to income tax disclosure primarily related to the rate
reconciliation and income taxes paid information, and to improve the effectiveness of income tax disclosures. This ASU is effective for public entities for
annual periods beginning after December 15, 2024. Early adoption is permitted. ASU 2023-09 will be effective for the Company in the first quarter of its
fiscal year ending December 31, 2025. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial
statements.
3.
Product Revenue Reserves and Allowances
From January 1, 2023 through May 17, 2023 (the date the Company entered into the product rights agreement (PRA) with Alimera), the Company’s
product revenues were primarily from sales of YUTIQ® in the U.S. Since the execution of the PRA, the
F-15
Company’s product revenues are primarily from the Company’s commercial supply agreement with Alimera of YUTIQ® in the U.S., pursuant to which,
during the term of the PRA, the Company agreed to manufacture and exclusively supply to Alimera agreed-upon quantities of YUTIQ® necessary for
Alimera to commercialize YUTIQ® in the United States at certain cost plus amounts. For the year ended December 31, 2022, the Company’s product
revenues were primarily from sales of YUTIQ® and DEXYCU® in the U.S.
Net product revenues by product for the years ended December 31, 2023 and 2022 were as follows (in thousands):
(A)
YUTIQ
DEXYCU
Total product sales, net
(B)
Year Ended
December 31,
2023
Year Ended
December 31,
2022
$
$
14,232
—
14,232
$
$
28,329
11,576
39,905
(A)
(B)
Includes approximately $452 and $343 of revenue from YUTIQ® product sales to Ocumension Therapeutics under a supply agreement for the
years ended December 31, 2023 and 2022, respectively.
Includes approximately $82 and $20 of revenue from DEXYCU® product sales to Ocumension Therapeutics under a supply agreement for the
years ended December 31, 2023 and 2022, respectively.
The following table summarizes activity in each of the product revenue allowance and reserve categories for the years ended December 31, 2023
and 2022 (in thousands):
Chargebacks,
Discounts
and Fees
Government
and Other
Rebates
Returns
Total
Beginning balance at January 1, 2023
$
859 $
Provision related to sales in the current year
Adjustments related to prior period sales
Deductions applied and payments made
1,612
65
(2,453 )
Ending balance at December 31, 2023
$
83 $
158 $
—
(55 )
(103 )
— $
871 $
25
(54 )
(165 )
677 $
1,888
1,637
(44 )
(2,721 )
760
As of December 31, 2023, returns, chargebacks, discounts and fees, and rebates are recorded as a component of accrued expenses on the
consolidated balance sheets (see Note 7)
Chargebacks,
Discounts
and Fees
Government
and Other
Rebates
Returns
Total
Beginning balance at January 1, 2022
Provision related to sales in the current year
Adjustments related to prior period sales
Deductions applied and payments made
Ending balance at December 31, 2022
$
$
1,153 $
10,970
—
(11,264 )
859 $
1,821 $
5,520
—
(7,183 )
158 $
379 $
816
—
(324 )
871 $
3,353
17,306
—
(18,771 )
1,888
As of December 31, 2022, returns are recorded as a reduction of accounts receivable on the consolidated balance sheets. Chargebacks, discounts and
fees, and rebates are recorded as a component of accrued expenses on the consolidated balance sheets (see Note 7).
F-16
License and Collaboration Agreements and Royalty Income
Alimera Product Rights Agreement and Commercial Supply Agreement
On May 17, 2023 (the Closing Date), the Company entered into a PRA with Alimera Sciences, Inc. (Alimera). Under the PRA, the Company
granted to Alimera an exclusive and sublicensable right and license (the License) under the Company’s and its affiliates’ interest in certain of the
Company’s and its affiliates’ intellectual property to develop, manufacture, sell, commercialize, and otherwise exploit certain products, including YUTIQ®,
for the treatment and prevention of uveitis in the entire world except Europe, the Middle East and Africa (EMEA). The License also excludes any rights to
YUTIQ® for the treatment of chronic non-infectious uveitis affecting the posterior segment of the eye the Company granted to Ocumension Therapeutics
(Ocumension) under the license agreements and a Memorandum of Understanding for YUTIQ® (the Ocumension Agreement), pursuant to which rights
have been exclusively licensed to Ocumension in China and certain other countries and regions in Asia.
Additionally, pursuant to the PRA, the Company transferred and assigned to Alimera certain assets (the Transferred Assets) and certain contracts
with third parties related to YUTIQ®, including the new drug application for YUTIQ® (collectively, the Asset Transfer). The Transferred Assets consist
primarily of agreements and internally developed intangible assets which had zero carrying value at the date of transfer. Pursuant to the PRA, Alimera paid
the Company a $75.0 million upfront payment. Alimera will also make four quarterly payments of $1.875 million to the Company totaling $7.5 million
during 2024. Alimera will also pay royalties to the Company from 2025 to 2028 at a percentage of low-to-mid double digits of Alimera’s related U.S.
annual net sales of certain products (including YUTIQ®) in excess of certain thresholds, beginning at $70 million in 2025, and increasing annually
thereafter. Upon Alimera’s payment of the Upfront Payment and the 2024 quarterly payments, the licenses and rights granted to Alimera will automatically
become perpetual and irrevocable. Payments received from Alimera are non-refundable.
On the Closing Date, the Company and Alimera also entered into a commercial supply agreement (CSA), pursuant to which, during the term of the
PRA, the Company agreed to manufacture and exclusively supply to Alimera agreed-upon quantities of YUTIQ® necessary for Alimera to commercialize
YUTIQ® in the United States at certain cost plus amounts, subject to adjustments set forth in the CSA (the Supply Transaction and together with the
License and the Asset Transfer, the Transaction). The initial term of the CSA is two years following the Closing Date, subject to certain changes set forth in
the CSA. The CSA shall thereafter automatically renew for successive one (1) year terms; provided, that the term of the CSA automatically terminates
upon the successful completion of the transfer of manufacturing for YUTIQ® to Alimera or its designee in accordance with the CSA.
In addition, the Company entered into a transition services agreement (TSA) under which the Company agreed to provide agreed upon transition
services to Alimera on a cost-plus pricing arrangement for up to six months following the closing of the Transaction. As part of the TSA, the Company
agreed to fulfill Alimera sales orders for YUTIQ® in the United States, to the extent requested by Alimera, during the period up to six months following the
Closing Date, to the Company’s third-party customers on behalf of Alimera, including by invoicing for YUTIQ® and receiving payments for such invoiced
YUTIQ® for fulfilling Alimera sales orders of YUTIQ® and remit such payments to Alimera (see Note 7) (the Sales Services). The Sales Services were
completed during fiscal 2023.
The Company classified the cash proceeds of the $75.0 million Upfront Payment received from Alimera as deferred revenue at the Closing Date,
pursuant to the PRA and the CSA because the License and supply units to be delivered under both agreements comprise a single, combined performance
obligation as Alimera will not have the right or ability to manufacture YUTIQ® (or have YUTIQ® manufactured by a third-party contract manufacturing
organization) over the initial two-year term pursuant to the CSA. The combined performance obligation is satisfied over time using the units delivered
output method to measure progress based on initial estimated supply units of YUTIQ® over the two-year term for purposes of recognizing revenue, such
that revenue is recognized based on the value transferred in the form of units of product in the satisfaction of a performance obligation. Through this
method, the Company compares the actual units delivered to date with the current estimated total to be delivered in the contractual term to measure the
satisfaction of the performance obligation and recognize revenue. The Company will monitor its estimate of total units to be delivered to determine if an
adjustment is needed to ensure that revenue is recognized proportionally for units delivered to date relative to the total units expected to be delivered for the
combined performance obligation. Such estimates of the total delivery will be reassessed on an ongoing basis. If the Company determines that a change in
estimate is necessary, it will adjust revenue using a cumulative catch-up method.
During the year ended December 31, 2023, the Company recognized $2.1 million of revenue from sales of product supply to Alimera under the CSA
and recorded this amount in product sales, net on the consolidated statements of comprehensive loss. The Company recognized $29.5 million of license and
collaboration revenue related to the PRA for the years ended December 31, 2023. Under the TSA, the Company also recognized approximately $1.0
million of license and collaboration revenue related to additional transitional services for the year ended December 31, 2023. As of December 31, 2023, the
Company had $37.2 million and $8.3 million as current and non-current deferred revenue recognized under the PRA, respectively.
F-17
SWK Royalty Purchase Agreement
Pursuant to a royalty purchase agreement (RPA) with SWK Funding LLC (SWK), the Company sold its right to receive royalty payments on future
sales of products subject to a licensing and development agreement, as amended, with Alimera (the Amended Alimera Agreement) for an upfront cash
payment of $16.5 million. The Company classified the proceeds received from SWK as deferred revenue at inception of the RPA and is recognizing
revenue as royalty payments are made from Alimera to SWK. The Company recognized $1.0 million and $0.9 million of royalty revenue related to the
RPA for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the Company classified $1.4 million and $12.4 million as
current and non-current deferred revenue recognized under the RPA, respectively. As of December 31, 2022, the Company classified $1.2 million and
$13.6 million as current and non-current deferred revenue recognized under the RPA, respectively.
Ocumension Therapeutics
Pursuant to the Ocumension Agreement signed with the Company, Ocumension has:
•
•
•
An exclusive license for the development and commercialization of its three-year micro insert using the Durasert technology for the
treatment of posterior segment uveitis of the eye (YUTIQ® in the U.S.) in Mainland China, Hong Kong, Macau, and Taiwan at its own cost
and expense in return for royalties based on sales with the Company supplying products for clinical trials and commercial sale;
An exclusive license for the development and commercialization in Mainland China, Hong Kong, Macau and Taiwan of DEXYCU® for the
treatment of post-operative inflammation following ocular surgery at its own cost and expense in return for royalties based on sales with the
Company supplying product for clinical trials and commercial sale; and
Exclusive rights to develop and commercialize YUTIQ® and DEXYCU® products under its own brand names in South Korea and other
jurisdictions across Southeast Asia in Brunei, Burma (Myanmar), Cambodia, Timor-Leste, Indonesia, Laos, Malaysia, the Philippines,
Singapore, Thailand, and Vietnam, at its own cost and expense in return for royalties based on sales with the Company supplying product for
clinical trials and commercial sale.
During the years ended December 31, 2023 and 2022, the Company recognized $0.5 million and $0.4 million, respectively, of revenue from sales of
product supply to Ocumension under the supply agreement and recorded this amount in product sales, net on the condensed consolidated statements of
operations and comprehensive loss. The Company recognized approximately $0.1 million and $0.2 million, of license and collaboration revenue,
respectively, related to additional technical assistance during the years ended December 31, 2023 and 2022. The Company also recorded royalty income of
$0 and $0.3 million during the years ended December 31, 2023 and 2022, respectively.
The Chief Executive Officer of Ocumension is a member of the Company's board of directors.
Exclusive License Agreement with Betta Pharmaceuticals, Co., Ltd.
On May 2, 2022, the Company entered into an exclusive license agreement (the Betta License Agreement) with Betta Pharmaceuticals Co., Ltd.
(Betta), an affiliate of Equinox Sciences, LLC (Equinox) (see Note 13). Under the Betta License Agreement, the Company granted to Betta an exclusive,
sublicensable, royalty-bearing license under certain of the Company’s intellectual property to develop, use (but not make or have made), sell, offer for sale
and import the Company’s product candidate, EYP-1901, an investigational sustained delivery treatment for anti-VEGF-mediated retinal diseases
combining vorolanib, a selective and patent-protected tyrosine kinase inhibitor (TKI) with Durasert E™ (the Licensed Product), in the field of
ophthalmology (the Betta Field) in the greater area of China, including China, the Hong Kong Special Administrative Region, the Macau Special
Administrative Region, and Taiwan (the Betta Territory). The Company retained rights under the Company’s intellectual property to, among other things,
conduct clinical trials on the Licensed Product in the Betta Field in the Betta Territory.
In consideration for the rights granted by the Company, Betta agreed to pay the Company tiered, mid-to-high single-digit royalties based upon
annual net sales of Licensed Products in the Betta Territory. The royalties are payable on a Licensed Product-by-Licensed Product and region-by-region
basis commencing on the first commercial sale of a Licensed Product in a region and continuing until the later of (i) the date that is twelve (12) years after
first commercial sale of such Licensed Product in such region, and (ii) the first day of the month following the month in which a generic product
corresponding to such Licensed Product is launched in the relevant region. The royalty rate is subject to reduction under certain circumstances, including
when there is no valid claim of a licensed patent that covers a Licensed Product in a particular region.
Betta is responsible for all costs relating to development, registration, manufacturing, marketing, advertising, promotional, launch, and sales
activities in connection with the Licensed Products in the Betta Field in the Betta Territory. Betta is required to use commercially reasonable efforts to
develop, seek regulatory approval for, and commercialize at least one Licensed Product in the Betta Field in the Betta Territory. The Betta License
Agreement also requires Betta to achieve certain diligence milestones relating to
F-18
regulatory filings, patient dosing, and regulatory approval by certain specified deadlines set forth in the Betta License Agreement, subject to certain
exceptions and extensions as set forth in the Betta License Agreement. Betta’s development activities will be conducted pursuant to a development plan
subject to periodic updates. In the event that the Company conducts a global registrational clinical trial for a Licensed Product in the Betta Field, Betta will
have the right to participate in such clinical trial by including clinical trial sites in the Betta Territory in accordance with the terms of the Betta License
Agreement. The Company has also agreed to provide certain technology transfer and other support services to Betta subject to certain conditions and
limitations set forth in the Betta License Agreement.
The Company recorded no revenue from product sales, license and collaboration revenue, or royalty income for the years ended December 31, 2023
and 2022, related to this agreement.
4.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
Prepaid expenses
Prepaid clinical trials
Other
Total prepaid expenses and other current assets
5.
Inventory
Inventory consisted of the following (in thousands):
Raw materials
Work in process
Finished goods
Total inventory
6.
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
Property and equipment
Construction in process
Leasehold improvements
Gross property and equipment
Accumulated depreciation and amortization
Property and equipment, net
December 31,
2023
December 31,
2022
1,695 $
6,335
1,009
9,039 $
2,723
6,353
782
9,858
December 31,
2023
December 31,
2022
1,303 $
882
1,721
3,906 $
1,410
1,078
398
2,886
December 31,
2023
December 31,
2022
3,086 $
3,728 $
1,008
7,822
(2,571 )
5,251 $
—
2,459
—
1,008
3,467
(2,107 )
1,360
—
$
$
$
$
$
$
$
Depreciation expense totaled $0.5 million and $0.4 million in the years ended December 31, 2023 and 2022, respectively.
F-19
7.
Accrued Expenses
Accrued expenses consisted of the following (in thousands):
Personnel costs
Clinical trial costs
Professional fees
Sales chargebacks, rebates and other revenue reserves
Other
Total accrued expenses
8.
Leases
December 31,
2023
December 31,
2022
$
$
12,631 $
3,305
666
760
159
17,521 $
9,515
3,308
761
1,017
1,758
16,359
On March 8, 2022, the Company amended the lease for its headquarters in Watertown, Massachusetts totaling 21,649 square feet (i) to extend the
term to May 31, 2028, for 13,650 square feet of laboratory and manufacturing operations space, with the landlord agreeing to provide the Company a
construction allowance of up to $0.7 million to be applied toward upgrades and improvements within the space; (ii) to rent an additional 11,999 square feet
of office space within the building through May 31, 2028 (New Premises); and (iii) to terminate a portion of the lease comprising 7,999 square feet of
office space in the building in accordance with its existing contractual term on May 31, 2025. The amendment also reinstated the Company’s right to
extend the lease for the space it occupies after May 31, 2025, for one additional period of five years. Rent for the extension period would be at the fair
market rent for comparable space in comparable properties in the Watertown area. During the second quarter of 2022, the Company recognized a $2.9
million increase to its lease liabilities and right-of-use (ROU) assets resulting from the lease amendment for the term extension of the laboratory and
manufacturing operations space.
The lease for the New Premises commenced during the third quarter of 2022. The Company occupied the New Premises when the landlord
substantially completed its construction for the space, after which the Company’s obligation to pay base rent began. The Company recognized an increase
of $1.6 million to its lease liabilities and $1.7 million to its ROU assets resulting from the lease for the New Premises.
The Company previously provided a cash-collateralized $0.2 million irrevocable standby letter of credit as security for the Company’s obligations
under the lease, which will remain in effect through the period that is four months beyond the expiration date of the amended lease. The Company will also
be required to pay its proportionate share of certain operating costs and property taxes applicable to the leased premises in excess of new base year
amounts.
On January 23, 2023, the Company entered into a lease agreement for its new standalone manufacturing facility, including office and lab space
located at 600 Commerce Drive, Northbridge, Massachusetts. The new leased premises will consist of approximately 40,000 square feet. The lease includes
a non-cancellable lease term of fifteen years and four months, with two options to extend the lease term for two additional terms of either five years or ten
years at 95% of the then-prevailing fair market rent. The lease term will commence upon the substantial completion of construction of the facility and
related leasehold improvements, which are owned by the lessor, to prepare the premises for the Company’s intended use, which is currently expected to
occur during the second half of 2024. The Company’s obligation to pay base rent will begin four months following the commencement of the lease term.
The lease will create significant rights and obligations for the Company, including the payment of base rent on monthly basis, of which the Company
estimates will total approximately $40.8 million during the initial non-cancellable term of the lease (i.e., fifteen years and four months). The Company will
be responsible for real estate taxes, maintenance, and other operating expenses applicable to the leased premises. As of December 31, 2023, a lease
commencement date in accordance with ASC 842, Leases, had not occurred, as such, no ROU or lease liability has been recorded as of December 31, 2023.
Since the Company elected to account for each lease component and its associated non-lease components as a single combined component, all
contract consideration was allocated to the respective lease components. The expected lease terms include non-cancellable lease periods. Renewal option
periods have not been included in the determination of the lease terms as they are not deemed reasonably certain of exercise. Variable lease payments, such
as common area maintenance, real estate taxes, and property insurance are not included in the determination of the lease’s ROU asset or lease liability.
As of December 31, 2023, the weighted average remaining term of the Company’s operating leases was 4.3 years and the weighted average discount
rate was 5.84%.
F-20
Supplemental balance sheet information related to operating leases as of December 31, 2023 and 2022, respectively, is as follows (in thousands):
Other current liabilities – operating lease current portion
Operating lease liabilities – noncurrent portion
Total operating lease liabilities
$
$
563 $
4,906
5,469 $
543
5,984
6,527
December 31,
2023
December 31,
2022
Operating lease expense recognized was $1.4 million and $1.2 million, excluding $0.2 million and $0.06 million of variable lease costs, for the
years ended December 31, 2023 and 2022, respectively, and was included in the accompanying consolidated statements of comprehensive loss.
Cash paid for amounts included in the measurement of operating lease liabilities was $1.4 million and $0.8 million for the years ended December
31, 2023 and 2022, respectively.
The Company’s total future minimum lease payments under non-cancellable leases at December 31, 2023, were as follows (in thousands):
2024
2025
2026
2027
2028
Total lease payments
Less imputed interest
Total
9.
Loan Agreements
SVB Loan Agreement
Operating Leases
877
1,494
1,589
1,637
693
6,290
(821 )
5,469
$
$
$
The Company's loans (SVB Loan) under an agreement (the SVB Loan Agreement) with First Citizens BancShares, as successor to Silicon Valley
Bank (SVB), as lender (the Lender), were originally due and payable on January 1, 2027. The loans bore interest that was payable monthly in arrears at a
per annum rate equal to (i) with respect to the term facility, the greater of (x) the Wall Street Journal prime rate plus 2.25% and (y) 5.50% and (ii) with
respect to the revolving facility, the Wall Street Journal Prime Rate. Commencing on February 1, 2024, the Company was scheduled to begin repaying the
principal of the term facility in 36 consecutive equal monthly installments. At maturity or if earlier prepaid, the Company was also required to pay an exit
fee equal to 2.00% of the aggregate principal amount of the term facility.
On May 17, 2023, the Company utilized a portion of the upfront payment from the PRA with Alimera (see Note 3) to repay in full all outstanding
amounts under the SVB Loan Agreement. The SVB Loan Agreement was terminated, and all security interests and other liens granted to or held by the
Lender were terminated and released. This payment included (i) the remaining $30.0 million principal portion of the SVB Loan, (ii) $0.6 million,
representing a prepayment fee equal to 2.00% of the aggregate principal amount of the term facility, (iii) a $0.6 million exit fee, (iv) accrued and unpaid
interest of $0.1 million through the pay-off date, and (v) $0.2 million, representing in the aggregate a statement fee, termination fee and unused credit line
fee under the revolving facility. As a result of the early repayment of the SVB Loan, the Company recorded a loss on extinguishment of debt of $1.4
million for the year ended December 31, 2023, related to the write-off of the remaining balance of unamortized debt discount and other extinguishment
fees.
Amortization of debt discount under the SVB Loan Agreement totaled $0.1 million and $0.2 million for the years ended December 31, 2023 and
2022, respectively.
F-21
10.
Stockholders’ Equity
Equity Financings
Common Stock Offerings
In December 2023, the Company sold 13,529,411 shares of its common stock in an underwritten public offering at a price of $17.00 per share,
including the exercise in full by the underwriters of their option to purchase an additional 1,764,705 shares of common stock. The gross proceeds of the
offering to the Company were approximately $230 million. Underwriter discounts and commissions and other share issue costs totaled approximately $14.6
million.
There were no equity financings during the year ended December 31, 2022.
ATM Facility
In August 2020, the Company entered into an at-the-market facility (the ATM Facility) with Cantor Fitzgerald & Co (Cantor). Pursuant to the ATM
Facility, the Company may, at its option, offer and sell shares of its common stock from time to time, through or to Cantor, acting as sales agent. The
Company will pay Cantor a commission of 3.0% of the gross proceeds from any future sales of such shares.
During the year ended December 31, 2023, the Company sold 902,769 shares of its common stock under the ATM Facility at a weighted average
price of $11.05 per share for gross proceeds of approximately $10 million. Share issue costs, including sales agent commissions, totaled approximately $0.4
million.
During the year ended December 31, 2022, the Company did not sell any shares of its common stock under the ATM Facility.
Warrants to Purchase Common Shares
Pursuant to a credit agreement, the Company issued a warrant to SWK to purchase (i) 40,910 shares of the Company’s common stock on March 28,
2018, at an exercise price of $11.00 per share with a seven-year term and (ii) 7,773 shares of the Company’s common stock on June 26, 2018, at an exercise
price of $19.30 per share with a seven-year term. The weighted average exercise price for the warrants as of December 31, 2023 and 2022 was $12.33 per
share. At December 31, 2023, the weighted average remaining life of the warrant was approximately 1.28 years.
11.
Share-Based Payment Awards
Equity Incentive Plans
Prior to June 20, 2023, the Company had authorized the issuance of 5,900,000 shares of the Company's common stock under the 2016 Long-Term
Incentive Plan (the 2016 Plan), of which 184,904 shares remained available for future grants.
At the Company’s Annual Meeting of Stockholders held on June 20, 2023, the Company’s stockholders approved the adoption of the 2023 Long
Term Incentive Plan (the 2023 Plan) and authorized up to 3,500,000 shares of common stock reserved for issuance to participating employees plus the
184,904 shares that remained available for grant under the 2016 Plan upon adoption of the 2023 Plan plus any shares that would have otherwise have
become available for grant under the Company's 2008 Plan or the 2016 Plan as a result of termination or forfeiture of awards under such plan. The 2023
Plan replaced the 2008 Plan and the 2016 Plan. At December 31, 2023, a total of approximately 2,274,000 shares were available for new awards under the
2023 Plan.
Starting March 2022, the Company also granted non-statutory stock options to new employees as inducement awards to enter into employment with
the Company. The grants were approved by the Compensation Committee of the Board of Directors and awarded in accordance with Nasdaq Listing Rule
5635(c)(4). Although not awarded under the 2023 Plan or the 2016 Plan, the grants are subject to and governed by the terms and conditions of the plan in
effect at the time of the grant.
F-22
Stock Options
The following table provides a reconciliation of stock option activity under the Company’s equity incentive plans and for inducement awards for the
year ended December 31, 2023:
Outstanding at January 1, 2023
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2023
Exercisable at December 31, 2023
Number of
Options
Weighted
Average
Exercise
Price
4,082,555 $
2,923,861
(260,321 )
(385,075 )
(56,253 )
6,304,767 $
2,325,480 $
13.79
4.76
11.33
7.38
26.71
9.98
15.61
Weighted
Average
Remaining
Contractual
Life
(in years)
Aggregate
Intrinsic
Value
(in thousands)
7.89 $
6.31 $
85,536
20,178
The Company has granted stock options with 25% of the option vesting after one year followed by ratable monthly vesting over the remaining three
years. Nonemployee awards are granted similar to the Company’s employee awards. All option grants have a 10-year term. Options to purchase a total of
1,128,000 shares of the Company’s common stock vested during the year ended December 31, 2023.
In determining the grant date fair value of option awards during the years ended December 31, 2023 and 2022, the Company applied the Black-
Scholes option pricing model based on the following key assumptions:
Option life (in years)
Stock volatility
Risk-free interest rate
Expected dividends
Year Ended
December 31,
2023
5.27 - 6.08
78% - 97%
3.44% - 4.68%
0.0%
Year Ended
December 31,
2022
5.50 - 6.09
76% - 78%
1.46% - 4.15%
0.0%
The following table summarizes information about employee, non-executive director and external consultant stock options for the years ended
December 31, 2023 and 2022 (in thousands except per share amounts):
Year Ended
December 31,
2023
Year Ended
December 31,
2022
Weighted average grant date fair value per share
Total cash received from exercise of stock options
Total intrinsic value of stock options exercised
$
3.46 $
2,955
1,970
6.79
41
14
Time-Vested Restricted Stock Units
Time-vested restricted stock units (RSUs) issued to date under the 2016 Plan and the 2023 Plan generally vest on a ratable annual basis over three
years. The related stock-based compensation expense is recorded over the requisite service period, which is the vesting period. The fair value of all time-
vested RSUs is based on the closing share price of the Company’s common stock on the date of grant.
F-23
The following table provides a reconciliation of RSU activity under the 2016 Plan and the 2023 Plan for the year ended December 31, 2023:
Nonvested at January 1, 2023
Granted
Vested
Exercised
Forfeited
Nonvested at December 31, 2023
Number of
Restricted
Stock Units
Weighted
Average
Grant Date
Fair Value
509,170 $
1,071,354
(201,414 )
—
(45,918 )
1,333,192 $
10.81
3.92
11.04
—
8.60
5.31
At December 31, 2023, the weighted average remaining vesting term of the RSUs was 1.46 years.
Employee Stock Purchase Plan
The Company’s Employee Stock Purchase Plan (the ESPP) allows qualified participants to purchase the Company’s common stock twice a year at
85% of the lesser of the average of the high and low sales price of the Company’s common stock on (i) the first trading day of the relevant offering period
and (ii) the last trading day of the relevant offering period. The number of shares of the Company’s common stock each employee may purchase under this
plan, when combined with all other employee stock purchase plans, is limited to the lower of an aggregate fair market value of $25,000 during each
calendar year, or 5,000 shares of the Company’s common stock in any one offering period. The Company has maintained consecutive six-month offering
periods since August 1, 2019. During the year ended December 31, 2023, 107,056 shares of the Company’s common stock were issued pursuant to the
ESPP.
The Company estimated the fair value of the option component of the ESPP shares at the date of grant using a Black-Scholes valuation model. For
the years ended December 31, 2023 and 2022, the compensation expense from ESPP shares was $0.2 million and $0.2 million, respectively.
Stock-Based Compensation Expense
The Company’s consolidated statements of comprehensive loss included total compensation expense from stock-based payment awards for the years
ended December 31, 2023 and 2022, respectively, as follows (in thousands):
Research and development
Sales and marketing
General and administrative
Total stock-based compensation expense
Year Ended
December 31,
2023
Year Ended
December 31,
2022
$
$
4,650 $
289
7,118
12,057 $
6,130
1,650
6,397
14,177
At December 31, 2023, there was approximately $11.1 million of unrecognized compensation expense related to outstanding equity awards under
the 2023 Plan, the 2016 Plan, the inducement awards and the ESPP that is expected to be recognized as expense over a weighted average period of
approximately 1.62 years.
12.
License and Asset Purchase Agreements
Exclusive License Agreement with Equinox Science, LLC
In February 2020, the Company entered into an Exclusive License Agreement (the Equinox License Agreement) with Equinox, pursuant to which
Equinox granted the Company an exclusive, sublicensable, royalty-bearing right and license to certain patents and other Equinox intellectual property to
research, develop, make, have made, use, sell, offer for sale and import the compound vorolanib and any pharmaceutical products comprising the
compound for local delivery to the eye for the prevention or treatment of age-related macular degeneration, diabetic retinopathy, and retinal vein occlusion
using the Company’s proprietary localized delivery technologies (the Original Field), in each case, throughout the world except China, Hong Kong,
Taiwan, and Macau (the Territory).
F-24
In consideration for the rights granted by Equinox, the Company (i) made a one time, non-refundable, non-creditable upfront cash payment of $1.0
million to Equinox in February 2020, and (ii) agreed to pay milestone payments totaling up to $50.0 million upon the achievement of certain development
and regulatory milestones, consisting of (a) completion of a Phase II clinical trial for the compound or a licensed product, (b) the filing of a new drug
application or foreign equivalent for the compound or a licensed product in the United States, European Union, or United Kingdom and (c) regulatory
approval of the compound or a licensed product in the United States, European Union, or United Kingdom.
The Company also agreed to pay Equinox tiered royalties based upon annual net sales of licensed products in the Company Territory. The royalties
are payable with respect to a licensed product in a particular country in the Company Territory on a country-by-country and licensed product-by-licensed
product basis until the later of (i) twelve years after the first commercial sale of such licensed product in such country and (ii) the first day of the month
following the month in which a generic product corresponding to such licensed product is launched in such country. The royalty rates range from the high-
single digits to low-double digits depending on the level of annual net sales. The royalty rates are subject to reduction during certain periods when there is
no valid patent claim that covers a licensed product in a particular country.
On May 2, 2022, concurrent with the Company entering into the Betta License Agreement, the Company entered into Amendment #1 to the
Equinox License Agreement, pursuant to which the Original Field was expanded to cover the prevention or treatment of ophthalmology indications using
the Company’s proprietary localized delivery technologies and certain conforming changes were made to the Equinox License Agreement in connection
therewith.
No R&D expense was recorded for the years ended December 31, 2023 and 2022, respectively, for this license.
13.
Restructuring Charges
Fiscal Year 2023 Restructuring Plan
On May 17, 2023, the Company executed a restructuring plan (the Restructuring Plan) with regard to its commercial operations. The Restructuring
Plan is a result of the PRA with Alimera (see Note 3). In connection with the Restructuring Plan, the Company, among other things, downsized its current
workforce, with reductions coming primarily from its YUTIQ® sales force and supporting commercial operations. The Company recorded approximately
$1.4 million of YUTIQ® sales force personnel and employee severance for discretionary termination benefits during the year ended December 31, 2023,
upon notification of the affected YUTIQ® sales force personnel and employees in accordance with ASC 420, Exit or Disposal Cost Obligations. The
charges of $1.4 million were recognized in the Company’s operating results, of which $0.3 million, $0.9 million, and $0.2 million were included in research
and development expense, sales and marketing expense and general and administrative expense, respectively.
The Company expects the implementation of the Restructuring Plan will be substantially completed during the first quarter of fiscal year 2024. The
charges that the Company expects to incur in connection with the Restructuring Plan are subject to a number of assumptions, and actual results may differ
materially.
The following table summarizes the restructuring activities related to the Plan for the year ended December 31, 2023 (in thousands):
Beginning balance at January 1, 2023
Restructuring charges
Cash payments
Ending balance at December 31, 2023
Employee Severance and Benefits
—
$
1,405
(1,345 )
60
$
F-25
14.
Fair Value Measurements
The following tables summarize the Company’s assets by significant categories carried at fair value measured on a recurring basis at December 31,
2023 and 2022, respectively, by valuation hierarchy (in thousands):
Carrying
Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Cash
Equivalents
Marketable
Securities
December 31, 2023
Level 1:
Money market funds
Subtotal
$
$
270,476 $
270,476 $
Level 2:
Commercial paper
U.S. Treasury securities
U.S. Agency securities
Subtotal
Total
$
$
$
19,295 $
17,762
17,694
54,751 $
325,227 $
— $
— $
8 $
8
8
24 $
24 $
— $
— $
— $
—
(1 )
(1 ) $
(1 ) $
270,476 $
270,476 $
270,476 $
270,476 $
19,303 $
17,771 $
17,701
54,775 $
325,251 $
1,998 $
2,990 $
—
4,988 $
275,464 $
—
—
17,305
14,781
17,701
49,787
49,787
Carrying
Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Cash
Equivalents
Marketable
Securities
December 31, 2022
Level 1:
Money market funds
Subtotal
$
$
77,191 $
77,191 $
Level 2:
Commercial paper
U.S. Treasury securities
Subtotal
Total
$
$
$
18,701 $
35,266
53,967 $
131,158 $
— $
— $
— $
—
— $
— $
— $
— $
— $
(55 )
(55 ) $
(55 ) $
77,191 $
77,191 $
18,701 $
35,211
53,912 $
131,103 $
77,191 $
77,191 $
— $
4,984
4,984 $
82,175 $
—
—
18,701
30,227
48,928
48,928
At December 31, 2023, a total of $270.5 million or 98.2% of the Company’s interest-bearing cash equivalent balances were concentrated in one
institutional money market fund that has investments consisting primarily of Repurchase Agreements, U.S Treasuries, and U.S. Government Agency Debts.
The Company had $5.0 million or 1.8% of the Company's interest-bearing cash equivalent balance which consisted of investment-grade Commercial paper
and investment-grade U.S. Treasury securities at December 31, 2023.
At December 31, 2022, a total of $77.2 million, or 93.9% of the Company’s interest-bearing cash equivalent balances were concentrated in one
institutional money market fund that has investments consisting primarily of certificates of deposit, commercial paper, time deposits, Treasury repurchase
agreements and U.S. Treasury securities. A total of $5.0 million, or 6.1%, of the Company’s interest-bearing cash equivalent balances consisted of
investment-grade U.S. Treasury securities at December 31, 2022. Generally, these deposits may be redeemed upon demand and, therefore, the Company
believes they have minimal risk.
The Company’s cash equivalents and marketable securities are classified within Level 1 or Level 2 on the basis of valuations using quoted market
prices or alternative pricing sources and models utilizing market observable inputs, respectively. The marketable securities have been valued on the basis of
valuations provided by third-party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to,
reported trades, executable bid and ask prices, broker/dealer quotations, prices or yields of securities with similar characteristics, benchmark curves or
information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information
regarding securities with similar characteristics and have been classified as Level 2 to determine the valuation for a security.
The carrying amounts of accounts receivable, accounts payable, and accrued expenses approximate fair value because of their short-term maturity.
F-26
15.
Retirement Plans
The Company operates a defined contribution plan intended to qualify under Section 401(k) of the U.S. Internal Revenue Code. Participating U.S.
employees may contribute a portion of their pre-tax compensation, as defined, subject to statutory maximums. The Company matches employee
contributions up to 6% of eligible compensation, subject to a stated calendar year Internal Revenue Service maximum.
The Company contributed a total of $1.6 million and $1.6 million for the years ended December 31, 2023 and 2022, respectively, in connection with
these retirement plans.
16.
Income Taxes
The components of loss before income taxes are as follows (in thousands):
U.S. operations
Non-U.S. operations
Loss before income taxes
Year Ended
December 31,
2023
Year Ended
December 31,
2022
$
$
(70,812 ) $
100
(70,712 ) $
(102,354 )
100
(102,254 )
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:
Federal statutory income tax rate
State income taxes, net of federal benefit
Non-U.S. income tax rate differential
Change in fair value of derivative
Change in federal tax rate
Research and development tax credits
Permanent items
Changes in valuation allowance
Other, net
Effective income tax rate
December 31,
2023
December 31,
2022
21.0 %
7.5
—
—
—
1.3
(0.5 )
(30.4 )
1.0
(0.1 ) %
21.0 %
5.8
—
—
—
1.0
(1.5 )
(25.5 )
(0.8 )
— %
The significant components of deferred income taxes are as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards
Capitalized R&D
Deferred revenue
Lease liability
Stock-based compensation
Tax credits
Other
Total deferred tax assets
Deferred tax liabilities:
Right-of-use assets
Total deferred tax liabilities
Deferred tax assets, net
Valuation allowance
Total deferred tax liability
December 31,
2023
December 31,
2022
$
82,599 $
23,652
16,196
1,635
11,720
8,473
3,515
147,790
1,361
1,361
146,429
146,429
$
— $
F-27
88,584
12,226
4,033
1,793
9,461
6,916
3,433
126,446
1,650
1,650
124,796
124,796
—
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the option to deduct research and development expenditures in the current
year and requires taxpayers to amortize them over five or fifteen years pursuant to IRC Section 174. During 2023, the Company capitalized $57.2 million
of research and development expenditures.
The valuation allowance generally reflects limitations on the Company’s ability to use the tax attributes and reduces the value of such attributes to
the more-likely-than-not realizable amount. Management assessed the available positive and negative evidence to estimate if sufficient taxable income will
be generated to use the existing net deferred tax assets. Based on a weighting of the objectively verifiable negative evidence in the form of cumulative
operating losses over the three-year period ended December 31, 2020, management believes that it is not more likely than not that the deferred tax assets
will be realized and, accordingly, a full valuation allowance has been established. The valuation allowance increased $21.6 million and $26.1 million for
the years ended December 31, 2023 and 2022, respectively, with such increases attributed to the re-measurement of the net deferred tax assets at the year-
end dates.
The Company has tax net operating loss and tax credit carry forwards in its individual tax jurisdictions. Including approximately $49.3 million
related to our 2018 acquisition of Icon Bioscience, Inc. at December 31, 2023, the Company had U.S. federal net operating loss carry forwards of
approximately $296.5 million. The net operating losses consist of $151.8 million, which expire at various dates between calendar years 2023 and 2039. The
utilization of certain of these loss and tax credit carry forwards may be limited by Sections 382 and 383 of the Internal Revenue Code as a result of
historical or future changes in the Company’s ownership. At December 31, 2023, the Company had state net operating loss carry forwards of approximately
$254.7 million, which expire between 2033 and 2040, as well as U.S. federal and state research and development tax credit carry forwards of
approximately $8.9 million, which expire at various dates between calendar years 2023 and 2040. In addition, at December 31, 2023, the Company had net
operating loss carry forwards in the UK of £20.9 million (approximately $25.3 million), which are not subject to any expiration dates.
The Company’s U.S. federal income tax returns for calendar years 2014 through 2022 remain subject to examination by the Internal Revenue
Service. The Company’s UK tax returns for fiscal years 2006 through 2021 remain subject to examination.
Through December 31, 2023, the Company had no unrecognized tax benefits in its consolidated statements of comprehensive loss and no
unrecognized tax benefits in its consolidated balance sheets as of December 31, 2023 and 2022, respectively.
As of December 31, 2023 and 2022, the Company had no accrued penalties or interest related to uncertain tax positions.
17.
Contingencies
Legal Proceedings
The Company is subject to various routine legal proceedings and claims incidental to its business, which management believes will not have a
material effect on the Company’s financial position, results of operations or cash flows.
U.S. Department of Justice Subpoena
In August 2022, the Company received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts (DOJ) seeking production of
documents related to sales, marketing and promotional practices, including as pertain to DEXYCU® (DOJ Subpoena). The Company is cooperating fully
with the government in connection with this matter. At this time, the Company is unable to predict the duration, scope or outcome of this matter or whether
it could have a material impact on the Company’s financial condition, results of operation or cash flow.
18.
Segment and Geographic Area Information
Business Segment
The Company operates in one business segment, which is the business of developing and commercializing innovative ophthalmic products for the
treatment of eye diseases. Operating segments are identified as components of an enterprise about which separate discrete financial information is available
for evaluation by the chief operating decision maker in making decisions regarding resource allocation and assessing performance. The chief operating
decision maker made such decisions and assessed performance at the Company level, as one segment.
F-28
Geographic Area Information
The following table summarizes the Company’s revenues and long-lived assets, net by geographic area (in thousands):
Revenues
Long-Lived Assets, Net
Year Ended
December 31,
2023
Year Ended
December 31,
2022
December 31,
2023
December 31,
2022
$
$
45,270 $
648
100
46,018 $
40,481 $
823
100
41,404 $
5,251 $
—
—
5,251 $
1,360
—
—
1,360
U.S.
China
UK
Consolidated
19.
Related Party Transactions
On December 18, 2023, the Company entered into a consulting agreement with Dr. John Landis who also serves as the Company's Chair of the
Science Committee and a member of the Board of Directors (the Board). Pursuant to the terms of the consulting agreement, Dr. Landis is entitled to receive
an annual compensation payment of up to $0.6 million in exchange for performing certain research and development services as the Company's interim
head of development. On January 5, 2024, pursuant to the consulting agreement, the Company granted Dr. Landis (i) stock options to purchase 20,000
shares of the Company’s common stock and (ii) 10,000 of restricted stock units. All equity grants to Dr. Landis vest after one year. He also received the
Board stock option award to purchase 25,014 shares of the Company’s common stock. The compensation expense related to the consulting agreement
recognized by the Company for the year ended December 31, 2023, was immaterial.
The former Chief Executive Officer and current Executive Vice Chair of the Board is a member of the Board of Directors of Altasciences, the
parent company of Calvert Laboratories, Inc. (Calvert Labs), an entity with which the Company conducts business. The Company recorded $1.9 million
and $1.7 million of research and development expense in the accompanying consolidated statements of comprehensive loss related to preclinical and
analytical services provided by Altasciences for the years ended December 31, 2023 and 2022, respectively. Additionally, the Company recorded accounts
payable of $0.3 million and $0.2 million, and prepaid expenses of $0.5 million and $0.8 million in the accompanying consolidated balance sheets related to
services provided by Altasciences, as of December 31, 2023 and 2022, respectively.
F-29
Exhibit 4.3
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
As of the date of the Annual Report on Form 10-K of which this exhibit forms a part, the only class of securities of EyePoint Pharmaceuticals, Inc.
(“we,” “us” and “our”) registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is our common stock,
$0.001 par value per share.
COMMON STOCK
The following description of our common stock summarizes provisions of our certificate of incorporation, as amended, our by-laws, as amended,
and the Delaware General Corporation Law. For a complete description, refer to our certificate of incorporation, our by-laws and the amendments thereto,
which are incorporated by reference as exhibits to the Annual Report on Form 10-K of which this exhibit is a part, and to the applicable provisions of the
Delaware General Corporation Law.
Our certificate of incorporation authorizes us to issue up to 305,000,000 shares, 300,000,00 of which are designated as common stock with a par
value of $0.001 per share.
Rights
Voting Rights. Holders of shares of our common stock are entitled to one vote for each share held of record on all matters to be voted on by
stockholders, including the election of directors. When a quorum is present at any meeting, a plurality of the votes properly cast for election to any office
shall elect to such office and a majority of the votes properly cast upon any question other than an election to an office shall decide the question, except
when a larger vote is required by law, by our certificate of incorporation or by our by-laws.
Our certificate of incorporation and by-laws do not provide for cumulative voting rights. Because of this, the holders of a majority of the shares of
common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they should so choose.
Dividends. Subject to the preferences that may be applicable to any then outstanding preferred stock, the holders of our outstanding shares of
common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds.
Liquidation Rights. In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in the
net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to the satisfaction of any
liquidation preference granted to the holders of any outstanding shares of preferred stock.
Other Rights and Preferences. The terms of our common stock do not include any preemptive, conversion or subscription rights, nor any
redemption or sinking fund provisions. The common stock is not subject to future calls or assessments by us.
Preferred Stock. Our board of directors is authorized to issue up to 5,000,000 shares of preferred stock in one or more series, with such rights,
preferences and privileges as shall be determined by our board of directors. The rights, preferences and privileges of the holders of our common stock are
subject to, and may be adversely affected by, the rights of shares of any series of our preferred stock that we may classify and issue in the future.
Anti-Takeover Effects of Our Certificate of Incorporation and By-laws and Delaware Law
MACROBUTTON DocID \\4136-9651-6430 v2
Exhibit 4.3
Certificate of Incorporation and By-laws. Provisions of our certificate of incorporation and by-laws may delay or discourage transactions involving
an actual or potential change of control or change in our management, including transactions in which stockholders might otherwise receive a premium for
their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Among other things, our certificate of incorporation
and our by-laws:
• permit our board of directors to issue up to 5,000,000 shares of preferred stock, with any rights, preferences and privileges as it may designate,
which issuance could result in the loss of voting control by other stockholders;
• provide that all vacancies on our board of directors, including as a result of newly created directorships, may, except as otherwise required by law, be
filled only by the affirmative vote of a majority of directors then in office, even if less than a quorum;
• provide that, stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a
meeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder’s notice;
• do not provide for cumulative voting rights, thereby allowing the holders of a majority of the shares of common stock entitled to vote in any election
of directors to elect all of the directors standing for election; and
• provide that special meetings of our stockholders may be called only by the (i) the chairperson of the board; (ii) the president of our company; or (iii)
a majority of the members of our board of directors then in office.
Section 203 of the Delaware General Corporation Law. We are subject to the provisions of Section 203 of the Delaware General Corporation
Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder”
for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a
prescribed manner. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of
the following conditions:
• prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
• the interested stockholder owned at least 85% of the voting stock of the corporation outstanding upon consummation of the transaction, excluding
for purposes of determining the number of shares outstanding (1) shares owned by persons who are directors and also officers and (2) shares owned by
employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or
• on or subsequent to the consummation of the transaction, the business combination is approved by the board of directors and authorized at an annual
or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66-2/3% of the outstanding voting stock which is not
owned by the interested stockholder.
Section 203 defines a business combination to include:
• any merger or consolidation involving the corporation and the interested stockholder;
• any sale, transfer, lease, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;
• subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested
stockholder;
• subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder; and
MACROBUTTON DocID \\4136-9651-6430 v2
• the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through
the corporation.
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock
of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
Exhibit 4.3
Listing
Our shares of common stock are listed for trading on the Nasdaq Global Market under the symbol “EYPT.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.
MACROBUTTON DocID \\4136-9651-6430 v2
INDEMNIFICATION AGREEMENT
Exhibit 10.17
This Indemnification Agreement (“Agreement”) is made as of - by and between EyePoint Pharmaceuticals, Inc., a
Delaware corporation (the “Company”), and - (“Indemnitee”). This Agreement supersedes and replaces any and all previous
agreements between the Company and Indemnitee covering the subject matter of this Agreement.
RECITALS
WHEREAS, the Board of Directors of the Company (the “Board”) believes that highly competent persons have become
more reluctant to serve publicly-held corporations as directors, officers or in other capacities unless they are provided with
adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the corporation;
WHEREAS, the Board has determined that, in order to attract and retain qualified individuals, the Company will attempt
to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its
subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice
among United States-based corporations and other business enterprises, the Company believes that, given current market
conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At
the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly
subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been
brought only against the Company or business enterprise itself. The Certificate of Incorporation of the Company (as amended,
the “Certificate of Incorporation”) requires indemnification of the officers and directors of the Company. Indemnitee may also be
entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (the “DGCL”). The Certificate of
Incorporation and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby
contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other
persons with respect to indemnification;
WHEREAS, the uncertainties relating to such insurance and to indemnification may increase the difficulty of attracting
and retaining such persons;
WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental
to the best interests of the Company and its stockholders and that the Company should act to assure such persons that there will
be increased certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to
advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue
to serve the Company free from undue concern that they will not be so indemnified;
-1-
Exhibit 10.17
WHEREAS, this Agreement is a supplement to and in furtherance of the Certificate of Incorporation and any resolutions
adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee
thereunder; and
WHEREAS, Indemnitee does not regard the protection available under the Certificate of Incorporation and insurance as
adequate in the present circumstances, and may not be willing to serve or continue to serve as an officer or director without
adequate protection, and the Company desires Indemnitee to serve or continue to serve in such capacity. Indemnitee is willing to
serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee be so
indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee
do hereby covenant and agree as follows:
Section 1.Services to the Company. Indemnitee agrees to serve as a director or officer, as applicable, of the Company.
Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any
obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue
Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its
subsidiaries or any Enterprise) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee’s employment with the
Company (or any of its subsidiaries or any Enterprise), if any, is at will, and the Indemnitee may be discharged at any time for
any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee
and the Company (or any of its subsidiaries or any Enterprise), other applicable formal severance policies duly adopted by the
Board, or, with respect to service as a director or officer of the Company, by the Certificate of Incorporation, the Company’s By-
laws (the “By-laws”), and the DGCL. The foregoing notwithstanding, this Agreement shall continue in force after Indemnitee
has ceased to serve as an officer or director of the Company, as provided in Section 16 hereof.
Section 2.Definitions. As used in this Agreement:
(a)
References to “agent” shall mean any person who is or was a director, officer, or employee of the
Company or a subsidiary of the Company or other person authorized by the Company to act for the Company, to include such
person serving in such capacity as a director, officer, employee, fiduciary or other official of another corporation, partnership,
limited liability company, joint venture, trust or other enterprise at the request of, for the convenience of, or to represent the
interests of the Company or a subsidiary of the Company.
Agreement of any of the following events:
(b) A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this
i. Acquisition of Stock by Third Party. Any Person (as defined below) is or becomes the Beneficial
Owner (as defined below), directly or indirectly, of securities of the Company representing fifteen percent (15%) or more of the
combined voting power of the Company’s then outstanding securities unless the change in relative Beneficial Ownership of the
-2-
Exhibit 10.17
Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities
entitled to vote generally in the election of directors;
ii. Change in Board of Directors. During any period of two (2) consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered into an agreement with the Company to effect a
transaction described in Sections 2(b)(i), 2(b)(iii) or 2(b)(iv)) whose election by the Board or nomination for election by the
Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any
reason to constitute at least a majority of the members of the Board;
iii. Corporate Transactions. The effective date of a merger or consolidation of the Company with any
other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted
into voting securities of the Surviving Entity) more than 50% of the combined voting power of the voting securities of the
Surviving Entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the
board of directors or other governing body of such Surviving Entity;
iv. Liquidation. The approval by the stockholders of the Company of a complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets,
including by license; and
v. Other Events. There occurs any other event of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form)
promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting
requirement.
For purposes of this Section 2(b), the following terms shall have the following meanings:
(A) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended
from time to time.
(B) “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the
Exchange Act; provided, however, that Person shall exclude (i) the Company, (ii) any trustee
or other fiduciary holding securities under an employee benefit plan of the Company, and (iii)
any corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
(C) “Beneficial Owner” shall have the meaning given to such term in Rule 13d-3
under the Exchange Act; provided,
-3-
however, that Beneficial Owner shall exclude any Person otherwise becoming a Beneficial
Owner by reason of the stockholders of the Company approving a merger of the Company
with another entity.
(d) “Surviving Entity” shall mean the surviving entity in a merger or consolidation or
any entity that controls, directly or indirectly, such surviving entity.
Exhibit 10.17
“Corporate Status” describes the status of a person who is or was a director, officer, employee or agent of
the Company or of any other corporation, limited liability company, partnership or joint venture, trust or other enterprise which
such person is or was serving at the request of the Company.
(c)
Proceeding in respect of which indemnification is sought by Indemnitee.
(d)
“Disinterested Director” shall mean a director of the Company who is not and was not a party to the
“Enterprise” shall mean the Company and any other corporation, limited liability company, partnership,
joint venture, trust or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer,
trustee, partner, managing member, employee, agent or fiduciary.
(e)
(f)
“Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of
experts and other professionals, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed
receipt of any payments under this Agreement, ERISA excise taxes and penalties, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or
preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses shall also include (i) Expenses incurred in
connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs
relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 14(d) only,
Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this
Agreement, by litigation or otherwise. The parties agree that for the purposes of any advancement of Expenses for which
Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such demand
that are certified by affidavit of Indemnitee’s counsel as being reasonable in the good faith judgment of such counsel shall be
presumed conclusively to be reasonable. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the
amount of judgments or fines against Indemnitee.
(g)
“Independent Counsel” shall mean a law firm, or a member of a law firm, that is experienced in matters of
corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee
in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or
of other indemnitees under similar indemnification agreements), or (ii) any other party to the
-4-
Exhibit 10.17
Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel”
shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.
The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully
indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement
or its engagement pursuant hereto.
(h)
The term “Proceeding” shall include any threatened, pending or completed action, suit, claim,
counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative
hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and
whether of a civil, criminal, administrative, legislative, or investigative (formal or informal) nature, including any appeal
therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of
Indemnitee’s Corporate Status, by reason of any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any
action (or failure to act) on Indemnitee’s part while acting pursuant to Indemnitee’s Corporate Status, in each case whether or not
serving in such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement, or
advancement of Expenses can be provided under this Agreement. If the Indemnitee believes in good faith that a given situation
may lead to or culminate in the institution of a Proceeding, this shall be considered a Proceeding under this paragraph.
(i)
Reference to “other enterprise” shall include employee benefit plans; references to “fines” shall include
any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Company” shall
include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person
who acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the
Company” as referred to in this Agreement.
Section 3.Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the
provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than
a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be
indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in
settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such
Expenses, judgments, fines and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on Indemnitee’s
behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal
Proceeding had no reasonable cause to believe that Indemnitee’s conduct was unlawful. The parties hereto intend that this
Agreement shall provide to the fullest extent permitted by law for indemnification in excess of that expressly permitted by
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Exhibit 10.17
statute, including, without limitation, any indemnification provided by the Certificate of Incorporation, the By-laws, vote of its
stockholders or disinterested directors or applicable law.
Section 4.Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in
accordance with the provisions of this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any
Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be
indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee
or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good
faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. No
indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee
shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court (as
hereinafter defined) or any court in which the Proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnification.
Section 5.Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other
provisions of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is a party to (or a
participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein,
in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by
Indemnitee in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with or
related to each successfully resolved claim, issue or matter to the fullest extent permitted by law. For purposes of this Section
and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice,
shall be deemed to be a successful result as to such claim, issue or matter.
Section 6.Indemnification For Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the
fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a
witness or otherwise asked to participate in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified
against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.
Section 7.Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by
the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless
indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.
Section 8.Additional Indemnification.
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Exhibit 10.17
(a) Notwithstanding any limitation in Sections 3, 4, or 5, the Company shall indemnify Indemnitee to the
fullest extent permitted by applicable law if Indemnitee is a party to or threatened to be made a party to any Proceeding
(including a Proceeding by or in the right of the Company to procure a judgment in its favor) by reason of Indemnitee’s
Corporate Status.
shall include, but not be limited to:
(b)
For purposes of Section 8(a), the meaning of the phrase “to the fullest extent permitted by applicable law”
additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL, and
i.
to the fullest extent permitted by the provision of the DGCL that authorizes or contemplates
adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.
ii.
to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL
Section 9.Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this
Agreement to make any indemnification payment in connection with any claim involving Indemnitee:
for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or
other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other
indemnity provision; or
(a)
(b)
for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of
securities of the Company within the meaning of Section 16(b) of the Exchange Act (as defined in Section 2(b) hereof) or similar
provisions of state statutory law or common law, (ii) any reimbursement of the Company by the Indemnitee of any bonus or other
incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the
Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting
restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the
payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of
the Sarbanes-Oxley Act) or (iii) any reimbursement of the Company by Indemnitee of any compensation pursuant to any
compensation recoupment or clawback policy adopted by the Board or the compensation committee of the Board, including but
not limited to any such policy adopted to comply with stock exchange listing requirements implementing Section 10D of the
Exchange Act; or
(c)
except as provided in Section 14(d) of this Agreement, in connection with any Proceeding (or any part of
any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee
against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or
any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant
to the powers vested in the Company under applicable law.
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Exhibit 10.17
Section 10.Advances of Expenses. Notwithstanding any provision of this Agreement to the contrary (other than Section
14(d)), the Company shall advance, to the extent not prohibited by law, the Expenses incurred by Indemnitee in connection with
any Proceeding (or any part of any Proceeding) not initiated by Indemnitee or any Proceeding initiated by Indemnitee with the
prior approval of the Board as provided in Section 9(c), and such advancement shall be made within thirty (30) days after the
receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final
disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to
Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the
other provisions of this Agreement. In accordance with Section 14(d), advances shall include any and all Expenses incurred
pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the
Company to support the advances claimed. The Indemnitee shall qualify for advances upon the execution and delivery to the
Company of this Agreement, which shall constitute an undertaking providing that the Indemnitee undertakes to repay the
amounts advanced (without interest) to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified
by the Company. No other form of undertaking shall be required other than the execution of this Agreement. This Section 10
shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 9.
Section 11.Procedure for Notification and Defense of Claim.
(a)
Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to
seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by
Indemnitee of written notice thereof. The written notification to the Company shall include a description of the nature of the
Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall submit to
the Company a written request, including therein or therewith such documentation and information as is reasonably available to
Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification
following the final disposition of such Proceeding. The omission by Indemnitee to notify the Company hereunder will not relieve
the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any
delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary
of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee
has requested indemnification.
(b)
The Company will be entitled to participate in the Proceeding at its own expense.
Section 12.Procedure Upon Application for Indemnification.
(a) Upon written request by Indemnitee for indemnification pursuant to Section 11(a), a determination, if
required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case: (i) if a Change in
Control shall have occurred, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to
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Exhibit 10.17
Indemnitee; or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even
though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the
Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such
Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to
Indemnitee or (D) if so directed by the Board, by the stockholders of the Company; and, if it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall
cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to
indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and
reasonably necessary to such determination. Any costs or Expenses (including attorneys’ fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company
(irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and
agrees to hold Indemnitee harmless therefrom. The Company promptly will advise Indemnitee in writing with respect to any
determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which
indemnification has been denied.
(b)
In the event the determination of entitlement to indemnification is to be made by Independent Counsel
pursuant to Section 12(a) hereof, the Independent Counsel shall be selected as provided in this Section 12(b). If a Change in
Control shall not have occurred, the Independent Counsel shall be selected by the Board, and the Company shall give written
notice to Indemnitee advising Indemnitee of the identity of the Independent Counsel so selected. If a Change in Control shall
have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company
advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may
be, may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted
only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined
in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a
proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and
substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is
withdrawn or the Delaware Court has determined that such objection is without merit. If, within twenty (20) days after the later
of submission by Indemnitee of a written request for indemnification pursuant to Section 11(a) hereof and the final disposition of
the Proceeding, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may
petition the Delaware Court for resolution of any objection which shall have been made by the Company or Indemnitee to the
other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by such court or
by such other person as such court shall designate, and the person with respect to whom all objections are so resolved
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Exhibit 10.17
or the person so appointed shall act as Independent Counsel under Section 12(a) hereof. Upon the due commencement of any
judicial proceeding or arbitration pursuant to Section 14(a) of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then
prevailing).
Section 13.Presumptions and Effect of Certain Proceedings.
(a)
In making a determination with respect to entitlement to indemnification hereunder, the person or persons
or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to
indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 11(a)
of this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.
Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the
commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee
has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or
Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a
presumption that Indemnitee has not met the applicable standard of conduct.
(b)
Subject to Section 14(e), if the person, persons or entity empowered or selected under Section 12 of this
Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60)
days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall, to
the fullest extent not prohibited by law, be deemed to have been made and Indemnitee shall be entitled to such indemnification,
absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s
statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such
indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to
exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to
indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information
relating thereto; and provided, further, that the foregoing provisions of this Section 13(b) shall not apply (i) if the determination
of entitlement to indemnification is to be made by the stockholders pursuant to Section 12(a) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such determination the Board has resolved to submit such
determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days
after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15)
days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60)
days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 12(a) of this Agreement.
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Exhibit 10.17
(c)
The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this
Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not
act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the
Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct
was unlawful.
(d)
For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith
if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on
information supplied to Indemnitee by the directors or officers of the Enterprise (as defined below) in the course of their duties,
or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an
independent certified public accountant or by an appraiser, financial advisor or other expert selected with reasonable care by or
on behalf of the Enterprise. The provisions of this Section 13(d) shall not be deemed to be exclusive or to limit in any way the
other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this
Agreement.
The knowledge and/or actions, or failure to act, of any director, officer, trustee, partner, managing
member, fiduciary, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right
to indemnification under this Agreement.
(e)
Section 14.Remedies of Indemnitee.
(a)
Subject to Section 14(e), in the event that (i) a determination is made pursuant to Section 12 of this
Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely
made pursuant to Section 10 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made
pursuant to Section 12(a) of this Agreement within ninety (90) days after receipt by the Company of the request for
indemnification, (iv) payment of indemnification is not made pursuant to Section 5, 6 or 7 or the second to last sentence of
Section 12(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) payment of
indemnification pursuant to Section 3, 4 or 8 of this Agreement is not made within ten (10) days after a determination has been
made that Indemnitee is entitled to indemnification, or (vi) in the event that the Company or any other person takes or threatens
to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding
designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be provided to the Indemnitee
hereunder, Indemnitee shall be entitled to an adjudication by a court of Indemnitee’s entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted
by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall
commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which
Indemnitee first has the right to commence such proceeding pursuant to this Section
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Exhibit 10.17
14(a). The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.
(b)
In the event that a determination shall have been made pursuant to Section 12(a) of this Agreement that
Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 14 shall
be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 14 the Company shall
have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.
(c)
If a determination shall have been made pursuant to Section 12(a) of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 14, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material
fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or
(ii) a prohibition of such indemnification under applicable law.
(d)
The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 14 that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all
the provisions of this Agreement. It is the intent of the Company that, to the fullest extent permitted by law, the Indemnitee not
be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights
under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Indemnitee hereunder. The Company shall, to the fullest extent permitted by law,
indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by
the Company of a written request therefor) advance, to the extent not prohibited by law, such Expenses to Indemnitee, which are
incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement of Expenses
from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the
Company if, in the case of indemnification, Indemnitee is wholly successful on the underlying claims; if Indemnitee is not wholly
successful on the underlying claims, then such indemnification shall be only to the extent Indemnitee is successful on such
underlying claims or otherwise as permitted by law, whichever is greater.
Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.
(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of
Section 15.Non-exclusivity; Survival of Rights; Insurance; Subrogation.
shall not be deemed exclusive of any other rights to which Indemnitee
(a)
The rights of indemnification and to receive advancement of Expenses as provided by this Agreement
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Exhibit 10.17
may at any time be entitled under applicable law, the Certificate of Incorporation, the By-laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision
hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by Indemnitee
in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law,
whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded
currently under the Certificate of Incorporation and this Agreement, it is the intent of the parties hereto that Indemnitee shall
enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be
exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
(b)
To the extent that the Company maintains an insurance policy or policies providing liability insurance for
directors, officers, employees, or agents of the Enterprise, Indemnitee shall be covered by such policy or policies in accordance
with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under
such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director
and officer liability insurance in effect, the Company shall give prompt notice of such claim or of the commencement of a
Proceeding, as the case may be, to the insurers in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such Proceeding in accordance with the terms of such policies.
(c)
In the event of any payment made by the Company under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and
take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to
bring suit to enforce such rights.
The Company shall not be liable under this Agreement to make any payment of amounts otherwise
indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise
actually received such payment under any insurance policy, contract, agreement or otherwise.
(d)
(e)
The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was
serving at the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of
any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise shall
be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such other
corporation, limited liability company, partnership, joint venture, trust or other enterprise.
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Exhibit 10.17
Section 16.Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) ten (10)
years after the date that Indemnitee shall have ceased to serve as a director or officer of the Company and (b) one (1) year after
the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or
advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 14 of this Agreement
relating thereto. The indemnification and advancement of expenses rights provided by or granted pursuant to this Agreement
shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the
Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or of
any other Enterprise, and shall inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and
administrators and other legal representatives.
Section 17.Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired
thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed
reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto;
and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section
of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested thereby.
Section 18.Enforcement.
(a)
The Company expressly confirms and agrees that it has entered into this Agreement and assumed the
obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company
acknowledges that Indemnitee is relying upon this Agreement in serving or continuing to serve as a director or officer of the
Company.
(b)
This Agreement constitutes the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with
respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the
Certificate of Incorporation, the By-laws and applicable law, and shall not be deemed a substitute therefor, nor to diminish or
abrogate any rights of Indemnitee thereunder.
Section 19.Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding
unless executed in writing by the parties hereto. No waiver of
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Exhibit 10.17
any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement
nor shall any waiver constitute a continuing waiver.
Section 20.Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with
any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter
which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify
the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or
otherwise.
Section 21.Notices. All notices, requests, demands and other communications under this Agreement shall be in writing
and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said
notice or other communication shall have been directed or (d) sent by facsimile transmission or email, with receipt of oral
confirmation that such transmission has been received:
(a)
If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address
as Indemnitee shall provide to the Company.
(b)
If to the Company to
EyePoint Pharmaceuticals, Inc.
480 Pleasant Street
Watertown, MA 02472
Attention: Chief Legal Officer
Facsimile: (617) 926-5050
Email: rhonig@eyepointpharma.com
or to any other address as may have been furnished to Indemnitee by the Company.
Section 22.Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in
this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall
contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid
in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such
proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the
relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such
Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in
connection with such event(s) and/or transaction(s).
Section 23.Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall
be governed by, and construed and enforced in accordance with,
-15-
Exhibit 10.17
the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced
by Indemnitee pursuant to Section 14(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally
(i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Court of
Chancery of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of
America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes
of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not
otherwise subject to service of process in the State of Delaware, irrevocably RL&F Service Corp., 920 North King Street, 2nd
Floor, Wilmington, New Castle County, Delaware 19801 as its agent in the State of Delaware as such party’s agent for acceptance
of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if
served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such
action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or
proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.
Section 24.Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall
for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this
Agreement.
Section 25.Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun
where appropriate. The headings of this Agreement are inserted for convenience only and shall not be deemed to constitute part
of this Agreement or to affect the construction thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above
written.
EYEPOINT PHARMACEUTICALS, INC.
INDEMNITEE
By: ___________________
Name:
Office:
By:
Name:
Address:
-16-
Schedule of Material Differences
The following directors and executive officers are parties to an Indemnification Agreement with the Company, each of which are
substantially identical in all material respects to the representative Indemnification Agreement filed herewith as Exhibit 10.20 except as to the
name of the signatory and the date of each signatory’s Indemnification Agreement, which are listed below. The actual Indemnification
Agreements are omitted pursuant to Instruction 2 to Item 601 of Regulation S-K.
Exhibit 10.17
Indemnitee
Effective Date
Nancy S. Lurker
Dario Paggiarino, M.D.
Jay S. Duker, M.D.
Göran Ando, M.D.
John Landis
David R. Guyer M.D.
Scott Jones
Wendy DiCicco
George Elston
Ye Liu
Michael C. Pine
Anthony P. Adamis, M.D.
Karen Zaderej
Stuart Duty
September 15, 2016
September 26, 2016
September 27, 2016
June 14, 2018
October 30, 2018
January 25, 2019
June 10, 2019
July 15, 2019
November 14, 2019
December 31, 2020
January 10, 2022
June 23, 2022
July 11, 2022
October 16, 2023
MACROBUTTON DocID \\PH - 047167/000003 - 376000 v2
Nonstatutory Stock Option
Executive Officer Inducement Award
Exhibit 10.20
1. Grant of Option.
This certificate evidences a nonstatutory stock option (this “Stock Option”) granted by EyePoint Pharmaceuticals, Inc., a
Delaware corporation (the “Company”), on ###GRANT_DATE### (the "Date of Grant") to ###PARTICIPANT_NAME###
(the "Participant"). This Stock Option is granted to the Participant in connection with his entering into employment with the
Company and is regarded by the parties as an inducement material to the Participant’s entering into employment within the
meaning of Nasdaq Listing Rule 5635(c). Under this Stock Option, the Participant may purchase, in whole or in part, on the
terms herein provided, a total of ###TOTAL_AWARDS### shares of common stock of the Company (the "Shares") at
###GRANT_PRICE### per Share, which is not less than the fair market value of a Share on the Date of Grant. The latest date
on which this Stock Option, or any part thereof, may be exercised is 5:00 P.M. Eastern Time on ###EXPIRY_DATE### (the
"Final Exercise Date"). The Stock Option evidenced by this certificate is intended to be, and is hereby designated, a nonstatutory
option, meaning an option that does not qualify as an incentive stock option as defined in section 422 of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"). This Stock Option shall be subject to and governed by, and shall be
construed and administered in accordance with, the terms and conditions of the Company’s 2023 Long Term Incentive Plan (as
from time to time in effect, the “Plan”), which terms and conditions are incorporated herein by reference. A copy of the Plan has
been made available to the Participant. Notwithstanding the foregoing, this Stock Option is not awarded under the Plan and the
grant of this Stock Option shall not reduce the number of shares of Stock available for issuance under awards issued pursuant to
the Plan.
2. Vesting.
(a) During Employment. This Stock Option will vest according to the following schedule and become exercisable;
provided that, and subject to Section 2(c) below, upon a cessation of the Participant’s Employment by reason of an involuntary
termination without Cause (as defined in the existing Employment Agreement between the Company and the Participant
(“Employment Agreement”) (“Cause”)) or a voluntary termination for Good Cause (as defined in the Employment Agreement
(“Good Cause”)) any unvested portion of this Stock Option that would have vested as of the first anniversary of the cessation of
the Participant's Employment had the Participant continued in Employment through such first anniversary will vest immediately
prior to such cessation of Employment.
###VEST_SCHEDULE_TABLE###
(b) Termination of Employment. Notwithstanding the foregoing, and subject to Section 2(c) below, the following
rules will apply if a Participant’s Employment ceases regardless of the circumstances: automatically and immediately upon the
cessation of Employment, this Stock Option will cease to be exercisable and will terminate, except that:
Exhibit 10.20
(I) such portion, if any, of this Stock Option as is held by the Participant immediately prior to the cessation of
the Participant’s Employment for any reason other than for Cause or as a result of Participant's death and as is then exercisable
(after giving effect to any accelerated vesting owing to a cessation of Employment by reason of an involuntary termination
without Cause or a voluntary termination for Good Cause pursuant to Section 2(a) above), will remain exercisable until (i) 5:00
P.M. Eastern Time on the last day of the three-month period commencing on the date of such cessation of Employment or (ii) the
Final Exercise Date, if earlier, and will thereupon terminate;
(II) such portion, if any, of this Stock Option as is held by the Participant immediately prior to the Participant’s
death and as is then exercisable, will remain exercisable until (i) 5:00 P.M. Eastern Time on the first anniversary of the
Participant’s death or (ii) the Final Exercise Date, if earlier, and will thereupon terminate; and
(III) such portion, if any, of this Stock Option as is held by the Participant immediately prior to the cessation of
the Participant’s Employment for Cause will immediately terminate.
(c) Change of Control. Notwithstanding any other provision of this Section 2 to the contrary, if a Change of Control
occurs, whether or not the Change of Control also constitutes a Covered Transaction, and within the 24 months thereafter there is
a cessation of the Participant’s Employment by reason of an involuntary termination without Cause or a voluntary termination for
Good Cause, the provisions of this Section 2(c) shall apply:
(I) This Stock Option, if it survives the Change of Control, including any stock option granted in substitution
for this Stock Option in connection with the Change of Control, shall automatically vest and become exercisable immediately
prior to such cessation of Employment and will remain exercisable until (i) 5:00 P.M. Eastern Time on the first anniversary of the
date of such cessation of Employment or (ii) the Final Exercise Date, if earlier, and will thereupon terminate; provided that, in the
event of the Participant’s death during such extended exercise period following a Change of Control, any portion of this Stock
Option as is held by the Participant immediately prior to the Participant’s death will remain exercisable until (i) 5:00 P.M. Eastern
Time on the first anniversary of the Participant’s death or (ii) the Final Exercise Date, if earlier, and will thereupon terminate.
(II) Any and all performance or other vesting conditions imposed pursuant to Section 7(a)(5) of the Plan with
respect to any stock, cash or other property delivered in exchange for this Stock Option in connection with the Change of Control
shall automatically be deemed to have been satisfied immediately prior to such cessation of Employment.
(III) For purposes of this Section 2(c), “Employment” shall be deemed to include employment with any
successor to the Company’s business or assets in connection with a Change of Control.
(IV) For purposes of this Stock Option, “Change of Control” shall mean:
Exhibit 10.20
(A) the acquisition by any Person (defined as any individual, entity or group (within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (“Exchange Act”))) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the common stock of the
Company; provided, however, that for purposes of this subsection (a), an acquisition shall not constitute a Change of Control if it
is: (i) either by or directly from the Company, or by an entity controlled by the Company, (ii) by any employee benefit plan,
including any related trust, sponsored or maintained by the Company or an entity controlled by the Company (“Benefit Plan”), or
(iii) by an entity pursuant to a transaction that complies with the clauses (i), (ii) and (iii) of subsection (C) below; or
(B) individuals who, as of the Date of Grant, constitute the Board (together with the individuals
identified in the proviso to this Section 2(c)(IV)(B), the “Incumbent Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director subsequent to the Date of Grant whose election, or
nomination for election by the Company’s stockholders, was approved by at least a majority of the directors then comprising the
Incumbent Board shall be treated as a member of the Incumbent Board unless he or she assumed office as a result of an actual or
threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or
(C) consummation of a reorganization, merger or consolidation involving the Company, or a sale or
other disposition of all or substantially all of the assets of the Company, (a “transaction”) in each case unless, following such
transaction, (i) all or substantially all of the Persons who were the beneficial owners of the common stock of the Company
outstanding immediately prior to such transaction beneficially own, directly or indirectly, more than 50% of the combined voting
power of the then outstanding voting securities of the entity resulting from such transaction (including, without limitation, an
entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such transaction,
of the outstanding common stock of the Company, (ii) no Person (excluding any entity or wholly owned subsidiary of any entity
resulting from such transaction or any Benefit Plan of the Company or such entity or wholly owned subsidiary of such entity
resulting from such transaction) beneficially owns, directly or indirectly, 35% or more of the combined voting power of the then
outstanding voting securities of such entity except to the extent that such ownership existed prior to the transaction and (iii) at
least a majority of the members of the board of directors or similar board of the entity resulting from such transaction were
members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for
such transaction; or
(D) approval by the stockholders of the Company of a liquidation or dissolution of the Company.
(d) Notwithstanding the foregoing provisions of this Section 2, this Stock Option shall not vest or become eligible to
vest on any date specified above unless the Participant has
Exhibit 10.20
continuously been, since the Grant Date until the date immediately prior to such termination of Employment, Employed by the
Company, its Affiliates, its subsidiaries, or, following a Change of Control, any successor to the Company’s business or assets in
connection with the Change of Control.
3. (cid:0)Exercise of Stock Option.
The Participant may exercise the vested and exercisable portion of this Stock Option by logging in to his or her account
on the Solium Shareworks website at eyepoint.solium.com (or the website of any other stock plan administrator selected by the
Company in the future), and exercising the Stock Option and paying the aggregate exercise price and any required tax
withholdings that are due upon exercise through one of the methods provided for on such website, which methods may include:
(i) exercise and sell all Shares (also known as “cashless exercise”), (ii) exercise and sell at least such number of Shares sufficient
to pay for the exercise price and required tax withholdings, with the remaining Shares issued to the Participant (also known as
“sell to cover”) or (iii) exercise and hold all Shares (also known as “exercise and hold”). The Company reserves the right to
change the means of exercising options or option administration at any time.
In the event of the Participant’s death or incapacity, the vested and exercisable portion of this Stock Option may be exercised in
writing, signed by the Participant’s executor, administrator, or legally appointed representative (in the event of the Participant’s
incapacity) or the person or persons to whom this Stock Option is transferred by will or the applicable laws of descent and
distribution, and received by the Company at its principal office, accompanied by this certificate and payment in full as provided
in the Plan. Subject to the further terms and conditions provided in the Plan, the exercise price may be paid as follows: (i) by
delivery of cash or check acceptable to the Administrator; or (ii) through a broker-assisted exercise program acceptable to the
Administrator; or (iii) by any other means acceptable to the Administrator, or (iv) by any combination of the foregoing means of
exercise. In the event that this Stock Option is exercised by one of the foregoing permitted transferees, the Company will be
under no obligation to deliver Shares hereunder unless and until it is satisfied as to the authority of the permitted transferee to
exercise this Stock Option.
4. (cid:0)Withholding.
Except as otherwise determined by the Administrator, this Stock Option may not be exercised unless the person
exercising this Stock Option timely remits to the Company, in cash, all amounts required to be withheld upon exercise (all as
determined by the Administrator) or makes other arrangements satisfactory to the Administrator for the payment of such taxes.
5. (cid:0)Nontransferability of Stock Option.
This Stock Option is not transferable by the Participant otherwise than by will or the laws of descent and distribution,
and is exercisable during the Participant's lifetime only by the Participant (or in the event of the Participant's incapacity, the
person or persons legally appointed to act on the Participant's behalf).
Exhibit 10.20
6. (cid:0)Provisions of the Plan.
This Stock Option is subject to the provisions of the Plan, which are incorporated herein by reference. A copy of the
Plan as in effect on the date of the grant of this Stock Option has been furnished to the Participant. By accepting this Stock
Option, the Participant agrees to be bound by the terms of the Plan and this certificate. All initially capitalized terms used herein
will have the meaning specified in the Plan, unless another meaning is specified herein.
7. Other Agreements.
The Company and Participant agree, in consideration of the grant of this Stock Option, and other good and valuable
consideration, the receipt of which is mutually acknowledged, that the provisions of Section 2 shall supersede the provisions of
any other agreement between the Company and Participant regarding the vesting and exercise of this Stock Option following a
cessation of the Participant’s Employment by reason of an involuntary termination without Cause or a voluntary termination for
Good Cause.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officer.
EyePoint Pharmaceuticals, Inc.
By ###SIGNATURE###
Acknowledged and agreed:
By: __________________________
###PARTICIPANT_NAME###
Dated: ###GRANT_DATE###
Dated: ###GRANT_DATE###
Exhibit 10.21
CONSULTING AGREEMENT
between
EYEPOINT PHARMACEUTICALS US, INC.
and
John Landis, PhD
THIS Consulting Agreement (the “Agreement”), effective as of December 18, 2023 (the “Effective Date”), is entered
into between John Landis, PhD (“Consultant”) and EyePoint Pharmaceuticals US, Inc. (“EyePoint”), a corporation
organized under the laws of the State of Delaware.
EyePoint desires to retain the services of Consultant in a consulting capacity with respect to certain activities as
described in this Agreement, and Consultant is willing to so act.
NOW THEREFORE, Consultant and EyePoint agree as follows:
1. Services. EyePoint hereby retains Consultant as a consultant to EyePoint and Consultant hereby agrees to perform
for EyePoint the consulting services described in Exhibit A hereto (the “Services”). Consultant agrees to perform the
Services personally and will not subcontract any Services without the prior written consent of EyePoint.
2. Nature of Relationship. Consultant is an independent contractor and shall not be deemed an employee of
EyePoint for the purposes of any employee benefit programs, income tax withholding, FICA taxes, unemployment
benefits or otherwise. Consultant shall not enter into any agreement or incur any obligations on EyePoint’s behalf or
commit EyePoint in any manner without EyePoint’s prior written consent.
3. Term and Expiration.
through December 31, 2024, (the “Term”), unless earlier terminated as provided herein.
This Agreement shall become effective as of the Effective Date and remain in effect
4. Compensation. In consideration for the Services to be provided, EyePoint will pay Consultant a fee, as more
specifically set forth in Exhibit B hereto.
5. Expenses. EyePoint will reimburse Consultant for only those specific expenses set forth in Exhibit B hereto. No
other expenses shall be incurred on behalf of Company; nor shall any other expenses be reimbursed to Consultant by
Company. All expenses require proper receipts in addition to documented approval as set forth in Exhibit B.
6.
Intellectual Property, Proprietary Information, Confidentiality and Publicity.
(a)
Consultant shall promptly and fully disclose to EyePoint all inventions, improvements, discoveries,
developments, original works of authorship,
Exhibit 10.21
trade secrets, formulas, processes, techniques, know-how, data, or other intellectual property learned,
made, conceived, developed, or reduced to practice by Consultant, either alone or jointly with others,
during the performance of the Services, or which result from tasks assigned to Consultant by EyePoint,
or which are funded by EyePoint, or which result from the use of equipment, facilities, or premises
owned, leased, or contracted by EyePoint, or which relate to controlled release drug delivery systems or
any other product or technology now or formerly under development by EyePoint (“Intellectual
Property”). In consideration of good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Consultant agrees to irrevocably assign, and does hereby irrevocably assign,
to EyePoint and its successors and assigns, Consultant’s entire right, title, and interest in and to all
Intellectual Property, whether or not patentable or copyrightable, for the United States of America (as
defined in 35 U.S.C. § 100) and throughout the world. Consultant further agrees to execute all
documents or legal instruments requiring Consultant’s signature, including but not limited to
declarations of inventorship and assignments of ownership, deemed necessary or advisable for filing,
procuring, registering, maintaining or enforcing any applications for patents and/or copyrights,
domestic or foreign, rights related to the Intellectual Property. The parties acknowledge that all original
works of authorship that are made by Consultant within the scope of the Services and that are
protectable by copyright are “works made for hire” as the term is defined in the United States Copyright
Act (17 USCA
§ 101).
(b)
Consultant understands and agrees that Consultant possesses or may in the future possess information
that has been created, discovered, or developed by or on behalf of EyePoint, or has otherwise become
known to EyePoint, which information is not publicly known, and that such information may be
disclosed to or discovered by Consultant in the course of performing the Services. All the
aforementioned information, as well as all the
Intellectual Property, is hereunder called “Proprietary Information.” By way of illustration, but not
limitation, Proprietary Information includes trade secrets, processes, formulae, data, know-how,
improvements, inventions, techniques, planned products, research and development, marketing plans,
business plans, clinical trials design, clinical trial results, preclinical results, regulatory filings,
regulatory approval strategies, forecasts, customer lists, business plans, and confidential information
about technologies, finances, marketing, pricing, costs, and employees.
(c)
At all times during the Term and after termination of this Agreement, Consultant will keep in
confidence and trust all Proprietary Information and will not, without the advance written consent of
EyePoint, disclose
any Proprietary Information to any other person or entity or use any Proprietary Information for
purposes other than performing the Services.
Exhibit 10.21
(d)
(e)
(f)
Consultant shall use best efforts to keep separate and segregated from other work all documents,
records, notebooks, and correspondence arising from performance of the Services. All rights, title, and
interest therein shall belong to EyePoint and, upon expiration or termination of this Agreement, all such
documents and materials, including copies thereof, whether prepared by Consultant or others, will be
delivered to EyePoint upon written request.
In the event that EyePoint is unable for any reason whatsoever to secure Consultant’s signature for any
lawful and necessary documents required under Section 6, including those necessary for the assignment
of, application for, or prosecution of any United States or foreign application for inventors certificates,
letter patents, copyrights, or the like, Consultant hereby designates and appoints EyePoint and its duly
authorized officers and agents as agents and attorneys-in-fact to act for and on her behalf and stead to
execute and file any such application and to do all other lawfully permitted acts to further the
assignment, prosecution, and issuance of inventors certificates, letter patents, copyrights, and the like
with the same legal force as if executed by Consultant. Consultant hereby waives any and all claims of
any nature whatsoever that Consultant may now have or may hereafter have for infringement of any
patent or copyright resulting from any such application.
Consultant may not use EyePoint’s name, or any trademark, logo, or any other identifier of EyePoint, in
any form of advertising, promotion or publicity including press releases, or for any other purpose,
without the prior written consent of EyePoint, nor shall Consultant disclose the existence or substance
of this Agreement except as is required by applicable law. Consultant may not disclose, publish or
lecture on matters concerning the Services performed hereunder, or EyePoint’s business or anticipated
research, without EyePoint’s prior written consent.
7. Reasonableness of Covenant. Consultant represents and acknowledges that (i) s/he is familiar with the covenant
in Section 6, (ii) s/he is fully aware of its obligations thereunder, and (iii) the provisions of said covenant, including,
without limitation, the length of time, scope, and coverage of the limitations, are reasonable.
Consultant acknowledges that breach of Consultant’s obligations relating to disclosure and non-
8. Remedies.
use of Confidential Information could cause irreparable harm to EyePoint. As a result, Consultant agrees that, in
addition to damages and attorneys’ fees, EyePoint shall be entitled to seek preliminary and permanent injunctive relief
for any such breach without having to post a bond.
9. Governing Law.
Commonwealth of Massachusetts without regard to its conflicts of law principles.
This Agreement shall be governed and construed in accordance with the laws of the
10 Consultant Representations. Consultant represents that its performance of all of the terms of the Agreement, and
provision of the Services, does not and will not breach
Exhibit 10.21
any agreement to keep in confidence proprietary information acquired by Consultant in confidence or in trust prior to
retention as an advisor by EyePoint. Consultant has not entered into, and agrees that it will not enter into, any agreement,
either written or oral, in conflict herewith. Consultant has not brought and will not bring with it to EyePoint or use in the
performance of the Services, any equipment, supplies, facility, or trade secret information of any third party, unless s/he
has obtained written authorization for the possession and use thereof. Consultant also agrees that, in its retention as an
advisor to EyePoint, it will not breach any obligation of confidentiality that it has to others. Consultant shall use best
efforts to segregate work done under this Agreement from work done for any other entity so as to minimize any
questions of disclosure or ownership of rights with regard to intellectual property.
Consultant represents that Consultant has the appropriate expertise and experience in the field for which Consultant is
agreeing to provide the Services. Consultant shall perform the Services in a professional manner, in accordance with the
standard of care customarily observed with regard to such Services and consistent will all applicable state and federal
laws.
Consultant represents and warrants that Consultant is not and has not been: (a) excluded from participation in, or
otherwise ineligible to participate in a “Federal Health Care Program” (as defined in 42 U.S.C. § 1320a-7b(f)) or in any
other government payment program; (b) listed on the General Services Administration’s List of Parties Excluded from
Federal Procurement and Non-procurement Programs; or (c) debarred under the Generic Drug Enforcement Act of 1992
(the “GDE Act”) (21 U.S.C. § 335(a) and (b)). To the best of Consultant’s knowledge, Consultant represents and
warrants that Consultant has not engaged in any activity that could lead Consultant to become excluded or debarred as set
forth above.
In entering into this Agreement, Consultant represents and warrants that Consultant does not have an obligation, whether
express or implied, to any third party (including with any other pharmaceutical company) that would interfere with,
hamper or limit Consultant’s ability to provide the Services or to comply with Consultant’s obligations. During the term
of this Agreement, the Consultant will not enter into any agreement, arrangement or understanding with any other
person or entity that would in any way conflict or interfere with this Agreement or the duties and obligations of the
Consultant under this Agreement or that would otherwise prevent the Consultant from performing the Services under
this Agreement. In the event that Consultant’s engagement to render services for a third party, including another
pharmaceutical company, may give rise to a conflict of interest, Consultant shall notify the Company of the potential
conflict prior to entering into such an engagement, and the parties shall work together cooperatively to resolve the
conflict.
If Consultant is a government employee, Consultant further represents and warrants that Consultant will comply with
applicable government ethics rules and that Consultant has secured any necessary approval of an appropriate ethics
officer and as necessary, supervisor, to enter into this Agreement.
11.
Termination.
(a)
This Agreement may be terminated upon five (5) days’ written notice by
Exhibit 10.21
either party without regard to cause.
(b)
Termination of this Agreement by either party shall not affect the rights and obligations of the parties
that accrued prior to the effective date of termination. The rights and duties under Paragraphs 6, 7, 8, 10,
12, and 15 of this Agreement shall survive the expiration or termination of this Agreement.
12. Successors, Transferees and Assigns. This Agreement shall be binding upon and shall inure to the benefit of
EyePoint’s successors, transferees, and assigns.
13. Notice. Any notice, report, or other communications required or permitted to be given hereunder shall be in
writing to both parties and shall be deemed given on the date of hand delivery or fax, or one day after shipping if shipped
by reputable overnight courier, or three days after mailing if mailed by first-class mail, postage prepaid, to the following
addresses, or to such other address as any party hereto may designate by notice given as herein provided:
If to Consultant: John Landis, PhD
[***]
If to EyePoint:
EyePoint Pharmaceuticals US, Inc.
480 Pleasant Street, Suite C400 Watertown, MA
02472 Attention: Kimberly Jarman
Associate General Counsel
14. Amendments. This Agreement shall not be amended or modified in whole or part except by an instrument in
writing signed by each party hereto.
15. Entire Agreement. This Agreement and its Exhibits, including any amendments thereto, constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede all previous negotiations,
commitments, and writings. In addition,
should there be any conflict between any Exhibit and the terms and conditions of this Agreement, the terms and
conditions of this Agreement shall prevail.
16. Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original, but all
of which together shall constitute one and the same agreement.
Exhibit 10.21
In WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date last signed below.
JOHN LANDIS, PhD
EYEPOINT PHARMACEUTICALS
US, INC.
By: /s/ John Landis
By: /s/ Jennifer Leonard
Name: John Landis, PhD
Name: Jennifer Leonard
Date: 12/18/2023 Title: Chief People Officer & SVP, IT
Date: 12/18/2023
List of Subsidiaries of EyePoint Pharmaceuticals, Inc.
Subsidiary Name
EyePoint Pharmaceuticals US, Inc.
pSiMedica Limited
EyePoint Pharmaceuticals Securities Corporation
Icon Bioscience, Inc.
Jurisdiction of Incorporation
Delaware
United Kingdom
Massachusetts
Delaware
Exhibit 21.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-152146, 333-163208, 333-216166, 333-227525, 333-233137, 333-
249902, 333-258595, 333-269167 and 333-275124 on Form S-8 and Registration Nos. 333-226341, 333-253053, 333-258598, and 333-275125 on Form S-
3 of our report dated March 8, 2024, relating to the financial statements of EyePoint Pharmaceuticals, Inc. and subsidiaries appearing in this Annual Report
on Form 10-K for the year ended December 31, 2023.
Exhibit 23.1
/s/ Deloitte & Touche LLP
Boston, Massachusetts
March 8, 2024
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
Exhibit 31.1
I, Jay S. Duker, certify that:
1.
I have reviewed this Annual Report on Form 10-K of EYEPOINT PHARMACEUTICALS, INC.;
CERTIFICATIONS
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 8, 2024
/s/ Jay S. Duker
Name: Jay S. Duker, M.D.
Title: President and Chief Executive Officer
(Principal Executive Officer)
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
Exhibit 31.2
I, George O. Elston, certify that:
1.
I have reviewed this Annual Report on Form 10-K of EYEPOINT PHARMACEUTICALS, INC.;
CERTIFICATIONS
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 8, 2024
/s/ George O. Elston
Name: George O. Elston
Title: Executive Vice President and Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
In connection with the Annual Report of EyePoint Pharmaceuticals, Inc. (the “Company”) on Form 10-K for the twelve months ended December 31,
2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jay S. Duker, President and Chief Executive Officer of
the Company, certify that to the best of 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 8, 2024
Exhibit 32.1
/s/ Jay S. Duker
Name: Jay S. Duker, M.D.
Title: President and Chief Executive Officer
(Principal Executive Officer)
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
In connection with the Annual Report of EyePoint Pharmaceuticals, Inc. (the “Company”) on Form 10-K for the twelve months ended December 31,
2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, George O. Elston, Executive Vice President and Chief
Financial Officer of the Company, certify that to the best of 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 8, 2024
Exhibit 32.2
/s/ George O. Elston
Name: George O. Elston
Title: Executive Vice President and Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
Exhibit 97.1
EyePoint Pharmaceuticals, Inc.
Incentive Compensation Recovery Policy
Adopted by the Board of Directors (the “Board”) of EyePoint Pharmaceuticals, Inc. (the
“Company”) on September 17, 2023
The Company is committed to conducting business in accordance with the highest ethical and legal standards, and the Board
believes that a culture that emphasizes integrity and accountability is in the best interests of the Company and its stockholders
and essential to the Company’s success. The Board is therefore adopting this Incentive Compensation Recovery Policy (this
“Policy”), hereby replacing the Company’s prior Incentive Compensation Recovery Policy of 2020, to provide for the recovery
of certain incentive compensation in the event of an Accounting Restatement. This Policy is intended to foster a culture of
compliance and accountability, to reward integrity, and to reinforce the Company’s pay-for-performance compensation
philosophy.
Statement of Policy
In the event that the Company is required to prepare an Accounting Restatement, except as otherwise set forth in this Policy,
the Company shall recover, reasonably promptly, the Excess Incentive Compensation received by any Covered Executive
during the Recoupment Period.
This Policy applies to all Incentive Compensation received during the Recoupment Period by a person
(a) after beginning service as a Covered Executive, (b) who served as a Covered Executive at any time during the performance
period for that Incentive Compensation and (c) while the Company has a class of securities listed on the Nasdaq Stock Market
LLC (“Nasdaq”) or another national securities exchange or association. This Policy may therefore apply to a Covered
Executive even after that person is no longer a Company employee or a Covered Executive at the time of recovery.
Incentive Compensation is deemed “received” for purposes of this Policy in the fiscal period during which the financial
reporting measure specified in the Incentive Compensation award is attained, even if the payment or issuance of such Incentive
Compensation occurs after the end of that period. For example, if the performance target for an award is based on total
stockholder return or revenue for the year ended December 31, 2023, the award will be deemed to have been received in 2023
even if paid in 2024.
Exceptions
The Company is not required to recover Excess Incentive Compensation pursuant to this Policy to the extent the Compensation
Committee of the Board (the “Committee”) makes a determination that recovery would be impracticable for one of the
following reasons (and the applicable procedural requirements are met):
(a) after making a reasonable and documented attempt to recover the Excess Incentive Compensation, which documentation
will be provided to Nasdaq to the extent required, the Committee determines that the direct expenses that would be paid to
a third party to assist in enforcing this Policy would exceed the amount to be recovered;
Exhibit 97.1
(b) based on a legal opinion of counsel acceptable to the Nasdaq, the Committee determines that recovery would violate a
home country law adopted prior to November 28, 2022; or
(c) the Committee determines that recovery would likely cause an otherwise tax-qualified retirement plan, under which
benefits are broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26
U.S.C. 411(a) and regulations thereunder.
Definitions
“Accounting Restatement” means an accounting restatement due to the material noncompliance of the Company with any
financial reporting requirement under the 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 would result in a
material misstatement if the error were corrected in the current period or left uncorrected in the current period. For the
avoidance of doubt, a restatement resulting solely from any one or more of the following is not an Accounting Restatement:
retrospective application of a change in generally accepted accounting principles; retrospective revision to reportable segment
information due to a change in the structure of an issuer’s internal organization; retrospective reclassification due to a
discontinued operation; retrospective application of a change in reporting entity, such as from a reorganization of entities under
common control; retrospective adjustment to provisional amounts in connection with a prior business combination; and
retrospective revision for stock splits, reverse stock splits, stock dividends or other changes in capital structure.
“Covered Executive” means the Company’s Chief Executive Officer, President, Chief Financial Officer, principal accounting
officer (or if there is no such accounting officer, the controller), any vice-president of the Company in charge of a principal
business unit, division, or function, any other officer who performs a policy-making function for the Company, any other
person who performs similar policy- making functions for the Company, and any other employee who may from time to time
be deemed subject to this Policy by the Committee. For purposes of the foregoing, designation by the Board as an “Officer” for
purposes of Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) shall constitute
designation as a Covered Executive.
“Excess Incentive Compensation” means the amount of Incentive Compensation received during the Recoupment Period by
any Covered Executive that exceeds the amount of Incentive Compensation that otherwise would have been received by such
Covered Executive if the determination of the Incentive Compensation to be received had been determined based on restated
amounts in the Accounting Restatement and without regard to any taxes paid.
“Incentive Compensation” means any compensation (including cash and equity compensation) that is granted, earned, or
vested based wholly or in part upon the attainment of a financial reporting measure. For purposes of this definition, a
“financial reporting measure” is (i) any measure that is determined and presented in accordance with the accounting principles
used in preparing the Company’s financial statements and any measure derived wholly or in part from such measures, or (ii)
the Company’s stock price and/or total shareholder return. A financial reporting measure need not be presented within the
financial statements or included in a filing with the U.S. Securities and Exchange Commission. Incentive
Compensation subject to this Policy may be provided by the Company or subsidiaries or affiliates of the Company (“Company
Affiliates”).
Exhibit 97.1
“Recoupment Period” means the three completed fiscal years preceding the Trigger Date, and any transition period (that
results from a change in the Company’s fiscal year) of less than nine months within or immediately following those three
completed fiscal years, provided that any transition period of nine months or more shall count as a full fiscal year.
“Trigger Date” means the earlier to occur of: (a) the date the Board, the Audit Committee of the Board of Directors (or such
other committee of the Board as may be authorized to make such a conclusion), or the officer or officers of the Company
authorized to take such action if action by the Board is not required concludes, or reasonably should have concluded, that the
Company is required to prepare an Accounting Restatement; and (b) the date a court, regulator, or other legally authorized
body directs the Company to prepare an Accounting Restatement; in the case of both (a) and (b) regardless of if or when
restated financial statements are filed.
Administration
This Policy is intended to comply with Nasdaq Listing Rule 5608, Section 10D of the Exchange Act, and Rule 10D-1(b)(1) as
promulgated under the Exchange Act, and shall be interpreted in a manner consistent with those requirements. The Committee
has full authority to interpret and administer this Policy. The Committee’s determinations under this Policy shall be final and
binding on all persons, need not be uniform with respect to each individual covered by the Policy, and shall be given the
maximum deference permitted by law.
The Committee has the authority to determine the appropriate means of recovering Excess Incentive Compensation based on
the particular facts and circumstances, which could include, but is not limited to, seeking direct reimbursement, forfeiture of
awards, offsets against other payments, and forfeiture of deferred compensation (subject to compliance with Section 409A of
the Internal Revenue Code).
Subject to any limitations under applicable law, the Committee may authorize any officer or employee of the Company to take
actions necessary or appropriate to carry out the purpose and intent of this Policy, provided that no such authorization shall
relate to any recovery under this Policy that involves such officer or employee.
If the Committee cannot determine the amount of excess Incentive Compensation received by a Covered Executive directly
from the information in the Accounting Restatement, such as in the case of Incentive Compensation tied to stock price or total
stockholder return, then it shall make its determination based on its reasonable estimate of the effect of the Accounting
Restatement and shall maintain documentation of such determination, including for purposes of providing such documentation
to Nasdaq.
Except where an action is required by Nasdaq Listing Rule 5608, Section 10D of the Exchange Act or Rule 10D-1(b)(1)
promulgated under the Exchange Act to be determined in a different matter, the Board may act to have the independent
directors of the Board administer this policy in place of the Committee in any particular circumstance.
Each Covered Executive shall sign an Incentive Compensation Recovery Policy Acknowledgement and Agreement in the form
approved by the Committee.
Exhibit 97.1
No Indemnification or Advancement of Legal Fees
Notwithstanding the terms of any indemnification agreement, insurance policy, contractual arrangement, the governing
documents of the Company or other document or arrangement, the Company shall not indemnify any Covered Executive
against, or pay the premiums for any insurance policy to cover, any amounts recovered under this Policy or any expenses that a
Covered Executive incurs in opposing Company efforts to recoup amounts pursuant to the Policy.
Non-Exclusive Remedy; Successors
Recovery of Incentive Compensation pursuant to this Policy shall not in any way limit or affect the rights of the Company to
pursue disciplinary, legal, or other action or pursue any other remedies available to it. This Policy shall be in addition to, and is
not intended to limit, any rights of the Company to recover Incentive Compensation from Covered Executives under any legal
remedy available to the Company and applicable laws and regulations, including but not limited to the Sarbanes-Oxley Act of
2002, as amended, or pursuant to the terms of any other Company policy, employment agreement, equity award agreement, or
similar agreement with a Covered Executive.
This Policy shall be binding and enforceable against all Covered Executives and their successors, beneficiaries, heirs, executors,
administrators, or other legal representatives.
Amendment
This Policy may be amended from time to time by the Committee of the Board. Effective Date
This Policy shall apply to any Incentive Compensation received on or after October 2, 2023.
Exhibit 97.1
EXHIBIT A – BROAD FORM OF ACKNOLWEDGMENT AND AGREEMENT
EYEPOINT PHARMACEUTICALS, INC. INCENTIVE
COMPENSATION RECOVERY POLICY
ACKNOWLEDGMENT AND AGREEMENT
This Acknowledgment and Agreement (this “Agreement”) is entered into as of the 30th day of November, 2023,
between EyePoint Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and (the “Executive”), under the
following circumstances:
WHEREAS, the Board of Directors of the Company (the “Board”) has adopted the Company Incentive Compensation
Recovery Policy (the “Policy”);
WHEREAS, the Executive has been designated as a “Covered Executive” of the Company as defined in the Policy;
WHEREAS, in consideration of, and as a condition to the receipt of, future cash and equity-based awards, performance-
based compensation, and other forms of cash or equity compensation made under
the Company’s 2023 Long-Term Incentive Plan or any other incentive compensation plan or program of the Company, the
Executive and the Company are entering into this Agreement; and
WHEREAS, defined terms used but not defined in this Agreement shall have the meanings set forth in the Policy.
NOW, THEREFORE, the Company and the Executive hereby agree as follows:
1.
2.
3.
The Executive hereby acknowledges receipt of the Policy, to which this Agreement is attached, and the terms of which
are hereby incorporated into this Agreement by reference. The Executive has read and understands the Policy and has
had the opportunity to ask questions to the Company regarding the Policy.
The Executive hereby acknowledges and agrees that the Policy shall apply to any Incentive Compensation granted to
the Executive by the Board or the Compensation Committee of the Board (the “Committee”) as set forth in the Policy
and that all such Incentive Compensation shall be subject to recovery under the Policy.
Any applicable award agreement or other document setting forth the terms and conditions of any Incentive
Compensation granted to the Executive by the Board or the Committee shall be deemed to include the restrictions
imposed by the Policy and incorporate the Policy by reference. In the event of any inconsistency between the
provisions of the Policy and the applicable award agreement or other document setting forth the terms and conditions
of any Incentive Compensation granted to the Executive, the terms of the Policy shall govern unless the terms of such
other agreement or other document would result in a greater recovery by the Company.
4.
The Executive hereby acknowledges that, notwithstanding any indemnification agreement or other
Exhibit 97.1
arrangement between the Company and the Executive, the Company shall not indemnify the
Executive against, or pay the premiums for any insurance policy to cover, losses incurred under the Policy.
5.
6.
7.
8.
9.
In the event it is determined by the Company that any amounts granted, awarded, earned or paid to the Executive must
be forfeited or reimbursed to the Company, the Executive will promptly take any action necessary to effectuate such
forfeiture and/or reimbursement.
This Agreement and the Policy shall survive and continue in full force and in accordance with their terms
notwithstanding any termination of the Executive’s employment with the Company and its affiliates.
This Agreement may be executed in two or more counterparts, and by facsimile or electronic transmission (such as
PDF), each of which will be deemed to be an original but all of which, taken together, shall constitute one and the same
Agreement.
This Agreement shall be governed by the laws of the Commonwealth of Massachusetts, without reference to principles
of conflict of laws.
No modifications or amendments of the terms of this Agreement shall be effective unless in writing and signed by the
parties hereto or their respective duly authorized agents. The provisions of this Agreement shall inure to the benefit of,
and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Executive, and the
successors and assigns of the Company.
[Signature Page Follows]
Exhibit 97.1
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above
written.
EYEPOINT PHARMACEUTICALS, INC.
By: Name:
Title:
[EXECUTIVE]
Name: Title: