HYPERION DEFI, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of the results of operations and financial condition of Eyenovia, Inc. (“Eyenovia,” the “Company,” “we,” “us” and “our”) as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 should be read in conjunction with our unaudited condensed financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (“SEC”) on March 30, 2021. Forward Looking Statements This report contains “forward-looking statements.” Specifically, all statements other than statements of historical facts included in this report, including regarding our financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These forward-looking statements are based on the beliefs of management at the time these statements were made, as well as assumptions made by and information currently available to management. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “may,” “might,” “will,” “continue” “intend,” and “plan” and words or phrases of similar import are intended to identify forward-looking statements. These statements reflect our current view with respect to future events and are subject to risks, uncertainties and assumptions related to various factors that could cause actual results and the timing of events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” included in our most recent Annual report on Form 10-K filed with the SEC. Furthermore, such forward-looking statements speak only as of this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Overview We are a clinical stage ophthalmic company developing a pipeline of advanced therapeutics based on our proprietary microdose array print (MAP™) platform technology. We aim to achieve clinical microdosing of next-generation formulations of novel and existing ophthalmic pharmaceutical agents using our high-precision targeted ocular delivery system, branded the Optejet®. Optejet µ-therapeutics have the potential to replace conventional eye dropper delivery and improve safety, tolerability, patient compliance and topical delivery success for ophthalmic eye treatments. In clinical trials, the Optejet has demonstrated that our targeted horizontal microdose delivery can achieve a significantly higher rate of successful ocular topical delivery compared to the established rate reported with traditional eye drops (~ 90% vs. ~ 50%). Our technology is designed to achieve single-digit µl-volume physiologic drug delivery with up to a 75% reduction in ocular drug and preservative topical dosing and has demonstrated significant improvement in the therapeutic index in drugs used for mydriasis and IOP lowering through three Phase II and Phase III trials. Conventional eye formulations lack high-precision micro-volume delivery and expose the ocular surface to approximately 300% more medication and preservatives than are physiologically indicated leading to clinically recognized ocular and non-ocular side effects. Using the Optejet, we are developing the next generation of smart ophthalmic therapeutics which target new indications or new combinations where there are currently no comparable drug therapies approved by the U.S. Food and Drug Administration, or the FDA. Our microdose therapeutics follow the FDA-designated pharmaceutical registration and regulatory process. Our products are classified by the FDA as drugs, and not medical devices or drug-device combination products. Our pipeline is currently focused on the late-stage development of novel, potential first-in-class therapeutic indications for over an estimated five million potential patients with progressive myopia in the United States and over an estimated one hundred million potential patients with age-related near vision impairment, or presbyopia – indications where there is tremendous unmet need and no known existing FDA-approved therapies. We are also developing the first microdose fixed combination ophthalmic pharmaceutical for mydriasis to address the estimated over 100 million annual comprehensive eye exams with pupil dilation. MicroPine is our first-in-class topical therapy for the treatment of progressive myopia, a back-of-the-eye ocular disease associated with pathologic axial elongation and sclero-retinal stretching. In the United States, myopia is estimated to affect approximately 25 million children, with up to five million considered to be at risk for high myopia. In February 2019, the FDA accepted our investigational new drug application, or IND, to initiate a Phase III registration trial of MicroPine (the CHAPERONE study) to reduce the progression of myopia in children. We enrolled the first patient in the CHAPERONE study in June 2019. Due to the COVID-19 pandemic, we previously experienced delays in trial enrollment and initiation as a result of reduced clinical trial activities and operations at investigator sites. However, we have since been able to resume enrollment in the CHAPERONE study. 19 Table of Contents On October 9, 2020, we entered into a License Agreement (the “Bausch License Agreement”) with a subsidiary of Bausch Health Companies Inc. (“Bausch Health”) pursuant to which Bausch Health may develop and commercialize MicroPine in the United States and Canada. Under the terms of the Bausch License Agreement, we received an upfront payment of $10.0 million and we may receive up to a total of $35.0 million in additional payments, based on the achievement of certain regulatory and launch-based milestones. Bausch Health also will pay us royalties on a tiered basis (ranging from mid-single digit to mid-teen percentages) on gross profits from sales of MicroPine in the United States and Canada, subject to certain adjustments. Under the terms of the Bausch License Agreement, Bausch Health is in the process of assuming oversight for, and has assumed the costs related to the ongoing CHAPERONE study. MicroLine is our pharmacologic treatment for presbyopia. Presbyopia is a non-preventable, age-related hardening of the lens, which causes the gradual loss of the eye’s ability to focus at near and impairs near visual acuity. There currently are no known FDA-approved drugs for the improvement of near vision in patients with presbyopia, although other companies have related therapies in their pipeline. We have two planned Phase III VISION trials for MicroLine, and initiated the first of these trials in December 2020. On May 25, 2021, we announced positive topline data from the Phase III VISION-1 study evaluating MicroLine for the temporary improvement of near vision in adults with presbyopia. The study achieved its primary endpoint and preparations are underway for a second Phase III registration study, VISION-2, targeted to be initiated later this year. VISION-2 will be a double-masked, placebo-controlled, cross-over superiority trial designed to enroll 120 patients randomized between 2% pilocarpine and placebo cohorts. Topline data from VISION-2 is anticipated in mid-2022. These studies will serve as the basis for a planned New Drug Application (NDA) submission to FDA. VISION-1 results will be presented at a future ophthalmic-focused medical meeting. On August 10, 2020, we entered into a License Agreement (the “Arctic Vision License Agreement”) with Arctic Vision (Hong Kong) Limited (“Arctic Vision”), pursuant to which Arctic Vision may develop and commercialize MicroPine and MicroLine in Greater China (mainland China, Hong Kong, Macau and Taiwan) and South Korea. Under the terms of the Arctic Vision License Agreement, we received an upfront payment of $4.0 million before any payments to Senju Pharmaceutical Co., Ltd. (“Senju”). In addition, we may receive up to a total of $41.75 million in additional payments, based on various development and regulatory milestones, including the initiation of clinical research and approvals in Greater China and South Korea, and development costs. Arctic Vision also will purchase its supply of MicroPine and MicroLine from us or, for such products not supplied by us, pay us a mid-single digit percentage royalty on net sales of such products, subject to certain adjustments. We will pay a mid-double digit percentage of such payments, royalties, or net proceeds of such supply to Senju pursuant to the Exclusive License Agreement with Senju dated March 8, 2015, as amended by the License Amendment dated April 8, 2020, and a Letter Agreement dated August 10, 2020 (the “Senju License Agreement”). MydCombi™ (or MicroStat) is our fixed combination formulation of phenylephrine-tropicamide for mydriasis, designed to be a novel approach for the estimated over one hundred million office-based comprehensive and diabetic eye exams performed every year in the United States. We have completed two Phase III trials for MydCombi and announced positive results from these studies, known as MIST-1 and MIST-2. In March 2021, the FDA accepted our NDA, for MydCombi with an expected Prescription Drug User Fee Act, or PDUFA, date of October 28, 2021. We have not completed development of any product candidate and we have therefore not generated any revenues from product sales. Historically, we have financed our operations principally through equity offerings, including our initial public offering, numerous public offerings in 2018, 2019 and August 2020, and our private placement that closed in March 2020. Recently we also have generated cash through licensing arrangements and our credit facility with Silicon Valley Bank. However, based upon our current operating plan, there is substantial doubt about our ability to continue as a going concern for a period of at least the next twelve months. Our ability to continue as a going concern depends on our ability to raise additional capital, through the sale of equity or debt securities to support our future operations. If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs. Our net losses were $4.8 million and $10.2 million for the three and six months ended June 30, 2021. As of June 30, 2021, we had working capital and an accumulated deficit of $14.9 million and $87.6 million, respectively. 20 Table of Contents Financial Overview Revenue and Cost of Revenue In August and October 2020, we entered into the Arctic Vision License Agreement and Bausch License Agreement, respectively. Both of these agreements provide for the Company to earn revenue from an upfront licensing fee, the achievement of various development and regulatory milestones, and royalty income on sales of licensed products. Pursuant to the Senju License Agreement, we will pay a mid-double digit percentage of such payments from the Arctic Vision License Agreement to Senju. See Note 7 – Commitments and Contingencies and Note 8 – Related Party Transactions. Research and Development Expenses Research and development expenses are incurred in connection with the research and development of our microdose-therapeutics and consist primarily of contract service expenses. Given where we are in our life cycle, we do not separately track research and development expenses by project. Our research and development expenses consist of: ● direct clinical and non-clinical expenses, which include expenses incurred under agreements with contract research organizations, contract manufacturing organizations, and costs associated with preclinical activities, development activities and regulatory activities; ● personnel-related expenses, which include expenses related to consulting agreements with individuals that have since entered into employment agreements with us as well as salaries and other compensation of employees that is attributable to research and development activities; and ● facilities and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, marketing, insurance and other supplies used in research and development activities. We expense research and development costs as incurred. We record costs for some development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment, clinical site activations or other information our vendors provide to us. In addition, our license agreements with Arctic Vision and Bausch Health require them to assume or reimburse us for specified research and development costs. We expect that our research and development expenses will increase with the continuation of the initiatives and activities described above. General and Administrative Expenses General and administrative expenses consist primarily of payroll and related expenses, legal and other professional services, as well as non-cash stock-based compensation expense. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and the potential commercialization of our product candidates. We also anticipate increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements. In addition, director and officer insurance premiums and investor relations costs associated with being a public company are expected to increase in future periods. 21 Table of Contents Results of Operations Three Months Ended June 30, 2021 Compared with Three Months Ended June 30, 2020 Revenue and Cost of Revenue In August 2020, we received a $4.0 million upfront payment under the Arctic Vision License Agreement, and made a related payment of $1.6 million to Senju. This upfront payment was recorded as $4.0 million of deferred license fee and $1.6 million of deferred cost of revenue. The trial data for one of the two products (MicroPine) was fully submitted to Arctic Vision in March 2021. As a result, the Company recognized $2.0 million of deferred license fees (one-half of the $4.0 million upfront license fee) and recognized $0.8 million of deferred license costs related to the Senju payment during the three months ended March 31, 2021. The trial data for the other product (MicroLine) was fully submitted to Arctic Vision in June 2021. As a result, the Company recognized the remaining $2.0 million of deferred license fees and recognized the remaining $0.8 million of deferred license costs related to the Senju payment during the three months ended June 30, 2021. Research and Development Expenses Research and development expenses for the three months ended June 30, 2021 totaled $3.6 million, an increase of $0.7 million, or 24%, as compared to $2.9 million recorded for the three months ended, June 30, 2020. Research and development expenses consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ ​ June 30, ​ 2021 2020 Direct clinical and non-clinical expenses ​ $ 1,493,600 ​ $ 1,503,565 Personnel-related expenses ​ 1,299,090 ​ 727,519 Non-cash stock-based compensation expenses ​ 319,497 ​ 348,447 Supplies and materials ​ 277,557 ​ 284,908 Facilities and other expenses ​ 226,638 ​ 50,811 Total research and development expenses ​ $ 3,616,382 ​ $ 2,915,250 ​ The increase in personnel-related expenses was primarily due to salary increases, costs related to staff hired late in 2020 and new hires related to manufacturing and the ramp up for the launch of the MydCombi product. The increase in costs related to facilities and other expenses was primarily due to an increase in travel-related expenses related to clinical studies as COVID restrictions have been relaxed. General and Administrative Expenses General and administrative expenses for the three months ended June 30, 2021 totaled $2.3 million, an increase of $0.2 million, or 12%, as compared to $2.1 million recorded for the three months ended June 30, 2020. This increase was primarily attributable to a $0.1 million increase in the cost of directors & officers insurance and a $0.1 million increase in sales and marketing expense mainly due to the MydCombi dosing study. Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020 Revenue and Cost of Revenue In August 2020, we received a $4.0 million upfront payment under the Arctic Vision License Agreement, and made a related payment of $1.6 million to Senju. This upfront payment was recorded as $4.0 million of deferred license fee and $1.6 million of deferred cost of revenue. The trial data for one of the two products (MicroPine) was fully submitted to Arctic Vision in March 2021 and the trial data for the other product (MicroLine) was fully submitted to Arctic Vision in June 2021. As a result, the Company recognized the $4.0 million of deferred license fees and recognized $1.6 million of deferred license costs related to the Senju payment during the six months ended June 30, 2021. There was no revenue for the six months ended June 30, 2020. 22 Table of Contents Research and Development Expenses Research and development expenses for the six months ended June 30, 2021 totaled $7.9 million, an increase of $1.3 million, or 20%, as compared to $6.5 million recorded for the six months ended, June 30, 2020. Research and development expenses consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Six Months Ended ​ ​ June 30, ​ 2021 2020 Direct clinical and non-clinical expenses ​ $ 3,878,381 ​ $ 3,330,782 Personnel-related expenses ​ 2,500,081 ​ 1,642,668 Non-cash stock-based compensation expenses ​ 649,210 ​ 655,856 Supplies and materials ​ 439,828 ​ 782,504 Facilities and other expenses ​ 396,608 ​ 137,727 Total research and development expenses ​ $ 7,864,108 ​ $ 6,549,537 ​ The increase in direct clinical and non-clinical expenses was primarily due to further testing and commercialization of the MydCombi product. The increase in personnel-related expenses was primarily due to salary increases, costs related to staff hired late in 2020 and new hires related to manufacturing and the ramp up for the MydCombi launch. The decrease in costs related to supplies and materials was primarily due to the fact that the bulk of dispensers needed for clinical cartridge supply in 2021 were produced in 2020. The increase in costs related to facilities and other expenses was primarily due to an increase in travel-related expenses as COVID restrictions have been relaxed and costs related to new hires (human resources and information technology-related expenses). General and Administrative Expenses General and administrative expenses for the six months ended June 30, 2021 totaled $4.6 million, an increase of $0.7 million, or 18%, as compared to $3.9 million recorded for the six months ended June 30, 2020. This increase was primarily attributable to an increase of $0.2 million for sales and marketing expenses related to the MydCombi dosing study, an increase of $0.3 million due to new hires which included a new project management director, an increase of $0.1 million for officer option grants and a $0.1 million increase in directors and officers insurance. Liquidity and Capital Resources Since inception, we have experienced negative cash flows from operations. As of June 30, 2021, our accumulated deficit since inception was $87.6 million. As of June 30, 2021, we had a cash balance of $27.2 million, working capital of $14.9 million and stockholders’ equity of $9.0 million. As of June 30, 2021 and December 31, 2020, we had $8.0 million and $0.5 million, respectively, of debt outstanding. These conditions raise substantial doubt about our ability to continue as a going concern for at least one year from the date that the financial statements included elsewhere in this Quarterly Report on Form 10-Q are issued. Our financial statements do not include adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. Our ability to continue as a going concern depends on our ability to raise additional capital through the sale of equity or debt securities to support our future operations. Our operating needs include the planned costs to operate our business, including amounts required to fund research and development activities including clinical studies, working capital and capital expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service offerings. If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve our cash. 23 Table of Contents During the six months ended June 30, 2021 and 2020, our sources and uses of cash were as follows: Net cash used in operating activities for the six months ended June 30, 2021 was $9.9 million, which includes cash used to fund a net loss of $10.2 million, reduced by $1.4 million of net non-cash expenses, plus $1.1 million of cash used to fund changes in operating assets and liabilities. Net cash used in operating activities for the six months ended June 30, 2020 was $9.9 million, which includes cash used to fund a net loss of $10.5 million, reduced by $1.3 million of net non-cash expenses, plus $0.7 million of cash used to fund changes in operating assets and liabilities. Cash used in investing activities for the six months ended June 30, 2021 was $0.6 million, which was related to purchases of property and equipment. Cash used in investing activities for the six months ended June 30, 2020 was $0.1 million, which was also related to purchases of property and equipment. Net cash provided by financing activities for the six months ended June 30, 2021 totaled $9.4 million, which was attributable to aggregate net proceeds from the Silicon Valley Bank loan of $7.4 million, the exercise of stock warrants of $2.1 million and the exercise of stock options of $0.1 million. This was slightly offset by the repayment of $0.3 million of notes payable. Net cash provided by financing activities for the six months ended June 30, 2020 totaled $6.1 million, which was attributable to aggregate net proceeds from the sale of common stock and warrants in our private placement of $5.5 million, $0.5 million in proceeds from a loan in connection with the Paycheck Protection Program under the Cares Act and $0.4 million of proceeds from the exercise of stock warrants. This was slightly offset by the repayment of notes payable of $0.2 million. On May 7, 2021, the Company entered into a Loan and Security Agreement (the “Loan”) with Silicon Valley Bank (the “Lender”) for an aggregate principal amount of up to $25.0 million. The Loan bears interest at annual rate equal to the greater of (a) the sum of 1.25% plus the prime rate as reported in The Wall Street Journal and (b) 5.00%. The Loan matures on May 1, 2025. The initial tranche in the amount of $7.5 million was received by the Company on May 7, 2021. In connection with the Loan, the Company issued to the Lender warrants to purchase 91,884 shares of common stock at an exercise price per share equal to $4.76. The warrants are exercisable for a period of ten years from the date of issuance. At the Company’s option, the Company has the ability to draw down the remaining $17.5 million in gross proceeds in two tranches over the next two years based upon the achievement of several milestones in accordance with the terms of the agreement. We filed a universal shelf registration on Form S-3 with the SEC on January 25, 2019, which was declared effective on February 12, 2019, pursuant to which we registered for sale up to $75.0 million of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, which we refer to as the 2019 Form S-3. In addition, on May 14, 2021, we entered into a sales agreement with SVB Leerink LLC, which we refer to as the 2021 Sales Agreement, with respect to an at-the-market offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate value up to $30.0 million. We make no assurances as to the continued effectiveness of the 2019 Form S-3 or as to any sales under the 2021 Sales Agreement. Off-Balance Sheet Arrangements There are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on financial conditions, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders. Critical Accounting Policies For a description of our critical accounting policies, see Note 2 – Summary of Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q. Recently Adopted Accounting Standards For a description of recently adopted accounting standards, including adoption dates and estimated effects, if any, on our condensed financial statements, see Note 2 – Summary of Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q. ​ Item 3. Quantitative and Qualitative Disclosures About Market Risk. Smaller reporting companies such as Eyenovia are not required to provide the information required by this item. 24 Table of Contents