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 March 31, 2023 and for the three months ended March 31, 2023 and 2022 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, 2022 as filed with the Securities and Exchange Commission (the“SEC”) on March 31, 2023, as amended by Amendment No. 1, as filed with the SEC on May 1, 2023. Forward Looking Statements This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include our estimates regarding expenses, future revenue, capital requirements and our need for additional financing and other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements about the advantages of our product candidates and platform technology; estimates regarding the potential market opportunity for our product candidates and platform technology; statements regarding our clinical trials; factors that may affect our operating results; statements about our ability to establish and maintain intellectual property rights; statements about our ability to retain key personnel and hire necessary employees and appropriately staff our operations; statements related to future capital expenditures; statements related to future economic conditions or performance; and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “will,” “plan,” “project,” “seek,” “should,” “target,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections titled “Summary Risk Factors” and “Risk Factors” included in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2023, and as amended by Amendment No. 1, as filed with the SEC on May 1, 2023, and the risks discussed in our other SEC filings. Furthermore, such forward-looking statements speak only as of the date of this Quaterly 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. Recent Development - FDA Approval of Mydcombi™ We received notification from the FDA on May 5, 2023 that its NDA for the Mydcombi™ product was approved. It is the only FDA-approved fixed combination of the two leading mydriatic agents in the United States. As an ophthalmic spray, Mydcombi may present a number of benefits for the optometric and ophthalmic offices as well as patients. Those benefits may include better tolerability, more efficient use of office time and resources, and an overall improved doctor-patient experience. The Company is preparing to commercialize the product starting with a targeted launch and expanding in 2024 when internal manufacturing capabilities are expected to come on-line. Overview We are an ophthalmic technology company developing the Optejet® delivery system for use both in combination with our own drug-device therapeutic programs as well as out-licensing for additional indications. Our aim is to improve the delivery of topical ophthalmic medication through ergonomic design that facilitates ease-of-use, delivery of more physiologically appropriate medication volume, with the goal to reduce side effects and improve tolerability, and introduce digital health technology to improve therapy compliance and ultimately medical outcomes. The ergonomic and functional design of the Optejet® allows for horizontal drug delivery and eliminates the need to tilt the head back or the manual dexterity to squeeze a bottle, to administer medications. Drug is delivered in a microscopic array of droplets 15 Table of Contents faster than the blink reflex to help ensure instillation success. The precise delivery of a low-volume columnar spray by the Optejet® device minimizes contamination with a non-protruding nozzle and self-closing shutter. In clinical trials, the Optejet® has demonstrated that its targeted delivery achieves a high rate of successful administration, with 98% of sprays being accurately delivered upon first attempt compared to the established rate reported with traditional eye drops of ~ 50%. A more physiologically appropriate volume of medication in the range of seven to nine microliters is delivered by the Optejet, which is approximately one fifth of the 35 to 50 microliter dose typically delivered in a single eye drop. Lower volume of medication exposes the ocular surface to less active ingredient and preservatives, potentially reducing ocular stress and surface damage and improving tolerability. The lower volume also minimizes the potential for drug to enter systemic circulation, with the goal of avoiding some common side effects that are related to overdosing of the eye. We are developing versions of the Optejet with on-board digital technology to provide reminders via Bluetooth to smart devices and date and time stamp device use. This information can then be used by practitioners and health care systems to measure treatment compliance and improve medical decision making. In this way, the Optejet could serve as an extension of the physician’s office by providing information that is not currently possible to collect except through the use of diaries. Our drug-device product line includes Mydcombi™ (tropicamide and phenylephrine HCL ophthalmic spray) and therapeutic programs MicroPine (atropine ophthalmic spray) and MicroLine (pilocarpine ophthalmic spray). MicroPine is our first-in-class topical therapy for the treatment of progressive myopia, a 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 high risk for progressive myopia. In February 2019, the FDA accepted our IND to initiate the CHAPERONE study to reduce the progression of myopia in children. The first patient was enrolled in the CHAPERONE study in June 2019. On October 9, 2020, we entered into the Bausch License Agreement with B+L, pursuant to which B+L 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. B+L also will pay royalties to Eyenovia on a tiered basis (ranging from mid-single digit to mid-teen percentages) on gross profits from sales of MicroPine in the United States and Canada, subject to certain adjustments. Under the terms of the Bausch License Agreement, B+L assumed sponsorship of the IND as well as ownership and the costs related to the ongoing CHAPERONE study. We have also successfully expanded our manufacturing capabilities through a partnership with Coastline International, Inc. located in Tijuana, Mexico, and the construction of our own fill and finish facility in Redwood City, California. As of the date of filing, we are up-to-date supplying clinical product for the CHAPERONE and VISION Studies. MicroLine is our investigational 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 on near objects and impairs near visual acuity. Allergan recently launched Vuity™, a pilocarpine drug product for the treatment of presbyopia. Our second Phase III study, VISION-2, used the same drug, delivered with the advantages of our Optejet® device. We released positive top-line results from VISION-2 in the fourth quarter of 2022. Mydcombi™ is our fixed combination formulation of tropicamide-phenylephrine for inducing mydriasis for diagnostic procedures and in conditions where short term pupil dilation is desired. Mydcombi is a novel approach for the over 106 million office-based comprehensive and diabetic eye exams performed every year in the United States. As the only FDA-approved fixed combination of the two leading mydriatic agents in the United States and as an ophthalmic spray, Mydcombi may present a number of benefits for the optometric and ophthalmic offices as well as patients. Those benefits may include better tolerability, more efficient use of office time and resources, and an overall improved doctor-patient experience. As noted above in Recent Development, we received FDA approval on May 5, 2023, and are preparing to commercialize the product starting with a targeted launch and expanding in 2024 when we expect our internal manufacturing capabilities to come on-line. On August 10, 2020, we entered into the Arctic Vision License Agreement with Arctic Vision, which was amended on September 14, 2021, pursuant to which Arctic Vision may develop and commercialize MicroPine, MicroLine and Mydcombi in Greater China (mainland China, Hong Kong, Macau and Taiwan) and South Korea. Under the terms of the Arctic Vision License Agreement, as amended, we received an upfront payment of $4.25 million before any payments to Senju Pharmaceutical Co., Ltd. (“Senju”). In addition, we may receive up to a total of $39.7 million in additional payments, based on various development and regulatory milestones, 16 Table of Contents including the initiation of clinical research and approvals in Greater China and South Korea, and development costs. Arctic Vision also will purchase its supply of MicroPine, MicroLine and Mydcombi from Eyenovia or, for such products not supplied by Eyenovia, pay a mid-single digit percentage royalty on net sales of such products, subject to certain adjustments. We will pay between 30 and 40 percent of such payments, royalties, or net proceeds of such supply to Senju pursuant to an exclusive license agreement with Senju dated March 8, 2015, as amended (the “Senju License Agreement”). We are in active discussions with manufacturers of existing and late-stage ophthalmic medications to explore whether development with the Optejet technology can solve unmet medical and business needs. Some of those business needs could include extension of exclusivity under the Optejet patents, improvement in a drug’s tolerability profile, or potential improvement in treatment compliance. Historically, we have financed our operations principally through equity offerings. We have also generated cash through licensing arrangements and our credit facilities with SVB and Avenue. However, based upon our current operating plan, there is substantial doubt about our ability to continue as a going concern for at least one year from the date that our financial statements are issued. Our ability to continue as a going concern depends on our ability to complete additional licensing or business development transactions or raise additional capital through the sale of equity or debt securities to support our future operations. If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and/or take additional measures to reduce costs. Our net losses were $5.7 million and $7.3 million for the three months ended March 31, 2023 and 2022. As of March 31, 2023, we had working capital and an accumulated deficit of approximately $20.0 million and $124.0 million, respectively. Financial Overview Research and Development Expenses Research and development expenses are incurred in connection with the research and development of our microdose-therapeutics and consist primarily of contract service expenses. Given where we are in our life cycle, we do not separately track research and development expenses by project. Our research and development expenses consist of: ● direct clinical and non-clinical expenses, which include expenses incurred under agreements with contract research organizations, contract manufacturing organizations, and costs associated with preclinical activities, development activities and regulatory activities; ● personnel-related expenses, which include expenses related to consulting agreements with individuals that have since entered into employment agreements with us as well as salaries and other compensation of employees that is attributable to research and development activities; and ● facilities and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, marketing, insurance and other supplies used in research and development activities. We expense research and development costs as incurred. We record costs for some development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment, clinical site activations or other information our vendors provide to us. We expect that our research and development expenses will increase with the continuation of the aforementioned initiatives. General and Administrative Expenses General and administrative expenses consist primarily of payroll and related expenses, legal and other professional services, 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. 17 Table of Contents Results of Operations Three Months Ended March 31, 2023 Compared with Three Months Ended March 31, 2022 Research and Development Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended March 31, ​ 2023 2022 Personnel-related expenses ​ $ 1,614,852 ​ $ 1,566,056 Direct clinical and non-clinical expenses ​ ​ 138,043 ​ ​ 1,127,486 Non-cash stock-based compensation expenses ​ ​ 375,130 ​ ​ 501,181 Facilities expenses ​ 227,047 ​ 230,188 Supplies and materials ​ 47,087 ​ 183,541 Other expenses ​ 119,791 ​ 104,132 Total research and development expenses ​ $ 2,521,950 ​ $ 3,712,584 ​ Research and development expenses for the three months ended March 31, 2023 totaled approximately $2.5 million, a decrease of $1.2 million, or 32.1%, as compared to $3.7 million recorded for the three months ended March 31, 2022. The decrease in direct clinical and non-clinical expenses primarily resulted from the sharp decrease in clinical study expenses based on the VISION 2 Study being concluded in 2022. The decrease in non-cash stock-based compensation expenses primarily resulted from a change in the allocation percentages of a grant from research and development to general and administrative expense. The decrease in costs related to supplies and materials primarily resulted from the decline in clinical activity and the increase in deferred clinical supplies was due to greater demand from Arctic Vision and B+L for those supplies. ​ General and Administrative Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended March 31, ​ 2023 2022 Salaries and benefits ​ $ 1,021,951 ​ $ 1,028,782 Professional fees ​ ​ 613,035 ​ ​ 1,206,849 Stock-based compensation ​ 443,934 ​ 407,806 Insurance expense ​ ​ 256,736 ​ ​ 251,219 Sales and marketing ​ 195,620 ​ 179,309 Facilities expense ​ 121,419 ​ 106,031 Director fees and expense ​ 97,500 ​ 85,833 Other ​ ​ 186,691 ​ ​ 209,136 ​ ​ $ 2,936,886 ​ $ 3,474,965 ​ General and administrative expense for the three months ended March 31, 2023 totaled $2.9 million, a decrease of $0.5 million, or 15.5%, as compared to $3.5 million recorded for the three months ended March 31, 2022. The decrease was primarily attributable to legal and professional recruiting expenses associated with the addition of new directors in 2022 that were not recurring during this quarter. The increase in non-cash stock-based compensation expenses primarily resulted from a change in the allocation percentages of a grant from research and development to general and administrative expense. 18 Table of Contents Liquidity and Capital Resources; Going Concern We measure our liquidity in a number of ways, including the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2023 2022 Cash and cash equivalents ​ $ 18,466,322 ​ $ 22,863,520 ​ ​ ​ ​ ​ ​ ​ Working capital ​ $ 20,022,953 ​ $ 23,130,178 ​ ​ ​ ​ ​ ​ ​ Notes payable (gross) ​ $ 10,934,110 ​ $ 10,425,000 ​ Since inception, we have experienced negative cash flows from operations. As of March 31, 2023, our accumulated deficit since inception was $124.0 million. As of March 31, 2023, we had a cash and cash equivalents balance of $18.5 million, working capital of $20.0 million and stockholders’ equity of $15.8 million. As of March 31, 2023 and December 31, 2022, we had $10.9 million and $10.4 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. During the three months ended March 31, 2023 and 2022, our sources and uses of cash were as follows: Net cash used in operating activities for the three months ended March 31, 2023 was $7.0 million, which includes cash used to fund a net loss of $5.7 million, reduced by $1.2 million of non-cash expenses, and $2.4 million of cash used to fund changes in the balances of operating assets and liabilities. Net cash used in operating activities for the three months ended March 31, 2022 was $8.2 million, which includes cash used to fund a net loss of $7.3 million, reduced by $1.1 million of non-cash expenses, and $1.9 million of cash to fund changes in the balances of operating assets and liabilities. Cash used in investing activities for the three months ended March 31, 2023 was $0.8 million, which was related to vendor deposits, leasehold improvement expenditures for new leases and the purchase of property and equipment. Cash used in investing activities for the three months ended March 31, 2022 was $0.2 million, which was related to vendor deposits, leasehold improvement expenditures and the purchase of property and equipment. Net cash provided by financing activities for the three months ended March 31, 2023 totaled $3.4 million, which was attributable to aggregate proceeds received pursuant to the Sales Agreement with SVB Securities in an “at-the-market” offering. Net cash provided by financing activities for the three months ended March 31, 2022 totaled $15.6 million, which was primarily attributable to aggregate proceeds received from our “at-the-market” offering facility and our March 2022 offering, in which we sold (i) 3,000,000 shares of common stock, (ii) pre-funded warrants to purchase an aggregate of 1,870,130 shares of common stock and (iii) warrants to purchase an aggregate of 4,870,130 shares of common stock. The aggregate gross proceeds to us from the March 2022 offering were approximately $15 million, excluding the proceeds, if any, from the exercise of the warrants. 19 Table of Contents Contractual Obligations and Commitments During the next twelve months we have commitments to pay: (a) $2.5 million to settle our March 31, 2023 accounts payable, accrued expenses and other current liabilities; (b) $0.5 million relating to our non-cancelable operating lease commitments; and (c) $2.2 million of payments due under our notes payable. After twelve months, we have commitments to pay an additional $1.1 million relating to our non-cancelable operating lease commitments and notes payable in the amount of $8.8 million. 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 and Estimates For a description of our critical accounting policies, including critical accounting estimates, see Item 7 – Critical Accounting Policies in our Annual Report on Form 10-K, as filed with the SEC on March 31, 2023, as amended by Amendment No. 1, as filed with the SEC on May 1, 2023. 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 us are not required to provide the information required by this Item. ​ ​