EYPT - EyePoint: Well-Funded And Catalyst-Rich But Not Without Risks

2023-08-21 08:31:19 ET

Summary

• EyePoint Pharmaceuticals is developing the EYP-1901 treatment for wet age-related macular degeneration and non-proliferative diabetic retinopathy.
• Q2 2023 earnings show a decrease in net revenue, but the company has a strong cash position to fund operations until 2025.
• EYP-1901 shows promise, but potential risks exist. Phase 2 trial data expected in December 2023 and Q2 2024 will provide a more comprehensive assessment.

Introduction

EyePoint Pharmaceuticals ( EYPT ), based in Watertown, Massachusetts, develops treatments for severe eye disorders using its Durasert technology for sustained intraocular drug delivery. The company is testing EYP-1901 for wet age-related macular degeneration and non-proliferative diabetic retinopathy. It also launched the FDA-approved YUTIQ product for chronic non-infectious uveitis in 2019.

The following article discusses EyePoint Pharmaceuticals' progress with its investigational EYP-1901 treatment for wet age-related macular degeneration and non-proliferative diabetic retinopathy. Utilizing a TKI-based approach and sustained delivery through the Durasert insert, EYP-1901 shows promise, but potential risks exist. Upcoming Phase 2 trial data will offer a more comprehensive assessment of its prospects.

Q2 2023 Earnings

Looking at EyePoint's most recent earnings report , total net revenue decreased to $9.1M in Q2 2023 from $11.6M in Q2 2022, due to the sale of the YUTIQ franchise and the discontinuation of DEXYCU sales in 2023. Net product revenue declined from $11.3M to $5.3M. Net revenue from royalties and collaborations increased from $0.3M to $3.8M, primarily due to partial recognition of deferred revenue from the YUTIQ franchise sale. Operating expenses increased to $31.9M, largely due to R&D spending on the EYP-1901 clinical trials. The net loss for Q2 2023 was $22.9M, up from a net loss of $19.4M in Q2 2022. Cash and investments totaled $142.5M at the end of Q2 2023. This cash position is expected to fund operations into 2025.

Liquidity & Cash Runway

Turning to EyePoint's balance sheet , as of June 30, 2023, the company holds $139.6M in cash and cash equivalents and $2.9M in marketable securities, totaling $142.5M in highly liquid assets. Over the last six months, EyePoint reported a net loss of $44.1M. By dividing their total liquid assets of $142.5M by their average monthly net loss of $7.3M, EyePoint has an estimated cash runway of approximately 19.5 months, assuming current expenses persist. However, these estimates are my own and may differ from other analyses. EyePoint's current assets of $167.1M more than cover their current liabilities of $68.9M, indicating strong short-term financial health. The company has no long-term debt and has significantly reduced its short-term borrowings, further enhancing its balance sheet. Although EyePoint's recent profitability came from a one-time sale, the company has a considerable cash runway and may not require additional financing in the near future.

Valuation, Growth, & Momentum

According to Seeking Alpha data: EyePoint's capital structure is characterized by a small amount of debt relative to its market capitalization and a significant amount of cash. The enterprise value stands at $364.16 million. Valuation metrics are not meaningful due to negative earnings, but the company trades at a high EV/Sales ratio of 9.75. Growth prospects appear mixed with revenue declining year-over-year but expected to grow at a CAGR of 17.94% over the next three years. Earnings estimates show deterioration in the fiscal year 2025, with a decrease in EPS and sales. Notably, EyePoint's stock has strong momentum, outperforming the S&P 500 significantly over the past 3M, 6M, and 9M periods.

EYP-1901: EyePoint's Innovative TKI-based Treatment for Eye Diseases

EyePoint Pharmaceuticals' lead candidate, EYP-1901, has made significant progress as a potential treatment for wet age-related macular degeneration (wet AMD) and non-proliferative diabetic retinopathy ((NPDR)). EYP-1901 utilizes the small-molecule tyrosine kinase inhibitor ((TKI)) vorolanib within a bioerodible Durasert insert, allowing a single intravitreal injection for sustained drug delivery.

TKIs can be particularly beneficial for eye diseases due to their ability to block specific enzymes, called tyrosine kinases, involved in the transmission of intracellular signals. In the context of eye diseases, such as wet AMD and NPDR, excessive vascular endothelial growth factor ((VEGF)) signaling leads to abnormal blood vessel growth and increased permeability, resulting in vision loss. By inhibiting VEGF receptors, TKIs can reduce abnormal blood vessel formation and improve vision. TKIs like vorolanib offer a potential alternative or complement to anti-VEGF therapies, bringing a new mechanism of action and treatment paradigm for serious eye diseases.

Recent advancements in EYP-1901's development include the full enrollment of the Phase 2 DAVIO 2 and PAVIA clinical trials, with topline data expected in December 2023 and the second quarter of 2024, respectively. Interim safety data and baseline patient demographics from the DAVIO 2 trial were presented at the OIS Retina Innovation Summit, revealing no reported drug-related ocular or systemic SAEs in the enrolled patients. At the ASRS Annual Meeting, 12-month ocular pharmacokinetic results from a study evaluating EYP-1901’s drug delivery were presented, along with an encore subgroup analysis showing a reduction in supplemental anti-VEGF injection needs for DAVIO patients.

However, there are some potential risks associated with TKIs, as they can inhibit multiple tyrosine kinases, leading to off-target effects. These risks may include liver toxicity, hypertension, fatigue, or skin problems. In the case of EYP-1901, the ocular application of the drug may limit systemic exposure, potentially reducing the risk of systemic adverse events. The targeted, sustained delivery through the Durasert insert could also help mitigate potential risks.

My Analysis & Recommendation

In conclusion, EyePoint Pharmaceuticals appears to be at an interesting crossroads. While the company has faced revenue declines due to the sale of the YUTIQ franchise and the discontinuation of DEXYCU sales, it has shown positive strides with its EYP-1901 treatment. Given its robust cash and marketable securities of $142.5M, the company is in a strong financial position, with a cash runway estimated to last until 2025. Investors can take some comfort in the fact that the company has no long-term debt and has successfully reduced its total liabilities. This liquidity should enable EyePoint to comfortably fund the continued development of EYP-1901 and other pipeline candidates.

The market opportunity for EYP-1901 is significant, as wet AMD and NPDR are both serious eye diseases affecting millions of people worldwide. With the TKI-based approach and targeted sustained delivery of vorolanib through the Durasert insert, EYP-1901 has the potential to become a game-changer in the treatment of these conditions. The interim safety data and baseline patient demographics from the DAVIO 2 trial, as well as the 12-month ocular pharmacokinetic results, have added to the growing optimism surrounding this candidate.

However, investors should keep a close eye on the topline data from the Phase 2 DAVIO 2 and PAVIA clinical trials, expected to be released in December 2023 and the second quarter of 2024, respectively. While EYP-1901 has shown promise so far, these results will provide a more comprehensive view of its efficacy and safety in a broader patient population. Furthermore, EyePoint is not alone in its quest to advance a sustained-release TKI for eye disorders.

Given the current strong momentum in EyePoint's stock, investors may be tempted to jump in and purchase shares. However, I would recommend a "Hold" stance at this point in time. The company has substantial financial strength to fund operations, and EYP-1901 holds great potential for the treatment of wet AMD and NPDR. However, the company's valuation may already reflect the optimism surrounding EYP-1901. In addition, the TKI-based approach brings competition and potential risks, and we still await key clinical trial data. Therefore, a more prudent approach may be to wait for these data releases, as they will offer a better assessment of EYP-1901's prospects and the company's valuation.

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