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EYEG: Q2 Inline. Additional Trials Expected To Commence

By Brian Marckx, CFA


Q2 Financial Results, Operating Update…

EyeGate (NASDAQ:EYEG) announced Q2 financial results and provided a business update.  Relative to the financials, there were no meaningful surprises.  As expected, revenue remains relatively unexciting, consisting solely of government grants related to some of Jade's pipeline candidates.  Q2 revenue was $148k, largely consistent with our $175k estimate.  Approximately $221k remains to be funded under the current grants which run through 2017 and which is reflected in our model as revenue in the current year.

And while EYEG has yet to recognize as revenue any of the upfront and subsequent cash milestones received from Valeant related to licensing agreements for EGP-437 in the uveitis and (more recent) cataract surgery indications, that could soon change.  Through June 30th EYEG received $8.861M from Valeant.  This includes $636k received in May, which is the initial milestone payment under the ocular surgery contract, and $8.225M related to the uveitis contract (no additional payments were received related to the uveitis indication during Q2).  As a reminder, these payments are initially booked as deferred revenue on the balance sheet and then brought over to the income statement as revenue when the requisite milestones are completed (or in the case of upfront payments, is recognized as revenue ratably based on the proportional share that each milestone represents of the total).  

So while recognizing these milestones as revenue has no cash effect, it is important as it represents development progress of EGP-437 in these indications.  EYEG expects initial revenue from the ocular surgery indication to be recognized by current year-end.  But, drawn-out enrollment of the Phase 3 uveitis indication has delayed anticipated timing of initial revenue being booked from that contract - from prior expectations of sometime in 2017, to now, expected in 2H 2018.  The update is reflected in our model (again, this has no cash impact).    

Q2 operating expenses were $3.5M, meaningfully lower than our $4.0M estimate - with all of the difference in R&D expense.  We think at least some of the difference relates to slower enrollment of the (EGP-437) Phase 3 uveitis study.  But, with additional activity expected in most of the ‘focused’ development programs, including EGP-437 in both uveitis and cataract surgery, and CMHA-S in the OBG indication, we think R&D expense will trend higher.

Q2 net loss and EPS were $3.3M and ($0.28), compared to our $3.8M and ($0.35) estimates.  

Cash: In mid-June EYEG raised ~$8.8M net ($10M gross) via the sale of 5.3M common shares (@ $1.50/share) and 1,995 Series B preferred (convertible into 1.33M common shares), along immediately exercisable warrants (@ $1.50) to purchase 6.67M shares (i.e. 100% warrant coverage).  Cash balance, which also recently benefitted from the $636k ocular surgery-related milestone payment from Valeant in Q2 (in addition to $4M received in Q1), was $11.8M at Q2 quarter-end.  EYEG mentions in the 10-Q that they believe the current cash balance is sufficient to fund operations for approximately nine months.  

Additional funding is expected to come from milestone payments from Valeant related to the uveitis and cataract surgery licensing agreements as well as potentially from the sale of equity and/or debt.  As a reminder, the EGP-437 ocular surgery licensing agreement calls for up to $99M in cash payments from Valeant upon achievement of specific development/commercialization milestones. 

Meanwhile, terms of the recent $10M securities transaction restrict future sale of common shares under the ATM program for 24 months (i.e. until June 2019) unless executed at more than $3/share.     

On the operational front, while EYEG continues to make progress in all of their major development programs, including receipt of the initial milestone payment from Valeant for the EGP-437 ocular surgery program, there have been some slight delays since our last update in late-May.  This includes guidance for;

- EGP-437 in uveitis:
o while management's guidance relative to timing for topline data from the ongoing phase III study (Q1 2018) as well as when they think an NDA may be filed (1H 2018), remain unchanged, they do note in the Q2 10-Q that due to longer enrollment time, they now do not expect to begin recognizing revenue (i.e. booking deferred revenue as revenue on the income statement) from this contract until 1H 2018 - which is delayed from prior expectations (i.e. as of the Q1 10-Q) of sometime this year . We think this may suggest that the timeline for completion of the phase III study is also lagging expectations

- OBG:
o the OBG program has experienced some ongoing delays as EYEG continues to work to get IDE approval to commence a second pilot study.  Expectations prior to filing of the Q2 10-Q were to; commence a second pilot study in PRK surgery patients in Q2 2017 and for topline data to be available in 2H 2017.  Assuming positive results from the second pilot study, EYEG would then hope to commence a pivotal study in 2H 2017, report topline data in Q1 2018 and make 510(k) and CE Mark filings in 1H 2018.  

As we noted in our update in late May, we believed that timeline was somewhat aggressive, which looks to have been prescient.  As a reminder EYEG announced in early May that they submitted an IDE seeking FDA approval to commence this second pilot study.  However, in this week's Q2 earnings release the company notes that, "We received FDA feedback on the application in June and anticipate refiling the IDE to address the Agency’s comments later this quarter."  While the company still hopes to initiate the study and have topline data later this year, they are now shooting to begin the follow-on study in Q1 2018 (delayed from late 2017), report topline data from that (pivotal?) study in Q2 2018 (delayed from Q1 2018), make CE Mark and 510(k) filings in Q3 2018 (delayed from 1H 2018) and potentially launch in 2019 (delayed from 2018).  While the latest update to expected timelines equates to only ~3 to 6 months, we think the delay to IDE approval means these timelines may be overly optimistic and, even in the event of timely IDE approval, these expectations have essentially zero margin for any additional delays and we think assume a best-case scenario.  But, despite the slight delays, it has very little influence on our model or price target.  Additionally, we continue to believe that based on earlier positive clinical trial data and the de-risked nature of OBG that, if efficacy is confirmed in this follow-up study, we think the likelihood of eventual commercialization could be reasonably high. 

In Summary, EYEG’s Anticipated (Updated) Near-Term Milestones Include:

o Initiate second pilot study in Q3 2017, topline data Q4 2017
o Initiate pivotal study Q1 2018, topline data in Q2 2018
o De Novo 510(k) and CE Mark filings for corneal re-epithelization post-PRK surgery in Q3 2018
o Launch in 2019


o Uveitis
• Topline data from phase III uveitis confirmatory study in Q1 2018
• NDA filing for uveitis by 1H 2018
o Cataract surgery
• On 8/1 EYEG announced that the first patient enrolled in phase IIb study
• Topline data in late-2017
• Assuming positive phase II results, would follow with a phase III study
• Possible future supplementary NDA related to pain and inflammation 

EGP-437: Cataract Surgery

The most recent significant news was the announcement in May that EYEG received from Valeant the first development milestone ($636k) related to the EGP-437 in ocular surgery.  As a reminder, Valeant picked up their option for a cataract surgery indication.  In February 2017 EYEG announced that in return for $4M upfront cash (received in Q1 2017) and up to an additional potential $99M in development and commercialization milestones, they licensed rights to their EGP-437/delivery combination product candidate for the treatment of post-operative pain and inflammation in ocular surgery patients.

Phase IIb Study Just Commenced

On 8/1 EYEG announced that the first patient enrolled in their new phase IIb study.  The study design:  
double-masked, randomized, placebo-controlled.  Expected enrollment is up to 100 subjects. The trial will be conducted at up to 8 sites in the United States and is designed to evaluate the safety and efficacy of EGP-437 in patients having undergone cataract surgery with implantation of a monofocal posterior chamber intra-ocular lens (IOL). Primary efficacy endpoint is the proportion of subjects with an anterior chamber (AC) cell count of zero at day 7 and the proportion of subjects with pain score of zero at day 1.  Given the positive data to-date (below) including reduction in AC cell count and reduced pain favoring the EGP-437 treatment arms (versus placebo), we are optimistic for the success of this ongoing phase IIb study.  Assuming positive results, EYEG hopes to move directly to a phase III study for support of an eventual FDA filing.  

Positive Phase Ib/IIa Data

In December 2015 EYEG announced additional positive clinical data from their phase Ib/IIa post-cataract surgery dose-ranging clinical trial.  As a reminder, the study was designed to enroll up to 80 patients which have undergone unilateral cataract extraction and implantation of a monofocal intraocular lens.  

Patients were separated into cohorts of 10 patients each with each cohort treated at different doses and/or treatment regimens.  Subjects were evaluated on days 1 (i.e. 1 day following cataract surgery), 14 and 28.  Primary endpoint was the proportion of subjects with ACC count of zero on day 14.  Secondary efficacy endpoint was the proportion of subjects with a pain score of zero on Day 7. 

In August 2016 EYEG announced top-line data from 40 patients (4 cohorts) which were administered iontophoretic EGP-437 at either 9.0 mA-min or 14.0 mA-min on day 0, day 1 and day 2 or day 0, day 1 and day 4, with potential for an additional treatment at day 7 in all cohorts.  Results showed patients receiving the 14.0 mA-min dose on days 0, 1 and 4 had the most significant improvement in ACC  - with 40% of patients in this group achieving an ACC count of 0 at day 14 (i.e. the primary endpoint) and this increased to 88% on day 28. 

In addition, all patients receiving the iontophoretic treatment reported reduced pain at all time points with 90% having no pain as early as day 1 and increasing to 100% on day 14.  In addition, there was no steroid-related increase in intraocular pressure reported.

Concurrent with the top-line data release in August, the company noted that they would enroll three additional cohorts at other doses and dosing regimens with the expectation of further improving on the efficacy data to-date.  
In December 2016, EYEG announced additional positive data. Dosing and treatment regimen were modified slightly from that of the cohorts represented in the August data and included 30 patients (3 cohorts) which were administered iontophoretic EGP-437 at either 4.5mA-min on day 0 (post-operative), day 1 and day 4 or at 14mA-min on day 0 (pre-operative), day 1 and day 4.  The third cohort was dosed with placebo on day 0 (post-operative), day 1 and day 4.  An optional treatment (at physician’s discretion) on day 7 was available for all three cohorts.   

Results indicated that subjects in the lowest dose cohort (i.e. 4.5mA-min) exhibited the greatest response, with 30% of those patients reaching an ACC count of zero by day 14 and 80% by day 28.  While there was limited other data released, EYEG’s press release ( did provide other indications of a positive EGP-437 treatment response including that; ACC count reduction was observed in both EGP-437 treatment arms, only 10% of placebo patients reached an ACC count of zero by day 28 and 80% of placebo patients required rescue prior to day 14.  

In addition, and related to the pain outcome measure, it was noted that all EGP-437 patients experienced less pain at all time points and 70% had pain score of zero by day 1 whereas only 10% of placebo patients had pain score of zero at day 1.

See our table below summarizing the results disclosed in August (4 cohorts) and December (3 cohorts) 2016 and the respective dosing and treatment regimens.  Perhaps interesting, and maybe arguably confounding, is that ACC count reduction was most profound in one of the two highest dose cohorts in the August data but the December data showed the opposite – that is, the lowest dose cohort had the greatest number of subjects reaching an ACC count of zero.  

Although not mentioned in EYEG’s data announcement, one potential factor that could relate to this seeming counter-dose effect is that the higher dose cohort (i.e. 14mA-min) in the December data was treated on day 0 pre-operatively while the lower dose cohort (i.e. 4.5mA-min) was treated post-operatively on day 0.  Treating pre-operatively was found to be problematic in EYEG’s earlier cataract surgery (completed in 2013) study as the surgical procedure washed out the drug, thereby eliminating any potential therapeutic benefit.  This “wash-out” effect is what prompted the change in trial design to where EGP-437 is administered immediately following surgery.  

We characterize this data as highly promising given that it provides additional evidence of a positive treatment response to EGP-437.  EYEG initiated a phase IIb trial of EGP-437 in cataract surgery patients in Q3 2017.  Assuming positive results, a subsequent single phase III study is expected to be sufficient to support an FDA filing.  If all goes well, an FDA filing for a post-cataract surgery indication (reduction of pain/inflammation) could be made sometime next year.  The recent licensing agreement with Valeant should aid in funding development.  

EGP-437: Anterior Uveitis

While EYEG has not provided an update on the anterior uveitis (or macular edema) studies in the last several of months, they do note in their recent public filings and PRs that their phase 3 anterior uveitis clinical trial continues to enroll patients and they hope to have top-line data sometime in Q1 2018.  If all goes well EYEG thinks they may be in a position to make an NDA filing for this indication in 1H 2018.  Below is a refresher of the ongoing phase 3 study. 

New, Pivotal Phase III Study..

In May 2015 EYEG announced that FDA communicated that if a planned new phase III study demonstrates non-inferiority, that that data, along with results of the earlier phase III study (see Appendix for development background), will be sufficient to support an NDA filing.    

This non-infectious anterior uveitis “confirmatory study” is randomized, double-blind, placebo-controlled and designed to demonstrate non-inferiority of EGP-437 combination therapy to PA 1%.  Up to 250 patients (~125 each arm) with anterior segment uveitis (ACC count > 11) are expected to enroll at approximately 60 U.S. sites.  Primary efficacy endpoint is the same as the initial phase III study (i.e. ACC count of zero at Day 14).  Study details are listed on, trial ID NCT02517619   

Patients are randomized to either three treatments of EGP-437 combination therapy (Days 0, 4 and 9) plus placebo eye drops or PA 1% plus sham EGP-437 combination therapy.  The design of this confirmatory study, while similar to the initial phase III anterior uveitis trial, has some important differences which should improve the chances of meeting the primary efficacy endpoint.  This includes its larger size (greater chance of fleshing out statistical significance), three EGP-437 combination treatments (1.5 mA-min @ 2.7mA) instead of two (4.0 mA-min @ 1.5mA) and randomization based on severity of the disease (to eliminate the potential bias of more severe patients which was seen in the AGP-437 arm in the initial study).  

Timelines: The first patient was enrolled in the confirmatory study in January 2016.  The latest update on, on 7/25/17, lists anticipated primary completion date (i.e. final data collection) and estimated study completion date of December 2017 and February 2018, respectively.  While EYEG has not provided an update on this study in the last several months, they do note in their Q2 10-Q (filed August 4, 2017) that it continues to enroll patients and they hope to have top-line data sometime in Q1 2018.  If all goes well EYEG thinks they may be in a position to make an NDA filing for this indication in 1H 2018.

U.S. Regulatory Pathway:  Assuming positive results (i.e. primary efficacy endpoint met and acceptable safety profile), EYEG expects to file for U.S. regulatory approval/clearance of both the EyeGate II Delivery system and EGP-437 simultaneously.  EyeGate has already received confirmation from FDA that their delivery system is considered a Class II device but can pursue clearance through the (relatively simple) 510(k) clearance pathway.  For EGP-437, which must be approved through an NDA, EyeGate intends to file a 505(b)(2) NDA.  

Relative to the device.  EYEG’s 510(k) will cite two existing iontophoresis devices which deliver drugs through the skin, one of which is DJO Global’s (Empi’s) Dupel II Buffered iontophoresis electrode for use of delivery of lidocaine and epinephrine.  FDA has agreed that these are acceptable to use as predicates.  

The 505(b)(2) NDA relates to, “an application that contains full reports of investigations of safety and effectiveness but 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.”  It “permits FDA to rely, for approval of an NDA, on data not developed by the applicant.”    FDA allows 505(b)(2) applications in circumstances where there are changes to an approved drug such as, formulation, dosage form, strength and route of administration, among others.  EYEG has referenced Decadron, a topical dexamethasone formulation, which they believe they may be able to use the existing safety and efficacy literature of for filing of EGP-437 under the 505(b)(2) pathway.  

Based on our communication with EyeGate, management is comfortable, based on their interaction and communication with FDA including the agency accepting a preclinical and clinical data protocol based on the 505(b)(2) NDA route, that this is an acceptable pathway.  And importantly, EGP-437 has demonstrated what appears to be an acceptable safety profile in the five clinical studies in which it has been used.  

CMHA-S: Ocular Bandage Gel (OBG) Positive Initial Clinical Data, 2nd Pilot Study Could Initiate Q3 2017

In late January 2017 EyeGate announced encouraging top-line results of its human pilot study of its Ocular Bandage Gel (OBG).  While the study was small, results indicate that OBG may be associated with faster corneal healing following eye surgery as compared to standard of care.  We view this as meaningfully positive as it sets the stage to move OBG into a second pilot study – assuming IDE approval, could kick off in Q3.  In May 2017 EYEG submitted an IDE application to FDA.  They subsequently announced that the FDA provided feedback in June and that they expect to refile the IDE in Q3.      

As a reminder, OBG is the lead CMHA-S candidate which came from the Jade Therapeutics acquisition and is being developed for corneal repair indications.  Given the strong safety profile of the compound and expected (relatively streamlined) de novo 510(k) FDA pathway (in November FDA confirmed de novo 510(k) is an appropriate pathway for OBG to pursue in seeking U.S. regulatory clearance), we think OBG may represent one of EYEG’s most near-term commercialization opportunities.  See our Appendix for more background on the compound and the Jade acquisition.   

The pilot study compared OBG to artificial tears with bandage contact lens (BCL) in patients undergoing bilateral photorefractive keratectomy (“PRK”).  PRK is a type of vision-correction laser eye surgery - recovery from which includes regrowth of the epithelium (i.e. thin outer layer of the cornea).     

Ocular Bandage Gel photoreactive keratectomy pilot study 
➢ Objective:  evaluate safety and performance of OBG eye drop administered 4x/day for 14 days with or
without a BCL as compared to artificial tears and a BCL in healing of corneal epithelial defects
➢ Primary efficacy endpoint: complete wound closure by Day 3
➢ Design: prospective, randomized, controlled study in up to 39 subjects undergoing bilateral PRK surgery.
➢Subjects randomized to one of three cohorts;
o Arm 1 (n=12): EyeGate Ocular Bandage Gel 4x/day for 2 weeks after surgery without a BCL
o Arm 2 (n=14): EyeGate Ocular Bandage Gel 4x/day for 2 weeks after surgery in combination with a BCL 
o Arm 3 (n=13): Artificial tears 4x/day and BCL

Topline results of the pilot study, which was the first in-human study of OBG, showed a greater proportion of OBG-treated patients versus those treated with standard of care met the primary endpoint of complete wound closure by Day 3.  Top-line results were initially announced in January but in EYEG’s 2016 10-K (filed Feb 23, 2017) additional data was provided.  The updated data showed that 10 of the 12 (83%) patients treated with OBG alone (i.e. no BCL) met the primary endpoint, compared to 9 of the 14 (64.3%) OBG+BCL patients and just 7 of the 13 (53.8%) artificial tears+BCL patients.  

Remaining wound surface area on Days 1 (24 hours following surgery) and 3 were also assessed and similarly favored the OBG-alone cohort which had an average wound size of just 18.5mm on Day 1 and 0.02mm on Day 3.  This compares to 39.5mm and 0.37mm in the SOC patients at Days 1 and 3, respectively.            

While specifics were not provided relative to adverse events, EYEG did note in their PR that the study demonstrated safety and tolerability. 

Given the positive results of the pilot study, EYEG plans to move into a second pilot study which the company hopes to commence in Q3 2017 (following IDE approval) and hopes to have topline data from in Q4 2017.  We look forward to hearing details about the planned design and size of this study and note that given the de-risked nature of OBG, if efficacy is confirmed in this follow-up study, we think the likelihood of eventual commercialization could at that point be reasonably high.  We do note, however, that EYEG has indicated that they do expect that an eventual regulatory filing will need to be supported by a pivotal study which would follow this second pilot study.  Assuming success of the pilot and eventual pivotal studies, EYEG thinks they could make a De Novo 510(k) and CE Mark filing in Q3 2018 and launch sometime in 2019.  

We also think that, assuming continued success in the PRK/ re-epithelialization studies, that CMHA-S programs could reasonably be expanded to include other indications given its safety profile and potential broad applications related to corneal wound healing.  And as a reminder, in addition to Ocular Bandage Gel, Jade had already initiated development programs for CMHA-S in other applications including as an ocular surface shield and for treatment of bacterial keratitis – both of which have been funded by federal grants.     


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