Overview
We are a clinical-stage
specialty pharmaceutical company that is focused on developing and commercializing products for treating diseases and disorders
of the eye. We accomplish this by leveraging our two proprietary platform technologies, crosslinked thiolated carboxymethyl hyaluronic
acid (“CMHA-S”) and our iontophoresis drug delivery system.
We are developing
products using CMHA-S, a modified form of the natural polymer hyaluronic acid, which is a gel that possesses unique physical and
chemical properties such as hydrating and healing properties when applied to the ocular surface. The ability of CMHA-S to adhere
longer to the ocular surface, resist degradation and protect the ocular surface makes it well-suited for treating various ocular
surface injuries. Our first CMHA-S-based product, the EyeGate Ocular Bandage Gel (“OBG”), has completed a pilot trial
where we announced positive top-line data. OBG is a topically-applied eye drop formulation that is being developed under the 510(k)
De Novo path for devices submitted for marketing clearance to the U.S. FDA.
The CMHA-S platform
is based on hyaluronic acid (“HA”), a naturally occurring polymer that is important in many physiological processes,
including wound healing, tissue homeostasis, and joint lubrication. To create hydrogels, the HA is modified to create CMHA-S that
is then cross-linked together through the thiol groups. Some products employ disulfide cross-linking while others utilize a Polyethylene
Glycol Diacrylate, or PEGDA, cross-linker. Cross-linking slows degradation of the HA backbone and provides a matrix for incorporating
therapeutic agents. Variations in the number of thiols per molecule, the molecular weight of the polymer, the concentration of
the polymer, the type of cross-linking, and incorporation of active ingredients, provides a highly versatile platform that can
be tailored to a specific application. CMHA-S can be formulated as gels or films.
Our first CMHA-S-based
product candidate, the EyeGate Ocular Bandage Gel (“OBG”), is a topically-applied eye drop formulation that has completed
its first-in-man clinical trial. We announced positive top-line data from the initial pilot trial evaluating the ability of EyeGate
OBG to accelerate ocular surface re-epithelialization following photorefractive keratectomy (“PRK”). The EyeGate OBG
eye drop creates a thin, durable and protective coating to the damaged surface of the eye, serving to facilitate and accelerate
corneal re-epithelization. The EyeGate OBG is intended for the management of corneal epithelial wounds, defects, and epitheliopathies.
Preclinical studies
suggest that the specific CMHA-S chemical modification comprising the EyeGate OBG creates a favorable set of attributes, including
prolonged retention time on the ocular surface, and a smooth continuous clear barrier without blur that can minimize mechanical
lid friction, reduce repeat injury, and mechanically protect the ocular surface, allowing accelerated corneal re-epithelization.
The gel is presently
available commercially as a veterinary device indicated for use in the management of superficial corneal ulcers. Manufactured by
SentrX Animal Care and sold in the U.S. by Bayer Animal Health as Remend® Corneal Repair, the product has been used successfully
for five years in dogs, cats and horses, without adverse effects. The composition of the veterinary product is identical to that
of the EyeGate OBG. We do not have the rights to the CMHA-S platform for animal health or veterinary medicine.
In addition, we are
developing EGP-437, which incorporates a reformulated topically active corticosteroid, Dexamethasone Phosphate, that is delivered
into the ocular tissues through our proprietary innovative drug delivery system, the EyeGate® II Delivery System. EGP-437 is
being developed under the 505(b)(2) New Drug Application, or NDA, regulatory pathway for drugs submitted for approval to the U.S.
Food and Drug Administration, or FDA, which enables an applicant to rely, in part, on the FDA’s findings of safety and efficacy
for an existing product, or published literature, in support of its NDA.
The EyeGate® II
Delivery System features a compact, elegant, and easy-to-use device that we believe has the potential to deliver drugs non-invasively
and quickly into the ocular tissues through the use of iontophoresis, which can accelerate the onset of action, dramatically reduce
treatment frequency versus eye drops and sustain therapeutic effect. Iontophoresis employs the use of a low electrical current
that promotes the migration of a charged drug substance across biological membranes. The current produces ions, which through electrorepulsion,
drive a like-charged drug substance into the tissues. The EyeGate® II Delivery System is easy-to-use, only takes a few minutes
to employ and more than 3,000 treatments have been administered in clinical trials.
We are developing
EGP-437 for the treatment of various inflammatory conditions of the eye, including the treatment of ocular inflammation and pain
in post-surgical cataract patients and anterior uveitis, a debilitating form of intraocular inflammation of the anterior portion
of the uvea, such as the iris and/or ciliary body. Based on guidance provided by the FDA, we expect that if the planned confirmatory
Phase 3 trial of EGP-437 in anterior uveitis meets non-inferiority criteria, data from this trial along with data from our previously
completed Phase 3 trial in anterior uveitis will be sufficient to support an NDA filing. We also believe, based on guidance provided
by the FDA, that the design of the planned confirmatory Phase 3 anterior uveitis trial is acceptable and that the nonclinical work
completed to date is sufficient to support an NDA filing.
We have entered into
two exclusive global license agreements with a subsidiary of Valeant Pharmaceuticals International, Inc. (“Valeant”)
through which we granted Valeant exclusive, worldwide commercial and manufacturing rights to our EyeGate® II Delivery System
and EGP-437 combination product, or the Product, in the fields of anterior uveitis and ocular iontophoretic treatment for post-operative
ocular inflammation and pain in ocular surgery patients, as well as a right of last negotiation to license the Product for other
indications. We are responsible for the development of the Product in the U.S. for the indication of anterior uveitis, together
with the costs associated therewith. Valeant has the right to develop the Product in the fields outside of the U.S. and has agreed
to fund 100% of any costs associated therewith.
Our Strategy
Our goal is to become
a leading specialty pharmaceutical company focused on developing and commercializing products for treating diseases and disorders
of the eye. The key elements of this strategy are to:
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Continue clinical development of our EyeGate OBG
device for the treatment of corneal epithelial defects
. We completed our first-in-man trial enrolling subjects with a 9mm
corneal wound, a large corneal epithelial defect, post photorefractive keratectomy (PRK) surgery and released positive top-line
data in the first quarter of 2017. We expect to initiate a masked controlled pilot trial in the first half of 2018.
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Initiate clinical development of our EyeGate OBG
device for the treatment of punctate epitheliopathies.
We anticipate submitting a second IDE in the first quarter of 2018
to begin a clinical trial focused on treating patients with punctate epitheliopathies as confirmed by fluorescein staining of
the cornea. We expect to initiate a masked controlled pilot trial in the first half of 2018.
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Continue to analyze the data
from our recently completed Phase 2b trial with our EGP-437 Combination Product for the treatment of
inflammation and pain post cataract surgery
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enrollment of a 100 subject double-masked placebo controlled Phase 2b trial and
announced topline data for this trial in the first quarter of 2018. Although
EGP-437 demonstrated a higher rate of success compared to vehicle at all time points, the
co-primary endpoints of proportion of subjects with an anterior chamber cell (ACC) count of
zero at day 7 and the proportion of subjects with a pain score of zero at day 1 did not
show statistical significance. The efficacy results for the absence of inflammatory
cells in the EGP-437 treatment group met our expectations, but the vehicle group
response was better than anticipated. We will continue to review the data to determine next
steps and to continue evaluating EGP-437 for the reduction of pain and inflammation
following ocular surgery.
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Continue clinical development of our EGP-437 Combination
Product for the treatment of noninfectious anterior uveitis
. We have initiated and continue enrolling patients for the confirmatory
Phase 3 trial evaluating the safety and efficacy of our EGP-437 Combination Product for the treatment of noninfectious anterior
uveitis. Based on our estimates regarding subject enrollment, we expect to have topline data for this trial in the third quarter
of 2018.
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Utilize the EyeGate iontophoresis expertise to expand our drug delivery platform for the treatment of eye diseases
. Our initial platform, the EyeGate® II Drug Delivery System, is an in-office treatment performed by an eye care giver. We plan to develop a system based on iontophoresis that could be applied at home by the patient. This would be ideal for the treatment of certain chronic ocular diseases where less frequent visits to the eye care givers office are required.
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Pursue other strategic collaborations.
We plan to evaluate opportunities to enter into collaborations that may contribute to our ability to advance our drug delivery platform and product candidates and to progress concurrently a range of discovery and development programs. We also plan to evaluate opportunities to in-license or acquire the rights to other products, product candidates or technologies for the treatment of eye diseases.
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Ophthalmic Market Opportunity
Ophthalmology is a
specialty market with commercial and regulatory dynamics that make it possible for small or medium sized companies like us to develop
and commercialize products on our own. We believe that the specialists in the U.S. who treat ocular diseases are sufficiently concentrated
that we could effectively promote our products with a specialty sales and marketing group.
EyeGate OBG
The EyeGate OBG is
a synthetic biocompatible cross-linked thiolated carboxymethyl hyaluronic acid (CMHA-S) hydrogel capable of coating the ocular
surface and designed to resist degradation under conditions present in the eye. This prolongs residence time of the bandage on
the ocular surface, thereby addressing the limitations of current non-cross-linked hyaluronic acid formulations. Additionally,
cross-linking allows the product’s viscosity to be modified to meet optimum ocular needs. The increased viscosity and non-covalent
muco-adhesive interfacial forces improve residence time in the tear film, thus providing a coating that aids and promotes re-epithelization
of the ocular surface via physical protection.
The EyeGate OBG exhibits
significant shear thinning properties. This feature allows the CMHA-S polymer to act as a more concentrated, viscous barrier at
low shear rates in a resting tear film, but also as a lower resistance fluid (therefore thinned) during high shear events such
as blinking. This property enables better residence time and a more favorable ocular surface coating with less optical blur. This
should enhance ocular surface protection and patient comfort.
The EyeGate OBG has
been shown to provide a mechanical barrier that aids in the management of corneal epithelial defects and accelerates re-epithelization
in both preclinical studies and in clinical ophthalmic veterinary use. As such, photorefractive keratectomy (PRK) surgery was chosen
as the subject population which is best suited to demonstrate this effect. PRK is an efficacious alternative to patients seeking
surgical correction of refractive errors who are not suitable candidates for laser in situ keratomileusis (LASIK) due to inadequate
corneal thickness, larger pupil size, history of keratoconjunctivitis sicca (KCS), or anterior basement membrane disease. The primary
effectiveness endpoint for this initial pilot trial was time to re-epithelization of a large epithelial defect following PRK surgery.
We completed the initial trial and announced positive top-line data in the first quarter of 2017. We anticipate initiating our
next pilot trial in the first half of 2018.
We believe that the
EyeGate OBG can be used for the management of a variety of large and small corneal epithelial defects including Punctate Epitheliopathies.
Punctate Epitheliopathies are an early sign of epithelial compromise and are associated with a variety of pathologic ocular inflammatory
conditions including ocular causes, as well as systemic diseases. This ocular surface condition is common and may represent areas
of epithelial cell damage and loss and therefore stain positively with fluorescein. Causes can include dry eye, acute and chronic
bacterial and viral conjunctivitis, trauma, contact lens wear (tight lens syndrome), chemical irritation and burns, diabetic and
infectious neuropathies, chemotherapy and corneal abrasion. We plan on submitting a second IDE to the FDA in the first quarter
of 2018 for the development of EyeGate OBG for treating Punctate Epitheliopathies. We anticipate initiating our first pilot trial
in the first half of 2018.
EyeGate® II Delivery System and
EGP-437
Delivery of therapeutic
agents using ocular iontophoresis has been of interest as a means of non-invasively achieving higher drug levels within the eye
by promoting the migration of a charged drug substance across biological membranes with a low electrical current. The EyeGate®
II Delivery System applicator utilizes an inert electrode, which stimulates the electrolysis of water to produce ions (hydroxide
or hydronium), which via electrorepulsion, drive a like-charged drug substance into the ocular tissues. The EyeGate® II Delivery
System delivery platform requires custom pharmaceutical formulations to enable delivery efficiency and safety while allowing for
potential novel intellectual property. The data from multiple clinical trials suggests that EGP-437 does not significantly raise
mean intraocular pressure, or IOP, at the time points evaluated during the study period.
Many front of the
eye diseases such as cataract surgery and non-infectious anterior uveitis are acute inflammatory conditions. The current standard
of care to treat ocular surface and anterior segment inflammation is patient administered corticosteroids in the form of eye drops.
Topical corticosteroids suffer from a number of drawbacks including low ocular bioavailability, rapid clearance and steroid-related
side effects including elevated IOP. We believe that our EGP-437 Combination Product has the potential to address these unmet needs
by providing in-office treatments given by the eye care provider thereby mitigating the patient compliance issues and substantially
reducing the burden of care.
Currently, the only
primary route of administration for drugs treating retinal diseases is through intravitreal injection into the vitreous of the
eye. These injections must be given as frequently as once per month when treating chronic diseases like macular degeneration. Unfortunately,
there are known drawbacks associated with administering intravitreal injections, including safety risks, adverse patient experience
and being time- and labor-intensive to administer. Data from our Phase 1b/2a proof-of-concept macular edema trial suggests that
iontophoresis can non-invasively deliver EGP-437 to the back of the eye. The non-invasive delivery of EGP-437 has demonstrated
a positive response in some patients with macular edema.
Current Targeted Indications
EyeGate OBG: Large Corneal Epithelial
Defects
The EyeGate OBG provides
a thin coating to the surface of the eye, serving as a protectant to facilitate and accelerate corneal re-epithelization. EyeGate
conducted a randomized masked, prospective study of the safety and performance of the EyeGate Ocular Bandage Gel, a 0.75% crosslinked
Hyaluronic Acid applied topically for accelerating re-epithelization of large corneal epithelial defects resulting from photorefractive
keratectomy (PRK) used in combination with and without a bandage contact lens.
Photorefractive keratectomy
(PRK) is an efficacious alternative to patients seeking surgical correction of refractive errors who are not suitable candidates
for laser in situ keratomileusis (LASIK) due to inadequate corneal thickness, larger pupil size, history of keratoconjunctivitis
sicca (KCS), or anterior basement membrane disease. PRK involves controlled mechanical removal of corneal epithelium with subsequent
excimer laser photoablation of the underlying Bowman’s layer and anterior stroma, including the subepithelial nerve plexus.
The military prefers
PRK as a refractive surgery due to the stability of the PRK incision and the absence of risk for flap dislocation during military
active duty. Although this procedure yields desirable visual acuity results, common complications of the procedure include post-operative
pain secondary to the epithelial defects, risk of corneal infection prior to re-epithelization of the large epithelial defect,
corneal haze formation, decreased contrast sensitivity, and slower visual recovery.
EyeGate OBG: Punctate Epitheliopathies
Punctate Epitheliopathies,
or PE, are an early sign of epithelial compromise and are associated with a variety of pathologic ocular inflammatory conditions
including ocular causes, as well as systemic diseases. This ocular surface condition is common and may represent areas of epithelial
cell damage and loss and therefore stain positively with fluorescein. PE is characterized by a breakdown or damage of the epithelium
of the cornea in a pinpoint pattern, which can be seen with examination with a slit-lamp. Patients may present with non-specific
symptoms such as red eye, tearing, foreign body sensation, photophobia and burning. Causes can include dry eye, acute and chronic
bacterial and viral conjunctivitis, trauma, contact lens wear (tight lens syndrome), chemical irritation and burns, diabetic and
infectious neuropathies, chemotherapy and corneal abrasion.
Standard of care treatments
are aimed at attempting to heal these punctate micro defects and/or epitheliopathies and can include increasing humidity, artificial
tears, lubricants and ointments and in severe cases can even utilize bandage contact lens, antibiotics and amniotic membrane graphs,
as well as treating the underlying cause with topical anti-inflammatory and T cell modulators. The endpoint of treatment is to
re-epithelize the cornea and resolve the corneal staining. Resolution of the corneal staining are frequently measured by scales
such as the National Eye Institute Scale (NEI) or Oxford scale. These standardized and validated scales have been developed to
help score and measure these defects. Often these current treatments fall short as they are ineffective in protecting and enabling
corneal re-epithelization. The artificial tears have limited residence time and often do nothing to mechanically protect the cornea
and create an environment that can accelerate corneal reepithelization and resolve staining. Furthermore, many of the ointments
and gels, although offering better residence time, are thicker and blur vision, thus making them less attractive for day time use.
The EyeGate OBG, once
applied to the eye, forms a thin layer that protects the eye to promote re-epithelization in the management of a variety of large
and small corneal epithelial defects including PE.
EGP-437: Cataract Surgery
Cataracts are the
leading cause of blindness worldwide, and there are more than 24 million people age 40 and older who have cataracts in the U.S.
alone, according to the Vision Problems in the U.S. report from Prevent Blindness. A cataract is a clouding of the lens in the
eye that affects vision. Most cataracts are related to aging and are very common in older people. By age 80, more than half of
the U.S. population either have a cataract or have had cataract surgery. Cataract surgery is the most common surgical procedure
in the population aged over 65 years. There are approximately three million cataract surgeries performed per year in the U.S. As
the technology of cataract surgery has progressed, so too, has the increased patient demand for excellent vision and safety after
the procedure, but visual rehabilitation after cataract surgery is sometimes delayed by the inflammatory processes that are induced
by phacoemulsification where the eye’s internal lens is emulsified with an ultrasonic hand piece and aspirated from the eye.
Inflammation is induced in all cataract surgery by the mechanical transmission of energy into the eye, disruption of cell membranes,
and the normal healing process. Postoperative topical corticosteroids are used routinely to reduce inflammation and improve visual
outcomes after cataract surgery. Despite their use, transient corneal edema is one of the major factors hindering the improvement
of vision in the first days after surgery, and cystoid macula edema may reduce quality of vision for weeks and months after the
procedure. Therefore, reducing inflammation and its potential damage to the corneal endothelium and retina is a high priority for
the ophthalmic surgeon.
EGP-437: Non-Infectious Anterior
Uveitis
Uveitis is a general
term for inflammation of the uveal tract and encompasses a wide range of etiologies. It may be iodiopathic, associated with systemic
diseases or result from a variety of infectious agents. An annual estimated 17.6% of active uveitis patients experience transient
or permanent loss of vision. Uveitis is responsible for more than 2.8% of cases of blindness in the U.S., making this disorder
an important cause of vision loss and impairment. Non-infectious anterior uveitis is a debilitating form of intraocular inflammation
of the anterior portion of the uvea, such as the iris and/or ciliary body and is the most common form of uveitis. Incidence in
the U.S. ranges from approximately 26.6 to 102 per 100,000 adults annually with recent reports indicating occurrence
in all age groups with the highest incidence in those over age 65 years. Chronic or recurrent, anterior uveitis may lead to complications
such as posterior subcapsular cataract, glaucoma and macular edema.
Inflammation can be
classified as either acute or chronic. Acute inflammation is the initial response of the body to harmful stimuli and is achieved
by the increased movement of plasma and white blood cells from the blood into the injured tissues, in this case the uvea. Sometimes,
the inflammation associated with anterior uveitis is in response to a real infection. This is known as infectious anterior uveitis.
However, anterior uveitis often occurs for no apparent reason as the result of the immune system malfunctioning and triggering
the process of inflammation even though no infection is present. This is known as non-infectious anterior uveitis. Patients that
have anterior uveitis exhibit a large number of white blood cells in the anterior chamber of the eye. In order to count these cells
in the anterior chamber, the physician uses a slit lamp, an instrument consisting of a high-intensity light source that can be
focused to shine a thin sheet of light into the eye. The treatment objective is to eliminate the inflammation of the uvea which
can be confirmed by an anterior chamber cell count of zero.
Clinical Trial Results
EyeGate OBG: Large Corneal Epithelial
Defects
In the first quarter
of 2017, we reported topline results from the first-in-human pilot trial of EyeGate OBG, the acceleration of re-epithelialization
of large corneal epithelial defects in patients having undergone photorefractive keratectomy (“PRK”). The prospective,
randomized, controlled study enrolled 39 subjects undergoing bilateral PRK surgery and aimed to assess the safety and performance
of EyeGate OBG on its own or combined with a Bandage Contact Lens (“BCL”) compared to the current standard of care,
artificial tears and BCL. The primary endpoint of the study was complete wound closure by Day 3.
The enrolled subjects
were randomized into one of three study groups, with subjects receiving the same treatment in both eyes:
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Patients in arm 1 (n=12) received EyeGate Ocular Bandage Gel four times daily (QID) for two weeks
after surgery.
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Arm 2 (n=14) was comprised of EyeGate Ocular Bandage Gel QID for 2 weeks after surgery in combination
with a BCL.
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Arm 3 (n=13) was comprised of artificial tears administered four times daily and BCL.
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The study demonstrated
safety and tolerability of EyeGate OBG, with encouraging potential efficacy. 83.3% of the subjects in Arm 1 (EyeGate OBG alone)
achieved complete wound closure by Day 3, compared to 53.8% of patients that received the standard of care. Thus, the OBG arm had
approximately 55% more subjects achieve full wound closure on Day 3 than the standard of care arm. Also, on Day 3, the average
wound length, measured horizontally and vertically was 83.3% and 66.7% smaller, respectively, for the OBG arm versus the standard
or care arm. Additionally, on Day 1 (24 hours post-surgery), the average wound length, measured horizontally and vertically, was
35.9% and 27.4% smaller, respectively, for the OBG arm versus the standard-of-care arm. Based on these positive results, EyeGate
plans to continue development with a double-masked, controlled trial evaluating EyeGate OBG monotherapy against BCL in the first
half of 2018.
EGP-437
We submitted an IND
for EGP-437 to the FDA on April 28, 2008. The initial protocol submitted as part of the IND application was for our Phase 1/2 non-infectious
anterior uveitis trial. Subsequently, we submitted amendments to our IND for protocols for additional trials that we have since
completed on September 12, 2008, April 6, 2010, October 18, 2011, April 13, 2012 and May 20, 2015. An IND application (IND 107,846)
referencing our IND (IND 77,888) was submitted by the University of Pennsylvania, School of Medicine on January 29, 2010 with a
protocol for the treatment of anterior scleritis.
We have completed
seven clinical trials under IND 107,846 for the EGP-437 Combination Product. The first two trials were executed in parallel - a
Phase 1/2 non-infectious anterior uveitis trial and a Phase 2 dry eye trial. These two trials were followed by a Phase 3 dry eye
trial. Subsequently, we completed our first Phase 3 trial for non-infectious anterior uveitis. During the time that we executed
the Phase 3 non-infectious anterior uveitis trial we completed a Phase 2 proof-of-concept cataract surgery trial, with prophylactic
treatment of the EGP-437 Combination Product. In 2016, we completed a Phase 1b/2a dose ranging trial treating inflammation and
pain for subjects that have undergone cataract surgery and a Phase 1b/2a proof-of-concept macular edema trial.
PROTOCOL
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INDICATION
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PHASE
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NO. SUBJECTS RANDOMIZED
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CONTROL ARM
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EGP-437-001
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Anterior Uveitis
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1/2
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40
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None
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EGP-437-002
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Dry Eye
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2
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105
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Placebo
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EGP-437-003
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Dry Eye
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3
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198
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Placebo
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EGP-437-004
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Anterior Uveitis
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3
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193
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Standard of care
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EGP-437-005
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Cataract Surgery
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2 POC
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45
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Placebo
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EGP-437-007
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Macular Edema
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1b/2a
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26
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None
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EGP-437-008
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Cataract Surgery
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1b/2a
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80
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Placebo
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Cataract Surgery: Phase 1b/2a Trial
(EGP-437-008)
We have reported positive
data for our dose-ranging clinical trial for the treatment of ocular inflammation and pain in post-surgical cataract patients.
The Phase 1b/2a clinical trial was a multi-center, open-label trial enrolling 80 subjects who had undergone unilateral cataract
extraction and implantation of a monofocal intra-ocular lens. The primary objective of this trial was to assess the safety and
efficacy of iontophoretic EGP-437 in these patients following surgery.
The trial design included
eight cohorts, ten subjects per cohort, whereby iontophoretic doses of 4.0 mA-min, 4.5 mA-min, 9.0 mA-min and 14.0 mA-min were
employed and the 9.0 and 14.0 mA-min cohorts included different dosing regimens. Dosing regimens included three treatments administered
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. One cohort
had the Day 0 treatment given prior to surgery and all other cohorts had the Day 0 treatment provided after surgery. All cohorts
except one was treatment delivering EGP-437, the exception was a placebo arm. The primary endpoint for all cohorts is based on
the proportion of subjects that achieved an anterior chamber cell (ACC) count of zero, with secondary endpoints measuring pain
score and intra-ocular pressure.
A positive response
was achieved demonstrating that EGP-437 delivered via our EyeGate® II Delivery System was safe and effective in reducing inflammation
and preventing pain. The best responses were achieved with the 4.5mA-min and 9.0mA-min cohorts with similar or greater percentage
of patients with ACC count of zero greater than Durezol* at Day 7. Both EGP-437 cohorts demonstrated a greater proportion of patients
with ACC count of zero than Durezol* at Day 28. The percentage of patients with zero pain was better than Durezol* at Day 4, 7
and 14 for both EGP-437 cohorts. The optimal dose was determined to take forward into a Phase 2b trial, initiated in the third
quarter of 2017.
Cataract Surgery: Phase 2b Trial (EGP-437-009)
We announced topline
data for this trial in the first quarter of 2018.
Although EGP-437 demonstrated a higher
rate of success compared to vehicle at all time points, the co-primary endpoints of proportion of subjects with an anterior chamber
cell (ACC) count of zero at day 7 and the proportion of subjects with a pain score of zero at day 1 did not show statistical significance.
The efficacy results for the absence of inflammatory cells in the EGP-437 treatment group met our expectations, but the vehicle
group response was better than anticipated. The difference in proportion of subjects with total clearing of ACC between the
EGP-437 group and the Placebo widens at Day 14 and Day 28, trending towards statistical significance (see graph below). Also, the
difference in average or mean cell count at Day 7 (the day for evaluating the primary endpoint) between the EGP-437 group and the
Placebo group was statistically significant with a P value = 0.0096.
We
will continue to review the data to determine next steps and to continue evaluating EGP-437 for the reduction of inflammation and
pain following ocular surgery.
Macular Edema: Phase 1b/2a Trial (EGP-437-007)
We have reported data
for our first clinical trial treating a back of the eye indication, macular edema. The Phase 1b/2a proof-of-concept trial suggests
that iontophoresis can non-invasively deliver EGP-437 to the back of the eye. The non-invasive delivery of EGP-437 has demonstrated
a positive response in some patients with macular edema.
The completed Phase
1b / 2a clinical trial is a multi-center, open-label trial. The data reported was based on the first 19 patients enrolled and had
macular edema associated with Retinal Vein Occlusion, Diabetic Retinopathy or Post-Surgical (cystoid) Macular Edema. The primary
objective of this trial is to evaluate the safety and efficacy of iontophoretic EGP-437 in patients suffering from Macular Edema.
Three treatments at 14.0 mA-min (3.5mA) were administered on Day 0, Day 4 and Day 9. Primary outcome of the trial measured reduction
in mean central subfield thickness on Day 4, Day, 9 and Day 14. Ozurdex® was administered as control to patients that did not
respond to the investigational therapy at Day 14 and were re-evaluated at Day 28.
A positive response
was observed in some of the patients, with pseudophakic eyes (an eye implanted with an intraocular lens) responding better than
phakic eyes (an eye with a natural lens). A positive response was demonstrated in three subpopulations of macular edema including
macular edema associated with diabetes, retinal vein occlusion and inflammation or cystoid. In one example, a subject that presented
with diabetic macular edema was provided with three treatments of EGP-437, Day 0, Day 4 and Day 9 and showed anatomic resolution
in approximately one week after only two treatments, as illustrated by the optical coherence tomography scan below. Additionally,
the investigational therapy showed no serious treatment emergent adverse effects including no increase in ocular pressure even
at three times the iontophoretic dose that was used for the Company’s Phase 3 non-infectious anterior uveitis trial.
Non-Infectious Anterior Uveitis: Phase
3 Clinical Trial (EGP-437-004)
Our previous Phase
1/2 non-infectious anterior uveitis clinical trial, and two dry eye clinical trials, showed that the EGP-437 dose selected for
the Phase 3 non-infectious anterior uveitis trial was well tolerated and demonstrated positive activity. The Phase 3 non-infectious
anterior uveitis clinical trial was conducted to assess safety and efficacy of the EGP-437 Combination Product and evaluate its
non-inferiority status to a standard of care, prednisolone acetate 1% (PA) eye drops. Communication received from the FDA, dated
December 3, 2007, stated that the FDA recommends that PA, administered at least four times per day (q.i.d.), be the positive control
agent for the treatment of anterior uveitis. Our trial utilized a more stringent regimen for the positive control of eight times
per day in week one and six times per day in week two before going to four times per day in weeks three and four. Patients had
to agree to comply with dosing regimen to be included in the trial.
The completed Phase
3 non-inferiority study in patients with non-infectious anterior uveitis appeared to demonstrate that two iontophoretic treatments
with our EGP-437 Combination Product achieved the same response rate as the positive control for the primary efficacy endpoint,
a complete clearing of anterior chamber cells, by Day 14. The control is the current standard of care, PA, which was administered
multiple times daily as eye drops. Although we achieved the same response rate in our Phase 3 clinical trial, the dose of the EGP-437
Combination Product tested was just outside the pre-set non-inferiority margin for intent-to-treat and per protocol populations
and did not achieve statistical significance in the intent-to-treat population as compared to the positive control based on the
primary efficacy endpoint.
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·
|
The EGP-437 Combination Product produced the same outcomes compared to PA while eliminating the need to apply up to eight eye drops a day, for a total of 154 drops over a four-week period - eight times per day for week one, six times per day for week two and four times per day for weeks three and four.
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This was achieved with a lower incidence of increased IOP, which is characterized as an increase of six mm Hg or more from baseline; in the EGP-437 Combined Product group, 14 subjects had 17 occurrences while 24 subjects had 41 occurrences in the PA arm.
|
Phase 3 Safety Discussion
Our EGP-437 Combination
Product appears to be clinically comparable to PA topical drops. With regard to elevated IOP, no subjects in the EGP-437 Combination
Product treatment arm experienced any significant increase in IOP (greater than 20mmHg), whereas the PA treatment arm had one subject
with a reported IOP increase of 27mmHg. With regard to IOP-related adverse events, one subject in the EGP-437 Combination Product
treatment group reported an adverse event (seen approximately three weeks after rescue was initiated) and six subjects in the PA
treatment arm reported adverse events related to IOP.
Phase 3 Clinical Trial Conclusion
Topical corticosteroid
therapy administered as frequently as every hour with tapering over the treatment period has been the mainstay for uveitis treatment
since the 1950s. In this unique Phase 3 randomized, double-masked, positive-controlled clinical trial in subjects with non-infectious
anterior uveitis, two treatments with ocular iontophoretic delivery of EGP-437 appears to be clinically comparable to PA topical
drops administered with a tapering schedule from eight drops per day to four drops per day over 28 days.
By Days 7 and 14,
the proportion of subjects reaching ACC counts of zero was slightly greater in the EGP-437 Combination Product arm than the PA
arm. This effect was more noticeable in the subgroup of subjects with a higher baseline ACC count; a higher proportion of subjects
in the EGP-437 Combination Product arm reached an ACC count of zero by Days 7 and 14 in this sub-group of subjects. Safety findings
were comparable for both study arms.
Non-Infectious Anterior Uveitis: Phase
1/2 Trial (EGP-437-001)
Our first clinical
trial initiated with the EGP-437 Combination Product was a Phase 1/2 trial for subjects with non-infectious anterior uveitis, which
was defined as having anterior chamber cell (ACC) scores ≥ 1.5, or in other words, cell counts of less than or equal to 11 cells.
Subjects who have anterior uveitis, exhibit a large number of white blood cells in the anterior chamber of the eye. The treatment
objective is to eliminate the inflammation which can be visually confirmed when all white blood cells have been cleared from the
anterior chamber. The degree of intraocular inflammation is based on a grading scheme or score that uses an ordinal scale ranging
from 0 to 4.
The primary objective
of this exploratory study was to define a safe and effective dose of EGP-437 in subjects with non-infectious anterior segment uveitis.
The secondary objective was to evaluate the systemic pharmacokinetic profile of EGP-437 (dexamethasone and dexamethasone phosphate)
following ocular dosing.
This multi-site, randomized,
double-masked, parallel group, dose comparison, exploratory study comprised five visits conducted over 28 days. The study population
was comprised of 40 eyes of 40 subjects. Enrolled subjects were randomly assigned to receive one of four iontophoresis dose levels
of EGP-437 for approximately four minutes with up to ten subjects per treatment arm. Subjects received a single treatment only,
at Day 0, subjects returned for examination on Days 1, 7, 14, and 28. Eligible subjects received one of the following four iontophoresis
dose levels of EGP-437 (dexamethasone phosphate ophthalmic solution (40mg/mL)) for approximately 4 minutes:
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Treatment Group A: 1.6 mA-min at 0.4 mA
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Treatment Group B: 4.8 mA-min at 1.2 mA
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Treatment Group C: 10.0 mA-min at 2.5 mA
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Treatment Group D: 14.0 mA-min at 3.5 mA
|
Following the single
treatment with the EGP-437 Combination Product, 48% of the subjects achieved an ACC score of zero within two weeks. By Day 28,
60% of the subjects achieved an ACC score of zero and required no further treatment. At Day 14, in the lowest treatment group,
the proportion of subjects with an ACC count of zero was 4/10 (40%) and for all treatment groups was 7/40 (18%). At Day 28, in
the lowest treatment group, the proportion of subjects with an ACC count of zero was higher at 6/10 (60%) and for all treatment
groups was 14/40 (35%). The highest proportion of subjects with an ACC score or ACC count of zero was in the 1.6 mA-min at 0.4
mA treatment group at both Days 14 and 28.
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TREATMENT GROUP
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CHARACTERISTIC
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STATISTIC OR CATEGORY
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1.6 mA-min
(N = 10)
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4.8 mA-min
(N = 10)
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10.0 mA-min
(N = 10)
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14.0 mA-min
(N = 10)
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Total
(N = 40)
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ACC
Score
of Zero
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Day 14
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8 (80
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)%
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6 (60
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)%
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2 (20
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)%
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3 (30
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)%
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19 (48
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)%
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|
Day 28
|
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8 (80
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)%
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6 (60
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)%
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5 (50
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)%
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5 (50
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)%
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|
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24 (60
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)%
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ACC
Count
of Zero
|
|
Day 14
|
|
|
4(40
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)%
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|
|
1 (10
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)%
|
|
|
1 (10
|
)%
|
|
|
1 (10
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)%
|
|
|
7 (18
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)%
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|
|
Day 28
|
|
|
6 (60
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)%
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|
|
2 (20
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)%
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|
|
1 (10
|
)%
|
|
|
5 (50
|
)%
|
|
|
14 (35
|
)%
|
The median time in
days to an ACC score of zero ranged from a minimum of 11.5 days in the 1.6 mA-min dose group to a maximum of 31.0 days in the 14.0
mA-min dose group. The proportion of patients with an ACC score reduction of 0.5 or more on Day 28 was 80% (eight) in the 1.6 mA-min
dose group and 60% (six) in the other three dose groups. The mean change in ACC score from baseline to Day 28 ranged from a maximum
of -2.25 in the 1.6 mA-min dose group to a minimum of -2.00 in the 14.0 mA-min dose group. The relatively short mean times to reach
an ACC score of zero in each dose group suggest that the treatment has a rapid onset of action.
The results from this
trial appeared to demonstrate that the most effective EGP-437 dose level is in the 1.6 mA-min at 0.4 mA dose level. The level of
association between the iontophoresis treatments and achieving an ACC Score of zero was assessed and the association was estimated
to be statistically significant at a 5% level of significance (p-value = 0.032) on Day 14, suggesting that the treatment differences
are larger than would be expected by chance alone. The probability-value or p-value is a number between 0.00 and 1.00, and is used
to demonstrate the strength of a conclusion drawn from clinical trial data. Essentially the p-value measures consistency between
the results actually obtained in the trial and the “pure chance” explanation for those results. A statement and corresponding
p-value are considered of strong significance if the probability of the same reaction occurring randomly or by chance is less than
5%, corresponding to a p-value of p<0.05.
This trial showed
low short-term systemic exposure to dexamethasone following ocular iontophoresis delivery of dexamethasone phosphate, and no corticosteroid
mediated effects were observed.
While this dose-ranging
study did not include positive or negative controls, the results demonstrated that a single treatment with the EGP-437 Combination
Product: (1) lowered ACC scores in the majority of patients without requiring additional treatment and (2) produced low short-term
systemic exposure to dexamethasone and dexamethasone phosphate.
Clinical Development Plan
EyeGate OBG
The EyeGate OBG has
been shown to provide a mechanical barrier that aids in the management of corneal epithelial wounds, defects and epitheliopathies.
EyeGate OBG has been shown to accelerate re-epithelization in both preclinical studies and in clinical ophthalmic veterinary use.
As such, photorefractive keratectomy (PRK) surgery was chosen as the subject population, which is best suited to demonstrate the
acceleration of re-epithelization. PRK is an efficacious alternative to patients seeking surgical correction of refractive errors
who are not suitable candidates for laser in situ keratomileusis (LASIK) due to inadequate corneal thickness, larger pupil size,
history of keratoconjunctivitis sicca (KCS), or anterior basement membrane disease. The primary effectiveness endpoint for this
initial pilot trial was time to re-epithelization of epithelial defect following PRK surgery. We have completed the initial proof-of-concept
trial and announced positive top-line data in the first quarter of 2017. We anticipate initiating a prospective, masked pilot clinical
trial in the first half of 2018 for large corneal epithelial defects following PRK surgery.
The FDA, at the pre-submission
meeting that occurred in the fourth quarter of 2016, asked us to file an Investigational Device Exemption (IDE) application prior
to continuing with the development of OBG. The IDE was filed in May of 2017 and in June of 2017, 30 days following submission,
we received a comment letter from the FDA. The letter asked us to complete specific tasks and to submit an IDE amendment with the
results for those tasks. The majority of the comments were related to the validation of the manufacturing process for OBG. Due
to the chemical characteristics of OBG, we are unable to terminally sterilize our final product. Terminal sterilization means that
the product in its final container is subjected to a sterilization process such as heat or irradiation. We provide a sterile product
produced by aseptic processing. In an aseptic process, the drug product, container, and closure are first subjected to sterilization
methods separately, as appropriate, and then brought together. Because there is no process to sterilize the product in its final
container, it is critical that containers be filled and sealed in an extremely high-quality environment. Aseptic processing involves
more variables than terminal sterilization. Before aseptic assembly into a final product, the individual parts of the final product
are generally subjected to various sterilization processes. Each of these manufacturing processes requires validation and control.
A terminally sterilized product, on the other hand, undergoes final sterilization in a sealed container, thus limiting the possibility
of error.
Some of the items
requested from the FDA included tasks such as:
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Evaluate the manufacturing process to eliminate sources which could contribute to excessive bioburden
levels,
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Provide alert and action levels for device components prior to filter sterilization,
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Provide description of validation protocol and bacterial retention results for sterilizing grade
filters,
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Provide percent recovery results for bioburden test methods,
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·
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Validate gamma irradiation dose for device packaging, and
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·
|
Include validated analytical methods to identify and quantify impurities.
|
We plan on filing
the IDE amendment in the first quarter of 2018 and anticipate commencing our next PRK trial in the first half of 2018. We also
plan on submitting a second IDE in the first quarter of 2018 for the development of OBG for the treatment of Punctate Epitheliopathies,
including dry eye. We anticipate commencing this pilot trial in the first half of 2018.
EGP-437: Cataract Surgery
We
have completed three trials (Phase 2 prophylactic, Phase 1b/2a dose-ranging and Phase 2b) and reported positive data for our
Phase 1b/2a dose-ranging clinical trial for the treatment of ocular inflammation and pain in post-surgical cataract patients.
The design of this trial is based on treating the patients’ post-surgery and not prophylactically. The Phase 1b/2a
clinical trial was a multi-center, open-label trial enrolling 80 subjects who had undergone unilateral cataract extraction
and implantation of a monofocal intra-ocular lens. The primary objective of this trial was to assess the safety and efficacy
of iontophoretic EGP-437 in these patients following surgery. A positive response was achieved and an optimal dose was
determined to take forward into a Phase 2b trial that was initiated in the third quarter of 2017. We announced topline data
for the Phase 2b trial in the first quarter of 2018.
Although EGP-437 demonstrated
a higher rate of success compared to vehicle at all time points, the co-primary endpoints of proportion of subjects with
an anterior chamber cell (ACC) count of zero at day 7 and the proportion of subjects with a pain score of zero at day 1 did
not show statistical significance. The efficacy results for the absence of inflammatory cells in the EGP-437 treatment group
met our expectations, but the vehicle group response was better than anticipated. We will continue to review the data to
determine next steps and to continue evaluating EGP-437 for the reduction of pain and inflammation following ocular
surgery.
EGP-437: Anterior Uveitis
We have completed
two trials (Phase 1/2 and Phase 3) for anterior uveitis and have demonstrated in the completed Phase 3 non-inferiority study that
two iontophoretic treatments with our EGP-437 Combination Product achieved the same response rate as the positive control for the
primary efficacy endpoint, a complete clearing of anterior chamber cells, by Day 14. This was achieved with a lower incidence of
increased IOP, which is characterized as an increase of six mm Hg or more from baseline. We currently have an ongoing confirmatory
Phase 3 trial underway and anticipate top-line data in the second quarter of 2018. The FDA has provided guidance that the ongoing
confirmatory Phase 3 trial of EGP-437 in anterior uveitis meets non-inferiority criteria, data from this trial along with data
from our previously completed Phase 3 trial in anterior uveitis will be sufficient to support an NDA filing. The FDA also communicated
that the design of the ongoing confirmatory Phase 3 anterior uveitis trial is acceptable and that the nonclinical work completed
to date is sufficient to support an NDA filing.
EGP-437: Other Indications
Although we have completed
two trials (Phase 2 and Phase 3) for dry eye, at this time we are not anticipating any further development for this indication.
We have completed a Phase 1/2 for macular edema and at this time we are assessing the next steps for this indication.
Intellectual Property and Proprietary
Rights
Overview
We are building an
intellectual property portfolio for our EGP-437 Combination Product and CMHA-S platform, as well as other devices and product candidates
for treatment of ocular indications in the U.S. and abroad. We currently seek, and intend to continue to seek, patent protection
in the U.S. and internationally for our product candidates, methods of use, and processes for manufacture, and for other technologies,
where appropriate. Our current policy is to actively seek to protect our proprietary position by, among other things, filing patent
applications in the U.S. and abroad relating to proprietary technologies that are important to the development of our business.
We also rely on, and will continue to rely on, trade secrets, know-how, continuing technological innovation and in-licensing opportunities
to develop and maintain our proprietary position. We cannot be sure that patents will be granted with respect to any of our pending
patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing
patents or any patents that may be granted to us in the future will be commercially useful in protecting our technology.
Our success will depend
significantly on our ability to obtain and maintain patent and other proprietary protection for the technologies that we consider
important to our business, our ability to defend our patents, and our ability to preserve the confidentiality of our trade secrets
and operate our business without infringing the patents and proprietary rights of third parties.
Patent Portfolio
Our patent portfolio
includes drug delivery device patents directed to the EyeGate
®
II Delivery
System, drug composition patents directed to EGP-437 and other compositions and devices related to the EyeGate® II Delivery
System. In addition, further patent applications are directed to the CMHA-S platform in combination with active therapeutics to
treat ocular diseases. These issued patents will expire between 2018 and 2034.
We have been developing
drug compositions and drug delivery systems for non-invasive treatment on the eye for several years. These delivery systems include
various patented and patent pending drug delivery devices, active therapeutics and combination device/therapeutic to treat components
of the eye, such as the cornea, sclera, and combinations thereof. These devices and therapeutics have been further improved to
provide better patient comfort levels, patient compliance and recovery times. The delivery system patent portfolio consists of
seven Patent families, which includes fifteen U.S. Patents and 87 corresponding International Patents. We hold fifteen patents
(thirteen issued and two allowed). Additionally, we hold 103 patents by way of our subsidiary, EyeGate Pharma S.A.S., a French
corporation, or EyeGate S.A.S.
License Agreements
We are a party to
six license agreements as described below. Four of the six license agreements require us to pay royalties or fees to the licensor
based on revenue related to the licensed technology, and the agreements with Valeant require Valeant to pay royalties to us based
on revenue related to the licensed technology.
On February 15, 1999,
we entered in to an exclusive worldwide license agreement with the University of Miami School of Medicine to license technology
relating to our EyeGate® II Delivery System, which grants us the right to use certain French, European, Canadian, Japanese,
American, Mexican, Korean, Brazilian and Israeli patents in our EGP-437 Combination Product. This agreement, which was amended
in December 2005, requires us to pay to the University of Miami an annual license fee of $12,500. This license also requires payments
to the University of Miami upon our achievement of certain milestones. All annual license fee and milestone payments have been
paid to date. The total amount of milestone payments paid to date under this license agreement is $30,000 and there are potential
aggregate additional amounts of up to $70,000 due on certain milestones being met. This license agreement remains in effect until
the later of twelve (12) years after the date of the first commercial sale of the applicable product or the date of the last to
expire patent relating to the patent rights under the Agreement. Upon such expiration and assuming it was not terminated earlier
in accordance with its terms, we retain a fully paid up and perpetual license to the product and certain intellectual property.
The license agreement also provides that it may be terminated by either party in the case of continued material breach or provision
of false reports, by the licensor pertaining to certain bankruptcy or insolvency circumstances regarding our company or by us upon
ninety (90) days prior written notice.
On July 23, 1999,
we entered into a perpetual Transaction Protocol agreement with Francine Behar-Cohen to acknowledge our right to use certain patents
that Ms. Behar-Cohen had certain ownership rights with respect to and which are used in our EGP-437 Combination Product. The agreement
also provides for us to pay Ms. Behar-Cohen a fee based on a percentage of the pre-tax turnover generated from sales of our EGP-437
Combination Product relating to our inclusion of the EyeGate® II Delivery System. The fees due under the agreement expired
in January 2018.
On September 12, 2013,
Jade entered into an agreement with BioTime, Inc. granting to it the exclusive worldwide right to commercialize cross-linked thiolated
carboxymethyl hyaluronic acid (“CMHA-S”) for ophthalmic treatments in humans. The agreement calls for a license
issue fee paid to BioTime of $50,000, and requires us (through our Jade subsidiary) to pay an annual fee of $30,000 and royalties
to BioTime based on revenue relating to any product incorporating the CMHA-S technology. The agreement expires when patent protection
for the CMHA-S technology lapses.
On July 9, 2015, we
entered into an exclusive worldwide licensing agreement with a subsidiary of Valeant through which we have granted Valeant exclusive,
worldwide commercial and manufacturing rights to our EGP-437 Product in the field of anterior uveitis, as well as a right of last
negotiation to license the EGP-437 Product for other indications. Under the agreement, Valeant paid us an upfront payment of $1.0
million. We are eligible to receive milestone payments totaling up to $32.5 million, upon and subject to the achievement of certain
specified developmental and commercial milestones. In addition, we are eligible to receive royalties based on a specified percent
of net sales of the Product throughout the world, subject to adjustment in certain circumstances.
On June 17, 2016,
we entered into an exclusive worldwide license agreement with the University of Utah Research Foundation to further the commercial
development of the NASH technology, together with alkylated HA. The agreement calls for payments due to the University of Utah,
consisting of a license grant fee of $15,000 due within 30 days of signing, and an annual licensing fee, initially $5,000, and
escalating ratably up to $20,000 in 2021.
On February 21, 2017,
we entered into an exclusive, worldwide licensing agreement with a subsidiary of Valeant (the “New Valeant Agreement”),
through which we granted Valeant exclusive, worldwide commercial and manufacturing rights to its EGP-437 Product in the field of
ocular iontophoretic treatment for post-operative ocular inflammation and pain in ocular surgery patients (the “New Field”).
Under the New Valeant Agreement, Valeant paid us an initial upfront payment of $4.0 million, and we are eligible to receive milestone
payments totaling up to approximately $99.0 million, upon and subject to the achievement of certain specified developmental and
commercial progress of the EGP-437 Product for the New Field. In addition, we are eligible under the New Valeant Agreement to receive
royalties based on a specified percent of net sales of its EGP-437 Product for the New Field throughout the world, subject to adjustment
in certain circumstances.
Confidential Information and Inventions
Assignment Agreements
We currently require
and will continue to require each of our employees and consultants to execute confidentiality agreements upon the commencement
of such individual’s employment, consulting or collaborative relationships with us. These agreements provide that all confidential
information developed or made known during the course of the relationship with us be kept confidential and not disclosed to third
parties except in specific circumstances.
In the case of employees,
the agreements provide that all inventions resulting from such individual’s work performed for us, utilizing our property
or relating to our business and conceived or completed by the individual during employment shall be our exclusive property to the
extent permitted by applicable law. Our consulting agreements also provide for assignment to us of any intellectual property resulting
from services performed by a consultant for us.
Sales and Marketing
We have entered into
two exclusive global License Agreements with subsidiaries of Valeant Pharmaceuticals International, Inc. (“Valeant”),
through which we have granted Valeant exclusive, worldwide commercial and manufacturing rights to its EyeGate® II Delivery
System and EGP-437 combination product (“Product”) in the fields of anterior uveitis and ocular iontophoretic treatment
for post-operative ocular inflammation and pain in ocular surgery patients, as well as a right of last negotiation to license the
Product for other indications.
If EyeGate OBG is
approved by the FDA for commercial sale, we may enter into agreements with third parties to sell EyeGate OBG or we may choose to
market EyeGate OBG directly to physicians in the United States through our own sales and marketing force and related internal commercialization
infrastructure. If we market EyeGate OBG directly, we will need to incur significant additional expenses and commit significant
additional management resources to establish and train an internal sales and marketing force to market and sell EyeGate OBG.
Manufacturing
We do not have, and
do not intend to establish an in-house manufacturing capability for our products and as a result we will depend heavily on third-party
contract manufacturers to produce and package our products. We currently do not have any contractual relationships with third-party
manufacturers. We intend to rely on third-party suppliers that we have used in the past for the manufacturing of various components
that comprise our EGP-437 Combination Product, EyeGate OBG and other contemplated clinical trials.
Competition
The biotechnology
and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on
proprietary products. While we believe that our technologies, knowledge, experience and scientific resources provide us with competitive
advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical
and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. Any
product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may
become available in the future.
Our potential competitors
include large pharmaceutical and biotechnology companies, and specialty pharmaceutical and generic drug companies. Many of our
competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical
testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. These competitors
also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial
sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our
programs. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements
with large and established companies.
The key competitive
factors affecting the success of each of our product candidates, if approved for marketing, are likely to be its efficacy, safety,
method of administration, convenience, price, the level of generic competition and the availability of coverage and adequate reimbursement
from government and other third-party payors.
Our commercial opportunity
could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer
or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also
may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result
in our competitors’ establishing a strong market position before we are able to enter the market. In addition, our ability
to compete may be affected in many cases by insurers or other third party payors seeking to encourage the use of generic products.
Generic products currently being used for the indications that we may pursue, and additional products are expected to become available
on a generic basis over the coming years. If our product candidates achieve marketing approval, we expect that they will be priced
at a significant premium over competitive generic products.
Our competitors in
the treatment of non-infectious anterior uveitis and inflammation post cataract surgery include Durezol® (Novartis AG), Lotemax®
(Valeant Pharmaceuticals International, Inc.), Pred Forte® (Allergan, Inc.) and prednisolone acetate ophthalmic suspension
(1%) (Novartis AG). We are not aware of any FDA approved eye drops for the management and the acceleration of re-epithelization
of corneal epithelial defects following photorefractive keratectomy (PRK) surgery.
Government Regulation
FDA Approval Process
In the U.S., pharmaceutical
products are subject to extensive regulation by the FDA. The Food Drug and Cosmetic Act, or FDCA, and other federal and state statutes
and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval,
labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical
products. Failure to comply with applicable FDA or other requirements may subject a company to a variety of administrative or judicial
sanctions, such as the FDA’s refusal to approve pending applications, a clinical hold, warning letters, recall or seizure
of products, partial or total suspension of production, withdrawal of the product from the market, injunctions, fines, civil penalties
or criminal prosecution.
FDA approval is required
before any new drug, can be marketed in the U.S. The process required by the FDA before a new drug product may be marketed in the
U.S. generally involves:
|
·
|
completion of preclinical laboratory and animal testing and formulation studies in compliance with the FDA’s good laboratory practice, or GLP, regulation;
|
|
·
|
submission to the FDA of an IND for human clinical testing which must become effective before human clinical trials may begin in the U.S.;
|
|
·
|
approval by an independent institutional review board, or IRB, at each site where a clinical trial will be performed before the trial may be initiated at that site;
|
|
·
|
performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safety and efficacy of the proposed product candidate for each intended use;
|
|
·
|
satisfactory completion of an FDA pre-approval inspection of the facility or facilities at which the product is manufactured to assess compliance with the FDA’s cGMP regulations;
|
|
·
|
submission to the FDA of a new drug application, or NDA, which must be accepted for filing by the FDA;
|
|
·
|
satisfactory completion of an FDA advisory committee review, if applicable;
|
|
·
|
payment of user fees, if applicable; and
|
|
·
|
FDA review and approval of the NDA.
|
The preclinical and
clinical testing and approval process requires substantial time, effort and financial resources. Pre-clinical tests include laboratory
evaluation of product chemistry, formulation, manufacturing and control procedures and stability, as well as animal studies to
assess the toxicity and other safety characteristics of the product. The results of preclinical tests, together with manufacturing
information, analytical data and a proposed clinical trial protocol and other information, are submitted as part of an IND to the
FDA. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after
receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions and places the clinical trial on
a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can
begin. A clinical hold may occur at any time during the life of an IND and may affect one or more specific studies or all studies
conducted under the IND.
All clinical trials
must be conducted under the supervision of one or more qualified investigators in accordance with GCPs. They must be conducted
under protocols detailing the objectives of the trial, dosing procedures, research subject selection and exclusion criteria and
the safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND, and progress
reports detailing the results of the clinical trials must be submitted at least annually. In addition, timely safety reports must
be submitted to the FDA and the investigators for serious and unexpected adverse events. An institutional review board, or IRB,
at each institution participating in the clinical trial must review and approve each protocol before a clinical trial commences
at that institution and must also approve the information regarding the trial and the consent form that must be provided to each
trial subject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.
Sponsors of clinical
trials generally must register and report, at the NIH-maintained website ClinicalTrials.gov, key parameters of certain clinical
trials. For purposes of an NDA submission and approval, human clinical trials are typically conducted in the following sequential
phases, which may overlap or be combined:
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Phase 1:
The product is initially introduced into healthy human patients and tested for safety, dose tolerance, absorption, metabolism, distribution and excretion and, if possible, to gain an early indication of its effectiveness.
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Phase 2:
The product is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted indications and to determine dose tolerance and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more extensive clinical trials.
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Phase 3:
These are commonly referred to as pivotal studies. When Phase 2 evaluations demonstrate that a dose range of the product appears to be effective and has an acceptable safety profile, trials are undertaken in large patient populations to further evaluate dosage, to obtain additional evidence of clinical efficacy and safety in an expanded patient population at multiple, geographically-dispersed clinical trial sites, to establish the overall risk-benefit relationship of the product and to provide adequate information for the labeling of the product.
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Phase 4:
In some cases, the FDA may condition approval of an NDA for a product candidate on the sponsor’s agreement to conduct additional clinical trials to further assess the product’s safety and effectiveness after NDA approval. Such post-approval trials are typically referred to as Phase 4 studies.
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The results of product
development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted
on the chemistry of the drug, proposed labeling, and other relevant information are submitted to the FDA as part of an NDA requesting
approval to market the product. The submission of an NDA is subject to the payment of user fees; a waiver of such fees may be obtained
under certain limited circumstances. The FDA reviews all NDAs submitted to ensure that they are sufficiently complete for substantive
review before it accepts them for filing. The FDA may request additional information rather than accept an NDA for filing. In this
event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before
the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review.
Section 505(b)(2) New Drug Applications
According to section
505 of the FDCA, there are three types of new drug applications: (1) an application that contains full reports of investigations
of safety and effectiveness (section 505(b)(1)); (2) 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 from the entity that performed the studies (section 505(b)(2));
and (3) an application that contains information to show that the proposed product is identical in active ingredient, dosage form,
strength, route of administration, labeling, quality, performance characteristics, and intended use, among other things, to a previously
approved product (section 505(j)). We intend to submit a 505(b)(2) NDA for our EGP-437 Combination Product.
Section 505(b)(2)
of the FDCA enables an applicant to rely, in part, on the FDA’s findings of safety and efficacy for an existing product,
or published literature, in support of its NDA. Using this approval pathway may allow us to rely in part on information in the
public domain to support the safety and effectiveness of EGP-437. The FDA may also require sponsors to perform additional clinical
trials, measurements, or other types of studies or assessments (e.g., bridging studies) to support any change from the previously
approved product. The review process is lengthy and often difficult, and the FDA may refuse to approve an NDA if the applicable
regulatory criteria are not satisfied or may require additional clinical or other data and information. Even if such data and information
is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical
trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. The FDA may issue
a complete response letter, which may require additional clinical or other data or impose other conditions that must be met in
order to secure final approval of the NDA or an approved letter following satisfactory completion of all aspects of the review
process. 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.
Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured.
To the extent that
a Section 505(b)(2) NDA relies on clinical trials conducted for a previously approved drug product or the FDA’s prior findings
of safety and effectiveness for a previously approved drug product, the 505(b)(2) applicant must submit patent certifications in
its 505(b)(2) application with respect to any patents listed for the approved product on which the application relies in the FDA’s
publication, Approved Drug Products with Therapeutic Equivalence Evaluations (commonly referred to as the Orange Book). Specifically,
the applicant must certify for each listed patent that (1) the required patent information has not been filed; (2) the listed patent
has expired; (3) the listed patent has not expired, but will expire on a particular date and approval is not sought until after
patent expiration; or (4) the listed patent is invalid, unenforceable or will not be infringed by the proposed new product. A certification
that the new product will not infringe the previously approved product’s listed patent or that such patent is invalid or
unenforceable is known as a Paragraph IV certification. If the applicant does not challenge one or more listed patents through
a Paragraph IV certification, the FDA will not approve the Section 505(b)(2) NDA application until all the unchallenged listed
patents claiming the referenced product have expired. Further, the FDA will also not accept or approve, as applicable, a Section
505(b)(2) NDA application until any non-patent exclusivity, such as exclusivity for obtaining approval of a New Chemical Entity,
listed in the Orange Book for the referenced product, has expired.
If the 505(b)(2) NDA
applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification
to the owner of the referenced NDA for the previously approved product and relevant patent holders within 20 days after the 505(b)(2)
NDA has been accepted for submission by the FDA. The NDA and patent holders may then initiate a patent infringement suit against
the 505(b)(2) applicant. Under the FDCA, the filing of a patent infringement lawsuit within 45 days of receipt of the notification
regarding a Paragraph IV certification automatically prevents the FDA from approving the Section 505(b)(2) NDA for 30 months, or
until a court deems the patent unenforceable, invalid or not infringed, whichever is earlier. Moreover, in cases where a 505(b)(2)
application containing a Paragraph IV certification is submitted during a previously approved drug’s five-year exclusivity
period, the 30-month period is automatically extended to prevent approval of the 505(b)(2) application until the date that is seven
and one-half years after approval of the previously approved reference product. The court also has the ability to shorten or lengthen
either the 30 month or the seven and one-half year period if either party is found not to be reasonably cooperating in expediting
the litigation. Thus, the Section 505(b)(2) applicant may invest a significant amount of time and expense in the development of
its product only to be subject to significant delay and patent litigation before its product may be commercialized. Alternatively,
if the NDA applicant or relevant patent holder does not file a patent infringement lawsuit within the specified 45-day period,
the 30-month stay will not prevent approval of the 505(b)(2) application.
Notwithstanding the
approval of many products by the FDA pursuant to Section 505(b)(2), over the last few years, some pharmaceutical companies and
others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA changes its interpretation of Section 505(b)(2),
or if the FDA’s interpretation is successfully challenged in court, this could delay or even prevent the FDA from approving
any Section 505(b)(2) NDAs that we submit.
In the NDA submissions
for our product candidates, we intend to follow the development and approval pathway permitted under the FDCA that we believe will
maximize the commercial opportunities for these product candidates.
Combination Product Regulations
Medical products containing
a combination of new drugs, biological products, or medical devices may be regulated as “combination products” in the
U.S. A combination product generally is defined as a product comprised of components from two or more regulatory categories, such
as drug/device, device/biologic, or drug/biologic. Each component of a combination product is subject to the requirements established
by the FDA for that type of component, whether a new drug, biologic, or device. In order to facilitate premarket review of combination
products, the FDA designates one of its centers to have primary jurisdiction for the premarket review and regulation of both components.
We expect that the Center for Drug Evaluation and Research will have primary jurisdiction over out EGP-437 Combination Product.
The determination whether a product is a combination product or two separate products is made by the FDA on a case-by-case basis.
We have had discussions with the FDA about the status of our EGP-437 Combination Product as a combination product and we have been
told that the FDA considers our product a combination drug/device.
We will be subject
to regulations governing medical devices separate from those governing drugs. After the FDA permits a device to enter commercial
distribution, however, numerous regulatory requirements apply. These include:
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product labeling regulations;
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general prohibition against promoting products for unapproved or “off-label” uses;
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corrections and removals (e.g., recalls);
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establishment registration and device listing;
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general prohibitions against the manufacture and distribution of adulterated and misbranded devices; and
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the Medical Device Reporting regulation, which requires that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur.
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Failure to comply
with these regulatory requirements could result in civil fines, product seizures, injunctions, and/or criminal prosecution of responsible
individuals and us.
Approval or Clearance of Medical
Devices
Medical devices, such
as our EyeGate® II Delivery System, or the EyeGate® OBG, may be evaluated either through the premarket approval, or PMA
process, or the 510(k) clearance process, depending on the classification of the device.
The regulatory classification
for the EyeGate® II Delivery System is defined under Code of Federations Regulations 21, Part 890, section 5525 (21 CFR 890.5525).
The FDA has confirmed that the EyeGate® II Delivery System will be submitted under the 510(k) clearance process. The FDA has
further clarified the Code to state that an iontophoresis device intended for use with a specific drug that has been approved for
delivery by iontophoresis is a class II device. The EyeGate® II Delivery System will be indicated for use with a specific drug
(EGP-437) that will be approved through the NDA process and therefore classified as a class II device.
The FDA has confirmed
that the EyeGate® OBG will be submitted under the 510(k) de novo clearance process when used as a standalone device.
Gathering clinical
evidence for devices is subject to FDA’s good clinical practice regulations, including requirements for IRB approval and
informed consent. Significant risk devices require an approved investigational device exemption application before studies may
begin. PMA approval typically requires, among other things, the submission of valid scientific evidence in the form of preclinical
and clinical data, and a pre-approval inspection to determine if the manufacturing facility complies with cGMP practices under
the quality system regulation that governs the design and all elements of the manufacture of devices. For clearance, a 510(k) must
demonstrate substantial equivalence, i.e., must show that the device is as safe and effective as an already legally marketed device,
also known as a predicate device. The evaluation of the newer device must not raise different questions of safety and effectiveness
than that of the predicate device. 510(k)s normally do not, but sometimes do, require clinical data for clearance.
Post-Approval Requirements
Once an NDA is approved,
a product will be subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating
to product/device listing, recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and
reporting of adverse experiences with the product.
In addition, drug
manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their
establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state
agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and generally require
prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP
and impose reporting and documentation requirements upon us and any third-party manufacturers that we may decide to use. Accordingly,
manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.
Once an approval is
granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems
occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events
of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may
result in, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
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fines, warning letters or holds on post-approval clinical trials;
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refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;
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product seizure or detention, or refusal to permit the import or export of products; or
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injunctions or the imposition of civil or criminal penalties.
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The FDA strictly regulates
marketing, labeling, advertising and promotion of products that are placed on the market. While physicians may prescribe for off
label uses, manufacturers may only promote for the approved indications and in accordance with the provisions of the approved label.
The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses, and a company
that is found to have improperly promoted off label uses may be subject to significant liability, both at the federal and state
levels.
Patent Term Restoration and Marketing
Exclusivity
Depending upon the
timing, duration and specifics of FDA approval of the use of our drug candidates, some of our U.S. patents may be eligible for
limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman
Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product
development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent
beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the
time between the effective date of an IND, and the submission date of an NDA, plus the time between the submission date of an NDA
and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the application
for extension must be made prior to expiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA,
reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply for restorations
of patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration date, depending
on the expected length of clinical trials and other factors involved in the submission of the relevant NDA.
Market exclusivity
provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year
period of non-patent marketing exclusivity within the U.S. to the first applicant to gain approval of an NDA for a new chemical
entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety,
which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept
for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of
such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an
application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA
also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an approved NDA if new clinical investigations,
other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to
the approval of the application, for example, for new indications, dosages or strengths of an existing drug. This three-year exclusivity
covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for
drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of a
full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the
preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
Manufacturing Requirements
We and our third party
manufacturers must comply with applicable FDA regulations relating to FDA’s cGMP regulations. The cGMP regulations include
requirements relating to organization of personnel, buildings and facilities, equipment, control of components and drug product
containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory
controls, extensive records and reports, and returned or salvaged products. The manufacturing facilities for our products must
meet cGMP requirements to the satisfaction of the FDA pursuant to a pre-approval inspection before we can use them to manufacture
our products. We and our third party manufacturers and certain key component suppliers are also subject to periodic inspections
of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of our
products to assess our compliance with applicable regulations. Failure to comply with statutory and regulatory requirements subjects
a manufacturer to possible legal or regulatory action, including untitled letters, warning letters, determinations of product adulteration,
the seizure or recall of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing
operations and civil and criminal penalties. Adverse experiences with the product must be reported to the FDA and could result
in the imposition of market restrictions through labeling changes or in product removal. Product approvals may be withdrawn if
compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following
approval. Such perceived problems concerning safety or efficacy may arise in the context of clinical studies continued as a result
of our post-marketing obligations, reports we or FDA receive from patients and healthcare providers, or literature published by
third parties regarding our products or similar products.
Third Party Payor Coverage and Reimbursement
Reimbursement is expected
to use standard approaches for Ophthalmology with EGP-437 reimbursed as a physician-administered drug using a drug code (J-code)
and the procedure reimbursed via a CPT code in addition to the standard reimbursement for office visits. The commercial success
of our EGP-437 Combination Product and, if and when commercialized, our other product candidates will depend, in part, upon the
availability of coverage and reimbursement from third party payors at the federal, state and private levels, including U.S. Government
payor programs, such as Medicare and Medicaid, private health care insurance companies and managed care plans have attempted to
control costs by limiting coverage and the amount of reimbursement for particular procedures or drug treatments. The U.S. Congress
and state legislatures from time to time propose and adopt initiatives aimed at cost containment, which could impact our ability
to sell our products profitably. Ongoing federal and state government initiatives directed at lowering the total cost of health
care will likely continue to focus on healthcare reform, the cost of prescription pharmaceuticals and on the reform of the Medicare
and Medicaid payment systems.
We expect that the
pharmaceutical industry will continue to experience pricing pressures due to these initiatives and the trend toward managed healthcare
and the increasing influence of managed care organizations. Our results of operations could be adversely affected by current and
future healthcare reforms.
Some third party payors
also require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse healthcare providers
that use such therapies. While we cannot predict whether any proposed cost-containment measures will be adopted or otherwise implemented
in the future, the announcement or adoption of these proposals could have a material adverse effect on our ability to obtain adequate
prices for our EGP-437 Combination Product and operate profitably.
Other Regulatory Requirements
We are also subject
to various laws and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous
or potentially hazardous substances in connection with our research. In each of these areas, as above, the applicable regulatory
agency will have broad regulatory and enforcement powers, including, among other things, the ability to levy fines and civil penalties.
Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may
impair our research, development and production efforts, which could harm our business, operating results and financial condition.
Employees
As of December 31, 2017, we had
seventeen full time employees.
Business Segment and Geographical Information
Operating segments
are identified as components of an enterprise for which separate discrete financial information is available for evaluation by
the chief operating decision maker, or decision making group, in making decisions on how to allocate resources and assess performance.
We view our operations and manage our business in one operating segment. We operate in one geographic segment (research and development).
Our Corporate Information
EyeGate Pharmaceuticals,
Inc. was formed as a Delaware corporation on December 26, 2004. We were originally incorporated in 1998 under the name of Optis
France S.A. in Paris, France. At the time of our incorporation in Delaware, the name of the French corporation was changed to EyeGate
Pharma S.A.S. and became a subsidiary of EyeGate Pharmaceuticals, Inc. Our principal executive offices are located at 271 Waverley
Oaks Road, Suite 108, Waltham, MA 02452, and our telephone number is (781) 788-9043.
Available Information and Website
We maintain an internet
website at
www.eyegatepharma.com
and make available free of charge through our website our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a)
and 15(d) of the Exchange Act. We make these reports available through our website as soon as reasonably practicable after we electronically
file such reports with, or furnish such reports to, the United States Securities and Exchange Commission, or the SEC. You can find,
copy and inspect information we file at the SEC’s public reference room, which is located at 100 F Street, N.E., Room 1580,
Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the SEC’s public
reference room. You can review our electronically filed reports and other information that we file with the SEC on the SEC’s
web site at http://www.sec.gov. We also make available, free of charge on our website, the reports filed with the SEC by our executive
officers, directors and 10% stockholders pursuant to Section 16 under the Exchange Act as soon as reasonably practicable after
copies of those filings are provided to us by those persons. The information on our website is not incorporated by reference into
this Annual Report on Form 10-K and should not be considered to be a part of this Annual Report on Form 10-K. Our website address
is included in this Annual Report on Form 10-K as an inactive technical reference only.
Risks Related to Our Financial Position
and Need for Additional Capital
We have incurred significant operating
losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.
Since inception, we
have incurred significant operating losses. Our net loss was approximately $13.2 million for the year ended December 31, 2017,
$13.3 million for the year ended December 31, 2016 and $91.8 million from the period of inception (December 26, 2004) through December
31, 2017. To date, we have financed our operations primarily through private placements of our preferred stock and convertible
promissory notes, public offerings of our common stock, and payments from our license agreements. We have devoted substantially
all of our financial resources and efforts to research and development, including preclinical studies and, beginning in 2008, clinical
trials. We are still in the development stage of our product candidates and we have not completed development of any drugs. We
expect to continue to incur significant expenses and operating losses for the foreseeable future. Our net losses may fluctuate
significantly from quarter to quarter and year to year. Our recurring losses from operations have caused management to determine
there is substantial doubt regarding our ability to continue as a going concern, and as a result, our independent registered public
accounting firm included an explanatory paragraph in its report on our financial statements as of and for the year ended December
31, 2017 with respect to this uncertainty.
We anticipate that
our expenses will continue to be significant with the clinical trials for our EGP-437 Combination Product, which consists of EGP-437
and our EyeGate® II Delivery System, as well as the ongoing development of our EyeGate OBG product.
Our expenses will
also increase if and as we:
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pursue a safety clinical trial evaluating corneal endothelial cell counts over a six-month period with the EGP-437 Combination Product;
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seek marketing approval for the EGP-437 Combination Product for anterior uveitis or post cataract surgery inflammation and pain in the U.S., as well as for EyeGate OBG, whether alone or in collaboration with third parties;
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pursue the development of the EGP-437 Combination Product for the treatment of additional indications or for use in other patient populations or, if it is approved, seek to broaden the label for the EGP-437 Combination Product;
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continue the research and development of our other product candidates, including EyeGate OBG;
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seek to develop additional product candidates;
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in-license or acquire the rights to other products, product candidates or technologies for the treatment of ophthalmic diseases;
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seek marketing approvals for any product candidates that successfully complete clinical trials;
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establish sales, marketing and distribution capabilities and scale up and validate external manufacturing capabilities to commercialize any products for which we may obtain marketing approval;
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maintain, expand and protect our intellectual property portfolio;
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hire additional clinical, quality control, scientific and management personnel;
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expand our operational, financial and management systems and personnel, including personnel to support our clinical development, manufacturing and planned future commercialization efforts and our operations as a public company; and
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increase our insurance coverage as we expand our clinical trials and commence commercialization of the EGP-437 Combination Product and EyeGate OBG.
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Because of the numerous
risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount
of increased expenses or when, or if, we will be able to achieve profitability. Our expenses will increase if:
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we are required by the U.S. Food and Drug Administration, or FDA, or foreign equivalents, to perform studies or clinical trials in addition to those currently expected;
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there are any delays in enrollment of patients in or completing our clinical trials or the development of the EGP-437 Combination Product, EyeGate OBG, or any other product candidates that we may develop.
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Our ability to become
and remain profitable depends on our ability to generate revenue. We do not expect to generate significant revenue unless and until
we obtain marketing approval for, and commercialize, the EGP-437 Combination Product, EyeGate OBG, or other product candidates
that we may develop, which may never occur. This will require us to be successful in a range of challenging activities, including:
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continuing and obtaining favorable results
from a confirmatory Phase 3 clinical trial for the EGP-437 Combination Product for the treatment of non-infectious anterior uveitis
and post cataract surgery inflammation and pain, and for the endothelial cell count safety trial;
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subject to obtaining favorable results from a confirmatory Phase 3 clinical trial for the EGP-437 Combination Product treating anterior uveitis and post cataract surgery inflammation and pain patients, applying for and obtaining marketing approval for the EGP-437 Combination Product;
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establishing collaboration, distribution or other marketing arrangements with third parties to commercialize the EGP-437 Combination Product and EyeGate OBG in markets outside the U.S.;
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achieving an adequate level of market acceptance of our product candidates;
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protecting our rights to our intellectual property portfolio related to our product candidates; and
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ensuring the manufacture of commercial quantities of the EGP-437 Combination Product and EyeGate OBG.
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Even if we do achieve
profitability, 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. A decline in the value of
our company could also cause you to lose all or part of your investment.
We will need substantial additional
funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development
programs or commercialization efforts.
We expect to devote
substantial financial resources to our ongoing and planned activities, particularly continuing our clinical trial evaluating the
EGP-437 Combination Product for the treatments of uveitis and post-cataract surgery inflammation and pain, as well as developing
our EyeGate OBG product. In the future, we expect to raise additional financial resources for the continued clinical development
of the EGP-437 Combination Product, EyeGate OBG, and other product candidates we may develop. In addition, if we obtain regulatory
approval for any of our product candidates, we would need to devote substantial financial resources to commercialization efforts,
including product manufacturing, marketing, sales and distribution. Accordingly, we will need to obtain substantial additional
funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we
could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.
Our future capital
requirements will depend on many factors, including:
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the progress, costs and outcome of our clinical trials for our product candidates and of any clinical activities required for regulatory review of our product candidates outside of the U.S.;
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the costs and timing of process development and manufacturing scale up and validation activities associated with our product candidates;
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the costs, timing and outcome of regulatory review of our product candidates in the U.S., and in other jurisdictions;
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the costs and timing of commercialization activities for our product candidates if we receive marketing approval, including the costs and timing of establishing product sales, marketing, distribution and outsourced manufacturing capabilities;
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subject to receipt of marketing approval, the amount of revenue received from commercial sales of our product candidates;
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the progress, costs and outcome of developing the EGP-437 Combination Product for the treatment of additional indications or for use in other patient populations;
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our ability to establish collaborations on favorable terms, if at all, particularly manufacturing, marketing and distribution arrangements for our product candidates;
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the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and
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the extent to which we in-license or acquire rights to other products, product candidates or technologies for the treatment of ophthalmic diseases.
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As of December 31,
2017, we had cash and cash equivalents of $7.8 million. We will have sufficient cash to fund planned operations for approximately
seven months, however, the acceleration or reduction of cash outflows by management can significantly impact the timing for raising
additional capital to complete development of its products. To continue development, we will need to raise additional capital through
debt and/or equity financing, or access additional funding through grants. Although we completed our initial public offering, our
August 2015 follow-on public offering, our June 2016 registered direct offering, sales under the ATM Agreement, and our June 2017
follow-on public offering, additional capital may not be available on terms favorable to us, if at all. Accordingly, no assurances
can be given that management will be successful in these endeavors. These conditions raise substantial doubt about our ability
to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that
might be necessary should we be unable to continue as a going concern.
Identifying potential
product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process
that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and
achieve product sales. Our commercial revenues, if any, will be derived from sales of the EGP-437 Combination Product, EyeGate
OBG or any other products that we successfully develop, none of which we expect to be commercially available for several years,
if at all. In addition, if approved, the EGP-437 Combination Product, EyeGate OBG or any other product candidate that we develop
or any product that we in-license may not achieve commercial success. Accordingly, we will need to obtain substantial additional
financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or
at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we
believe we have sufficient funds for our current or future operating plans.
Raising additional capital may cause
dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
Until such time, if
ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings,
debt financings, government or other third-party funding, collaborations, strategic alliances, licensing arrangements and marketing
and distribution arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities
may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred
equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific
actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we cannot raise funds on acceptable
terms, we may not be able to grow our business or respond to competitive pressures.
If we raise additional
funds through government or other third-party funding, collaborations, strategic alliances, licensing arrangements or marketing
and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research
programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional
funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development
or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise
prefer to develop and market ourselves.
Our limited operating history may
make it difficult for you to evaluate the success of our business to date and to assess our future viability.
We are a clinical-stage
company with a limited operating history. Our operations to date have been limited to organizing and staffing our company, acquiring
rights to intellectual property, business planning, raising capital, developing our technology, identifying potential product candidates,
undertaking preclinical studies and, beginning in 2008, conducting clinical trials of the EGP-437 Combination Product, as well
as the EyeGate OBG. We have not yet demonstrated our ability to successfully complete development of a product candidate, obtain
marketing approvals, manufacture at commercial scale, or arrange for a third party to do so on our behalf, or conduct sales, marketing
and distribution activities necessary for successful product commercialization.
In addition, as a
pre-revenue business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors.
We will need to transition at some point from a company with a research and development focus to a company capable of supporting
commercial activities. We may not be successful in such a transition.
We expect our financial
condition and operating results to continue to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety
of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual
periods as indications of future operating performance.
Risks Related to the Discovery and Development
of Our Product Candidates
We depend heavily on the success
of the EGP-437 Combination Product and EyeGate OBG. If we are unable to successfully obtain marketing approval for the EGP-437
Combination Product and EyeGate OBG, or experience significant delays in doing so, or if after obtaining marketing approvals, we
fail to commercialize the EGP-437 Combination Product and EyeGate OBG, our business will be materially harmed.
We have invested a
significant portion of our efforts and financial resources in the development of the EGP-437 Combination Product for the treatment
of patients with non-infectious anterior uveitis and post cataract surgery inflammation and pain, and the EyeGate OBG. There remains
a significant risk that we will fail to successfully develop the EGP-437 Combination Product and EyeGate OBG. In 2013, we completed
a Phase 3 clinical trial to evaluate the safety, tolerability and efficacy of the EGP-437 Combination Product in patients with
non-infectious anterior uveitis. In 2017, we also completed a Phase 2b clinical trial for post cataract surgery inflammation and
pain. Our development plan for the EGP-437 Combination Product consists of a confirmatory Phase 3 clinical trial evaluating the
EGP-437 Combination Product for the treatment of non-infectious anterior uveitis, which is currently in progress, a confirmatory
Phase 3 clinical trial evaluating the EGP-437 Combination Product for post cataract surgery inflammation and pain, and a separate
clinical trial evaluating corneal endothelial cell counts six months post treatment of the EGP-437 Combination Product. In 2017,
we completed the first-in-human pilot trial of EyeGate OBG. Our development plan for EyeGate OBG consists of a second pilot trial
that we anticipate commencing in the first half of 2018 and, assuming positive results from that trial, a subsequent pivotal trial
we expect to initiate in the second half of 2018. We cannot accurately predict when or if the EGP-437 Combination Product and EyeGate
OBG will prove effective or safe in humans or whether it will receive marketing approval. Our ability to generate product revenues,
which may never occur, will depend heavily on our obtaining marketing approval for and commercializing the EGP-437 Combination
Product and EyeGate OBG
.
The success of the
EGP-437 Combination Product and EyeGate OBG will depend on several factors, including the following:
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obtaining favorable results from confirmatory Phase 3 clinical trials for the EGP-437 Combination Product and for the endothelial cell count safety trial, and from the second trial and subsequent pivotal trial of EyeGate OBG;
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applying for and receiving marketing approvals from applicable regulatory authorities for the EGP-437 Combination Product and EyeGate OBG;
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making arrangements with third-party manufacturers for commercial quantities of EyeGate OBG and both the EGP-437 and the EyeGate® II Delivery System and receiving regulatory approval of our manufacturing processes and our third-party manufacturers’ facilities from applicable regulatory authorities;
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establishing sales, marketing and distribution capabilities and launching commercial sales of the EGP-437 Combination Product and EyeGate OBG, if and when approved, whether alone or in collaboration with others;
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acceptance of the EGP-437 Combination Product and EyeGate OBG, if and when approved, by patients, the medical community and third-party payors;
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effectively competing with other therapies, including the existing standard of care;
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maintaining a continued acceptable safety profile of the EGP-437 Combination Product and EyeGate OBG following approval;
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obtaining and maintaining coverage and adequate reimbursement from third-party payors;
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obtaining and maintaining patent and trade secret protection and regulatory exclusivity; and
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protecting our rights in our intellectual property portfolio related to the EGP-437 Combination Product and EyeGate OBG.
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Successful development
of the EGP-437 Combination Product for additional indications, if any, or for use in broader patient populations and our ability,
if it is approved, to broaden the label for the EGP-437 Combination Product will depend on similar factors. If we do not achieve
one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully
commercialize the EGP-437 Combination Product and/or EyeGate OBG, which would materially harm our business.
If clinical trials of the EGP-437
Combination Product, EyeGate OBG or any other product candidate that we develop fail to demonstrate safety and efficacy to the
satisfaction of the FDA or other regulatory authorities or do not otherwise produce favorable results, we may incur additional
costs or experience delays in completing, or ultimately be delayed or unable to complete, the development and commercialization
of the EGP-437 Combination Product, EyeGate OBG or any other product candidate.
Before obtaining marketing
approval from regulatory authorities for the sale of any product candidate, including our EGP-437 Combination Product or EyeGate
OBG, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy
of our product candidates in humans
.
Clinical testing is expensive, difficult to design and implement, can take many years
to complete and is uncertain as to outcome
.
A failure of one or more clinical trials can occur at any stage of testing
.
The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and
interim results of a clinical trial do not necessarily predict final results
.
Moreover, preclinical and clinical data are
often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed
satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
We will be required
to demonstrate the safety of the EGP-437 Combination Product by assessing corneal endothelial cell counts at six months from treatment
in order to support marketing approval of the EGP-437 Combination Product for the treatment of non-infectious anterior uveitis
in the U.S. To meet this requirement in the future after raising additional funds, we plan to conduct a separate safety trial with
no fewer than 100 patients who will be treated with the EGP-437 Combination Product and followed for six months post treatment.
We cannot predict the results of this safety trial because we have no clinical data supporting the effect of our EGP-437 Combination
Product on corneal endothelial cells six months post treatment.
In general, the FDA
requires two adequate and well controlled pivotal clinical trials demonstrating effectiveness on a primary endpoint for marketing
approval of a non-infectious anterior uveitis drug. The endpoint is based on total clearance of inflammatory cells in the anterior
chamber of the eye. The trial must compare the EGP-437 Combination Product to standard of care. Our first Phase 3 trial evaluated
the EGP-437 Combination Product for the treatment of non-infectious anterior uveitis against a positive control, the standard of
care, prednisolone acetate ophthalmic suspension (1%), or PA. In our Phase 3 trial, the dose of the EGP-437 Combination Product
tested was just outside the pre-set non-inferiority margin for intent-to-treat and per protocol populations and did not achieve
statistical significance in the intent-to-treat population as compared to the positive control based on the primary efficacy endpoint.
We may fail to achieve
success in our confirmatory Phase 3 clinical trials evaluating the EGP-437 Combination Product for the treatment of non-infectious
anterior uveitis or post cataract surgery inflammation and pain for a variety of potential reasons. Even if our confirmatory Phase
3 trials are successful in showing confirmatory data, the FDA may still require us to provide additional data to grant regulatory
approval.
We are conducting
our confirmatory Phase 3 clinical trial for the treatment of non-infectious anterior uveitis at many clinical centers that were
not included in our first Phase 3 trial. The introduction of new centers, and the resulting involvement of new treating physicians,
can introduce additional variability into the conduct of the trials in accordance with their protocols and may result in greater
variability of patient outcomes, which could adversely affect our ability to detect statistically significant differences between
patients treated with the EGP-437 Combination Product and the standard of care control.
If, in our confirmatory
Phase 3 clinical trials, we do not demonstrate non-inferiority as compared with the standard of care and if the FDA does not find
this to be an acceptable means of meeting the requirements for marketing approval, we will not receive marketing approval for the
EGP-437 Combination Product, and we will have to conduct another Phase 3 clinical trial if we wish to seek marketing approval for
the EGP-437 Combination Product in the future.
The protocol for our
confirmatory Phase 3 clinical trials and other supporting information are subject to review by the FDA and regulatory authorities
outside the U.S. We did not submit the protocols for our second confirmatory Phase 3 clinical trials and do not plan on submitting
the protocols for our separate safety trial of the EGP-437 Combination Product to the FDA at any time prior to the raising of additional
funds. We have not received guidance from other regulatory authorities outside the U.S. regarding the design of our confirmatory
Phase 3 clinical trials.
Our confirmatory Phase 3 clinical
trial for the treatment of non-infectious anterior uveitis has a non-inferiority design. We may be unable to demonstrate non-inferiority
against the standard of care, PA, which may cause us to undergo additional clinical trials or admit additional subjects to our
trials delaying the time and increasing the expense it may take to commercialize our EGP-437 Combination Product.
Our confirmatory Phase
3 clinical trial for the treatment of non-infectious anterior uveitis uses a non-inferiority design rather than a superiority design.
In order to meet our primary endpoint, we must show that patients treated with the EGP-437 Combination Product demonstrate non-inferiority
according to pre-set non-inferiority margins as compared with the standard of care, PA. We may be unable to demonstrate non-inferiority
against the standard of care. The design and conduct of non-inferiority trials, including selection of non-inferiority margins,
account for many factors that can induce bias in the estimated effect of the standard of care in the non-inferiority trial and
thus lead to bias in the estimated effect of the experimental treatment and perhaps lead to a trial design that does not ensure
that the experimental treatment preserves a clinically acceptable fraction of the standard’s effect, which may result in
a vulnerability of the integrity of a non-inferiority trial to the irregularities in trial conduct. Our choice of an endpoint based
on total clearance of inflammatory cells in the anterior chamber of the eye means that success will depend to a significant degree
on the accuracy of our assumptions about the total clearance of inflammatory cells in the anterior chamber of the eye in the comparator
arms of our Phase 3 trial. Although we believe we have been conservative in our assumptions, if, for example, patients in the comparator
arm of our trial have significantly different clearance of inflammatory cells than we expect, we may find that our trial is unfeasible
or we may have to enroll more patients at additional cost and delay.
If we experience any of a number
of possible unforeseen events in connection with our clinical trials, potential marketing approval or commercialization of our
product candidates could be delayed or prevented.
We may experience
numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing
approval or commercialize the EGP-437 Combination Product, EyeGate OBG or any other product candidates that we may develop, including:
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clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;
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the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;
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any third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
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regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
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we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;
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we may decide, or regulators or institutional review boards may require us, to suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;
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the cost of clinical trials of our product candidates may be greater than we anticipate;
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the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and
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our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate the trials.
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If we are required
to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if
we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials
or tests are not favorable or are only modestly favorable or if there are safety concerns, we may:
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be delayed in obtaining marketing approval for our product candidates;
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not obtain marketing approval at all;
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obtain approval for indications or patient populations that are not as broad as intended or desired;
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obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;
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be subject to additional post-marketing testing requirements; or
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have the product removed from the market after obtaining marketing approval.
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Our product development
costs will also increase if we experience delays in testing or marketing approvals. We do not know whether any of our pre-clinical
studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant
preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize
our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully
commercialize our product candidates.
If we experience delays or difficulties in the enrollment
of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.
We may not be able
to initiate or continue clinical trials for the EGP-437 Combination Product, EyeGate OBG or our other product candidates that we
may develop if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required
by the FDA or similar regulatory authorities outside the U.S. In addition, some of our competitors may have ongoing clinical trials
for product candidates that treat the same indications as the EGP-437 Combination Product, and patients who would otherwise be
eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates.
Our inability to enroll
a sufficient number of patients for our clinical trials would result in significant delays, could require us to abandon one or
more clinical trials altogether and could delay or prevent our receipt of necessary regulatory approvals. Enrollment delays in
our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company
to decline and limit our ability to obtain additional financing.
If serious adverse or unacceptable
side effects are identified during the development of our product candidates, we may need to abandon or limit our development of
such product candidates.
If the EGP-437 Combination
Product, EyeGate OBG or any of our other product candidates are associated with serious adverse events or undesirable side effects
in clinical trials or have characteristics that are unexpected, we may need to abandon their development or limit development to
more narrow uses or subpopulations in which the serious adverse events, undesirable side effects or other characteristics are less
prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in clinical
or early stage testing for treating ophthalmic disease have later been found to cause side effects that prevented further development
of the compound.
We may not be successful in our efforts
to use our EyeGate® II Delivery System or platform to build a pipeline of product candidates.
A key element of our
strategy is to use our proprietary EyeGate® II Delivery System or platform to rationally design, engineer and generate a pipeline
of products and progress these therapies through clinical development for the treatment of a variety of ophthalmic diseases. Our
research and development efforts to date have resulted in a pipeline of additional product candidates directed at the treatment
of ophthalmic diseases. These and any other potential product candidates that we identify may not be suitable for continued preclinical
or clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate
that they are unlikely to be products that will receive marketing approval and achieve market acceptance. If we do not successfully
develop and commercialize our product candidates that we develop based upon our technological approach, we will not be able to
obtain product revenues in future periods.
We may expend our limited resources
to pursue a particular product candidate or indication and fail to capitalize on product candidates or 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 that we identify for specific indications.
As a result, we may forego or delay pursuit of opportunities with other product candidates or for 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. If we do not accurately evaluate the commercial potential
or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration,
licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development
and commercialization rights to such product candidate. To the extent our contemplated trials are unsuccessful, we may not be able
to raise additional funds for subsequent trials or pursuing other indications.
Risks Related to the Commercialization
of Our Product Candidates
Even if the EGP-437 Combination Product,
EyeGate OBG or any other product candidate that we develop receives marketing approval, it may fail to achieve the degree of market
acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success and
the market opportunity for the EGP-437 Combination Product and EyeGate OBG may be smaller than we estimate.
If the EGP-437 Combination
Product, EyeGate OBG or any other product candidate that we develop receives marketing approval, it may nonetheless fail to gain
sufficient market acceptance by physicians, patients, third-party payors and others in the medical community.
Current treatments
that are used for anterior uveitis and inflammation post cataract surgery include topical corticosteroids such as Durezol®
(Novartis AG), Lotemax® (Valeant Pharmaceuticals International, Inc.), Pred Forte® (Allergan, Inc.) and prednisolone acetate
ophthalmic suspension (1%) (Novartis AG), as well as topical NSAIDs such as Bromfenac. These treatments are well established in
the medical community, and doctors may continue to rely on these treatments rather than our EGP-437 Combination Product, if and
when it is approved for marketing by the FDA.
Current treatment
or standard-of-care post photorefractive keratectomy (PRK) surgery is a bandage contact lens (BCL), such as the Acuvue Oasys®
(Johnson & Johnson Vision Care, Inc.), along with a variety of topical antibiotics and anti-inflammatories, which are available
from several suppliers. BCL as treatments post PRK surgery are well established in the medical community, and doctors may continue
to rely on these treatments rather than the EyeGate OBG Product, if and when it is cleared for marketing by the FDA.
Our assessment of
the potential market opportunity for the EGP-437 Combination Product and EyeGate OBG is based on industry and market data that
we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and
third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to
be reliable, although they do not guarantee the accuracy or completeness of such information. If the actual market for the EGP-437
Combination Product and EyeGate OBG is smaller than we expect, our product revenue may be limited and it may be more difficult
for us to achieve or maintain profitability.
If we are unable to establish sales,
marketing and distribution capabilities, we may not be successful in commercializing the EGP-437 Combination Product, EyeGate OBG
or any other product candidates that we may develop if and when they are approved.
We do not have a sales
or marketing infrastructure. To achieve commercial success for any product for which we have obtained marketing approval and have
not licensed the commercialization rights, we will need to establish sales, marketing and distribution capabilities, either ourselves
or through collaborations or other arrangements with third parties as we have under the Valeant license agreements.
In the future, we
plan to build an ophthalmic focused sales and marketing infrastructure to market or co-promote the EyeGate OBG product and possibly
other product candidates that we develop in the U.S., if and when they are approved. There are risks involved with establishing
our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time
consuming and could delay any product launch. If the commercial launch of the EyeGate OBG or any other product candidate for which
we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely
or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain
or reposition our sales and marketing personnel.
Factors that may inhibit
our efforts to commercialize the EGP-437 Combination Product, EyeGate OBG or any other product candidates on our own include:
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our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
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the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe our products;
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the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
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unforeseen costs and expenses associated with creating an independent sales and marketing organization.
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We expect to enter
into arrangements with third parties to perform consulting, sales, marketing and distribution services in markets outside the U.S.
We may also enter into arrangements with third parties to perform these services in the U.S. if we do not establish our own sales,
marketing and distribution capabilities in the U.S. or if we determine that such third-party arrangements are otherwise beneficial.
Our product revenues and our profitability, if any, under any such third-party sales, marketing or distribution arrangements are
likely to be lower than if we were to market, sell and distribute the EGP-437 Combination Product, EyeGate OBG or any other product
candidates that we may develop ourselves. In addition, we may not be successful in entering into arrangements with third parties
to sell, market and distribute the EyeGate OBG product or any other product candidates or may be unable to do so on terms that
are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary
resources and attention to sell and market the EGP-437 Combination Product, EyeGate OBG or our other product candidates effectively.
If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with
third parties, we will not be successful in commercializing our EGP-437 Combination Product, EyeGate OBG or any other product candidates
that we may develop.
We face substantial competition, which may result in others
discovering, developing or commercializing products before or more successfully than we do.
The development and
commercialization of new drug products is highly competitive. We face competition with respect to the EGP-437 Combination Product,
EyeGate OBG and our other current product candidates, and will face competition with respect to any product candidates that we
may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and
biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market
and sell products or are pursuing the development of products for the treatment of the disease indications for which we are developing
our product candidates. Potential competitors also include academic institutions, government agencies and other public and private
research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development,
manufacturing and commercialization.
The current standard
of care for non-infectious anterior uveitis and inflammation post cataract surgery include topical corticosteroids such as Durezol®
(Novartis AG), Lotemax® (Valeant Pharmaceuticals International, Inc.), Pred Forte® (Allergan, Inc.) and prednisolone acetate
ophthalmic suspension (1%) (Novartis AG), as well as topical NSAIDs such as Bromfenac. Current treatment or standard-of-care post
PRK surgery is a BCL, such as the Acuvue Oasys® (Johnson & Johnson Vision Care, Inc.) along with a variety of topical antibiotics
and anti-inflammatories, which are available from several suppliers.
Our commercial opportunity
could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer
or less severe side effects, are more convenient or are less expensive than the EGP-437 Combination Product, EyeGate OBG or other
product candidates that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more
rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before
we are able to enter the market.
In addition, our ability
to compete may be affected in many cases by insurers or other third-party payors, particularly Medicare, seeking to encourage the
use of generic products. Generic products are currently being used for the indications that we are pursuing, and additional products
are expected to become available on a generic basis over the coming years. If the EGP-437 Combination Product, EyeGate OBG or any
other product candidate that we may develop achieves marketing approval, we expect that it will be priced at a premium over competitive
products.
Many of the companies
against which we are competing or against which we may compete in the future have significantly greater financial resources and
expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals
and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result
in even more resources being concentrated among a smaller number of our competitors. Smaller and other early stage companies may
also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical
trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for,
our programs.
Even if we are able to commercialize
the EGP-437 Combination Product, EyeGate OBG or any other product candidate that we may develop, the products may become subject
to unfavorable pricing regulations, third-party coverage or reimbursement practices or healthcare reform initiatives, which could
harm our business.
Our ability to commercialize
the EGP-437 Combination Product, EyeGate OBG or any other product candidates that we may develop successfully will depend, in part,
on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government
healthcare programs, private health insurers, managed care plans and other organizations. Government authorities and third-party
payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for 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. Coverage and reimbursement may not be available for the EGP-437 Combination
Product, EyeGate OBG or any other product that we commercialize and, even if they are available, the level of reimbursement may
not be satisfactory.
Inadequate reimbursement
may adversely affect the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining and
maintaining adequate reimbursement for our products may be difficult. We may be required to conduct expensive pharmacoeconomic
studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. If coverage and adequate
reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize
the EGP-437 Combination Product, EyeGate OBG or any other 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 indications
for which the drug is approved by the FDA or similar regulatory authorities outside the U.S. Moreover, eligibility for coverage
and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research,
development, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also not
be sufficient to cover our costs and may not be made permanent. 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 drugs 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 drugs 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 adequate reimbursement rates
from both government-funded and private payors for any approved products that we develop would compromise our ability to generate
revenues and become profitable.
The regulations that
govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Current
and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause
delays in obtaining approvals. Some countries require approval of the sale price of a drug 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 in a particular country, but then be subject to price regulations that delay our
commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able to generate
from the sale of the product in that country. To obtain reimbursement or pricing approval in some countries, we may be required
to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. Adverse
pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates
obtain marketing approval.
There can be no assurance
that our product candidates or any products that we may in-license, if they are approved for sale in the U.S. or in other countries,
will be considered medically reasonable and necessary for a specific indication, that they will be considered cost-effective by
third-party payors, that coverage and an adequate level of reimbursement will be available, or that third-party payors’ reimbursement
policies will not adversely affect our ability to sell our product candidates profitably.
Our strategy of obtaining rights
to product candidates and approved products for the treatment of a range of ophthalmic diseases through in-licenses and acquisitions
may not be successful.
We may expand our
product pipeline through opportunistically in-licensing or acquiring the rights to other products, product candidates or technologies
for the treatment of ophthalmic diseases. The future growth of our business may depend in part on our ability to in-license or
acquire the rights to approved products, additional product candidates or technologies. However, we may be unable to in-license
or acquire the rights to any such products, product candidates or technologies from third parties. The in-licensing and acquisition
of pharmaceutical products is a competitive area, and a number of more established companies are also pursuing strategies to license
or acquire products, product candidates or technologies that we may consider attractive. These established companies may have a
competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.
In addition, companies
that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to in-license or
acquire the rights to the relevant product, product candidate or technology on terms that would allow us to make an appropriate
return on our investment. Furthermore, we may be unable to identify suitable products, product candidates or technologies within
our area of focus. If we are unable to successfully obtain rights to suitable products, product candidates or technologies, our
ability to pursue this element of our strategy could be impaired.
Product liability lawsuits against
us could cause us to incur substantial liabilities and to limit commercialization of any products that we develop.
We face an inherent
risk of product liability exposure related to the use of the EGP-437 Combination Product, EyeGate OBG, and any other product candidates
that we develop in human clinical trials and will face an even greater risk if we commercially sell any products that we develop.
If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur
substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
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decreased demand for any product candidates or products that we develop;
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injury to our reputation and significant negative media attention;
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withdrawal of clinical trial participants;
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significant costs to defend the related litigation;
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substantial monetary awards to trial participants or patients;
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reduced time and attention of our management to pursue our business strategy; and
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the inability to commercialize any products that we develop.
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While we obtain insurance
for each clinical trial we perform, we may not be adequately insured to cover all liabilities that we may incur. We will need to
increase our insurance coverage as we expand our clinical trials. We will need to further increase our insurance coverage if we
commence commercialization of the EGP-437 Combination Product, EyeGate OBG or any other product candidate that receives marketing
approval. Insurance coverage is increasingly expensive. 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.
Risks Related to Our Dependence on Third
Parties
We may enter into collaborations
with other third parties for the development or commercialization of our product candidates, including the EGP-437 Combination
Product and EyeGate OBG. If our collaborations are not successful, we may not be able to capitalize on the market potential of
these product candidates.
We expect to utilize
a variety of types of collaboration, distribution and other marketing arrangements with third parties to commercialize the EGP-437
Combination Product and EyeGate OBG in markets outside the U.S. We also may enter into arrangements with third parties to perform
these services in the U.S. if we do not establish our own sales, marketing and distribution capabilities in the U.S. or if we determine
that such third-party arrangements are otherwise beneficial. We also may seek third-party collaborators for development and commercialization
of other product candidates. Our likely collaborators for any sales, marketing, distribution, development, licensing or broader
collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies
and biotechnology companies. To date, the only agreements we have entered into are our Valeant Licensing Agreements. Our ability
to generate revenues from these arrangements will depend on our collaborators’ abilities and efforts to successfully perform
the functions assigned to them in these arrangements.
Collaboration agreements
may not lead to development or commercialization of product candidates in the most efficient manner, or at all. If we do not receive
the funding we expect under collaboration agreements, our development of our product candidates could be delayed and we may need
additional resources to develop our product candidates. All of the risks relating to product development, regulatory approval and
commercialization described in this Annual Report on Form 10-K also apply to the activities of our collaborators.
Additionally, subject
to its contractual obligations to us, if a collaborator of ours were to be involved in a business combination, it might deemphasize
or terminate the development or commercialization of any product candidate licensed to it by us. If one of our collaborators terminates
its agreement with us, we may find it more difficult to attract new collaborators and our perception in the business and financial
communities could be harmed.
If we are not able to establish additional
collaborations, we may have to alter our development and commercialization plans and our business could be adversely affected.
For some of our product
candidates, we may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization
of therapeutic products. We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement
for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the
terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those
factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities
outside the U.S., the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering
such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership
of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry
and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar
indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with
us for our product candidate. We may also be restricted under future license agreements from entering into agreements on certain
terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and document. In addition, there
have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced
number of potential future collaborators.
If we are unable to
reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development
of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential
commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development
or commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities
on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms
or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development
and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue
to develop our product platform.
Disputes may arise under our Valeant
License Agreements, including disputes related to the scope of rights granted thereunder.
Disputes may arise
under our Valeant License Agreements, including disputes related to the scope of rights granted thereunder. Any such disputes could
lead to delays in the development or commercialization of our EGP-437 Combination Product and could result in time-consuming and
expensive litigation or arbitration, which may not be resolved in our favor. Either party may terminate the Valeant License Agreements
in their entirety if the other party materially breaches either Valeant License Agreement and the breach remains uncured for a
defined cure period, and either party may terminate either Valeant License Agreement in its entirety upon the bankruptcy of the
other party. We may terminate either Valeant License Agreement following commercial launch of our EGP 437-Combination Product if
Valeant ceases selling and distributing our EGP 437-Combination Product in the United States for a defined period of time, subject
to certain limitations. Valeant may terminate either Valeant License Agreement at any time, on a without cause basis, by providing
90 days written notice, or immediately upon the determination by a court of competent jurisdiction if Valeant’s actions pursuant
to the terms of the Valeant License Agreement infringe upon the intellectual property rights of a third party. We cannot make assurances
that these agreements will not be terminated in accordance with these terms, and such termination could have a material adverse
impact on our future business, results of operations, financial conditions, and the trading price of our common stock.
We rely, and expect to continue to
rely, on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing
to meet deadlines for the completion of such trials.
We have relied on
third parties, such as contract research organizations, or CROs, to conduct our completed trials of our EGP-437 Combination Product,
our ongoing confirmatory Phase 3 clinical trial of our EGP-437 Combination Product and do not plan to independently conduct clinical
trials of the EGP-437 Combination Product or other product candidates that we may develop, including EyeGate OBG. We expect to
continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators,
to conduct our clinical trials. These agreements might terminate for a variety of reasons, including a failure to perform by the
third parties. If we need to enter into alternative arrangements, that would delay our product development activities.
Our reliance on these
third parties for research and development activities will reduce our control over these activities but will not relieve us of
our responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance
with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly
referred to as Good Clinical Practices for conducting, recording and reporting the results of clinical trials to assure that data
and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected.
We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored
database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and
criminal sanctions.
Furthermore, these
third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do
not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with
regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals
for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product
candidates.
We contract with third parties for
the manufacture of the EGP-437 Combination Product and EyeGate OBG for clinical trials and expect to continue to do so in connection
with the commercialization of the EGP-437 Combination Product, EyeGate OBG, and for clinical trials and commercialization of any
other product candidates that we may develop. This reliance on third parties increases the risk that we will not have sufficient
quantities of our product candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair
our development or commercialization efforts.
We do not currently
own or operate manufacturing facilities for the production of clinical or commercial quantities of the EGP-437 Combination Product,
EyeGate OBG, or any other of our product candidates. We rely, and expect to continue to rely, on third parties to manufacture clinical
and commercial supplies of the EGP-437 Combination Product, EyeGate OBG, preclinical and clinical supplies of our other product
candidates that we may develop, and commercial supplies of products if and when any of our product candidates receives marketing
approval. Our current and anticipated future dependence upon others for the manufacture of the EGP-437 Combination Product, EyeGate
OBG and any other product candidate or product that we develop may adversely affect our future profit margins and our ability to
commercialize any products that receive marketing approval on a timely and competitive basis. In addition, any performance failure
on the part of our existing or future manufacturers could delay clinical development or marketing approval.
We currently rely
exclusively on third-party manufacturers to assemble and prepare the EGP-437 Combination Product and EyeGate OBG on a purchase
order basis. We do not currently have any contractual commitments for commercial supply of bulk drug substance for EGP-437, EyeGate
OBG, or fill-finish services or for components of the EyeGate® II Delivery System. We also do not currently have arrangements
in place for redundant supply or a second source for bulk drug substance for EGP-437, EyeGate OBG, or for fill-finish services.
The prices at which we are able to obtain supplies of EGP-437, EyeGate OBG, fill-finish services, and assemble the EyeGate®
II Delivery System may vary substantially over time and adversely affect our financial results.
If our third-party
manufacturers for the EGP-437 Combination Product or EyeGate OBG fail to fulfill our purchase orders or should become unavailable
to us for any reason, we believe that there are a limited number of potential replacement manufacturers, and we likely would incur
added costs and delays in identifying or qualifying such replacements. We could also incur additional costs and delays in identifying
or qualifying a replacement manufacturer for fill-finish services if our existing third-party manufacturer should become unavailable
for any reason. We may be unable to establish any agreements with such replacement manufacturers or to do so on acceptable terms.
Even if we could transfer manufacturing to a different third party, the shift would likely be expensive and time consuming, particularly
since the new facility would need to comply with the necessary regulatory requirements and we would need FDA approval before using
or selling any products manufactured at that facility.
In connection with
our application for a license to market the EGP-437 Combination Product, EyeGate OBG, or other product candidates in the U.S.,
we may be required to conduct a comparability study if the product we intend to market is supplied by a manufacturer different
from the one who supplied the product evaluated in our clinical studies. Delays in designing and completing this study to the satisfaction
of the FDA could delay or preclude our development and commercialization plans and thereby limit our revenues and growth.
Reliance on third-party
manufacturers entails additional risks, including:
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the EGP-437 Combination Product, EyeGate OBG and any other product candidates that we may develop may compete with other product candidates and products for access to a limited number of suitable manufacturing facilities that operate under current good manufacturing practices, or cGMP, regulations;
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reliance on the third party for regulatory compliance and quality assurance;
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the possible breach of the manufacturing agreement by the third party;
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the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
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the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.
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Third-party manufacturers
may not be able to comply with cGMP regulations or similar regulatory requirements outside the U.S. Our failure, or the failure
of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including
clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures
or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly
and adversely affect supplies of our products.
Risks Related to Our Intellectual Property
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 sufficiently broad,
our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully
commercialize our technology and products may be impaired.
Our success depends
in large part on our ability to obtain and maintain patent protection in the U.S. and other countries with respect to our proprietary
technology and products. We and our licensors have sought to protect our proprietary position by filing patent applications in
the U.S. and abroad related to our novel technologies and product candidates. The patent prosecution process is expensive and time-consuming,
and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely
manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is
too late to obtain patent protection. Maintaining patents in the U.S. is an expensive process and it is even more expensive to
maintain patents and patent applications in foreign countries. As a result, it is possible that we and our licensors will fail
to maintain such patents thereby reducing the rights of our portfolio.
The patent position
of pharmaceutical, biotechnology and medical device companies generally is highly uncertain, involves complex legal and factual
questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability
and commercial value of our and our licensors’ patent rights are highly uncertain. Our and our licensors’ pending and
future patent applications may not result in patents being issued which protect our technology or products or which effectively
prevent others from commercializing competitive technologies and products. In addition, the laws of foreign countries may not protect
our rights to the same extent as the laws of the U.S. 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. Therefore, we cannot know with certainty whether we or our licensors were the first
to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our licensors were
the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial
value of our owned or licensed patent rights are highly uncertain. Our pending and future patent applications may not result in
patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing
competitive technologies and products. In particular, during prosecution of any patent application, the issuance of any patents
based on the application may depend upon our ability to generate additional preclinical or clinical data that support the patentability
of our proposed claims. We may not be able to generate sufficient additional data on a timely basis, or at all. Moreover, changes
in either the patent laws or interpretation of the patent laws in the U.S. and other countries may diminish the value of our patents
or narrow the scope of our patent protection.
Recent patent reform
legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement
or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed
into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect
the way patent applications are prosecuted and may also affect patent litigation. The U.S. Patent Office recently developed new
regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated
with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly,
it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act
and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the
enforcement or defense of our issued patents.
Moreover, we may be
subject to a third-party pre-issuance submission of prior art to the U.S. Patent and Trademark Office, 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 reduce the scope
of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with
us, without payment to us, or result in our inability to manufacture or commercialize products 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.
Even if our owned
and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection,
prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able
to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner.
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 products. Given the amount of time required for the development, testing and regulatory review of new product
candidates, patents protecting such candidates might expire before or shortly after such 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 other intellectual property, which could be expensive, time consuming and unsuccessful.
Competitors may infringe
our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement
claims, which can be expensive and time consuming. Any claims we assert against perceived infringers could provoke these parties
to assert counterclaims against us alleging that we infringe their patents. In addition, in a patent infringement proceeding, a
court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly
or 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. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or
interpreted narrowly. 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.
Third parties may initiate legal
proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could
have a material adverse effect on the success of our business.
Our commercial success
depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our product candidates
and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable intellectual
property litigation in the medical device, 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 products and technology,
including interference or derivation proceedings before the U.S. Patent and Trademark Office. The risks of being involved in such
litigation and proceedings may increase as our product candidates near commercialization and as we gain the greater visibility
associated with being a public company. Third parties may assert infringement claims against us based on existing patents or patents
that may be granted in the future. We may not be aware of all such intellectual property rights potentially relating to our product
candidates and their uses. Thus, we do not know with certainty that the EGP-437 Combination Product, EyeGate OBG, or any other
product candidate, or our commercialization thereof, does not and will not infringe or otherwise violate any third party’s
intellectual property.
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 developing and marketing our products and technology. However, we may not be able to obtain any required license on commercially
reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors
access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing
technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’
fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our
product candidates or force us to cease some of our business operations. Claims that we have misappropriated the confidential information
or trade secrets of third parties could have a similar negative impact on our business.
If we fail to comply with our obligations
in our intellectual property licenses and funding arrangements with third parties, we could lose rights that are important to our
business.
We are party to licensing
agreements, including the Valeant Licensing Agreements, that impose, and, for a variety of purposes, we will likely enter into
additional licensing and funding arrangements with third parties that may impose, diligence, development and commercialization
timelines and milestone payment, royalty, insurance and other obligations on us. Under certain of our existing licensing agreements,
we are obligated to pay royalties or make specified milestone payments on net product sales of the EyeGate® II Delivery System
or related technologies to the extent they are covered by the agreements. We also are obligated under certain of our existing license
agreements to pay maintenance and other fees. We also have diligence and development obligations under certain of those agreements
that we are required to satisfy. If we fail to comply with our obligations under current or future license and collaboration agreements,
our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture
or market any product that is covered by these agreements or may face other penalties under the agreements. Such an occurrence
could diminish the value of the product candidate being developed under any such agreement. Termination of these agreements or
reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements
with less favorable terms, or cause us to lose our rights under these agreements, including our rights to important intellectual
property or technology.
We may be subject to claims by third
parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard
as our own intellectual property.
Some of our employees
were previously employed at universities or other biotechnology or pharmaceutical companies. Although we try to ensure that our
employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these
employees or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any
such employee’s former employer. Litigation may be necessary to defend against these claims.
In addition, while
it is our policy to require our employees and contractors who may be involved in the 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 develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing
or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to
determine the ownership of what we regard as our intellectual property.
If we fail in prosecuting
or 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 prosecuting or defending against such claims, litigation could result in substantial costs and be
a distraction to management.
Intellectual property litigation
could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in
our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses,
and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments and 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. Such litigation
or proceedings could substantially increase our operating losses and reduce the resources available for development activities
or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such
litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings
more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation
of patent litigation or other proceedings could compromise our ability to compete in the marketplace.
If we are unable to protect the confidentiality
of our trade secrets, our business and competitive position would be harmed.
In addition to seeking
patents for some of our technology and product candidates, we also rely on trade secrets, including unpatented know-how, technology
and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering
into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators,
outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality
and invention or patent assignment agreements with our employees and consultants. 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. 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 inside and outside the U.S. 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, or those to whom they communicate it, 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.
Risks Related to Regulatory Approval
of Our Product Candidates and Other Legal Compliance Matters
If we are not able to obtain required
regulatory approvals, we will not be able to commercialize the EGP-437 Combination Product, EyeGate OBG or any other product candidate
that we may develop, and our ability to generate revenue will be materially impaired. The marketing approval process is expensive,
time-consuming and uncertain. As a result, we cannot predict when or if we, or any collaborators we may have in the future, will
obtain marketing approval to commercialize the EGP-437 Combination Product, EyeGate OBG or any other product candidate.
The activities associated
with the development and commercialization of our product candidates, including the EGP-437 Combination Product and EyeGate OBG,
including design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale
and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the U.S. and similar regulatory
authorities outside the U.S. Failure to obtain marketing approval for a product candidate will prevent us from commercializing
the product candidate. We have not received approval to market the EGP-437 Combination Product, EyeGate OBG or any other product
candidate from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications
necessary to gain marketing approvals and expect to rely on third-party CROs and consultants to assist us in this process.
The process of obtaining
marketing approvals, both in the U.S. and abroad, is expensive and may take many years, especially if additional clinical trials
are required, if approval is obtained at all. Securing marketing approval requires the submission of extensive preclinical and
clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s
safety, purity and potency. Securing marketing approval also requires the submission of information about the product manufacturing
process to, and inspection of manufacturing facilities by, the regulatory authorities. The FDA or other regulatory authorities
may determine that the EGP-437 Combination Product, EyeGate OBG or any other product candidate that we may develop is not safe,
effective or pure, is only moderately effective or has undesirable or unintended side effects, toxicities or other characteristics
that preclude our obtaining marketing approval or prevent or limit commercial use. Any marketing approval we ultimately obtain
may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
The regulatory process
can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved.
Failure to obtain marketing approval
in international jurisdictions would prevent our product candidates from being marketed abroad.
In order to market
and sell the EGP-437 Combination Product, EyeGate OBG and any other product candidate that we may develop in other jurisdictions,
we or our third-party collaborators must obtain separate marketing approvals and comply with numerous and varying regulatory requirements.
The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ
substantially from that required to obtain FDA approval. The regulatory approval process outside the U.S. generally includes all
of the risks associated with obtaining FDA approval. In addition, in many countries outside the U.S., it is required that the product
be approved for reimbursement before the product can be sold in that country. We or these third parties may not obtain approvals
from regulatory authorities outside the U.S. on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory
authorities in other countries or jurisdictions, and approval by one regulatory authority outside the U.S. does not ensure approval
by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketing approvals
and may not receive necessary approvals to commercialize our products in any market.
Even if we, or any collaborators
we may have in the future, obtain marketing approvals for the EGP-437 Combination Product, EyeGate OBG or our other product candidates,
the terms of those approvals, ongoing regulations and post-marketing restrictions may limit how we, or they, manufacture and market
our products, which could materially impair our ability to generate revenue.
Once marketing approval
has been granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation.
We, and any collaborators we may have in the future, must therefore comply with requirements concerning advertising and promotion
for any of our products for which we or they obtain marketing approval. Promotional communications with respect to prescription
products are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s
approved labeling. Thus, if the EGP-437 Combination Product, EyeGate OBG or any other product candidate that we may develop receives
marketing approval, the accompanying label may limit the approved use of our product, which could limit sales of the product.
In addition, manufacturers
of approved products and those manufacturers’ facilities are required to comply with extensive FDA requirements, including
ensuring that quality control and manufacturing procedures conform to cGMPs, which include requirements relating to quality control
and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We, our
contract manufacturers, our future collaborators and their contract manufacturers will also be subject to other regulatory requirements,
including submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements
regarding the distribution of samples to physicians, recordkeeping, and costly post-marketing studies or clinical trials and surveillance
to monitor the safety or efficacy of the product such as the requirement to implement a risk evaluation and mitigation strategy.
We may be subject to substantial
penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products.
Violations of the
Federal Food, Drug, and Cosmetic Act relating to the promotion or manufacturing of prescription products may lead to investigations
by the FDA, Department of Justice and state Attorneys General alleging violations of federal and state healthcare fraud and abuse
laws, as well as state consumer protection laws. In addition, later discovery of previously unknown adverse events or other problems
with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various
adverse results, including:
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restrictions on such products, manufacturers or manufacturing processes;
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restrictions on the labeling or marketing of a product;
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restrictions on product distribution or use;
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requirements to conduct post-marketing studies or clinical trials;
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withdrawal of the products from the market;
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refusal to approve pending applications or supplements to approved applications that we submit;
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fines, restitution or disgorgement of profits or revenues;
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suspension or withdrawal of marketing approvals;
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refusal to permit the import or export of our products;
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injunctions or the imposition of civil or criminal penalties.
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Our relationships with customers
and third-party payors may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, transparency,
health information privacy and security, and other healthcare laws and regulations, which could expose us to criminal sanctions,
civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.
Healthcare providers,
physicians and third-party payors in the U.S. and elsewhere will play a primary role in the recommendation and prescription of
any product candidates, including the EGP-437 Combination Product and EyeGate OBG, for which we obtain marketing approval. Our
future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare
laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell
and distribute any products for which we obtain marketing approval. In addition, we may be subject to transparency laws and patient
privacy regulation by U.S. federal and state governments and by governments in foreign jurisdictions in which we conduct our business.
The applicable federal, state and foreign healthcare laws and regulations that may affect our ability to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;
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federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose criminal and civil penalties, including civil whistleblower or
qui tam
actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective implementing regulations, which imposes obligations, including mandatory contractual terms, on covered healthcare providers, health plans and healthcare clearinghouses, as well as their business associates, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; and
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analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
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Efforts to ensure
that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial
costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future
statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. 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, including, without limitation, damages, fines, imprisonment, exclusion
from participation in government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring
of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found
to be not in compliance with applicable laws, it may be subject to criminal, civil or administrative sanctions, including exclusions
from participation in government funded healthcare programs.
Recently enacted and future legislation
may affect our ability to commercialize and the prices we obtain for any products that are approved in the U.S. or foreign jurisdictions.
In the U.S. and some
foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare
system that could affect our ability to profitably sell or commercialize any product candidate, including the EGP-437 Combination
Product and EyeGate OBG, for which we obtain marketing approval or that we may in-license. The pharmaceutical industry has been
a particular focus of these efforts and has been significantly affected by legislative initiatives. Current laws, as well as other
healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward
pressure on the price that we receive for any approved product.
In the U.S., the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, changed the way Medicare covers and pays for pharmaceutical
products. Cost reduction initiatives and other provisions of this legislation could limit coverage of and reduce the price that
we receive for any approved products. While the MMA applies only to product benefits for Medicare beneficiaries, private payors
often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction
in reimbursement that results from the MMA or other healthcare reform measures may result in a similar reduction in payments from
private payors.
In March 2010, former
President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability
Reconciliation Act, or collectively PPACA. Among the provisions of PPACA of importance to our business, including, without limitation,
our ability to commercialize and the prices we may obtain for any of our product candidates and that are approved for sale, are
the following:
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an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents;
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an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;
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a new Medicare Part D coverage gap discount program, in which participating manufacturers must agree to offer 50% point-of-sale discounts off negotiated drug prices during the coverage gap period as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
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expansion of healthcare fraud and abuse laws, including the federal False Claims Act and the federal Anti-Kickback Statute, and the addition of new government investigative powers, and enhanced penalties for noncompliance;
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extension of manufacturers’ Medicaid rebate liability;
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expansion of eligibility criteria for Medicaid programs; and
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expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program.
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In addition, other
legislative changes have been proposed and adopted since PPACA was enacted
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These changes include aggregate reductions to
Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013
.
In January 2013, former
President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments
to several types of providers, and increased the statute of limitations period for the government to recover overpayments to providers
from three to five years
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These new laws may result in additional reductions in Medicare and other healthcare funding. In
addition, it is possible that changes in administration and policy, including the potential repeal of all or parts of the PPACA,
resulting from the recent U.S. presidential election could result in additional proposals and/or changes to health care system
legislation.
The pricing of prescription
pharmaceuticals is also subject to governmental control outside the U.S. In these countries, pricing negotiations with governmental
authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing
approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product
candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing
is set at unsatisfactory levels, our ability to generate revenues and become profitable could be impaired.
Laws and regulations governing any
international operations we may have in the future may preclude us from developing, manufacturing and selling certain products
outside of the U.S. and require us to develop and implement costly compliance programs.
If we expand our operations
outside of the U.S., we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in
which we plan to operate. The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering,
authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate
for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining
or retaining business. The FCPA also obligates companies whose securities are listed in the U.S. to comply with certain accounting
provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation,
including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international
operations.
Compliance with the
FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents
particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and
doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical
trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.
Various laws, regulations
and executive orders also restrict the use and dissemination outside of the U.S., or the sharing with certain non-U.S. nationals,
of information classified for national security purposes, as well as certain products and technical data relating to those products.
If we expand our presence outside of the U.S., it will require us to dedicate additional resources to comply with these laws, and
these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the U.S.,
which could limit our growth potential and increase our development costs.
The failure to comply
with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment
from government contracting. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of
the FCPA’s accounting provisions.
If we or our third-party manufacturers
fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur
significant costs.
We and our third-party
manufacturers are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory
procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the
future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials,
and produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes.
We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting
from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources.
We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws
and regulations.
Although we maintain
workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees, this insurance
may not provide adequate coverage against potential liabilities.
In addition, we may
incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These
current or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these
laws and regulations also may result in substantial fines, penalties or other sanctions.
Further, with respect
to the operations of our third-party contract manufacturers, it is possible that if they fail to operate in compliance with applicable
environmental, health and safety laws and regulations or properly dispose of wastes associated with our products, we could be held
liable for any resulting damages, suffer reputational harm or experience a disruption in the manufacture and supply of our product
candidates or products.
Risks Related to Employee Matters and
Managing Growth
Our future success depends on our
ability to retain key executives and to attract, retain and motivate qualified personnel.
We are highly dependent
on the research and development, clinical and business development expertise of Stephen From, our President and Chief Executive
Officer, as well as the other principal members of our management, scientific and clinical team and a number of third party consultants.
Although we have entered into an employment agreement with Mr. From, he may terminate his employment with us at any time. We do
not maintain “key person” insurance for any of our executives or other employees.
Recruiting and retaining
qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success. The loss
of the services of our executive officers or other key employees could impede the achievement of our research, development and
commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing
executive officers and key employees may be difficult and may take an extended period of time because of the limited number of
individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval
of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain
or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies
for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and
research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist
us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by
employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their
availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth
strategy will be limited.
Our business and operations would
suffer in the event of system failures.
Despite the implementation
of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable
to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.
If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug
development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result
in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent
that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure
of confidential or proprietary information, we could incur liability and the further development of our product candidates could
be delayed.
We expect to expand our development
capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties
in managing our growth, which could disrupt our operations.
We expect to experience
significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug development,
regulatory affairs and, if any of our product candidates receives marketing approval, sales, marketing and distribution. To manage
our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand
our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the
limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively
manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may
lead to significant costs and may divert our management and business development resources. Any inability to manage growth could
delay the execution of our business plans or disrupt our operations.
We may fail to realize any benefits and incur losses related
to any acquisition.
The success of our
strategic acquisitions will depend, in part, on our ability to successfully integrate the acquired businesses with our existing
business. It is possible that the integration process could result in the loss of key employees, the disruption of ongoing business
or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships
with clients, customers and employees or to achieve the anticipated benefits of the acquisition. Successful integration may also
be hampered by any differences between the operations and corporate culture of the two organizations. If we experience difficulties
with the integration process, the anticipated benefits of the acquisition may not be realized fully, or at all, or may take longer
to realize than expected.
Risks Related to Our Common Stock
Our principal stockholders, executive
officers and directors own a significant percentage of our common stock and will be able to exert a significant control over matters
submitted to the stockholders for approval.
Our officers and directors,
and stockholders who own more than 5% of our common stock, beneficially own a significant percentage of our common stock. This
significant concentration of share ownership may adversely affect the trading price for our common stock because investors often
perceive disadvantages in owning stock in companies with concentrated ownership. These stockholders, if they acted together, could
significantly influence all matters requiring approval by the stockholders, including the election of directors. The interests
of these stockholders may not always coincide with the interests of other stockholders.
Provisions in our corporate charter
documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult
and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our
restated certificate of incorporation and our amended and restated bylaws may discourage, delay or prevent a merger, acquisition
or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise
receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future
for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors
is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our
stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our
board of directors. Among other things, these provisions:
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establish a classified board of directors such that only one of three classes of directors is elected each year;
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allow the authorized number of our directors to be changed only by resolution of our board of directors;
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limit the manner in which stockholders can remove directors from our board of directors;
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establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;
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require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;
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limit who may call stockholder meetings;
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authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and
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require the affirmative vote of stockholders holding at least two-thirds of shares entitled to be cast to amend or repeal specified provisions of our restated certificate of incorporation or our amended and restated bylaws.
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Moreover, because
we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which
prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of
three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless
the merger or combination is approved in a prescribed manner.
The price of our common stock may
be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock.
Our stock price may
be volatile. The stock market in general and the market for smaller specialty pharmaceutical companies in particular have experienced
extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility,
you may not be able to sell your common stock at or above the price you paid for such shares. The market price for our common stock
may be influenced by many factors, including:
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the success of competitive products or technologies;
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results of clinical trials of the EGP-437 Combination Product or any other product candidate that we may develop;
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results of clinical trials of product candidates of our competitors;
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regulatory or legal developments in the U.S. and other countries;
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developments or disputes concerning patent applications, issued patents or other proprietary rights;
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the recruitment or departure of key scientific or management personnel;
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the level of expenses related to any of our product candidates or clinical development programs;
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the results of our efforts to discover, develop, acquire or in-license additional products, product candidates or technologies for the treatment of ophthalmic diseases, the costs of commercializing any such products and the costs of development of any such product candidates or technologies;
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actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
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variations in our financial results or those of companies that are perceived to be similar to us;
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changes in the structure of healthcare payment systems;
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market conditions in the pharmaceutical and biotechnology sectors;
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general economic, industry and market conditions; and
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the other factors described in this “Risk Factors” section.
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In the past, following
periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted
against that company. We also may face securities class-action litigation if we cannot obtain regulatory approvals for or if we
otherwise fail to commercialize EGP-437. Such litigation, if instituted against us, could cause us to incur substantial costs to
defend such claims and divert management’s attention and resources.
We have received notices from NASDAQ of non-compliance
with its continuing listing rules.
On November 20, 2017,
we received a notice from NASDAQ notifying us that as of November 20, 2017, we were not in compliance with NASDAQ Listing Rule
5550(b)(1), as we did not maintain a minimum required stockholders’ equity of $2.5 million, or NASDAQ Listing Rule 5550(b)(2),
as the market value of our listed securities (“MVLS”) was below the minimum $35 million for the previous 30 consecutive
business days, or NASDAQ Listing Rule 5550(b)(3), as we had not had net income from continuing operations in the latest fiscal
year or in two of the last three fiscal years. In accordance with NASDAQ Listing Rule 5810(c)(2)(A)(i), we submitted a plan to
regain compliance to NASDAQ on January 4, 2018. NASDAQ accepted that plan, and we have a period of 180 calendar days from receipt
of the original notice, or until May 21, 2018, to regain compliance. To regain compliance, at any time during the 180 calendar
day-compliance period our MVLS must close at $35 million or more for a minimum of 10 consecutive business days or we must report
stockholders’ equity of at least $2.5 million. We are actively monitoring our MVLS and stockholders’ equity between now and
May 21, 2018, and will consider available options to resolve the deficiency and regain compliance with Rule 5550(b).
In the event that
we do not regain compliance with either Listing Rule 5550(b)(1) or Listing Rule 5550(b)(2) prior to the expiration of the compliance
period, we will receive written notification that our securities are subject to delisting. At that time, we may appeal the delisting
determination to a hearings panel pursuant to the procedures set forth in the applicable NASDAQ Listing Rules. A delisting of our
common stock would have an adverse effect on the market liquidity of our common stock and, as a result, the market price for our
common stock could become more volatile. Further, a delisting also could make it more difficult for us to raise additional capital.
Our ability to use our net operating
loss carryforwards and certain other tax attributes may be limited.
As of December 31,
2017, we had federal net operating loss carryforwards of approximately $45.5 million, state net operating loss carryforwards of
approximately $33.3 million and aggregate federal and state research and development tax credit carryforwards of approximately
$1.6 million and $0.5 million available to reduce future taxable income. These federal and state net operating loss carryforwards
and federal and state tax credit carryforwards which will expire at various dates through 2037, if not utilized. Utilization of
these net operating loss and tax credit carryforwards may be subject to a substantial limitation under Sections 382 and 383 of
the Internal Revenue Code of 1986, as amended, or the Code, and comparable provisions of state, local and foreign tax laws due
to changes in ownership of our company that have occurred previously or that could occur in the future. Under Section 382 of the
Code and comparable provisions of state, local and foreign tax laws, 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 net operating loss carryforwards and other pre-change tax attributes, such as research and development
tax credits, to reduce its post-change income may be limited. We have not completed a study to determine whether our initial public
offering, our registered direct offering, our follow-on public offerings, and other transactions that have occurred over the past
three years may have triggered an ownership change limitation. We may also experience ownership changes in the future as a result
of subsequent shifts in our stock ownership. As a result, if we generate taxable income, our ability to use our pre-change net
operating loss and tax credits carryforwards to reduce U.S. federal and state taxable income may be subject to limitations, which
could result in increased future tax liability to us. In addition, the Tax Cuts and Jobs Act (“TCJA”) enacted on December
22, 2017 limits the amount of net operating losses that we are permitted to deduct in any taxable year to 80% of our taxable income
in such year. The TCJA also eliminates the ability to carry back net operating losses to prior years, but allows net operating
losses generated after 2017 to be carried forward indefinitely. As such, there is a risk that due to such items, our existing net
operating losses could expire or be unavailable to offset future income.
Sales of a substantial number of
shares of our common stock by our existing stockholders in the public market could cause our stock price to fall.
Sales of a substantial
number of shares of our common stock in the public market or the perception that these sales might occur, could significantly reduce
the market price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities.
We are an “emerging growth
company,” and a smaller reporting company and the reduced disclosure requirements applicable to emerging growth companies
and smaller reporting companies may make our common stock less attractive to investors.
We are an
“emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and
may remain an emerging growth company for up to five years following the end of the fiscal year during which we first sold common equity securities under an effective
registration statement, which period for us would end on December 31, 2020. For so long as we remain an emerging growth company, we are
permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies
that are not emerging growth companies. These exemptions include:
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being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
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not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
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not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
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reduced disclosure obligations regarding executive compensation; and
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exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
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We have taken advantage
of certain reduced reporting. In particular, in this Annual Report on Form 10-K, we have provided only two years of audited financial
statements under the smaller reporting company requirements and have not included all of the executive compensation related information
that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock
less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may
be a less active trading market for our common stock and our stock price may be more volatile.
In addition, the JOBS
Act also provides that an emerging growth company can take advantage of an extended transition period for complying with new or
revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until
those standards would otherwise apply to private companies. We have irrevocably elected not to delay such adoption of new or revised
accounting standards, and, as a result, we will comply with new or revised accounting standards on the relevant dates on which
adoption of such standards is required for public companies that are not emerging growth companies.
We are also a “smaller
reporting company” as defined in Rule 12b-2 of the Exchange Act and have elected certain scaled disclosure available for
smaller reporting companies.
We incur increased costs as a result
of operating as a public company, and our management is required to devote substantial time to new compliance initiatives and corporate
governance practices.
As a public company,
and particularly after we are no longer an emerging growth company, we incur significant legal, accounting and other expenses that
we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, FINRA
rules and other applicable securities rules and regulations impose various requirements on public companies, including establishment
and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel
need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase our
legal and financial compliance costs and make some activities more time-consuming and costly.
We are evaluating
these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and,
as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to
disclosure and governance practices.
Pursuant to Section
404 of the Sarbanes-Oxley Act, or Section 404, we are required to furnish a report by our management on our internal control over
financial reporting. However, while we remain either a smaller reporting company and/or an emerging growth company, we will not
be required to include an attestation report on internal control over financial reporting issued by our independent registered
public accounting firm. To achieve compliance with Section 404 within the prescribed period, we engaged in a process to document
and evaluate our internal control over financial reporting. In this regard, we will need to continue to dedicate internal resources,
potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over
financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning
as documented and implement a continuous reporting and improvement process for internal control over financial reporting. If we
identify one or more material weaknesses in our internal control over financial reporting, it could result in an adverse reaction
in the financial markets due to a loss of confidence in the reliability of our financial statements.
Because we do not anticipate paying
any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have never declared
or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth
and development of our business. In addition, any future debt agreements that we may enter into, may preclude us from paying dividends
without the lenders’ consent or at all. As a result, capital appreciation, if any, of our common stock will be your sole
source of gain for the foreseeable future.