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Edited Transcript of EYPT.OQ earnings conference call or presentation 6-May-20 12:30pm GMT

Q1 2020 EyePoint Pharmaceuticals Inc Earnings Call

WATERTOWN Jun 24, 2020 (Thomson StreetEvents) -- Edited Transcript of EyePoint Pharmaceuticals Inc earnings conference call or presentation Wednesday, May 6, 2020 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Dario A. Paggiarino

EyePoint Pharmaceuticals, Inc. - Senior VP & Chief Medical Officer

* David Scott Jones

EyePoint Pharmaceuticals, Inc. - Senior VP & Chief Commercial Officer

* George O. Elston

EyePoint Pharmaceuticals, Inc. - CFO & Head of Corporate Development

* Nancy S. Lurker

EyePoint Pharmaceuticals, Inc. - President, CEO & Director

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Conference Call Participants

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* Andrew Jacob D'Silva

B. Riley FBR, Inc., Research Division - Senior Analyst

* Devin J. Geiman

Guggenheim Securities, LLC, Research Division - Associate

* Yale Jen

Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst

* Yi Chen

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

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Presentation

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Operator [1]

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Good morning. My name is Shannon, and I will be your conference operator today. At this time, I would like to welcome everyone to the EyePoint Pharmaceuticals First Quarter 2020 Financial Results Conference Call. (Operator Instructions) Please be advised that this call is being recorded at the company's request. I would now like to turn the call over to George Elston, Chief Financial Officer of EyePoint Pharmaceuticals.

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George O. Elston, EyePoint Pharmaceuticals, Inc. - CFO & Head of Corporate Development [2]

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Thank you, operator, and thank you all for joining us on today's conference call to discuss EyePoint Pharmaceuticals' first quarter 2020 financial results and recent corporate developments.

With me today is Nancy Lurker, EyePoint's President and Chief Executive Officer; and Scott Jones, Eyepoint's Chief Commercial Officer. Nancy will provide a corporate overview as well as highlight recent pipeline developments and Scott will comment on recent progress made on our commercial launches. I will close with commentary on the first quarter 2020 financial results. We will then open up the call for your questions where we will be joined by Dr. Dario Paggiarino, Senior Vice President and Chief Medical Officer.

Earlier this morning, we issued a press release detailing our financial results as well as commercial and operational developments. A copy of the release can be found in the Investor Relations tab on the corporate website, wwww.eyepointpharma.com.

Before we begin our formal comments, I'll remind you that various remarks we will make today constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These include statements about our future expectations, clinical developments and regulatory matters and timelines, the potential success of our products and product candidates, financial projections and our plans and prospects. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent annual report on Form 10-K, which is on file with the SEC and in other filings that we may make with the SEC in the future.

Any forward-looking statements represent our views as of today only. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

I'll now turn the call over to Nancy Lurker, President and Chief Executive Officer of EyePoint Pharmaceuticals.

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [3]

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Thank you, George. Good morning, everyone, and thank you for joining us. We hope those listening in today and our greater community of patients, physicians, employees and partners are staying safe and healthy in these unprecedented times. The emergence of the novel coronavirus, or COVID-19, as a global pandemic in the first quarter of 2020, has impacted almost every aspect of our society. We want to recognize those health care workers on the front lines across our country, who have dedicated themselves to fighting this disease and saving lives.

Our company, like many others in our industry, has been affected by this pandemic, and in March, we experienced a marked reduction in customer demand for both DEXYCU and YUTIQ, caused by market conditions associated with the outbreak that continues today. However, we are encouraged by the recent reopening of surgical centers and the resumption of electical (sic) surgeries in some regions across the country as well as retinal and uveitis practices beginning to see more patients.

With normal operations starting to come back, we are working with treating physicians as they resume ordering DEXYCU and YUTIQ. While these openings are not yet widespread across the country, these initial trends are promising for the resumption of our normal commercial operations over the coming months.

I will now turn the call over to Scott Jones, our Chief Commercial Officer, to review our commercial performance in more detail. Scott?

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David Scott Jones, EyePoint Pharmaceuticals, Inc. - Senior VP & Chief Commercial Officer [4]

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Thank you, Nancy. Let me first begin with an update on first quarter activities regarding DEXYCU for postoperative inflammation following ocular surgery. In March, ambulatory surgery centers began postponing cataract surgeries and temporarily closing facilities under the recommendation of public health officials and government agencies.

In an effort to reduce exposure to the coronavirus, the Center for Disease Control and Prevention and Centers for Medicare and Medicaid Services separately recommended the cancellation and rescheduling of all elective surgeries, including cataract surgeries. Remember, the majority of patients having cataract surgery are of an older age and are considered to be at higher risk for COVID-19.

Despite the expected seasonality of sales at the start of the calendar year, DEXYCU trended well in January and February. Unfortunately, the effect of COVID-19 began during the third month of the quarter, March, which is when we normally see the greatest revenue demand as ASCs buy-in for the coming quarter. As a result of customer shutdowns in March, demand for DEXYCU and corresponding revenue for the first quarter, overall, were negatively impacted.

We recorded net product revenue for DEXYCU of $1.1 million for the period. Our team has successfully transitioned to providing virtual education and product assistance, while ASCs remain closed. And we expect to continue operating in this manner until restrictions on surgeries are lifted region by region.

As Nancy noted, we are encouraged that some ASCs have started to reopen and resume cataract surgeries in several regions of the country. We have begun to see DEXYCU ordering in these sites and look forward to reestablishing the use of DEXYCU by these ASCs. We remain bullish on the commercial potential for DEXYCU due to its ability to control inflammation up to 30 days post surgery, allowing physicians to send patients home with an important anti-inflammatory treatment in place and reducing the complexity of postsurgical steroid eye drop regimens.

In addition, and now importantly during the pandemic, DEXYCU delivers extended duration therapeutic treatments from a single injection, which, we believe, may reduce the frequency of in-person physician follow-up visits and both physicians as well as caregiver contact with patient's face and eyes. Further, the use of DEXYCU may also help reduce visits to busy pharmacies that surgeons utilize DEXYCU as a dropless regimen. For these reasons, we believe the use of DEXYCU will be viewed favorably by patients and physicians with the current emphasis on social distancing.

The impact of the pandemic during the first quarter has been different for YUTIQ, which is prescribed for the treatment of chronic noninfectious posterior segment uveitis. Patient visits and treatments at physicians' offices have continued as uveitic flares can lead to blindness, if left untreated. While some uveitis and retinal specialists' office have been closed due to COVID-19 pandemic, the majority have remained open, but on a significantly reduced schedule. We are pleased to see more and more closed or partially closed uveitis and retina specialists' office begin to resume or increase their operations. And we believe these trends will continue as regional restrictions lift.

Product demand was strong for the first 2 months of the quarter, but, like DEXYCU, demand was negatively impacted in March due to the COVID-19 shutdown. Although product demand for YUTIQ during the first quarter overall was down due to the pandemic, order flow did continue, and we recorded net product revenue for YUTIQ at $3.6 million in the period. YUTIQ fills a critical unmet medical need and is a highly differentiated treatment option compared to existing therapies due to its ability to deliver a consistent, sustained micro dose of steroid 24 hours a day for up to 3 years.

As with DEXYCU, we expect YUTIQ's product profile to be of benefit both during and after the pandemic. YUTIQ's long duration therapeutic profile of up to 3 years can potentially reduce the frequency of patient visits during the course of treatment, in addition to providing anti-inflammatory control. Our YUTIQ team has been available virtually to support physicians by responding to their product questions and will continue to support their accounts, both virtually and in person moving forward.

I'll now turn the call back over to Nancy.

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [5]

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Thank you, Scott. As Scott highlighted, we believe extended treatment options, such as DEXYCU and YUTIQ, provide important benefits in potentially helping to minimize patient exposure to others during the pandemic, a fact that is especially valuable to older patients who are most at risk for COVID-19. During the pandemic, there have been no disruptions in our manufacturing and supply chain for either product. We have ample supply of API, our active ingredient, and other associated raw materials that allow us to continue to manufacture finished product for sale.

We have maintained a rotating schedule to ensure continued production with heightened safety precautions to promote social distancing. The majority of our organization has been working remotely since the middle of March.

Given the new market conditions that we were facing during the quarter, we were able to identify cost savings opportunities, while continuing to drive our commercial products, DEXYCU and YUTIQ, forward, along with the development of EYP-1901, our preclinical anti-VEGF tyrosine kinase inhibitor, which is a 6-month sustained release potential therapy for wet AMD.

In April, the company announced a cancellation or deferral of planned spending to conserve cash as well as a reorganization of its commercial operations due to the impact of the COVID-19 pandemic. This reorganization was primarily focused on a reduction in the external contract sales organization for DEXYCU. The company has allocated its remaining DEXYCU commercial resources to high-volume ambulatory surgery centers in key U.S. regions, while we wait for the ramp-up in elective surgeries across the U.S.

We are very focused on driving revenues of our 2 products in a cost-efficient manner as well as advancing EYP-1901 along in its scheduled development plan, while also conserving cash wherever possible. Shortly, George will provide additional commentary on our cost reduction initiatives to support our balance sheet through these times.

Given the unclear trajectory of the pandemic and governmental response, it's difficult to predict product demand and revenue for the coming periods. However, our team will continue to work to educate the community about our products and visiting sites in regions where pandemic-related restrictions are lifted. This includes our goal of securing additional volume-based agreements with ASCs and integrated health care networks to expand access for patients.

While these conversations have primarily transitioned to virtual, they remain ongoing. Our medical affairs team continues to maintain dialogue with key opinion leaders, and is pursuing engagement opportunities at major ophthalmology medical meetings that have turned virtual.

Importantly, our research and development activities for our lead development candidate, EYP-1901, have continued on schedule without interruption. EYP-1901 is using our proven, bioerodable Durasert technology and is being developed for the treatment of wet age-related macular degeneration, or wet AMD. The commercial prospects for EYP-1901 are compelling as we believe it has the potential to be a disruptive and beneficial product option for patients and physicians in this established, attractive multibillion-dollar retinal disease market.

This market, the wet AMD market, has approximately $4 billion in global sales and is growing due to the aging of our population. It is a progressive debilitating disease and a leading cause of blindness. Frequent and short-acting injectable standards of care have significant limitations due to how painful and uncomfortable these eye injections can be for patients. And more so now than ever during the pandemic, with a heightened awareness around the risks of frequent office visits and the emphasis on social distancing. EYP-1901 has a potential -- has potential indications for the treatment of retinal vein occlusion and diabetic retinopathy. But for now, we are focused on wet AMD as the lead indication.

Vorolanib, which is the TKI component of EYP-1901 has established efficacy signals observed in 2 prior human studies in wet AMD as an orally delivered therapy. Preclinical studies of EYP-1901 administered into the eye have shown promising activity with no serious safety issues observed. We initiated GLP, otherwise known as good laboratory practice, toxicology studies in March, and anticipate filing an investigational new drug application with the U.S. FDA later this year, with a Phase I clinical trial to follow shortly afterwards.

We believe the 6-month consistent drug delivery of EYP-1901 represents a hugely differentiated product profile that can bring compelling advantages to the treatment of wet AMD. I want to close by recognizing our team at EyePoint that has come together to continue to move our operations forward in the face of the COVID-19 pandemic. Thank you.

I also want to acknowledge the health care community that is working around the clock to keep us safe, for which our team has donated personal protective equipment to area hospitals and supported relevant community service programs.

We remain dedicated to our goal of delivering innovative ophthalmic products to patients and families in need of new therapies, even in these difficult times. I'll now turn the call over to George to review the first quarter financials. George?

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George O. Elston, EyePoint Pharmaceuticals, Inc. - CFO & Head of Corporate Development [6]

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Thank you, Nancy. As mentioned earlier, we have focused on preserving our capital through these uncertain times, and we will continue to monitor the COVID-19 pandemic impact on our business and assess if further actions are needed. We anticipate product demand and corresponding revenues to continue at a decreased level through the duration of the pandemic as our customer base works toward resumption of normal operations.

I will now turn to the financial results included in the press release that was issued this morning.

For the 3 months ended March 31, 2020, total revenue was $7.5 million compared to $2 million for the 3 months ended March 31, 2019. Net product revenue for the 3 months ended March 31, 2020, was $4.7 million, with $3.6 million for YUTIQ and $1.1 million for DEXYCU, compared to net product revenue for the 3 months ended March 31, 2019, of $1.2 million, with $543,000 for YUTIQ and $684,000 for DEXYCU.

Net revenue from royalties and collaborations for the 3 months ended March 31, 2020, totaled $2.8 million compared to $785,000 in the corresponding quarter in 2019. This was driven by a $2 million payment by our partner, Ocumension, for DEXYCU rights in China, Hong Kong, Taiwan and Macau.

Operating expenses for the 3 months ended March 31, 2020, increased to $18.9 million from $16.7 million in the prior year period, due primarily to increased sales and marketing costs and research and development costs.

Nonoperating expense, net for the 3 months ended March 31, 2020, totaled $1.7 million of net interest expense compared to $4.6 million for the prior period. Net loss for the 3 months ended March 31, 2020, was $13.2 million or $0.11 per share compared to a net loss of $19.2 million or $0.20 per share for the prior year quarter.

Cash and cash equivalents at March 31, 2020, totaled $26.3 million compared to $22.2 million at December 31, 2019. The increase was driven by the February 2020 underwritten public offering of 15 million shares of common stock at a public offering price of $1.45 per share. The gross proceeds of the offering were $21.75 million before deducting the underwriting discounts and commissions and other transaction expenses.

In April, we received a $2 million payroll protection program loan under the CARES Act from the Small Business Administration. This PPP loan is enabling us to retain key commercial, infrastructure and employees and avoid furloughs, while we await the reopening of our customer facilities and the resumption of normal ordering and demand for our products.

With our recent cost-cutting initiatives, saving approximately $17 million in both recurring and onetime savings, coupled with recent financing, we expect that our cash on hand and projected cash flows from anticipated YUTIQ and DEXYCU product sales can fund the company's operating plan into 2021, given our current assumptions for the duration of the COVID-19-related closures in various regions across the U.S.

Our careful management of cash should enable us to achieve some important upcoming catalysts, namely the completion of the GLP tox study for EYP-1901, and if positive, the filing of an IND and follow-on initiation of a Phase I study. We will continue to evaluate and pursue nondilutive sources of capital, including further ex-U.S. out-licensing opportunities for both YUTIQ and DEXYCU.

I will now turn the call over to the operator for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Dana Flanders with Guggenheim.

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Devin J. Geiman, Guggenheim Securities, LLC, Research Division - Associate [2]

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This is Devin Geiman on for Dana Flanders. I have more than a couple of questions this morning. Firstly, in April, you announced the reorganization of your commercial operations related to DEXYCU external contract sales organization to allocate resources to high-volume ASCs in key U.S. regions. How have those geographic regions you've been targeting been impacted specifically by COVID-19? And do you expect some bulking deliveries as you begin to resupply ASCs going forward?

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [3]

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Okay. So thank you for your question. And let me just say that, generally speaking, across the country, even for those that we targeted, they shut down because of elective surgeries not being allowed. So that impacted any elective surgery, any drug used. So both the targeted ASCs, where we're focused, as well as those that we elected to minimize in terms of emphasis, have all been impacted. As we open back up, we are seeing some of those ASCs that we've targeted are now starting to slowly order.

As for, I think you characterized it as bulk shipments, we would expect to start to see some order in. Though again, it's a little hard to predict how much we would expect to see until we start to see volumes pick up. I do want to stress that the ASCs also are trying to figure this out. And even though ones that are opening, need to be careful that they don't just throw the doors open. So it's going to be a gradual, phased opening because they also have to maintain social distancing, particularly in the front office. But we're also hearing a number of them, in fact, many of them, will probably go to multiple shifts and extended hours because they've got a backlog, and they need to get that backlog filled.

I'm going to turn it over to Scott as well to see if he wants to add anything to that.

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David Scott Jones, EyePoint Pharmaceuticals, Inc. - Senior VP & Chief Commercial Officer [4]

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Thank you, Nancy, and I certainly agree with your comments. We were happy to actually have the first DEXYCU procedure since the COVID crisis last week in Indiana. So we are starting to see many of our key and high-volume accounts start to open. We expect to have over half of our ASCs open by the middle of May.

And as Nancy said, they are going to be kind of figuring things out as they go, and we'll see the volume increase. We believe that we will continue to see an uptick in orders over the next couple of months as the accounts come back online. And we will continue to evaluate how we can most efficiently help our accounts get back up to speed as there will be a lot of additional training going on in these accounts. But a good sign that we're starting to see many of our high-volume accounts come back online, both from last week as well as over the next 2 weeks.

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Devin J. Geiman, Guggenheim Securities, LLC, Research Division - Associate [5]

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Okay, great. And I have 1 follow-up, if I may. Just regarding your anti-VEGF TKI developmental candidate. I know you previously mentioned that you plan to initiate a Phase I as early as 2H '21. Just wondering if that timeline has been impacted by COVID-19? And then additionally, what specifically are you looking at in the toxicology studies that you initiated in March? Are there any certain safety signals that you are looking to elucidate based on previous Phase I and II studies that were run with the oral formulation?

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [6]

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Yes. Okay. So right now, we have not been impacted at all. And the reason is because we had started those animal tox studies before the pandemic hit. And these animal studies, being done by an outside CRO, are considered essential services so they've continued. Obviously, they're not going to sacrifice the animals in the middle of a pandemic. So we're quite pleased we're able to keep this going, and our timeline has not been impacted.

Obviously, if the pandemic continues to persist at a high level, meaning lockdowns either reinitiate across the country or it continues long term, then there's the potential that our Phase I study initiation could get impacted. But right now, we don't expect that, and we've had no delays at all. So we're quite pleased with that. I will turn it over to Dario to just briefly give a quick answer on what we're looking for on any tox signal. Dario?

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Dario A. Paggiarino, EyePoint Pharmaceuticals, Inc. - Senior VP & Chief Medical Officer [7]

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Yes. Thank you, Nancy. Yes, the Phase II/I and Phase II studies conducted with this compound were on a -- given orally, actually, were quite encouraging in terms of the ocular effect. In other words, there were really no safety issues in those studies. So obviously, we are looking at any potential effect in the eye once the product is delivered intravitreally with our insert. But we are not actually targeting any specific effect, again, on the basis of the encouraging safety in the human studies.

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George O. Elston, EyePoint Pharmaceuticals, Inc. - CFO & Head of Corporate Development [8]

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Yes, this is George. If I could just add to that. This is typical GLP tox required for the regulatory filing. And then just to clarify on the timeline. As we said during the call, we will -- we expect to file the IND in the fourth quarter and start the Phase I shortly thereafter. And we will -- we expect, assuming on that same timeline data mid-next year and not starting at mid-next year, just to clarify that point.

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Operator [9]

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Our next question comes from Yale Jen with Laidlaw & Company.

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Yale Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [10]

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So I have 2 here. The first one is that we look at the YUTIQ revenue for the first quarter, that seems to be not too far off from our projection. And so would that -- given that you mentioned that has not been interrupted too much by the COVID-19. So do you anticipate that the same trend goes for the remaining of the year?

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [11]

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Yes, we do. We expect -- well, we expect that it will grow more because there has been an impact, though, it's been modest, a modest impact. So we know that there's still patients who have not been treated, and we expect that that will pick up as retinal practices open more back up than they have. Now recall, they haven't all shut down because these patients need to continue to be treated because this is a blinding disease and, obviously, it's critical that they continue to get their injection. So -- but nevertheless, some patients and some practices have elected not to come in. And so you have seen a reduction, but not as much certainly as we saw with DEXYCU.

We do expect, as I said, that this is going to accelerate once we get more back to normal because we know that there is a backlog. But we've been pleased with what we've been seeing with YUTIQ. And again, I just want to stress that for both our products, they really are well situated -- unfortunately, in this pandemic, but they're well situated because there's the potential that they can minimize potentially frequent office visits. And certainly, everything that comes with that as well with DEXYCU, touching of the eyes, having to go to pharmacy to get drop prescriptions. So there's a lot of advantages to using both these products in a pandemic and post-pandemic world.

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Yale Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [12]

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Okay. That's very helpful, and maybe 2 quick ones. In terms of -- you mentioned the sales force reduction. At least the contract sales force reduction. From a housekeeping perspective, should we anticipate the marketing and sales as well as the general administrative expenditure of the first quarter could be sort of generally extrapolated for the remaining of the year? Or you think there would be some -- a major adjustment on that regard?

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [13]

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I'll let George answer that question.

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George O. Elston, EyePoint Pharmaceuticals, Inc. - CFO & Head of Corporate Development [14]

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Sure. Yale, as we said in the fall and part of the release is, as part of that restructuring, we reduced our burn by $17 million in both onetime and annualized cost savings. And so certainly, sales and marketing costs will decline versus what you saw in Q1 because this was something we initiated in April. And G&A will largely be flat. We've really trimmed that spending as well. But you should see a decline in sales and marketing spending for the rest of this year because that was a big chunk to align with the drop-off in the expected revenue.

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Yale Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [15]

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Okay. Maybe I'd just sneak in one more. There's always been the talk about the second wave of COVID. Certainly, we don't know much about what will be pan out. But just from a planning perspective, are you guys thinking about that? And any kind of sort of backup plans or any other thoughts on that?

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [16]

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Look, it's a little hard to project. Certainly, we always have contingency plans in place should we have to revert back to a lockdown similar to what we've been in across the country and everything shuts down again. So let me just answer it this way. We do have a contingency plan in place. We also are confident that we will continue to be able to operate. We know that our investors certainly support us. And I'll just say that there have been discussions in the event that the country was to lockdown again, and we feel confident we can continue to operate.

So George, do you want to add anything to that?

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George O. Elston, EyePoint Pharmaceuticals, Inc. - CFO & Head of Corporate Development [17]

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Yes. No, we -- as I mentioned on the call, Yale, we are closely managing cash, #1. And #2, as Scott pointed out, from a commercial perspective, our team has done a lot of work to support virtually. I think certainly for YUTIQ, that's a product that's been needed despite the lockdowns. And I think, at some point, the demand for DEXYCU surgeries is just -- that will need to restart, and we'll monitor that as we move forward.

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Operator [18]

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Our next question comes from Andrew D'Silva with B. Riley FBR.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [19]

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And sorry if you hit on any of this, there was a log jam trying to get into the call, so I might have missed some prepared remarks. But just to start, as it relates to the TKI opportunity. With it being a 6-month, can it also eventually be a 3-year like YUTIQ? I'm just assuming lingering fears from communicable diseases could make a longer-term option even more favorable now even in a post-COVID-19 world?

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [20]

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Andy, let me make a quick comment, and then I'll ask Dario to add on to this. Look, right now, it -- most physicians still want to be looking at ideally 6- to 9-month option, depending on who you talk to. And why is that? Because generally speaking, they're not going to go out to 3 years and not see patients. From a technology perspective, we probably won't be able to get this out to 3 years just because there's some physical chemical properties associated with the API.

But could we go longer? We could. We've elected to try to aim for a full 6 months and that seems to be the area right now that physicians want. And as I said, they need to keep seeing these patients regardless over -- now, they'll reduce the visits, but they don't really want to be going, letting these patients go 9 months, 10 months, a year or longer without seeing them just because the disease is so permanent and blinding. So Dario, do you want to add anything?

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Dario A. Paggiarino, EyePoint Pharmaceuticals, Inc. - Senior VP & Chief Medical Officer [21]

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No, really. I think I agree with your comments, Nancy. Yes. Thank you.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [22]

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Okay. Thanks for the insight there. And then as it relates to that $10 million of, I guess it was qualified as other planned expenditure, cancellations and deferrals. Can you give insight into what cuts were in there? And did you have to reverse any of the overhead reductions due to the PPP loan? Or are you just expecting to treat it as a loan and not even expect to qualify as a grant?

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [23]

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Yes. And George will take that question.

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George O. Elston, EyePoint Pharmaceuticals, Inc. - CFO & Head of Corporate Development [24]

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Sure. So as I noted earlier, when we announced the reorg, that was before the PPP loan. So we were monitoring. Remember, as we noted on the call, we were starting to get impacted in March from the COVID-19 shutdowns. And so we announced the reorg on April 1, and that spending was certainly across the organization, weighted against the sales and marketing effort simply because we had no activity there as those markets froze for us. And so thinking about the $10 million of onetime and the $7 million of annualized costs, that is weighted into sales and marketing, but we prioritized 1901 and R&D. We took some R&D costs out, and we took some G&A costs out as well.

And then regarding the PPP loan, we took that -- we were very deliberate and diligent in, first, our application to make sure that we qualified, and then on the more recent guidance, to make sure that we were still within the boundary set by SBA. And we are confident that EyePoint uniquely qualifies for this PPP program. And we expect, over the coming months, and as we stated, we'll be using the proceeds from that loan for the appropriate costs, and we expect a significant portion of that to be forgivable. And we'll monitor that over time. I think the guidelines have been a little bit gray, but we've been very diligent and deliberate to make sure that we are compliant, and we're hopeful that a large component of that will be forgivable.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [25]

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Okay. I know it's been pretty volatile as it relates to the guidance on this PPP and coming out of the SBA. Do you fall -- was the loan amount you took falling underneath the threshold that they recently put out from a standpoint of the dollar amount that, if you were under, you wouldn't -- you would be automatically audited if you -- if you're a public company?

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George O. Elston, EyePoint Pharmaceuticals, Inc. - CFO & Head of Corporate Development [26]

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So the threshold was at $2 million, and we were just over $2 million. If you read the details behind that, I think they said they'll be looking closely at compliance. And we're fine with that because we've been, as I mentioned, very diligent in that. And so we're prepared for any questions the agency may have.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [27]

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Okay. Great. And then last question for me. With the reorg taking place, I guess, now around 2 years, I believe, a little bit less with the current pass-through status for DEXYCU. Can you help me quantify what the goal or the target would be with DEXYCU? I recall you were aiming for around $150 million before. And then you noted you felt comfortable with that, I think, even at the end of last year. And I'd also just be curious, you referenced your working capital position into 2021. And based on certain reopening assumptions, could you just kind of educate me on what your assumptions are for the reopening as it relates to your working capital position and going into 2021?

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [28]

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So George, you can take that question.

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George O. Elston, EyePoint Pharmaceuticals, Inc. - CFO & Head of Corporate Development [29]

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Sure. So regarding pass-through, as you know, it's -- right now, it's through April of 2022. And after this, I'll throw it back to Nancy and Scott to talk about our thoughts on a potential extension of that. And we had always looked at peak revenues, which is the item you're talking about for DEXYCU in that $150 million range.

I think this pandemic and these closures have really pushed a lot of that timing out, and we're revisiting long term what does that program look like. But I think once this restarts, and going to your question on the cash or on the working capital into next year, that modeling really assumes that this -- the markets begin to reopen here in the second -- in the late second quarter as we're seeing it now. If there's a slowdown in that or a second wave of closures, we're going to have to revisit it. But based upon our current assumptions on, again, cash on hand from financings and expected cash inflows from our commercial programs, we should be able to fund the company into next year.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [30]

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But the second half of the second quarter, you're assuming a gradual reopening, correct? Not like a light switch happening at the end of the second quarter?

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George O. Elston, EyePoint Pharmaceuticals, Inc. - CFO & Head of Corporate Development [31]

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Exactly. Yes. We wish it was a light switch, but I think what's very clear is it's going to be a very scaled, slow, progressive reopening. And I think that will be another key is to see exactly how quick that opens, not just by region, but also by volume as well because of staging and other requirements. We don't expect, for example, ASCs to go back to 100% capacity. I think they're going to be staging as well. And if that ends up being slower than we anticipate, we'll come back and talk about that later this year. But where we sit today, we're comfortable about cash into next year.

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Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [32]

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Okay. Great. And then you said that Nancy would touch on pass-through possibly being extended. And I'd love to hear about that, too. And then really, that was all I had from a question standpoint.

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [33]

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Yes. Without going into a lot of detail, suffice it to say that we believe there's a strong case to be made for pass-through being extended. And that's obviously -- I think it's self-evident why, with the pandemic. So we are actively pursuing that, and Scott is leading that effort. So I'll turn it to him to provide any commentary.

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David Scott Jones, EyePoint Pharmaceuticals, Inc. - Senior VP & Chief Commercial Officer [34]

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Sure. Thank you, Nancy. So we're actually looking at 2 avenues for some adjustment on this regulatory and legislative. Obviously, there -- we're working with a number of entities right now relative to having CMS and HHS actually freeze the clock on pass-through status because of the public health emergency. That's something, again, that we're currently working on.

And then we have a long-term effort that we're actively engaged in relative to an overall regulatory and legislative strategy, both for seeking permanent pass-through status as well as potentially a 2-year extension onto the current pass-through that we have. So we have a number of different projects, and we feel -- I think we feel pretty optimistic that we'll be able to extend the pass-through status in some form or fashion for DEXYCU.

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Operator [35]

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Our next question comes from Yi Chen with H.C. Wainwright.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [36]

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Could you let us know how many sales rep you currently have promoting DEXYCU and YUTIQ, respectively?

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [37]

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Yes. We have 10 sales reps on DEXYCU, and we have 12 on YUTIQ, and we are looking to, as soon as the pandemic starts to lift more, we continue to look at adding more YUTIQ. And we'll be opportunistic with DEXYCU. We want to -- of course, our goal was to save capital. So we've paused on expanding with YUTIQ. And should we see DEXYCU begin to significantly pick up, we will reevaluate if we feel that we can generate the revenue, but we'll reevaluate slowly expanding on that as well.

But right now, we wanted to be judicious and really watch our capital given what's going on with this pandemic. And as we said before, DEXYCU is virtually a complete shutdown because it was considered elective, and cataract surgeries have just stopped across the board. But with YUTIQ, it was a different story. So that's why we did not need to do a downsizing with YUTIQ.

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George O. Elston, EyePoint Pharmaceuticals, Inc. - CFO & Head of Corporate Development [38]

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Yes. Just to add to that, DEXYCU is also a little bit unique versus YUTIQ in that. We've also got internal organization on the commercial team working on these volume-based agreements that we've talked about with ASCs as well. So that's an additional support beyond what we have for sales reps.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [39]

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Got it. Would you say that most of the ophthalmologists prescribing YUTIQ do have their offices open? And could you comment on the scale of ASC that have already reopened, you have observed thus far across the country?

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [40]

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And I'll let Scott answer that.

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David Scott Jones, EyePoint Pharmaceuticals, Inc. - Senior VP & Chief Commercial Officer [41]

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Sure. Thank you. On the YUTIQ side, I think the overwhelming majority of uveitis specialists have been and have remained open, although I would say their volume have been down somewhere between 50% and 75%. We are seeing them start to expand. I would remind you that many of the uveitis specialists are in large teaching centers. And so their internal restrictions in terms of patient flow vary pretty dramatically. And so I think they will be a little slower to get back to 100% versus those in private practice.

And we are starting to see the retina specialist getting back up to speed. Obviously, they're doing many more AMD injections at this point, but we're starting to see an increased volume in the uveitis patients as well.

On the DEXYCU side, we're -- it's region by region. We -- as I mentioned, we had our first DEXYCU procedure last week in Indiana. We have more accounts coming online in many of the southeastern states this week and next week. And based on the latest information that we have, we'll have around 29 of the states allowing for elective procedures over the next 2 weeks. And so certainly, by the 1st of June, we believe that the majority of our high-volume accounts will be back up and running in some form. And again, I think the volume is going to be a little bit lower.

There's 2 things. There's, one, the ability of the account to get back up and running. And then there's also the psychological impact of patients' willingness to go back in at this point. So both of those things will contribute to a little bit of a slower ramp up. But again, we're happy to see that they're open, and we're certainly supporting them virtually at this point. But we're starting to see a lot more conversations happening with our accounts, and we feel good about their ability to use DEXYCU in the very near future.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [42]

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Got it. Has Ocumension provided any update on the development of DEXYCU in Greater China?

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [43]

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Yes. Let me just say that that's considered proprietary. They are making good progress. I'll just say that. And I'd prefer that you speak to Ocumension directly rather than we talk about Ocumension. But as you know, we've out-licensed both YUTIQ and DEXYCU to them for use in China.

I do want to say that we are seeing some use of YUTIQ because there is a special area, where -- there's a special -- for regulatory approval, where you can deliver these drugs that they've been approved in Europe or the U.S., and you can deliver them in certain areas of the country. And they're doing that, while they wait for the full regulatory approval. But I would just add, they've been a terrific partner. We're quite pleased with the relationship with them, and they are making good progress.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [44]

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Last question. So regarding the status of the CRG loan, do you think that they will likely waive the debt covenant related to the 2020 revenue -- product revenue?

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [45]

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George?

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George O. Elston, EyePoint Pharmaceuticals, Inc. - CFO & Head of Corporate Development [46]

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Yes. I think, importantly, we've got a very strong relationship with CRG, and we have been in active dialogue with them really since the COVID-19 emerged, and we announced our reorg. We're working very closely with them to navigate through this. And I think both parties are interested in getting the right outcome that's good for the company. And we hope to come back to you on that later in Q2.

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Operator [47]

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Our next question is a follow-up from Yale Jen with Laidlaw & Company.

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Yale Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [48]

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Just a very brief one. In terms of the collaborative R&D income of this quarter is about $2 million. Is this onetime sort of high? Or should we extrapolate anything from this to the remaining of the year in terms of this particular item?

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [49]

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Let me just comment and then -- go ahead, George.

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George O. Elston, EyePoint Pharmaceuticals, Inc. - CFO & Head of Corporate Development [50]

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Yes. That's part of the agreement with -- so it's a onetime upfront milestones associated with the license of DEXYCU.

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Operator [51]

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And I'm currently showing no further questions at this time. I'd like to turn the call back over to CEO, Nancy Lurker, for closing remarks.

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Nancy S. Lurker, EyePoint Pharmaceuticals, Inc. - President, CEO & Director [52]

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Thank you very much for your time during our call, and we remain fairly optimistic about our future going forward despite the pandemic. I want to thank our employees who've been wonderful during this and have continued to -- many of them come into our clean room and continue to produce YUTIQ as well as ensure DEXYCU is getting quality assured and produced. So a huge thanks to them and the R&D team as well as continuing to move things along. And now our field and commercial organization that's remained active. So I do want to give a great big shout out to our team. All right. Thank you, everyone, and we look forward to our next call.

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Operator [53]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.