EyePoint Pharmaceuticals Inc (EYPT) 2023 Q2 法說會逐字稿

Good morning. My name is Val, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the EyePoint Pharmaceuticals Second Quarter 2023 Financial Results and Recent Corporate Developments 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.

Thank you, and thank you all for joining us on today's conference call to discuss EyePoint Pharmaceuticals' second quarter 2023 financial results and recent corporate developments. With me today is Dr. Jay Duker, President and Chief Executive Officer. Jay will begin with a review of recent corporate updates and discuss Phase II clinical trials for EYP-1901. I will close with commentary on the second quarter 2023 financial results and we will then open the call for your questions. Earlier this morning, we issued a press release detailing our financial results and recent operational developments. A copy of the release can be found in the Investor Relations tab on the corporate website, www.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 time lines, 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 Dr. Jay Duker, President and Chief Executive Officer of EyePoint Pharmaceuticals.

Thank you, George. Good morning, everyone, and thank you for joining us to discuss our continued success as we advance first-in-class therapeutics and delivery technologies to provide a brighter future for those at risk of losing their sight. First of all, I'd like to say that I'm honored to have been named EyePoint CEO, and I would like to thank the EyePoint Board of Directors for their confidence in me. I would also like to thank Nancy and the entire executive team for their partnership, collaboration and leadership during my tenure at EyePoint.

As a physician dedicated to improving outcomes in retinal disease, I'm incredibly passionate about EyePoint's mission of bringing innovative therapies to patients at risk of losing their sight. For the past 7 years, I've had the opportunity to work closely with the exceptional team of talented professionals at EyePoint to advance our exciting pipeline of products with the aim of transforming treatment paradigms for patients.

I'm committed to continued execution towards this goal. With the recent sale of YUTIQ, we at EyePoint have completed our transformation to a pure-play development stage biopharmaceutical company and I'm incredibly excited to be stepping into the CEO role at this important juncture. With our compelling clinical pipeline representing multibillion dollar product opportunities, our best-in-class sustained ocular delivery systems, along with a strong balance sheet, we are well-positioned to grow as a leader in ocular drug delivery and to bring impactful therapies to patients.

With that, I'll now review our recent progress and give an overview of upcoming milestones. Turning to our lead program, EYP-1901, a potentially paradigm-shifting maintenance treatment for patients suffering from serious eye diseases, we are now fully enrolled in 2 oversubscribed Phase II clinical trials. The DAVIO 2 trial for wet age-related macular degeneration, or wet AMD, and the PAVIA trial for non-proliferative diabetic retinopathy or NPDR.

As a reminder, EYP-1901 is an investigational sustained-release therapy that consists of Durasert E, the bioerodable formulation of our Durasert technology with vorolanib, a highly selective small molecule tyrosine kinase inhibitor with unique properties. EYP-1901 brings a new mechanistic approach to the treatment of VEGF-mediated chronic serious posterior segment diseases, such as wet AMD, NPDR and diabetic macular edema by acting as a pan-VEGF receptor blocker, blocking all VEGF isoforms.

Compared to other TKIs, vorolanib features reduced off-target binding and does not inhibit the TIE2 receptor at clinically relevant doses, leading to a potentially improved safety and efficacy profile for this differentiated molecule. Additionally, another potential treatment benefit of EYP-1901's mechanism of action is the possibility for neuroprotection and antifibrotic effects. EYP-1901 delivers vorolanib consistently and reliably with steady zero-order kinetic dosing for approximately 9 months in the eye through the Durasert E technology.

At the ARVO Annual Meeting in April, we presented preclinical data highlighting the potential neuroprotective effect of vorolanib, the active drug at EYP-1901 against photoreceptor degeneration in a validated rodent retinal detachment model. The preclinical data highlighted vorolanib's potential new mechanism of action for treating retinal diseases and its potential unique benefits that may set it apart from the existing ligand binding biologics. These preclinical data demonstrated that vorolanib significantly reduced the severity of change in baseline visual acuity and improved contrast thresholds in mice treated with vorolanib compared with placebo, suggesting a neuroprotective effect against photoreceptor degeneration.

Should this be reflected in clinical data, it would provide an important new mechanism of action for the treatment of these chronic blinding retinal diseases such as wet AMD, NPDR, DME and retinal vein occlusion. We are very pleased with the progress of our 2 key Phase II trials of EYP-1901. In the DAVIO 2 trial, EYP-1901 is being investigated in 160 subjects with previously treated wet AMD with a goal to sustain the treatment effect for the majority of wet AMD patients up to 6 months or longer following a single injection of EYP-1901. This could represent a significant improvement compared to current standard of care anti-VEGFs, which are dosed on average every 2 months in the United States. This lifetime of frequent treatment represents a tremendous burden for patients who are at risk for losing sight from wet AMD.

By using EYP-1901 as a maintenance therapy following induction treatment with large molecule anti-VEGFs, we aim to provide a sustained delivery of vorolanib so that patients and practitioners can potentially have the flexibility to reduce the number of visits to the retina specialists without sacrificing visual outcomes. All patients in the DAVIO 2 trial were previously treated with the standard of care anti-VEGF therapy and were randomly assigned to 1 of 2 doses of EYP-1901, approximately 2 milligrams or approximately 3 milligrams versus an on-label aflibercept control. EYP-1901 is delivered with a single intravitreal injection in the physician's office similar to current FDA-approved anti-VEGF treatments. Recently, we provided updates at several medical meetings for the Phase I DAVIO and Phase II DAVIO 2 trials.

At the OIS Retinal Innovation Summit in July, we presented interim masked safety and baseline patient demographics from the DAVIO 2 clinical trial in wet AMD. As of July 1, 2023, a masked safety summary found that there were no reported drug-related serious ocular adverse events or SAEs or drug-related systemic SAEs in the 160 enrolled patients in the DAVIO 2 trial. Additionally, an analysis of the reported baseline patient demographics suggest that the Phase II DAVIO 2 patients have, on average, better starting visual acuity and less central subfield thickness than the Phase I DAVIO cohort.

Mean BCVA at baseline was 74 letters for patients at DAVIO 2 versus 69 letters for patients in the DAVIO 1 trial, while on OCT evaluation, the mean central subfield thickness was 265 microns for patients in DAVIO 2 versus 299 microns in the Phase I DAVIO trial. Additionally, at this year's American Society of Retina Specialists Annual Meeting in July, we presented 12-month ocular pharmacokinetic results from a study evaluating EYP-1901's drug delivery through the Durasert platform. We also presented an encore subgroup analysis of the EYP-1901 final 12-month Phase I DAVIO results, which showed that of the 9 Phase I DAVIO patients that had no excess fluid edge screening, 67% did not require a supplemental anti-VEGF injection for up to 6 months and over 50% did not require any additional therapy for up to 1 year.

In June, we presented an encore presentation of 12-month results at the European Society of Ophthalmology Congress 2023 in Prague for the Phase I DAVIO clinical trial evaluating EYP-1901 in previously treated wet AMD. The presentation is significant because it marks the first time that we presented EYP-1901 clinical trial results outside of the United States. We are very excited by the trial's progress and we look forward to reading out top line results for the DAVIO 2 trial in December of this year.

Now let me turn to our second indication, NPDR. In June, we were pleased to report that we completed enrollment in the Phase II PAVIA clinical trial. This is a randomized controlled Phase II trial evaluating EYP-1901 as a potential 9-month treatment for moderate-to-severe NPDR. Similar to the DAVIO 2 trial, our PAVIA trial saw significant investigator and patient interest during enrollment and the trial enrolled 77 patients exceeding the 60-patient target.

Patients were randomly assigned to 1 of 2 doses of EYP-1901, approximately 2 milligrams or approximately 3 milligrams or to the control group that received a sham injection. As in the wet AMD trial, EYP-1901 is delivered with a single intravitreal injection in the physician's office for NPDR.

As a reminder, NPDR is a very common eye disease that affects almost 1/3 of diabetic adults over the age of 40 and is projected to impact over 14 million Americans by 2050. In NPDR, blood vessels are weakened, potentially leading to swelling of the macula, which is called diabetic macular edema, or DME and eventually abnormal blood vessel growth, which is called proliferative diabetic retinopathy, or PDR. Both of these complications can ultimately result in severe visual loss. It's important to note that there remains a great unmet need for a safe, efficacious and convenient treatment option for NPDR that proactively maintains a patient's vision over a long period of time with fewer intravitreal injections than the currently available therapeutic options.

Approximately 90% of patients with NPDR received no course of treatment apart from observation by their eye doctor until their disease progresses to a sight-threatening complication due to the burdensome nature of the currently approved short-acting treatments. EYP-1901 in our Phase II PAVIA trial could potentially safeguard patients' vision for a much longer period of time between treatments. Top line data remains on track for the second quarter of 2024.

Looking ahead, we also plan to initiate a Phase II trial evaluating EYP-1901 in DME in the first quarter of 2024. Importantly, in May, we sold YUTIQ to Alimera Sciences for $82.5 million in addition to future royalties. This value-creating transaction allowed us to retire all of our outstanding bank debt, reduced our projected SG&A and extend our cash runway into 2025 as we prepare for potential Phase III trials. The sale also completed EyePoint's transformation into a pure-play drug development company with a sharpened focus on advancing and expanding our pipeline of sustained delivery treatments for serious eye diseases.

I would like to thank the entire EyePoint team for an incredibly productive quarter. I will now turn the call back over to George to review the financials. George?

Thank you, Jay. As the financial results for the 3 months ended June 30, 2023, were included in the press release issued this morning, my comments today will focus on a high-level review for the quarter. As Jay mentioned, in May, we sold the YUTIQ franchise to Alimera Sciences for $82.5 million in addition to future royalties. EyePoint received a $75 million upfront cash payment at closing and will receive an additional $7.5 million in equal quarterly installments in 2024. Importantly, we were able to pay off all existing bank debt from the upfront proceeds of this transaction, significantly improving our balance sheet.

In addition, commencing in 2025, we will receive a low to mid-double-digit royalty on Alimera's related U.S. net sales above defined thresholds for the calendar years 2025 through 2028. Under the terms of the agreement, Alimera received global rights to YUTIQ outside of China, Hong Kong, Taiwan, Macau and Southeast Asia, where YUTIQ is exclusively licensed to Ocumension Therapeutics, and EyePoint will continue to receive royalties from Ocumension for its YUTIQ sales.

For the second quarter ended June 30, 2023, total net revenue was $9.1 million compared to $11.6 million for the quarter ended June 30, 2022. Net product revenue for the second quarter was $5.3 million compared to net product revenues for the second quarter ended June 30, 2022, of $11.3 million. Consistent with our exit from the commercial business, the decline in revenue resulted from the sale of the YUTIQ franchise to Alimera in May, along with the discontinuation of marketing activity for the DEXYCU franchise earlier this year due to the loss of pass-through reimbursement by CMS, effective on January 1, 2023. Net revenue from royalties and collaborations for the second quarter ended June 30, 2023, totaled $3.8 million compared to $0.3 million in the corresponding period in 2022. The increase was primarily due to recognition of deferred revenue from the sale of YUTIQ, which will be recognized over a 2-year period.

Operating expenses for the second quarter ended June 30, 2023, totaled $31.9 million versus $30.8 million in the prior year period. This increase was primarily driven by higher R&D spending on EYP-1901 clinical trials, partially offset by lower sales and marketing expense. Nonoperating expense net totaled $0.2 million and net loss was $22.9 million or $0.61 per share compared to a net loss of $19.4 million or $0.52 per share for the prior year period. Cash and investments at June 30, 2023, totaled $142.5 million compared to $144.6 million at December 31, 2022. We expect the cash, cash equivalents and investments on hand at June 30, 2023, will enable us to fund our current and planned operations into 2025.

In conclusion, we are pleased with EyePoint's progress in the second quarter and year-to-date and are well-capitalized to advance our product pipeline to key value inflection points. I'll now turn the call back over to Jay for closing remarks.

Thank you, George. As you can see, 2023 has been an excellent year for EyePoint thus far as we continue to execute on multiple clinical catalysts. Moving forward, we are well-positioned to achieve a number of potentially value-creating milestones, including top line data from our Phase II DAVIO 2 clinical trial in December; dosing of the first patient in the Phase II clinical trial of EYP-1901 in DME in the first quarter of next year; reading out top line data from our Phase II PAVIA clinical trial in the second quarter of 2024 and advancing our discovery stage pipeline that includes both wholly-owned products and partnered programs.

We believe EYP-1901 is a potentially game-changing treatment for patients suffering from serious eye diseases, providing unique benefits, including delivery of the active drug, vorolanib, consistently over approximately 9 months with the majority of patients not requiring any supplemental therapy up to 6 months after a single treatment. A new mechanism of action to treating retinal disease beyond anti-VEGF ligand blockers, potential for neuroprotection and antifibrotic benefits to the retina and a proven delivery technology with a positive safety profile. This remains an incredibly exciting time to be part of the EyePoint story, as we are well-positioned to execute on our upcoming milestones and continue to transform the treatment landscape with innovative long-term solutions to improve both the vision and the lives of patients with serious eye diseases.

Thank you all very much for listening this morning. I will now turn it over to the operator for questions.

(Operator Instructions) Our first question comes from the line of Tyler Van Buren of TD Cowen.

Congrats on all the progress. There's a lot to look forward to over the next year. I've got a couple of questions for you. So the first one is you mentioned the starting visual acuity and central subfield thickness for the DAVIO 2 patients that were enrolled and presented on over the weekend, of course. But can you discuss how that compares to the subgroup of patients in the DAVIO 1 trial that had no excess fluid at baseline and what the read-through for those -- for the -- what read-through that has for the results coming in Q4? And then the second question is, given the safety issues experienced by SYFOVRE early in the launch, what can you guys do during clinical trials to ensure that 1901 does not have the same issues pop up upon potential market introduction?

Thanks, Tyler. Appreciate the questions. I'll take the first one on visual acuity and CST from DAVIO 2 trial. Again, just to remind people, in DAVIO 1 we had a pretty heavily treated group of patients. On average, they have received 8.6 injections in the year prior. DAVIO 2, we believe, represents more of a cross-section of wet AMD population out there. And so the visual acuities in DAVIO 2 were about a line better than in DAVIO 1 and the CSTs were dryer, 299 versus 265.

Now if you go back and look at the subgroup analysis in DAVIO 1, by definition, that subgroup had no excess fluid. Remember, in DAVIO 2 we allowed some fluid and the CST cutoff was 350 microns, which allows some fluid, so the CSTs in the no excess fluid group was about 244 microns. So naturally less than the entire DAVIO 1 cohort or even DAVIO 2. Visual acuities, however, were worse in the subgroup analysis, again, reflecting the severity of the disease in DAVIO 1. As for read-through, again, I like to say, DAVIO 1 was in end of '17 and so it's dangerous to make broad statements about read-through. But I think it's safe to say that the DAVIO 2 population was under better control with their wet AMD than the DAVIO 1 population.

The second question was around safety. And of course, that is on everybody's mind in the retina community. It has been for a while. The good news is there really has never been any significant safety signal that we are aware of in the Durasert platform. Remember, the Durasert platform has been in 4 FDA-approved products over the last few decades. We estimate over 80,000 people have received it. And again, has a very clean safety record. The Durasert E or erodible form of Durasert that we're using in EYP-1901 has actually fewer excipients. So we believe the safety profile should be similar.

Turning to vorolanib. Vorolanib was tested as an oral agent in wet AMD in 2 trials, approximately 150 patients in total received it. And while it did have systemic toxicity as an oral agent, it had no ocular toxicity. And so far, in the DAVIO 1 and DAVIO 2 trials, we have seen no evidence or no reports of any drug-related ocular SAEs. Turning to preclinical. We have preclinical data on rabbits that show that the equivalent dose in a human of 10x what we could ever put into a human, it was safe in a rabbit. So we've not found the maximally tolerated dose of vorolanib in a rabbit at this point.

Looking at inserts, we've injected up to 6 inserts into a rabbit eye, the rabbit eye is about 1/4 the size of a human eye and no toxicity was reported. So we're very comfortable with the preclinical talks and so far, the clinical talks with EYP-1901. Of course, if you're talking about events that can occur one in 5,000 or one in 10,000, you've got to do a lot of patients before something like that would come out. That answer your questions, Tyler?

Yes, that's wonderful.

Our next question comes from the line of Yatin Suneja of Guggenheim.

Maybe just following up on Tyler's question. Can you maybe just tell us like in terms of these patients, the baseline that you provided like what was the average injections for them coming into the study? So that's first. And then can you maybe talk about the retreatment plan in Phase III, what the goal would be? How would you get retreatment on the label once you move into the pivotal, would you have to show that in the pivotal study?

Thanks, Yatin. The first question about the number of injections for the Phase II patients leading into the trial. That data has been collected, but it hasn't been collated yet. That's the type of data that we will hold off from talking about or showing publicly until we're ready to show the top line. So at this point, we, as a company, haven't seen that data and won't be talking about it until we're confirmed that the data is accurate.

With respect to retreatment, we've been very consistent from the start of the EYP-1901 program that we want to get a label for every 6 months retreatment. That's been our goal. Why every 6 months? Well, the answer is, first of all, that's what most retina specialists want when you pull them and ask them. Number 2, you could ask, well, why you have an insert that could last about 9 months in a human, why would you go for 6 months? And the answer is flexibility. Every patient is different.

And that's been shown really if you really drill down to the data in all of these anti-VEGF programs that the number one determinant of when a patient needs a retreatment is the patient, it isn't the drug. So as a result, we have patients in our Phase I, 1/3 of them went out a full year without a retreatment. But we would like the doctors to have the flexibility to retreat as early as every 6 months on the label and that's been the plan. This was discussed with the FDA in our Type C meeting last year. And with the tox studies to show that reinjection is safe in animals have been completed. And so we are optimistic that when we have our end of Phase II meeting to plan the pivotal trials, the FDA will be agreeable to our plan to do Q6 dosing throughout the pivotal trials.

Our next question comes from the line of Jennifer Kim of Cantor.

Congrats on another great quarter of execution, Jay, again, congrats on your new role. I have 2 questions here.

Thank you.

Yes. The first is just following up on the last question about the baseline average injections of patients coming into DAVIO 2. Could we get that data prior to the December readout? And then my second question is on the December readout, just any thoughts on the planned granularity of data in terms of the patients reasoning for rescues, et cetera? What should we expect in terms of what we'll get in December?

Thank you, Jennifer. First, baseline injections, again, that data has been collected, but this is historical from charts of the investigators. It isn't controlled within a study and it's not something that necessarily you want to state publicly until you're confident that the numbers are correct. So I don't believe there's any value or advantage for us to talk about interim data around the injection numbers. Suffice it to say, we would expect it to be less than the 8.6 that we saw on DAVIO 1, but we really don't know at this point.

However, when you really talk about that, what you're really getting at is the reduction in treatment burden. And I actually believe that the more important denominator here to look at is not the retrospective injections leading into the study, but it's the prospective injections that the Eylea arm will receive. So drilling down into that, after month 2, when all the patients received their last Eylea load and then they got either 1901 or a sham, for the 6 months following that visit, the Eylea arm should, on average, get at least 3 injections. And in fact, they may get more because they could also get supplemented. That's really the best comparator because that is under the control of the study. In 6 injections a year, multiple studies have shown us that's kind of the average that patients get in the real world.

So when we talk about treatment burden reduction at the top line, the first treatment reduction burden will be prospective against that Eylea arm, but we will also talk about retrospectively. One last point, which, again, drilling down a little bit, 3 injections in the Eylea arm in DAVIO 2 goes to 6 injections per year. That's a smaller number than the 8.6 that the DAVIO 1 trial showed. So even if we do just as well in DAVIO 2 with supplements or lack thereof in the treatment arms, the percentages will be different, will be lower because the denominator against that will be lower. So just a note there.

Finally, granularity of the data. I'd say, once again, we're working through exactly what we will be able to show and be confident in, in early December because the data will not be locked at that point. That takes another month or 2. But we will certainly show by group, the visual acuity, change in visual acuity, OCT data we expect to show supplement free rate for all the arms and percentages of patients who were supplementary up to month 6 which -- I'm sorry, up to month 8 in this study. And also safety, of course, we showed some safety data already and we should have the reported safety data pretty complete by the time we do top line. Jennifer, anything else?

No, that is great. Actually, maybe one question beyond DAVIO 2. The NPDR data is also right around the corner. So I'm wondering when you're thinking about that opportunity, we heard a lot of talks at these retina conferences about Home OCT and increased prevalence rates NPDR than previous estimates. Does that all factor into how you're viewing that opportunity?

Well, that's part of it. We view the opportunity basically as large because physicians and patients report that the reason that they're really not opting for the large molecule ligand blockers in this disease is the treatment frequency is too great. If the treatment frequency were much less, say, every 9 months or once a year and the treatment was safe, effective and tolerable, we believe a lot of patients and doctors would opt for it.

Home OCT is an early warning system. Again, under the clinical trials, when you've got patients who are motivated and are coming in every month or 2 in a clinical trial, you don't necessarily need home OCT, you're picking up any problems. But in the real world, that's not what happens. We know 50% of diabetics don't even go in for eye exams. So home OCT, I think, for the diabetic population in general, if you could get them to do it at home would be very helpful to catch the disease earlier. And again, probably be an early warning for all of these retinal vascular diseases that the patient should be treated.

Our next question comes from the line of Colleen Kusy of Baird.

Jay, you spoke a little bit to the variability of response of patients with wet AMD to current therapies. Do we have a sense of what's driving the variable response to current therapy and is there a way to control for that in your enrollment?

Colleen, that's a great question. And so I would say the simple answer of what's driving it is how fast VEGF levels come up in an eye after an injection. Most eyes in wet AMD respond to anti-VEGFs, respond anatomically, meaning the fluid gets better than 50% of the time goes away. Remember, 50% of the wet AMD population approximately, you never get all the fluid to go away. But we all have seen patients who despite monthly injections continue to have persistent fluid or worsening fluid. The good news is there's not many of them. But the point again is, I don't think you can take a patient who requires a monthly injection with one drug.

And every time you try to treat and extend that patient to 5 weeks or 6 weeks, they get fluid, you can't expect to switch that patient to another drug and get them to go out 3 or 4 months because they're just got high VEGF levels. Now to turn it back to EYP-1901, we really don't know yet how that's going to really pan out because this is a different mechanism of action. We're blocking intracellularly at the receptor level all isoforms of VEGF. So there may be a similar type of knowledge where there are good responders and bad responders. We expect that with any drug.

And just going back to the data that we have the end of '17 from our Phase I trial, it did appear the eyes that were failing standard of care, meaning despite monthly or every 6 week injections of a standard of care anti-VEGF, these eyes had worsening fluid. It didn't appear that EYP-1901 had much to offer those eyes. But we do believe that the bulk of the rest of the wet AMD population could benefit from our drug if the safety, efficacy and tolerability that we saw in Phase I holds throughout the rest of the studies.

That's helpful. And then can you just speak to how you approached the rescue criteria for the Phase II in light of balancing visual acuity, fluid and getting patients rescue-free?

Sure. So rescue criteria is interesting because as I know you know and I think a lot of people who in the field know that there's no standard for this and again, there's also 2 categories really. There's rescue criteria, which means the day of that visit, the patient gets a non-mandated injection, non-mandated by the protocol. And then there's disease activity. Disease activity means that the eye shows disease activity, they're in that day anyway for mandated injection. So they're not "being rescued". They're just being shifted to a different interval of visit based on that.

So there are 2 different definitions. And within those definitions, every study has kind of different parameters. As far as I'm aware, the FDA has never actually given direction to companies on what the rescue criteria should be and you see companies change the rescue criteria from Phase I to Phase II to Phase III. So that's just general statements. For us, recall that the primary endpoint that we would like to achieve and are striving to achieve in the pivotal trial is non-inferiority change in visual acuity against the Eylea control arm. So we elected in the Phase II to lower the standard for supplement in visual acuity to 5 letters. It was 10 letters in the Phase I.

And that's, again, in an effort to try to bracket the visual acuity to try to keep it intact, which ultimately, that's really what patients care about. Yes, you can show a patient a picture of their OCT and say, oh, look, there's fluid or there's not fluid. But ultimately, what they care about, what the retina specialist cares about is how are they seeing. So OCT and fluid are a biomarker, but not a perfect biomarker for visual acuity. So ultimately, that's the goal that we need to achieve, non-inferiority change in visual acuity.

Great. That makes sense. And then last one from us. Can you just remind us what your current thinking is for the planned Phase III design? Would you go non-inferiority? And just what your thoughts are for funding that program?

Well, the first part is easy. The second part is a broad question, but I'll go over the first part first. So our Phase II was designed to look very similar to the planned Phase III. Remember, we did have a Type C meeting with the FDA to go over this. And the FDA gave us excellent guidance at the time to what was the expectations. So if you look at our Phase II protocol, the DAVIO 2 protocol, there are going to be 2, I think, obvious changes in the pivotal trial. And one of them we talked about already, which is reinjection. We plan on doing reinjection of EYP-1901 every 6 months in the 2-year pivotal trial.

The second difference is the efficacy readout. The efficacy readout in DAVIO 2 was at 8 months, 32 weeks. The efficacy readout for the pivotal trials will be at approximately 1 year. Now things like dosing, end of the study, inclusion/exclusion criteria, that's all undecided until we see the results of DAVIO 2. And the science from DAVIO 2 will inform us on those other things. But ultimately, the structure of DAVIO 2 and the Phase III will look very similar.

Now from a funding perspective, I just will say we're very well-funded right now. Our balance sheet looks great. The sale of YUTIQ really helped us. We've got cash into 2025, so we could fund all our Phase II trials. There are multiple options we have and are discussing to fund the pivotals and maybe I'll ask George to kind of give a little more color on that.

Yes. I think we've talked about this publicly. As we look at the Phase II and the ultimate cost of the Phase III, it really is going to be defined -- we've talked openly that we do have some strategic interest and while you never know with those transactions, we are evaluating every range of mechanisms open within the Phase IIIs, which includes bringing in a partner, potential equity raises and other structures that may make sense. And I think we're going to be guided by the data. The Phase II data is really going to give us a lot of clarity on what the total cost of the Phase III will be and thinking for us sitting here today, we're on a good position and trajectory today than December.

Our next question comes from the line of Daniil Gataulin of Chardan.

I just wanted to ask what is your strategy for showing that EYP-1901 could also provide a benefit in patients with other approved anti-VEGF other than Eylea?

Thanks for the question. At the present time, the FDA guidance, at least for wet AMD has been in a pivotal trial, the control group can either be on-label Lucentis or on-label Eylea. So we're limited by the choices for wet AMD pivotal. It's certainly possible that when we start our DME pivotals that guidance for DME may be different and the standard of care for treating DME at that point may be different in which case, the control arm may be different. But currently, our wet AMD plan is to use Eylea on label in patients who have previously treated wet AMD as the control arm.

Our next question comes from the line of Sean Kim of JonesTrading.

I guess first question is, could you remind us whether the Phase II DAVIO 2 trial is statistically powered for (inaudible) to aflibercept? And also relating to the statistics, can you comment on the variability in visual acuity changes following treatment with 1901 as observed in Phase I DAVIO 2 trial and looking ahead for the Phase II DAVIO 2, what your expectations are regarding the variability, maybe specifically standard deviation over both 1901 and aflibercept control?

Thanks, Sean. Great questions. First of all, with respect to the Phase II, the statistics are descriptive only. The study is not powered to show, well, certainly confidence interval that would be necessarily non-inferior. It could do that, but the end of the study is probably too small to have that absolute confidence.

The variability of visual acuity in the Phase I, again, there's no statistics around that. There was variability. But remember, this was 4 different doses of EYP-1901 and I'm not sure that there's much read-through to variability in DAVIO 1 to DAVIO 2.

And finally, expectations for standard deviation. All we can do is go by what's out there from previous studies. And if you look at the standard deviation for treatment naive wet AMD trials, it's usually around 12 letters. It's pretty variable. The only study that we're aware of that looked at a perhaps similar population of maintenance patients was the Port Delivery System Phase III trial, which had a standard deviation of 7.1 letters. But that study limited enrollment to patients who were diagnosed with wet AMD for 9 months or less.

Our study allowed essentially any time of diagnosis of wet AMD. And if I were guessing, I would guess that our standard deviation would be closer to the 7.1 than the 12. I think that would make sense. However, we don't know. That's one of the many reasons that we chose to do what I would refer to as kind of a classic Phase II trial. Did I answer your questions?

Yes, very helpful. And if I could squeeze in another question, just a separate question. So I guess relating to the new proprietary injector that you're developing, could you confirm if 1901 will be packaged as a drug device combination for potential approval? Or would you maybe allow an option for clinicians to use the standard intravitreal needle and apparatus?

No, I can confirm that this will be a drug-device combination. We've been aware of that from the start of the development of the program since the EMA requires that. And while we were into the program, the FDA changed its guidance around that. So we've been preparing for this to be a drug-device combo. And no, we wouldn't intend to have doctors load the inserts into any kind of their own hypodermic. These injectors and it's true of the current syringe injector that we're currently using in the Phase II trials, they are preloaded, sterilized, prepackaged.

The physician just opens up the sterile package, takes a tab or a wire out and then goes ahead and injects. So there would be no plan to deviate from that. This is going to be something that's going to be completely preloaded, pre-sterilized and self-contained for the doctors to make it really easy for them to safely and sterilely deliver the inserts.

Our next question comes from the line of Yale Jen of Laidlaw & Company.

Jay, the first question is that in terms of the label seeking -- potential label seeking for the pivotal after the pivotal study, you mentioned earlier, you seek for 6 months. But just curious, in case for very few patients that potentially need to be rescued or need to be treated -- retreated in 5 months, for example, would that also be a label that you are seeking so the patient -- you can cover all the patients being treated?

So Yale, at the present time, we're planning on every 6 months in the pivotal trials. If we see positive results there, I could see a post-approval study pushing that to shorter time frame. And part of that really depends on the results. If we're not getting a lot of supplements in our pivotal trials at month 5 or month 7, it would be after the 1901 goes in, then there may not be value with that. I think it's something we'll clearly be looking at. But at this point, I don't believe that we'll be testing it shorter than 6 months.

Part of this, again, is our whole view here about the treat to maintain, where in the Phase I trial over 50% of the patients could go up to 6 months with stable vision and stable OCT and didn't require any other supplement. There was another approximately 1/3 of the patients in the Phase I, who did get a supplement prior to month 6, but the majority of those only got one.

And many of those patients have been treated every 4 weeks or 6 weeks going into the study. So you've now shifted a patient from being treated every 4 to 6 weeks to being treated every 3 months, albeit it could be alternating a approved ligand blocker with 1901. And there's a lot of reasons why doctors might consider doing that even as they push patients out further and further and treat and extend, remember with the ligand blockers the drug's gone by -- certainly by 3 or 4 months and if that patient misses a visit or gets sick, I think doctors would appreciate a safe, effective and tolerable sustained release insert that they know is working in the background for up to 8 or 9 months in that patient if they miss visits.

So again, back to the original question, right now, not planning on pushing the label sooner than 6 months, but it's something we will certainly consider based on the data and based on what the retina community wants.

Okay. Great. That's very helpful. And maybe just one housekeeping question for George. I believe you mentioned that the YUTIQ sales revenue income will be amortized over 2 years period. Just curious what might be the reasoning behind that given that the sales is already completed?

Yes. So thanks for that question, Yale. It's really accounting-driven and because of the nature of the agreement and the ultimate sale and license to Alimera, there's really 2 components. One is the sale of the asset and license of the IP, and that's the $82.5 million upfront. Part of that, we also have a supply agreement with Alimera will continue to supply YUTIQ to them. And based upon the interpretation of the accounting rules, those are tied together. And so that total of $82.5 million will be recognized over a 2-year period based on predicted volumes.

So if you think about it from your modeling perspective, it would be roughly even quarterly over those 2 years. Again, it's noncash. We've already got $75 million upfront. It's just the accounting treatment of the revenue. And that will show up, as you see in the financials today, that shows up as a collaboration and royalty line. It's not a product sale. Product sales for sales to both Alimera and our partner in China Ocumension, but again, it's a very, very different line on our P&L now. It's not true commercial sales, but we're following the accounting (inaudible).

Okay. Great. That's very helpful. Maybe just squeeze one more question here, Jay. In terms of NPDR, it's known that more than 90% of patients are not receiving treatment at the moment. So in terms of 1901, if the data turned out to be robust, the question is that besides the infrequent dosing, is there other factors that can encourage physicians and patients to use the drug against the current backdrop of the sort of treatment paradigm?

Yes, true. Again, it's a great way to think about this, but I go back to the first principle, what is the efficacy and safety. And so if the safety continues to look really good as it has so far, in the efficacy because of the zero order kinetics of the vorolanib release, if you imagine that is advantageous against the staccato injection of a large molecule ligand blocker, it's possible that our efficacy could be even better than what we've seen with the currently approved therapies. I think those 2 things coupled would really drive the market in our direction.

But flipping it around and saying, well, what if you're safe, but your efficacy is less? Well, given that essentially physicians and patients are not opting to any large degree for the current ligand blockers, even if our efficacy is less than they have, if we're safe and tolerable, I still think we'll get a significant part of that market, and we'll grow that market.

Our next question comes from the line of [Chaitanya Gollakota] of H.C. Wainwright & Co.

This is [Chait] on behalf of Yi Chen. You have answered most of my questions, so I'll just leave you with one quick one. Any major developments in the competitive landscape that you've noticed specifically for the maintenance treatment of wet AMD?

Thank you for that question. I would say recently, no, I don't think there are any developments. I think when you talk about true sustained release, true sustained release is what we're doing with EYP-1901, meaning that you've got a device or a method that continues to release drug and that would be the sustained release inserts like EYP-1901 or gene therapy, I'd put that in the same category. Against that is what I would refer to as extended duration. The extended duration means you've got first order kinetics, but you're putting in more of the drug in order to have it last longer. And obviously, that might refer to Faricimab or high-dose Eylea. Those 2 have been around for a while now. Obviously, high-dose Eylea hasn't launched yet.

But again, we don't consider those to be really competitors because we're looking at a maintenance population and we can be used in conjunction with them if the patient needs it or the doctor desires it. So unlike the previous iterations of anti-VEGFs, where when the new one came out, the promise was we're better than the last one, we last longer, you don't need them anymore. That's not our value. Our value is we can do something they can't, which is take, we believe, if the data holds at least half the wet AMD population out 6 months or longer with a single injection and possibly provide neuroprotection and possibly provide antifibrosis which may result in better visual acuity.

So back to the question, the simple answer to your question is I don't think there's been any significant changes in the competitive landscape in the last quarter.

And I'm showing no further questions in the queue at this time. Ladies and gentlemen, thank you for participating in today's conference. This does conclude your program. You may now disconnect. Everyone, have a great day.

Thanks, everybody.