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COVID-19's Timing Could Not Have Been Worse For EyePoint Pharmaceuticals


  • Before COVID-19, EYPT's revenues were surging quarter over quarter since its Q12019 launch and consensus FY2020 and FY2021 revenue estimates were, per Seeking Alpha, $51MM and $153MM, respectively.
  • COVID-19 stopped elective surgeries which dramatically slowed/stopped ~65% of EYPT's customer operations and, like numerous peers just launching new products, put an enormous strain on EYPT's business plan and liquidity.
  • At $0.88/share, EYPT's market cap is $110MM ($135MM enterprise valuation) versus a 10/2019 $300MM market cap and less than consensus FY2021 revenue estimates of $153MM just 4 months ago.
  • EYPT's loan agreement (12.5% $50MM outstanding) includes a $45MM FY2020 revenue covenant that now appears at great risk of default. Simply put, COVID-19's timing could not have been worse.
  • With $23.2MM net cash at 3/31/2020 and 4/2020 re-organization, EYPT says it has enough cash to last "into FY2021." Our analysis concludes EYPT's liquidity will be "on-fumes" at year-end.

EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT) was not consulted in the preparation of this article.

Our net analysis concludes EyePoint Pharmaceuticals was building a high-growth company that would have created enormous value for shareholders. COVID-19, through no fault of EYPT, literally shut down elective surgeries and temporarily slowed essential surgeries which we believe, net net, will set EYPT back one entire year. Simply put, our analysis concludes EYPT will more or less end FY2020 at the same place it ended FY2019, except EYPT's products will likely have 1 year less of a runway remaining on its products "pass-through" status (Pass through is a competitive advantage because it means EYPT customers take less financial risk incorporating EYPT's products into their business). EYPT is one of a number of companies that had a very successful commercial launch, then ran straight into COVID-19 at the worst possible time.

Our analysis also concludes EYPT needs to raise at least ~$20 million to stay responsibly capitalized through the end of FY2020 and at least another ~$30 million to get the business to break-even in mid-2022 versus a market cap today of $110 million at $0.88/share. Our analysis concludes ex-US partnerships may raise $2 million so, with $45MM in long-term debt due 12/31/2023, EYPT either needs to raise additional debt (i.e., a royalty-based loan), dilute shareholders or sell the company.

That being said, with a market capitalization of $110 million and enterprise valuation of $135 million at $0.88/share, our analysis also concludes EYPT is materially undervalued because:

1. EYPT trades at ~10% less than its pre-COVID-19 FY2021 consensus revenue estimate of approximately $153 million. The long-term outlook and competitive advantages of EYPT's products, and hence EYPT's valuation, are essentially unchanged (with the exception of losing one year of pass-through) and;

2. EYPT trades at only ~6 times its launch year

This article was written by

Boston area biotechnology professionals with a collective 100+ years experience in the biotech industry. We are not professional analysts and lack the resources of professional analysts. Our articles will include information that is forward looking. You should never rely on forward-looking statements because facts & circumstances can change dramatically and without notice. In plain English do not take us so seriously.

Analyst’s Disclosure: I am/we are long EYPT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

We have a small position in EYPT because we do believe management, with such clinically competitive assets, will be able to build significant shareholder value.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (12)

Dear Boston Biotech Investor,

Would like to hear your thoughts on the company's recent move to pay down part of CRG loan VS using funds for operations.

Peace, BeastmanMB
Boston Biotech Investors profile picture
@BeastmanMB To be transparent I saw the press release but don't know what to make of it other than I'm confident EYPT had no choice. I suspect EYPT violated a covenant and CRG demanded (or was about to demand) payment. Remember CRG has a lien on all assets (as collateral). It's our experience most loan agreements prohibit selling rights/royalties (unless used to pay down debt). I am (almost) certain CRG had to approve this transaction.

There is no other commercially reasonable explanation.

Again it's been some time since we reviewed EYPT. There could very well be another explanation. We will obviously review this transaction in great detail during our next review.
Dear Boston Biotech Investor,

Thank you for getting back to me, and the S.A. community, so quickly!

Looking forward to your next review.
@Boston Biotech Investor any comment on recent events?
Joelg5 profile picture
“COVID-19's timing could not have been worse” –author

Only partially agree. As a long-time stockholder, just more déjà vu: EYPT always over-invests in sales force, and then a few quarters later optimistic projections do not work out and company cuts back sales force. Different excuses each time. Virus shutdown of eye surgery as non-essential was an egregious and arbitrary abuse of government power. If you are losing vision to cataracts and cannot drive, etc., eye surgery is more essential than abortion, cannabis, liquor stores, etc. Happened immediately this time, rather than 3 quarters out. Something about management, always seems behind an eight ball of some sort and rosy scenarios never go right. If management ever gets it right, stock could do quite well from this level. My déjà vu: EYPT will get financing and keep trying and it will likely mean some dilution. Some type of merger with another eye-care company could make sense. I am holding at these levels, and will see how it plays out. If you wait, you will lose out on a merger scenario.

Maybe I am being a bit pedantic: But the virus did not decree that we have abortions and liquor stores but not eye surgeries. These arbitrary, economy-wide dictates always make me think of the 1917 Bolshevik coup d'état in Russia, where at one point even currency was abolished and activities were allowed or permitted based on dictatorial whim or ideology (what is best for the proletariat). Politicians, not viruses, are making these decisions. Minor point, but a good article.
I agree with your analysis that the company has major problems ahead due to the virus and elective surgeries at a standstill. Elective surgeries as cataract operations are allowable in NJ, upstate NY and the counties of Nassau and Suffolk Counties. One item that you have overlooked is the insider purchases of the company stock. Except for some purchases by Nancy Lurker in the open market, insider transactions are almost none existent. If management has no faith to buy stock, why should current and future stockholders make purchases. By the way you were 100% wrong in your evaluation at the present time of TXMD as one of the greatest opportunities of a lifetime.
great article, thanks!
marketILF profile picture
@BostonBiotechInvestor: I read your analysis, as promised. You confirm that they will need to raise cash, just like a said. I hope they will be able to get non dilutive funding, but dilution is easier and unfortunately bad management usually goes for it. Good management and some luck (see the covid situation) is the key for any stock. Having good and already approved drugs is not enough (see TXMD, that both of us well knows...)
mgwoods profile picture
Not disagreeing with your points, but I would qualify your comment, "Having good and already approved drugs is not enough." So true. Owned a lot of biotech stock when FDA approvals came through...only to have my heart broken. But due to years of biotech investing, the key to success is the rapid increase in prescriptions and the rapid expansion of docs prescribing after FDA approval. You'll note that BDSI, as an example, is up 200%+ since early 2017. It was making a tremendous move up in late 2019 and early 2020 until Covid hit. Why? The growth in prescriptions and number of docs prescribing. It's jumping every quarter. Young biotech companies with FDA approved drugs are abundant. The money is made when docs embrace the new drugs. This is the stage EYPT is in now. This is the real growth opportunity for biotech investors. Plus, the EYPT CEO has been smart, quick and strategic in building this company. There are a lot of good ingredients in EYPT. Just a bit more patience is needed as elective surgeries resume to prove the early sales trend's explosiveness to the upside. If the revenue trend resumes, the gains will be spectacular from here. If it dips, it's a buy.
marketILF profile picture
@mgwoods: Trust me, being long I really hope you are right! All the best and thank for commenting
mgwoods profile picture
Elective surgeries, like cataract surgery, have been placed on hold as retired folks mostly make up this patient base, and they are also the most at risk for Covid-19. But, this is rapidly changing. Surgeries are now six week appointments in my region. Docs are getting back to work and their calendars are filled. This is good news for EYPT investors. The surge in revenues should resume rapidly, and investors might be nicely surprised by a bump in sales in the past month, and guidance going into the 3rd quarter. It is worth the wait to see how fast sales resume their upward slope. These two products are superior.
Doron Fael profile picture
After many year of holding the PSDV shares which were re-named to EYPT, I gradually lost faith in management, and finally got rid of my holdings in March after ~70% loss from $4 down to $1.08. None of management's key possitive projections materialized, and share price kept falling lower and lower over many years.

The only hope for EYPT at this stage, is if a large pharma will consider them as a take over target.
I don't think they can make it out on their own.

I wouldn't recommend a long possition.
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