Eyenovia, Inc. (NASDAQ:EYEN) Q2 2024 Earnings Call Transcript

Eyenovia, Inc. (NASDAQ:EYEN) Q2 2024 Earnings Call Transcript August 12, 2024

Operator: Greetings. Welcome to Eyenovia’s Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note, this conference is being recorded. I would now like to turn the conference over to Eric Ribner, Investor Relations. Thank you. You may begin.

Eric Ribner: Good afternoon, and welcome to Eyenovia’s second quarter 2024 earnings conference call and audio webcast. With me today are Eyenovia’s Chief Executive Officer, Michael Rowe; Chief Financial Officer, John Gandolfo; and Chief Operating Officer, Bren Kern. This afternoon, we issued a press release announcing financial results for the three months ended June 30, 2024. We encourage everyone to read today’s press release as well as Eyenovia’s quarterly report on Form 10-Q for the quarter ended June 30, 2024, which was just filed with the SEC. The company’s press release and annual report are also available on our website at www.eyenovia.com. In addition, this conference call is being webcast on the company’s website and will be archived and available for replay for future reference.

Please note that on today’s call, we will be discussing products, product concepts and candidates, some of which have yet to receive FDA approval. Please also note that certain information discussed on the call today is covered under the safe harbor provisions of the Private Securities Litigation Reform Act. We caution listeners that during the call, Eyenovia’s management will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company’s business. These forward-looking statements are subject to a number of risks, which are described in more detail in our quarterly Form 10-Q, as well as our Annual Reports on Form 10-K.

This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, August 12, 2024. Eyenovia undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as may be required by the applicable securities laws. With that said, I’d like to turn the call over to Michael Rowe, Eyenovia’s Chief Executive Officer. Michael?

Michael Rowe: Thank you, Eric, and welcome to our second quarter 2024 financial results conference call. During the second quarter, we advanced several initiatives that we discussed previously that are designed to strengthen the inherent value of Eyenovia. These include our novel Optejet dispensing technology which we recently bought into three dry eye collaboration agreements of significant midterm potential value; two FDA-approved products, Mydcombi and Clobetasol and MicroPine. MicroPine is the only drug device combination therapy in late Phase III development for use in pediatric progressive myopia and is rapidly approaching a pivotal data readout. At Eyenovia, our vision is to enhance yours by making topical ophthalmic therapies easier to use and easier to live with.

By addressing a broad range of patients and eye care practitioner needs with novel technologies and products that are designed to be user-friendly, we believe we are building a strong foundation for accelerating value creation in 2025 and beyond. I would like to begin this afternoon with an update on MicroPine. Our drug device combination of low-dose atropine administered with our proprietary Optejet dispenser. This regimen is being developed as a potential treatment for progressive myopia in children. Recall that MicroPine is currently being evaluated in the ongoing late Phase III CHAPERONE study. Pediatric progressive myopia is increasingly recognized as an epidemic in both the United States and China. Pediatric myopia is a condition in which the eye abnormally elongates, putting children at risk of losing functional vision and can potentially result in severe retinal complications.

In the U.S. alone, of the nearly 20 million children with myopia, approximately $5 million are considered at risk of losing functional vision due to this disease. Additionally, the rights to MicroPine have been licensed to Arctic Vision, our partner in China, who is conducting a clinical trial for submission to the Chinese authority. While glasses and contact lenses are the current standard of care for children diagnosed with myopia, they only slow disease progression, but do not cure the disease. Current treatments are often not well tolerated or appropriate for the youngest, most vulnerable patients who frequently struggle with discomfort and [indiscernible] issues. Atropine has been shown in prior studies such as LAMP and ATOM to slow myopia progression by as much as 60%.

And now a proprietary atrophy formulation administered with the Optejet may offer benefits far beyond what could be obtained with a traditional eye drop. With the Optejet technology, children in the CHAPERONE study as young as six years old are dosing themselves nightly with minimal parental supervision. They can self-administer the dose, because the Optejet doesn’t require any head tilting or manipulation of an eye dropper bottle, making aiming with the built-in mirror and medication administration achievable. The children can see exactly where they are spraying medication and become familiar and comfortable with the dosing process quickly, which can reduce dosing anxiety and minimizes the myriad of struggles parent face when dosing children with conventional eye drops.

The side effects of atropine dosed with the Optejet have been notably mild and transient in the CHAPERONE study. These results are consistent with what we have come to expect with our advanced drug device dosing system. Throughout the trial, we have been measuring the performance of the Optejet with embedded firmware that allows study doctors to better understand how and when the device has been used. Each time the dosing button is pressed to administer medication, the device records the event and stores the information. This information can be accessed and reviewed by the clinic staff during visits from the study. For the commercial product, we anticipate MicroPine will be equipped with our Optecare system, which can notify patients and their parents when to administer their spray dose as well as communicate important compliance and adherence information to the treating physician.

Our engineers are working today on plans to validate the system for FDA approval. We are continuing to advance the Phase III CHAPERONE study and are planning for an efficacy analysis in the fourth quarter of this year once a statistically sufficient number of patients have reached the study efficacy end points. If the results are positive, this would significantly derisk the program and potentially enable an NDA submission as soon as late 2025 or early 2026. Recall that the FDA has agreed that a properly conducted single Phase III study could be sufficient for an NDA filing and approval. As we have mentioned before, we believe this program would then present a very attractive opportunity for commercialization either by us or a larger partner.

Turning now to dry eye. Since our last quarterly update, we have executed three collaboration agreements that leverage our Optejet dispenser for dry eye. Symptoms of dry eye can significantly interfere with daily life, leaving many patients unsatisfied with currently available therapies. According to a recent survey, while 48% of patients reported carefully following their treatment plans, only 13% experienced lasting relief. Nearly 16 million Americans suffer from dry eye with treatment expenditures totaling over $3 billion in the U.S. and $5 billion globally. Beginning with Formosa. We recently announced that we signed an agreement to develop a formulation of Clobetasol in the Optejet as a potential treatment for acute dry eye. This development program, which would require two 15-day clinical trials, would be free of any upfront fees from Eyenovia or development milestones to Formosa until the product is FDA approved.

This is an ideal extension of our existing relationship with Formosa and demonstrates how we can extend the use of an eye drop formulation through incorporation of the Optejet. We also recently signed a collaboration agreement with Senju Pharmaceutical to develop a new adjunctive treatment for chronic dry eye disease. For the terms of that agreement, we will jointly work to develop Senju’s epithelial wound healing candidate, SJP-0035, to use with our Optejet dispenser. This potential drug device combination is unique because it would be designed for use alongside other dry eye medications. In other words, it complements existing products rather than competing with them. We are working towards a meeting with the FDA later this year, followed by completion of a Phase IIb study in 2025.

If successful, the companies will expand this collaboration to initiate two Phase III studies by 2026. SJP-0035 has been shown to be well tolerated at prior Phase I and Phase II studies as a standard eye drop tested at multiple doses in over 250 subjects. And continuing on with the topic of dry eye. In late February, we entered into a collaboration agreement with SGN Nanopharma, an innovation-led clinical-stage nano pharmaceutical company focused on creating impactful, best-in-class nanotherapeutics targeting large unmet medical needs. SGN’s proprietary myocellular nanoparticle platform allows for the distribution of an active pharmaceutical ingredient into three or more phases, thereby improving its bioavailability, biodistribution and pharmacokinetics.

Per the terms of the agreement, Eyenovia has been conducting feasibility and process manufacturing testing with SGN’s Phase III-ready ophthalmic cyclosporin formulation, SGN-101, in combination with our Gen 2 Optejet device as a potential treatment for chronic dry eye. A combination of a faster working cyclosporin than the Optejet could be a powerful new treatment option for this large and underserved market. With the SGN collaboration, we may have this Phase III-ready asset next year in chronic dry eye. With these three agreements, we can potentially cover the entire dry eye market, which is a $3 billion annual addressable market in the United States with a multimillion patient population and significant unmet needs. We anticipate achieving this through an acute product for flare-ups with Formosa, an adjunctive chronic medication with Senju and a chronic medication with SGN.

Now, I’d like to discuss Clobetasol. The FDA approved Clobetasol on March 4 and shortly after, the new drug application or NDA for this product was transferred to us from Formosa. Clobetasol is the first new ophthalmic steroid approved in the U.S. in over 15 years. Clobetasol addresses many unmet needs in ophthalmic steroids with its highly differentiated clinical and pharmacologic profile. It offers twice daily dosing and from a safety perspective, fewer than 1% of patients experience sudden eye pressure increases, which may be more common with other steroids. Intraocular inflammation and eye pressure spikes are the primary safety concerns for eye surgeons as they can lead to serious clinical consequences, complications and non-reimbursable costs for providers.

We believe that Clobetasol has the potential to become the leading option in the postsurgical space. This unique steroid is the first product developed using Formosa’s proprietary APNT nanoparticle formulation platform. Patients do not have to shape the product prior to use, and that is just one of the unique elements of our approved label. While that may seem minor, it highlights the key difference between Clobetasol and other ophthalmic steroids. Clobetasol’s efficacy and its previously discussed safety profile further set it apart. In clinical results, nearly nine out of 10 patients experienced complete relief from postsurgical pain and 60% had total resolution of inflammation within 15 days after ocular surgery with all side effects occurring in less than 2% of cases.

Moreover, twice daily dosing without the need for titration is a clear advantage, especially compared to treatments requiring up to four doses a day. This simplicity is particularly valuable for eye surgery patients who will often use multiple medications during recovery. Both eye doctors and patients will appreciate this advancement, which may simplify the treatment regimen. It is estimated that more than 7 million ocular surgeries are performed annually in the U.S. with topical ocular steroids and steroid combinations currently generating $1.3 billion in sales. This represents a significant market opportunity. We believe we can capture a mid-single-digit market share over the next three or four years, as previously mentioned. Our 10 sales representatives who we began hiring over the last few months and completed their training just two weeks ago are today prequalifying eye surgery offices for their interest in Clobetasol.

Each representative or key account manager aims to secure 50 offices in preparation for the product launch in the United States. This approach will allow us to hit the ground running and build upon early success. We had previously communicated that we were planning on a commercial launch this summer, which would be supplemented by our co-promotion agreement with NovaBay Pharmaceuticals. This is still our intent as we await the product arriving here from Formosa. In the meantime, we have expanded our promotional arrangement with NovaBay to include additional products already used by our core customers, enabling our sales force to operate efficiently, while they set the stage for what we believe will be a game changer in the ocular steroid treatment.

Now, I’ll provide an update on Mydcombi. It is the first and only FDA-approved fixed combination of two well-known pupil dilation drugs, tropicamide and phenylephrine, and the first approved ophthalmic spray using the Optejet platform. Now that the hiring and training of our sales force is complete, and we have satisfied licensing requirements in states covering over two-third of the U.S. population, we are promoting Mydcombi in earnest. As of June 30, we had trained and converted 63 offices. This was up approximately — from approximately eight offices three months earlier. Many of those customers will see in our social media channel sharing their positive experiences for the product. We are pleased with this initial trajectory and on track to onboard more than 260 new offices by the end of the third quarter.

Additionally, we are partnering with these offices on a waiting room promotional campaign to afford patients about Mydcombi. We are also gathering market research information from these offices to help them bolster their practice satisfaction scores and better care for their patients. Offices and institutions, including the University of California and Premier Buying groups like Vision Source, have selected Mydcombi for several compelling reasons. Unlike traditional eye drops, Mydcombi spray delivers precise amount of medication, making the dilation process cleaner and more efficient. Clinical studies have reported virtually no stinging, ensuring the comfortable experience for patients. Its hygienic design eliminates protruding tips, reducing the risk of cross contamination between patients.

Moreover, Mydcombi works reliably and quickly setting it apart from other options. At this point, I’d like to turn the call over to our Chief Operating Officer, Bren Kern, for our manufacturing update. Bren?

Bren Kern: Thanks, Michael. Our engineering, manufacturing, quality and regulatory teams have been focusing on bringing our advanced Gen 2 Optejet device to the market. As a reminder, our Gen 2 platform offers the same performance as our first-generation platform, but simplifies the user experience by utilizing motor control actuation and a sleeker profile. This design has also been assessed for scalability, offering fewer production steps, thus bringing us closer to our cost of goods targets. Additionally, the Gen 2 device is being designed for future enhancements, such as our digital monitoring program, OptiCare. Fill and finish operations for the Gen 2 platform are performed at our Redwood City facility. Recently, the production team completed our fourth media fill with passing results, verifying the aseptic process and readying our systems to produce registration batches of Mydcombi.

The Mydcombi bulk drug is scheduled to ship this week where three manufacturing lots will subsequently be filled into the Gen 2 device and evaluated in a 12-month stability study. The units that comprise the study are commonly referred to as registration batches as the results of these studies are used to prove the drug product remains stable within the container over an extended duration. We anticipate the completion of manufacturing for the registration batches at the end of this year. The data collected over the subsequent 12 months will then be submitted to the FDA for its review. Similarly, the Gen 2 device also needs to undergo functional testing to obtain FDA approval. On July 23 of this year, we received feedback from the FDA regarding our Type C meeting request to discuss the qualification of the Gen 2 platform.

Content on the Type C meeting included an extensive overview of the Gen 2 device qualification plans covering each aspect of testing we intend to perform. The feedback from the FDA was largely in agreement with our plans, providing high confidence that when complete, the requirements of the FDA will be fully satisfied. Our engineering team is now detailing the associated protocols and scheduling applicable tests. We are targeting the completion of our first round of testing in early 2025. This provides ample time to complete the associated reports and FDA submission package on or before receiving the results of the aforementioned stability studies. The work we are doing to qualify the Gen 2 Mydcombi platform provides us with a model that we’re able to apply to other drug platforms.

For instance, upon receiving FDA approval for the Gen 2 Mydcombi, subsequent device testing will likely be limited to verifying key performance characteristics for the new drug and/or any new features we wish to incorporate. These tests comprise a minority of device testing, offering expediency for future platform qualification. For example, the Gen 2 platform for Mydcombi will incorporate features only necessary for office use. But for MicroPine, we will add additional features such as the OptiCare digital compliance system and child safety and lockout feature enabling a more desirable home use platform. The engineering team need only to focus on these new features as the Mydcombi design has already provided base platform from which to build upon.

Additionally, this system enables us to best support potential licensing partners in new treatment applications such as dry eye. As mentioned by Michael, our manufacturing team performed fill and finish activities for SGN’s Phase III-ready ophthalmic cyclosporin formulation, SGN-101, at the end of July. Eyenovia and SGN will now collaborate to discuss on the next steps, which may include a preliminary stability evaluation or additional device-related testing. Our model for evaluating new drugs begins with a small spray ability study utilizing our first-generation device to assess delivery volume. This preliminary assessment is short in duration, typically less than a month and provides Eyenovia and any potential partner with confidence about drug delivery performance in the Optejet platform.

With this hurdle cleared, we then begin discussing manufacturing the product and conducting appropriate engineering tests. In the case of SGN, this included fill and finish operations for cyclosporin in the second-generation platform. The collaborative and progressive nature of testing ensures critical aspects associated with introducing a new drug into the Optejet platform are properly developed before engaging in a full platform. These types of details are covered in the development agreements we established with each potential licensing partner. While all of this is going on, we are also still just beginning to commercialize our first Optejet-based product, Mydcombi. Production continues to progress as planed and as a reminder, earlier this year, our Redwood City facility was approved by the FDA to conduct final assembly, labeling and packaging of Mydcombi in our Gen 1 platform.

This addition, coupled with the capabilities of our CMO and our Reno facility provides synergies and manufacturing by allowing them to occur in relative close proximity and within the same time zone. This provides Eyenovia with greater control and scheduling flexibility, which we are leveraging to our advantage. Moving to Clobetasol. Our distribution systems have largely been established and as a reminder, our Redwood City facility will serve as the distribution center. These preparations should enable the Eyenovia sales team, as well as our co-promotion partner, NovaBay, to immediately begin selling upon receiving Clobetasol products. My enthusiasm for the activities, plans, most importantly, our future has never been higher. We have an amazing delivery platform, incredible team and have engaged with potential partners that can leverage the Optejet platform in treatments to benefit those afflicted by debilitating eye disease.

I would now like to turn the call over to our Chief Financial Officer, John Gandolfo. John?

John Gandolfo: Thank you, Bren. For the second quarter of 2024, we reported net loss of approximately $11.1 million or $0.21 per share on approximately 53.1 million weighted average shares outstanding. This includes a $0.05 loss related to the $2.9 million of costs for bringing MicroPine back to Eyenovia and a $0.02 gain included in other income from a change in fair value of equity consideration payable. This compares to a net loss of $6.2 million or $0.16 per share and approximately 38.1 million weighted average shares outstanding for the second quarter of 2023. Research and development expenses totaled approximately $4.6 million for the second quarter of 2024 and this compared to $2.8 million for the first quarter of 2023, an increase of 64%.

This increase is largely the result of expensing previously deferred clinical supplies. This was related to the reacquisition of the license rights from Bausch + Lomb. In addition, the company had increased internal engineering expenses related to development of the Gen 2 Optejet system. For the second quarter of 2024, G&A expenses were approximately $3.8 million as compared to $3.1 million for the second quarter of 2023, an increase of 19%. This increase was comprised of a $374,000 increase in salaries and benefits, primarily related to the hiring of our internal sales force for the start of the company’s commercialization efforts as well as $255,000 related to a nonrecurring FDA fee. Total operating expenses for the second quarter of 2024 were approximately $11.2 million, including the previously mentioned $2.9 million in repatriation costs for bringing MicroPine back to Eyenovia, and this compares to $6 million for the same period of 2023.

This represents an increase of approximately 88%. Our second quarter 2024 operating expense figure included approximately $3.8 million of noncash expenses. At June 30, 2024, we reported unrestricted cash of approximately $2.3 million, and this excludes approximately $5.8 million of capital that was raised after June 30, 2024. In addition to the current resources that we have available, the company is currently evaluating a wide range of capital raising structures and initiatives in order to fund our ongoing strategy. In addition, we will continue to look at ways to improve our operating efficiencies and potentially reduce operating expenses going forward. I’ll now provide an update on our existing licensing programs with Arctic Vision which covers all three of our products in China and South Korea: MicroPine, MicroLine, as well as Mydcombi and provides us sales royalties in addition to development milestones.

MicroPine in particular, is a significant opportunity in China for pediatric myopia. If approved, MicroPine could be potentially a meaningful source of nondilutive funding for our company over the long term. To date, our license agreements have generated approximately $16 million in license fees, and we have the potential to earn an additional $25 million in net license and development milestones from Arctic Vision over the next three to four years. Included in this amount is approximately $1.5 million to $2 million expected to be received over the next six to nine months. As I said previously, if our products are approved, upon commercialization, Eyenovia is also eligible to earn significant sales royalties. We are continuing to assess potential pipeline expansion opportunities similar to our Formosa, Senju and SGN agreements, and we will continue to leverage the Optejet technology to address unmet needs and additional large ophthalmic indications beginning with dry eye.

As Michael indicated earlier, we believe the steps we have taken to date create a solid foundation for which to drive meaningful sales growth in 2025 and beyond. In conclusion, we are very pleased with our performance in the second quarter of 2024. And to summarize our key highlights today. We are preparing for a full analysis of data from our ongoing Phase III CHAPERONE trial of MicroPine in pediatric progressive myopia, which, if positive, would allow us to significantly advance its remaining development timelines. We entered into development and collaborations with Formosa, Senju and SGN to develop novel therapeutic formulation for the Optejet that would potentially address unmet needs in acute chronic dry eye disease. We entered into a co-promotion agreement with NovaBay Pharmaceuticals, whereby NovaBay will market Clobetasol through its U.S. physician dispensed channel.

And the agreement also gives us access to their prescription Avenova, Antimicrobial Lid & Lash solution, which complements our commercial products. Our commercial launch of Mydcombi continues to track well with the product now in use at over 63 ophthalmology offices around the country and tracking to more than 260 by the end of the third quarter. And finally, our license agreement with Arctic Vision is progressing well and remains a promising avenue for significant development and regulatory milestones as well as the potential for sales royalties. That concludes our prepared remarks. We would now like to open the call to questions. Operator?

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question is from Matt Kaplan with Ladenburg Thalmann. Please proceed.

Matt Kaplan: Hey, guys. Thanks for taking the questions. Just can you give us a little bit more detail in terms of the path to the regulatory filing for MicroPine, assuming a positive outcome of the CHAPERONE analysis expected in the near term in the fourth quarter? And then also kind of in that vein, talk about the — also talk about the evolving competitive landscape for MicroPine and MicroPine and how it can be — how it can differentiate and when it comes to market.

Michael Rowe: Thank you, Matt. The regulatory pathway would be after looking at the efficacy data, we would request a meeting with the FDA. The earliest we would probably get that meeting is the beginning of 2025, 75 days after we ask for it, for the FDA to review the efficacy data. Assuming that goes well, there’s also a commitment for 1 year of additional safety, that would be up in about September, October of 2025. So when that is done, we would be able to submit the full data — full efficacy and safety information. At the same time, we plan to make registration batches of MicroPine beginning the end of this year. So that by the end of 2025, we would have the efficacy, the safety and the stability data ready for that NDA submission.

And that’s why we’re saying the end of 2025, early 2026. And then would be a 10-month review, which would take you to the middle back half of 2026 for approval. In terms of the competitive landscape, there’s only one other product that we are aware of that’s in late-stage development for this. And that product is similarly a low-dose atropine, but it’s an eye drop. And we think there’s a tremendous difference between using an eye drop in pediatrics and being able to use the Optejet. With the Optejet, as I mentioned, the kids are doing this themselves, and they have to do it every night. They brush their teeth, they spray their eyes and go to bed. But they have to do it for three years at least to get the full benefit of the product. So this is something that I just — as a parent myself, I have difficulty imagining me having to do that every night with my children and knowing how much they would enjoy having eye drops put in their eyes.

Also, our product, at least from what we’re seeing in the mask data, is very well tolerated, which is not a surprise given the Optejet uses a lower volume of medication. And inherent with that lower volume of medication, you’re also getting less systemic exposure to the active ingredient, which when you’re talking about pediatrics, you have small people using a drug over many years, and you want to minimize that as much as possible. And then lastly, you have all the benefits of the electronic Optecare system, which means that parents and the kids and their doctors can see what’s going on because if you don’t use the medication, you don’t get the benefit. And we want to make sure that everybody gets that benefit. And we have seen from the initial compliance data that the kids are using it more often and more regularly than one would expect from an eye drop.

So I think competitively, we’ll be in a very good place because of the marriage between the drug and the Optejet system.

Matt Kaplan: Okay. That’s really helpful. Thank you, Michael. And then if I may, a couple of more questions. In terms of Clobetasol, when do you think you’ll be able to launch that? It seems like you’ve been delayed a little bit this summer. And when do you think to be able to have that in the market?

Michael Rowe: So Bren is actually talking with them to figure out the transportation and other logistics, but we’re not going to wait for it to show up on the dock. We have our sales reps out there today prequalifying those offices. So far, the reaction has been very positive. They like the clinical profile. What they like even more is how easy we’re making it for them so that they’re not going to get callbacks and changes at the pharmacies and other things because we have priced the product at the same price as a branded co-pay. So we’ve removed that whole problem of people not wanting to pay and switches from the equation. And we can do that because we’re being extremely efficient with the way that we’re distributing through ourselves and through one e-pharmacy partner who’s well known in ophthalmology and to the optical offices as well.

So I’m hoping that, that happens within — by the end of the summer sometime in September. But in any case, it’s not like we’re sitting here doing nothing. We’re out there prequalifying these offices, and that’s the job of the sales force, to make sure those people are ready so that when it becomes available, they can turn the switch on and start using it immediately.

Matt Kaplan: Okay. That makes sense. And then last question. You’ve signed, I guess, three dry eye collaborations in the last — very recently. Can you talk a little bit about the strategy with these collaborations for dry eye? I guess, you have one for flare ups, one is adjunctive and one is for chronic therapy and how to think about those?

Michael Rowe: Yes. Thank you. So the first thing is that — what’s nice about this is that the three are not competitive with each other. You have the SGN product, which is a more rapidly acting cyclosporine. So they say that they work, I believe, in four weeks and typically cyclosporin will take 12, so people will get faster relief. So this is a way to take their product, which could be a foundation product, the first one you go in with dry eye and put it into the Optejet system to make it easier to use and also to differentiate their cyclosporine from other products that are out there. Then you have the Senju product, which works with a completely different mechanism, but may need to be paired with something like a cyclosporine or lifitegrast, so that you get the benefit.

Think of it as almost like the glaucoma model, where half of the patients are on two different glaucoma meds. This could be in dry eye where half the patients are on two different dry eye products. So it could be an adjunct to almost anything. So it’s noncompetitive and it’s really a unique way of looking at the marketplace. And then you have Clobetasol, which would be used for acute dry eye flare ups, which typically happen four or times times to people that have dry eye where they get a flare up and they need something to knock down the inflammation. So it’s a way of getting that also out in the market and differentiating it from the post-surgical steroid. So we looked at the three as a — almost like a good way to load up the bases and have a product at each phase.

And hopefully, we’ll be able to come to the plate and knock all of those home. Thank you.

Matt Kaplan: Thanks, Michael.

Michael Rowe: Thanks, Matt.

Operator: Our next question is from Kemp Dolliver with Brookline Capital Markets. Please proceed.

Kemp Dolliver: Great. Thank you and good evening. First question is the revenue numbers that you are booking right now. And how can we think about them in the context of the — you’re seeding the market for Mydcombi and then presumably, as we get later in the year, we should see some Clobetasol revenue?

John Gandolfo: Yes. I think that — so we haven’t given guidance yet. We will give guidance obviously once we launch the product. But I think that ultimately, the goal is to capture a 3% to 5% market share over a 12- to 15-month period for Clobetasol.

Michael Rowe: And Kemp, in terms of timing, you’re right, right now is — we don’t — we’re conditioning the market for Mydcombi and Clobetasol. I think that you’ll be seeing numbers in the fourth quarter for that because the reps are out there now, again, with the goal that they’re going to hit 200 additional new offices for Mydcombi between now and the end of September. And then they’re responsible to getting to 500 Clobetasol offices once the product is here, so that will probably be September, October. So when you’re going to actually see those revenues would be with the fourth quarter, I would presume.

Kemp Dolliver: All right. Just to dig into this a little bit more because it’s an atypical situation, which you’ve explained clearly. Last quarter, you had minimal revenue but cost of goods at the same level. This quarter, you had negative gross margin. What accounts for that difference?

John Gandolfo: Yes. So that’s actually included in that cost of revenue is the onetime write-down of inventory to net realizable value of about $150,000. So if you take out that — and that’s a nonrecurring expense. So if you take that out, you would have seen the revenue and the cost of revenue basically be equal to each other, as it happened in prior quarters. But we did take one time charge associated with that, which is included in that $490,000 number.

Kemp Dolliver: Great. And moving on to other things that are probably a little more interesting. Looking at the dry eye programs, and admittedly, this may be too early to speak to, but are we looking at the same endpoints in registrational trials? Or will there be some variations?

Michael Rowe: Great question, Kemp. Actually, they’re all different from each other, so it’s a perfect question. So if we look at Clobetasol, since that’s acute dry eye, you’re talking about two 15-day trials. Those — that would be the shortest one. If you look at SGN cyclosporin because the safety profile of cyclosporin is well understood, you’re looking probably at a 16-week trial in chronic dry. And again, I’m saying all of this, it has to be verified with the FDA, but this is my understanding. And if you look at Senju’s product with ours, that potentially could be the longest one with the actual one year plus a 16-week because they would have to establish — or we would have to establish long-term safety. So in summary, again, Clobetasol 15 weeks, SGN probably 15 days. SGN, probably 16 weeks. And Senju would likely be one year unless that data already exists somewhere and I’m not familiar with it.

John Gandolfo: Kemp, this is John. Let me just make one more point because you had raised something with the cost of revenues that was a very good point. But the other thing I want to point out is this quarter includes a lot of expenses that are nonrecurring relating to us buying back the rights from Bausch + Lomb. So when you look at it, we reported total operating expenses up $11.2 million. But when you strip away the reacquisition of the rights as well as all of the noncash charges and expenses related to the Bausch + Lomb transaction, we expect going forward that our R&D and G&A will be a total of $6 million to $6.1 million going forward. And then I just want to make everybody who’s on the call aware that if you look at it at face value, it looks like we’re increasing our expenses dramatically, but that’s not the case at all. It’s really tied to that Bausch + Lomb transaction.

Kemp Dolliver: Thank for that, John. Next two more questions. The first one is the time line for the Gen 2 filing that you outlined in the press release and the discussion. That’s unchanged, correct, that we’re probably looking at an approval in 2026?

Michael Rowe: Yes. We’re actually manufacturing. Bren, you can correct me, we’re manufacturing in the fourth quarter, correct?

Bren Kern: Yes. We are producing registration batches in the fourth quarter of this year to put on that [indiscernible] program to support the filing with the FDA. So your time line is correct.

Michael Rowe: Yes. So that would be 12 months from there we can file the NDA — sNDA.

Kemp Dolliver: Great. Thanks. And the last question pertains to the cash runway. Are we still looking at a runway into the end of this year? Or are we — is that any different now?

John Gandolfo: No, I think that in terms of our expenses that we’re still looking at it towards the end of this year, we do have access to capital today if we wanted it as well as, as I mentioned in my remarks, we are looking at a lot of different structures, whether it be subordinated debt, convertible debt that might add capital as well. But I think that that’s still accurate at this point.

Kemp Dolliver: Great. Thanks so much.

Michael Rowe: Thank you, Kemp.

Operator: Our next question is from Tim Lugo with William Blair. Please proceed.

Lachlan Hanbury-Brown: Hi, guys. This is Lachlan on for Tim. Thanks for taking the question. On the Mydcombi adoption, I was just wondering if you could provide more color on sort of the cadence of that throughout the second quarter because that obviously sounds like it grew decently and is growing perhaps even quicker in Q3. So maybe it’s the cadence through Q2 and now we should expect that to track into Q3. And then is Q3 going to be a sort of steady state? Or will it keep growing from there? And related to that, on the centers that haven’t adopted yet, maybe the ones that you’ve approached who haven’t adopted it, can you talk about why they haven’t adopted it? And then one other follow-up on the dry eye collaborations. As you noted, you sort of have three — covering all three areas of treatment.

Should we think of that as sort of maybe no more dry eye deals in the near term? Or are you still open to and perhaps more importantly, are partners still open to you developing or partnering for multiple products in the same space?

Michael Rowe: Well, let me take the second one first, and thank you, Tim. The dry eye collaboration as of this moment are nonexclusive. So if something comes along that makes more sense for us as a company, we would certainly consider that. So we haven’t shut any doors. And what I’m hoping that people will see and potential partners will see is that interest in our technology is picking up as a great way to extend the runway for things that might have a short patent life or to be more competitive in this market. For your first question on Mydcombi, it’s funny that you’re asking this because I just came back personally from an office that we trained about a week ago because I wanted to see what was going out there. And I think that the reason our cadence is picking up is that our sales force is in place and they are figuring out how to do this.

The general interest and acceptance of Mydcombi is high. What happens though is that people are used to using eye drops. They’ve been around for 150 years. So the way it works is you bring Mydcombi into the office, you find a champion, a tech, for example, who really likes the product and wants to use it first. And he or she is the one that introduces it within the practice. And soon, everybody else gets used to it well and finds all the reasons that it’s superior to the way that they’re doing things now. The issue is that, that takes time. So the way the sales process works is ourselves, representatives need to get into the office. Once they’re there, they have to do a quick training of everybody to introduce it because it is completely different from anything they’ve seen before.

They will stick around for a while to make sure everybody is using it correctly and doesn’t have any questions. And then over the next couple of weeks, they check back in to see how everything is. And I’ve seen this time and time again that you get that one person or two people in there who really like it and all of a sudden, you have a half dozen and then all of the techs who like it soon after that. So what we’ve learned is we have to have patience and we have to do it right. And then once we do, that’s how we get the reorders. The people that we found that you don’t go to is you don’t go into offices where they are entirely driven by I just want to get these patients in and out, in and out, in and out like a machine. And that’s not our customer.

Our customer is the one that cares about the patient experience and also cares about the other benefits of the product. For example, when I was in that office, they had a number of elderly patients. It was a glaucoma practice, and the elderly patients can’t tilt their heads back to have these drops put in their eyes. So it was especially helpful to use Mydcombi with them because they could look straight ahead for the dilation process. And that was something that I did not even consider until I actually saw it. So I’m very encouraged by what we’ve seen. And I think this is the right way to do this. It reminds me of the old try it, you’ll like it commercials because I’m confident they’ll try it and they’ll like it.

Lachlan Hanbury-Brown: Got it. Thanks. And on the timing of the Clobetasol launch, are there like actual updates that you’ve had on that? Or is that — are you just delaying that because you previously said maybe August and you sort of haven’t heard anything?

Michael Rowe: No. Bren and I are talking with them weekly. This is all logistics and paperwork that we’re combing through about anything I’m fairly concerned about. It is something I’m not dancing about because I would have liked it as soon as possible. But I am convinced that everybody is working as quickly as they can to get the product here.

Lachlan Hanbury-Brown: Okay. So does Formosa have the export license then?

Michael Rowe: No, they don’t yet. That’s what we’re working on.

Lachlan Hanbury-Brown: Okay. Thanks.

Michael Rowe: Thank you.

Operator: [Operator Instructions] Our next question is from Matthew Caufield with H.C. Wainright. Please proceed.

Matthew Caufield: Great. Thank you. Hi, Michael and team. So my question was on dry eye and kind of thinking about comparisons to standard of care. How common is it to segment those dry eye patients currently? In other words, is there any risk prescribers would ultimately be more familiar with just the overall dry eye indication itself versus breaking out inflammation patients from those that need faster relief, for example? My understanding at least is that they’re kind of all in one bigger bucket currently. Just wanted to kind of hear your perspective there.

Michael Rowe: Thanks, Matthew. Great to hear from you. I think if you spoke to a doctor who treats dry eye patients, he or she will honestly tell you that they are among the most difficult patients to treat because they are in a lot of discomfort and not — there’s nothing that works for everybody. And in fact, I think I saw some research that even with RESTASIS, fewer than half of the patients actually are satisfied with the release that they get. So what happens now is they might try one drug or they might try the other. And when it doesn’t work, they’ll switch to another drug. So what I like about the SGN faster working RESTASIS is that you’ll get an answer as to whether this is going to work or not much faster than you would with the existing products out there.

Plus, it’s easier to use with the Optejet. What I like about the Senju product is that because it works differently, you can add it on to anything. So instead of switching, you can go to an add-on therapy, okay, the cyclosporin or whatever I’m using is not enough. Let’s add this additional thing and think if this does the trick. And the reason it works differently is that it’s basically a wound-healing drug instead of an inflammation drug, so it’s treating a different aspect of what’s causing dry eye. And then for Clobetasol, I think the prescribers are very familiar with flare ups. They usually happen around the seasons and other things. And so this will, again, just be a different way of using a steroid hopefully, one that has a very low incidence of intraocular pressure spikes if it’s only 1% in the bottle when you’re using the Optejet, and you’re getting even less medication rolling around the eye, maybe it’s even better there, so it could offer some clinical benefit there, too.

Thanks.

Matthew Caufield: Yes. Very helpful. Thank you.

Operator: We have reached the end of our question-and-answer session. I would like to turn the conference back over to Michael Rowe for closing comments.

Michael Rowe: Thank you, Sheri. And thanks to everyone on the call today for taking the time to be with us. This is an exciting time to be with Eyenovia. Our advanced Gen2 device is getting ready for production while our CHAPERONE study for pediatric progressive myopia is intended to read out later this year. Upon a positive result, we look forward to moving MicroPine forward with the FDA. We have two FDA-approved products, one being actively promoted and the other one we look to do very, very soon. Both are very differentiated and well positioned in the eye care space. I encourage everyone to keep up to date with our progress on eyenovia.com or through our social media links. And this concludes our call, and we look forward to talking with you again in November.

Operator: Thank you. You may disconnect your lines at this time, and thank you for your participation.