Good day and thank you for standing by. Welcome to the EyePoint First Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, George Elston, Chief Financial Officer.
Please go
ahead.
Thank you, and thank you all for joining us on today's conference call to discuss EyePoint Pharmaceuticals' Q1 to 2021 financial results and recent corporate developments. With me today is Nancy Lurker, President and Chief Executive Officer Doctor. Jay Duker, Chief Strategic Scientific Officer and Scott Jones, Chief Commercial Officer. Nancy will begin with a review of recent corporate updates. Doctor.
Duker will then discuss pipeline developments for EYP-nineteen oh one, and Scott will comment on our commercial business performance. I will close with commentary on the Q1 2021 financial results, and we will then open the call up for your questions. Earlier this morning, we issued a press release detailing our financial results as well as commercial and operational developments. A copy of the release can be found in the Investor Relations tab on the corporate website, www.eyepointspharma.com. Before we begin our formal comments, I'll remind you that various remarks we will make today constitute forward looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.
These include statements about our future expectations, clinical developments and regulatory matters and timelines, the potential success of our products and product candidates, financial projections and our plans and prospects. Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in the Risk Factors section on our most recent annual report on Form 10 ks, which is filed and on file with the SEC and in other filings that we may make with the SEC in the future. Any forward looking statements represent our views as of today only. While we may elect to update these forward looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. Therefore, you should not rely on these forward looking statements as representing our views as of any date subsequent to today.
I'll now turn the call over to Nancy Lurker, President and Chief Executive Officer of EyePoint Pharmaceuticals.
Thank you, George. Good morning, everyone, and thank you for joining us. We are incredibly pleased with our progress this quarter with both our paradigm changing pipeline and our commercial products that are delivering innovation to patients with serious ophthalmic diseases. Before turning the call over to my colleagues, I will briefly review our recent achievements as we continue to make terrific progress on our clinical and commercial plans. On the clinical front, in January, we initiated our Phase 1 DAVIO trial for our lead pipeline asset EYP1901, a potential twice yearly treatment for wet age related macular degeneration or wet AMD and we remain on track with this trial.
As a reminder, EYP-nineteen oh one leverages a bioerodible formulation of our proprietary Durasert sustained release technology with virolinib, an anti VEGF tyrosine kinase inhibitor. We are very much looking forward to providing further updates with preliminary data from the Dovio study expected in the Q4 of this year. In February, we continued to strengthen our balance sheet after the successful completion of an oversubscribed $115,100,000 follow on offering. This financing provides us with significant capital to continue to grow our organization efficiently and purposefully, including plans to expand our pipeline by initiating studies in additional indications for EYP-nineteen oh one in diabetic retinopathy and retinal vein occlusion as well as advancing YUTIQ 5.0 for posterior segment uveitis. Right now, we hope to begin these studies sometime in late 2021 or early 2022.
Our improved balance sheet provided us the opportunity to work with our debt partner, CRG on improving our revenue covenant. I'm happy to say that we were able to obtain a reduction in the 2021 revenue covenant with CRG to $25,000,000 at no cost. Turning to our commercial business. Despite the challenges of the COVID-nineteen pandemic, we are pleased to report a strong Q1 of 2021 with net product revenues of $6,800,000 a 45% increase over Q1 of 2020. As Scott will discuss in more detail later on, although historically demand is slowest in the 1st calendar quarter across all commercial products, we were pleased with the continued return of customer demand.
Also this quarter, we introduced a new siliconized needle for YUTIQ, which we believe will provide an enhanced experience for patients and physicians in administering YUTIQ to patients. Lastly, our Asia partner, Ocumension Therapeutics, recently received approval for review of a new drug application from the National Medical Products Administration, or NMPA in China for OT-four zero one, which is named YUTIQ in the U. S. This is an exciting milestone for YUTIQ as it represents a safe, effective treatment option for patients in China and a future royalty stream for EyePoint. EyePoint ended the quarter in a strong position and we are focused on carrying our very positive momentum into the Q2 of 2021 beyond.
Additionally, as we look to provide preliminary data for our EYP-nineteen oh one Phase I trial in the Q4 of this year. We are now focused on: 1, expanding our product pipeline 2, driving growth for our commercial products with a goal of DEXYCU AVP, achieving franchise profitability by year end and 3, continue to maintain a strong balance sheet through disciplined spending. I'll now turn the call over to Doctor. Jay Duker, our Chief Strategic Scientific Officer to provide an update on our lead program EYP1901 as well as other pipeline initiatives. Jay?
Thank you, Nancy, and good morning. As you know, we are very pleased with the progress so far on our EYP-nineteen oh one program for the potential treatment patients with wet AMD. Despite the challenges of the COVID-nineteen pandemic, enrollment is on target for our Phase I clinical study, the DABIO trial, and we are pleased to report that our study remains on track to read out initial data in the Q4 of 2021. We are grateful for the effort by our team and our external partners for their extraordinary work as we progress the trial forward. The Phase 1 trial is an open label dose escalation study of 3 ascending doses with a total of 13 patients.
As a refresher, wet AMD is a chronic progressive and potentially devastating eye disorder. It presents with blurred vision that can result in a permanent central blind spot in the eye. The hallmark of wet AMD is the development of abnormal blood vessels that leak fluid and blood into the macula, the center of the retina. It is the leading cause of vision loss in people over 65 years of age, both in the United States and in other developed countries. Although there are safe and effective FDA approved medications on the market, there is a significant opportunity for longer lasting therapies that could replace the shorter duration of action of the current medications on the market.
Our lead pipeline asset, EYP-nineteen oh one, is a bioerodible anti VEGF formulation of our Durasert technology combined with virolinib, the active drug, a small molecule tyrosine kinase inhibitor. As a reminder, vorolanib showed strong efficacy in 2 human clinical trials with positive clinical signals and no significant adverse ocular events. Durasert is a reliable, long term sustained release delivery system currently found in 4 FDA approved products. With a single intravitreal injection, a Durasert implant can be designed to provide continuous stable release of medications to the eye from anywhere from 6 months to 3 years. In addition to the established prior clinical success of Durasert and the efficacy of vironib in wet AMD, a crucial aspect of EYP-nineteen oh one's potential success
is that
it features 0 order kinetic medication release. This feature means a constant sustained micro dose throughout the planned lifetime of the insert. Preclinical and clinical studies show that 0 order kinetics can deliver excellent efficacy with relatively lower doses, and we believe the combination of 0 order kinetics, irisert and vrolinib position EYP-nineteen oh one to be a potential blockbuster drug for wet AMD and other indications. For these reasons, we remain excited by the potential of EYP-nineteen oh one's application to other severe eye disorders, including diabetic retinopathy and retinal vein occlusion. And we are actively exploring paths to initiate these clinical trials in tandem with a potential Phase II trial of EYP-nineteen oh one in wet AMD.
Turning to our pipeline initiatives, we are actively exploring new applications for our DuraSert technology along with potential product and technology in licensing. Additionally, we plan to initiate a Phase 3, 45 to 60 person, 6 month clinical trial for YUTIQ 50, a potential twice yearly sustained delivery treatment for chronic non infectious uveitis affecting the posterior segment of the eye, later this year with results expected in 2022. YUTIQ 50 will use the same non erodible Durasert formulation corticosteroid as in YUTIQ. YUTIQ 50's design offers an intravitreal insert with a shorter duration of action that provides physicians with the flexibility to dose over shorter intervals compared to the 3 year interval that YUTIQ currently provides. We have identified a potential clinical pathway with the FDA for an sNDA filing and we are currently evaluating the timeline and investment requirements for trial completion.
We look forward to providing an update on EYP-nineteen oh one as well as our other pipeline initiatives over the upcoming quarters. I will now turn the call over to Scott Jones, Chief Commercial Officer, for the commercial update. Scott?
Thank you, Jay. Before I begin, as you know, EyePoint's revenue was negatively impacted by the COVID-nineteen pandemic in 2020. However, throughout this quarter, we continue to see strong growth in DEXYCU customer demand and as expected, slightly lower Q1 demand for YUTIQ, as Q1 calendars are historically softer in this category. We're pleased as well that the customer transition to the new YUTIQ needle is going well. Despite the Q1 being historically weaker for commercial product revenues, our Q1 net product revenue of $6,800,000 represents a 45% increase from the first quarter of 2020, where our net product revenues totaled $4,700,000 Net product revenue for the Q1 was $3,000,000 $3,800,000 for YUTIQ and DEXYCU, of a growing positive impact from our commercial alliance partner, ImprimisRx, and the growing impact of our recently signed contracts.
ImprimisRx experienced cataract surgery field forces bringing significant momentum to demand. We're also beginning to see patients feel more comfortable coming to the doctor's office as the vaccine continues to roll out across the country. We're also continuing to execute on several strategies to extend or create permanent pass through for DEXYCU, which is currently set to expire at the end of March 2022. We're currently working on both regulatory and legislative strategy to extend the payment for DEXYCU moving forward. Turning to UT, demand levels remain strong as a result of the expansion of our sales and marketing efforts in the retinal market, as well as the increased patient access, particularly in large hospital environments.
This quarter, we rolled out a new siliconized needle for YUTIQ and we're extremely excited about the opportunity to provide a better patient experience over the coming months as we continue to improve options for patients and ophthalmologists treating posterior uveitis. Given the pandemic, we are pleased with our current commercial trajectory and we're looking forward to growth throughout the rest of the year. As we look at the commercial year ahead, while it is difficult to project customer demand, we are optimistic that we will continue to see increased growth as sales and marketing for YUTIQ and DEXYCU increases. Based on current commercial numbers, our goal is to reach profitability or breakeven for DEXYCU and YUTIQ by the end of this year. Both products will continue to provide a unique value proposition of sustained delivery and fewer doctor visits, which remains attractive to doctors and patients both during the pandemic and beyond.
I'd also like to thank each and every team member and our many physicians for their continued support during the first quarter and the quarters to come. I would now like to turn the call over to George to review the financials. George?
Thank you, Scott. As the financial results for the 3 months ended March 31, 2021 were included in the press release issued this morning, my comments will be focused on a high level review for the quarter. As Nancy mentioned, we've begun 2021 with a strong balance sheet, driven by our $115,100,000 follow on offering that follows important 4th quarter transactions where we reduced our obligation to CRG by $15,000,000 and closed the $15,700,000 equity investment by our Asia partner, Ocumension. This improved position, combined with the continued return of our commercial business, has allowed us to reduce the 2021 revenue covenant with CRG Services to $25,000,000 at no additional cost. For the 3 months ended March 31, 2021, total net revenue was $7,300,000 compared to $7,500,000 for the 3 months ended March 31, 2020.
This includes net product revenue for the Q1 of $6,800,000 compared to net product revenues for the Q1 ended March 31, 2020 of $4,700,000 Net revenue from royalties and collaborations for the Q1 ended March 31, 2021, totaled $500,000 compared to $2,800,000 in the corresponding period in 2020. This decrease was driven by the monetization of our ILUVIEN royalty in December 2020 and a one time $2,000,000 license payment received in Q1 of 2020. Operating expenses for the Q1 ended March 31, 2021, totaled $18,300,000 versus $18,900,000 in the prior year period. This decrease was primarily due to a $2,400,000 decrease in sales and marketing expense, offset by a $800,000 increase in G and A, a $600,000 increase in R and D expense and a 0.4000000 dollars increase in cost of sales. Nonoperating expense net totaled $1,300,000 and net loss was 12,300,000 dollars or $0.50 per share compared to a net loss of $13,200,000 or $1.14 per share for the prior year period.
Cash and cash equivalents at March 31, 2021, totaled $138,600,000 compared to $44,900,000 at December 31, 2020. We expect cash on hand at March 31, 2020, and expect that net cash inflows from our product sales will enable us to fund our current and planned operations through the end of 2022. In conclusion, we are thrilled with EyePoint's progress in the first quarter of 2021 and are very well capitalized to advance our product pipeline to key value inflection points. Thank you all very much for listening this morning. And I now turn the call over to the operator for questions.
Our first question comes from the line of Georgi Georgi Georgiou from Cowen. Your line is now open.
Hi. Thank you so much for taking my question. So I guess maybe to start with a broader question for Doctor. Duker. How do you see the wet AMD space evolve over the next 5 to 10 years, given that in that time we'll be seeing the launch of generic sensors
and there'll
be other programs on the market? And given the issues that we have seen recently from some of the gene therapy companies with serious AEs, do you consider those less of a threat to a product like CY-five nineteen oh one?
Hi, Georgi. This is Nancy. I'll take that question. Doctor. Duker unfortunately couldn't make the Q and A today.
So let me answer the wet AMD space over the next 5 years is going to continue to grow just because of the aging baby boomers and that's in across the world. So the demand is going to continue to increase. And let me also state that this is such a large market and these diseases are unfortunately quite prevalent that there's going to be the need for continuing lots of different treatment options. We don't see a big impact due generics. I mean, clearly, that always has an impact on demand of new products.
But if your new products add significant value in improving outcomes and in treatment options, there's always a place for new innovative drugs. And that's what we believe is the case for EYP1901 certainly. When you look at what's been going on some of the gene therapy companies, let me just first state that it's always difficult and sad when you see some of these data reads out because patients need these alternative medications. However, it just further emphasizes a point that we've been making is this is not easy to do. It's not easy to deliver drugs into the ocular space, particularly in the back of the eye, the posterior segment of the eye.
So we like our odds with EYP1901 because as we've said many times, the DuraSert technology is very well proven. As you know, we've got we've had 4 FDA approvals on the line excuse me, approved by the FDA, they're on the market. We've had a remarkable safety track record. The implant does not break apart. It stays where it's injected once it drifts usually to the bottom of the vitreous.
And overall, it shows very good sustained zero order kinetics. So when you put all that together, we believe it could offer substantial improvement to patients. We think there's going to be a very large market for these drugs that are in development. And we think that we stand a good chance of being successful because of our DuraServe technology. Does that answer your question, Georgi?
Yes. This is very helpful. And maybe as a follow-up, you have indicated the plan your plan is to go into other indications. So maybe could you remind us of the opportunities there? And do you think that having a broader MOA such as a TKI might provide added benefit compared to the current standard of care, especially for refractory patients?
And do you have any guidance as to the percentage of patient population that those refractory patients might represent in these other retinal indications?
Okay. So let's see, you asked 3 questions there. So as to our other indications, yes, we are currently evaluating, doing some small studies in diabetic retinopathy and retinal vein occlusion. And we're hopeful that we can start those studies, potentially early next year. So we are in planning mode for those 2 additional studies.
Those if you look at all those areas, those remain again large areas. Diabetic retinopathy, as you know, is a very, very large area of large number of patients who suffer from that. That tends to be a precursor to wet AMD or excuse me, DME. And so most DME patients have had or have diabetic retinopathy, but it's a way to potentially catch those earlier and treat them. And as for refractory patients, I believe your question was how effective we think we might be.
I believe that was your question. Hard to say at this point. Obviously, the data suggests early data and not just with a boronib, which is the tyrosine kinase inhibitor we're using, but also if you look at the other tyrosine kinase inhibitors in development, it tends to show that these are effective drugs. We're going to have to see the data come through more though. And we do believe that the potential exists because these tyrosine kinase inhibitors, as you mentioned, hit a broader array of receptors.
So they operate at the receptor level, not at the ligand. And as a result, which is what the large antibodies do. And as a result, their potential is there that they could potentially be more effective. But we have to see the data.
No, this is great. And then just a housekeeping question, just in terms of the will Libya willing to provide any sort of spending guidance for this year? And if not, just thinking about Q1 in terms of spending, is that sort of a good runway for the rest of the year? Or should we expect standing in SG
and A to kind of pick up for
the remainder of the year?
Yes. George will take that question.
Yes. I think from a run rate perspective, Q1 is probably a good place to start. I think as we get later in the year, as you know, we're in the middle of the Phase 1 study with 1901. And we did update our cash guidance on the call this morning indicating that we have cash through the end of next year.
This is perfect. Thank you so much.
Thank you. Our next question comes from the line of Jennifer Kim from Cantor Fitzgerald. Your line is now open.
Hi. Thanks so much for taking our questions and congrats on the productive quarter. I have a few questions. The first one is just, is it fair to say that we should expect an enrollment update sometime this month or next month just to keep you on track for the 6 months around 6 month prelim data in the Q4? And then also since I saw and you talked about the update with CRG.
Have you been in any discussions with them regarding the 2022 financial covenant? And what was the thinking of that update for 2021 and the extent of the update for the year? And then my last question is, you already talked about spending guidance for the year. I was just wondering, did anything impact gross margins? And how should we think about gross margins for the year and going forward?
Thanks so much.
Okay, Jennifer. I'll take the enrollment update and then George will take the financial related questions. Yes, you can expect that we would give an update on enrollment certainly by this month or next month. So that is something we fully expect to do. George?
Yes. Thanks and good morning, Jennifer. Yes, so on the debt covenant perspective, so we have a we've had a great relationship with CRG. They've been incredibly strong partners for us as we went through a difficult 2020 as we all know. And really the background of the change in revenue covenant this year is just
to put it into a
reachable range, I think, because we've improved our balance sheet, because it Q1 was strong certainly versus last year. And so we wanted to put it in a range that was attainable as we climb out of COVID. And so they've continued to be a good partner. If you look at the history on the covenants, we tended to address them a year at a time. And I think as we look out at 2022, we anticipate that not being an issue when that time comes, either through the debt itself or through the covenant.
So, we're very comfortable where we sit with CRG today. And obviously, the other piece of that is we were able to pay down $15,000,000 of our obligation to them last year. So the revenue covenant really became less of an overhang to them. And we wanted to make sure it was something easily reachable this year. On gross margin, I think a lot of it is driven by product mix.
DEXYCU was a bigger piece of revenues in Q1, which does carry a lower margin than YUTIQ. And that was a big driver for that as well.
All right. Thanks so much.
Did I
get all of your questions?
Yes. I think you got all of them. Thanks. Okay.
Thank you.
Thank you. Our next question comes from the line of Dana Flanders from Guggenheim Partners. Your line is now open.
Hi. This is Devin on for Dana. Congrats on the commercial and clinical progress. I have a couple of questions. We saw the 10 Q update today regarding the SEC accounting investigation with no enforcement against the company.
Just could you elaborate on their specific findings and maybe clarify whether you expect any further action from the SEC or does this kind of conclude the investigation? George?
Yes. Thanks for that question. Yes. So the this goes back to Q actually Q2 of 2020. We disclosed in our 10 Q that we had received an SEC subpoena, which we had been fully compliant with.
And it's taken up to this point in time, but the short version is we are very cooperative with the SEC in their review. We were very pleased to get the memo from them yesterday, essentially stated that they've concluded their investigation and they have no intent they do not intend to recommend an enforcement action. I think if you look at our disclosures, we've always maintained that we were confident in our accounting and we're glad that this is now resolved and behind us. We don't expect anything additional. So it was a nice letter to get yesterday.
We updated that in our Q this morning.
Okay, great. And then on the commercial side of things, could you maybe give a little bit more color on what you're seeing in terms of retinal specialist trends and ASCs? Are they generally back to normal patient flow? Are you still seeing kind of depressed levels persisting with uneven geographic recoveries in the U. S?
Yes. So I'll have Scott answer that question. Go ahead, Scott.
Sure. Good morning and thanks for the question. So in terms of the ASC market, especially for cataracts, most seem to be getting back to normal. There are still areas of the country where I would say they are less than 100%. But in general, we're seeing a good return in the cataract space.
On the YUTIQ side, I think the private practice retina physicians seem to be back to a normal schedule for the most part. We do still see a little bit of unevenness in the, I think, more of the academic center, teaching center environment where there's still some in places, there are still some restrictions on patient flow. Certainly, our ability to access physicians, especially in that environment is much less available than in kind of the general private practice. But we are pleased to see things starting to return to a much more normal pace of patient flow.
Okay, great. And then my last one, just on the developmental side, I know you mentioned previously, depending on the EYP1901 Phase 1 data, you could potentially progress into a Phase 2 or even a pivotal trial. So is this dependent on the strength of the data? Or is there any clear delineating factors like a clear dose response or dose selection that are needed to move straight into a regulatory trial versus a Phase 2?
Yes. We're not going to get into that level of detail on this, but you are correct. It is going to be dependent on the strength of the data. So clearly, we want to 1st and foremost make sure that the drug is safe, which we do expect. So that's going to be important.
And then obviously showing good efficacy to move into a pivotal trial. Obviously, that is carries higher risk than moving into a normal IIb trial, but we'll assess all of that as we as the data starts to come in. Suffice it to say, we're planning for all outcomes.
Okay, great. Thank you very much.
You're welcome.
Thank you. Our next question comes from the line of Yi Chen from H. C. Wainwright. Your line is now open.
Hi. Thank you for taking my questions. First question is the sales of YUTIQ in the first quarter, was it subject to a severe impact of the COVID-nineteen pandemic, which peaked in January?
Yi, I'll take that question. Yes, we didn't see as much with DEXYCU, but we definitely did see a drop off in YUTIQ. And the other issue with YUTIQ is, there's a disproportionate number of university offices that treat uveitis patients as compared to community based offices. And they have opened up more slowly than community based offices. Now we are starting to see them open back up, but certainly we had 2 factors going on in Q1.
1 is your traditional normal slowdown, as Scott mentioned, that you always see pharmaceutical products, especially specialty drugs like YUTIQ. But then the second thing is the universities, which are a large part of our utilization, typically have been slower openings in community based offices. But again, we're starting to see them start to open up more and more.
Got it. Got it. So for YUTIQA in China, so has Okta mentioned indicated that when NMPA could possibly potentially approve the drug?
Yes, very good question. It wouldn't be right for me to comment on behalf of Okumention. But as you probably know, they have already filed and they did that in record time. They were able also to file it under a new system and they're the first drug my understanding to be able to file under this where they can use some real world data plus our NDA. And as a result, we're quite impressed with the progress that they've made.
So hopefully, we'll see an approval coming through potentially sometime this year, but that's up to them to comment on specifics.
Can you remind us the potential milestones and royalties EyePoint can receive from Art you mentioned?
Yes. George, you want to comment on that?
Sure. So as a reminder, we actually as part of our expansion into Southeast Asia for YUTIQ last year with Okumention, we received a payment for that, but they also prepaid the remaining milestone payments. And so what we have forward with them is a royalty stream, which we haven't disclosed specifically, but it's in the high single, low double digit range.
Got it. Thank you.
Thank you. Our next question comes from the line of Andrew D'Silva from B. Riley Securities. Your line is now open.
Thank you. Good morning. Thanks for taking my questions. Just to start, I have a couple of quick bookkeeping ones. As it relates to YUTIQ, was the end user demand fairly aligned with the distributor ordering patterns?
And then was your PPP loan forgiven yet? I just wasn't sure where we were on that.
George will take that question. Hi, Andy.
Hey. Sure. So the there's always a disconnect. And I think what we've certainly talked about in the past and beyond demand and revenues are different. I think they're starting to track closer, but there is still a bit of a difference in demand and stocking by distributors, which is where we recognize our revenue.
In the quarter, we also had some exchanges as well for the YUTIQ needle. Not a real consequence, but it affected it a little bit on the distributor side. And but it's fairly it's getting closer, but there's still a disconnect and we don't really want to guide on those specifics because it's a lot of reconciliation that doesn't really help. On the PPP front, we have as we've disclosed in our Q submitted our forgiveness application. We're very comfortable in our forgiveness application, but we are still waiting for the SBA to act on that.
We've provided all the necessary documentation. I think as you know, our loan was above the $2,000,000 threshold, making it subject to additional review by SBA and we're just waiting for that process to work itself through. But we do continue to expect complete forgiveness of that loan.
Okay, great. Thank you. Just looking for an update there. And then as it relates to exeQ, I recall, I believe it was last year on one of your earnings calls, you mentioned you were potentially looking for pass through to be extended through an inclusion in an omnibus spending bill. Was that originally expected to be part of the Consolidated Appropriations Act of 2021, which was recently signed in law?
Or were you looking at other bills or another path to extension? Just any color there would be useful.
Yes. I'll answer that and then I'll actually ask Scott to comment if he wants to add anything further because he and I actually have been pretty involved with this. So yes, I can tell you that we obviously were hoping that it would be part of the Omnibus Bill, but unfortunately, they really didn't put any drug related legislation in the omnibus spending bill. So but we have other we have additional avenues that we are pursuing, continue on the legislative front, and we continue to have support in Congress by some members for this. The second thing is, is that we're also pursuing this at the CMS level, on the regulatory front.
We're not going to go into a lot of detail on this, but, we certainly are somewhat optimistic that we should at a minimum get an extension of pass through tied to the public health emergency, because they've already CMS has already extended that to medical devices and a few other categories. And it makes sense because these drugs, when you calculate what the new bundled price is, you take a look back over the last couple of years in terms of the utilization. And obviously, the utilization across all these drugs used in the surgical suite have been severely depressed due to COVID. So it's very hard for them to do what I would consider to be a fair bundled price given that dynamic. So we do expect and we're hopeful, I should say, that CMS will at least provide an extension on pass through tied to the length of time of the public health emergency, which by the way has still not been lifted.
It's still ongoing. Scott, do you want to add anything to that?
Nancy, I think that was well said. I was just going to add and I think you covered it slightly. But it's not when we say the strategy for extension, it's not one strategy. It's multiple tactics that were employed both for dealing with the PHE shutdown and extending the tolling period on our pass through for that as well as looking at long term options to continue payment for pass through type products, especially policy package products. So again, we have both regulatory and legislative strategies that we're currently implementing.
And we do feel confident that we'll see something in the coming weeks or months relative to those strategies that we're employing today.
Okay. Could you just refresh my
memory with OMIDRIA when it got its extension, was that through legislative or congressional support versus going down perhaps the regulatory CMS path? I think it was an omnibus, but I don't remember for sure how they Well, it was both.
Yes. Andy, it was both. They first got an extension through a piece of regulation that was put into an omnibus spending bill, but that had, again, a time period tied to it. And so then they actually lost reimbursement when that expired. And then they were able to get CMS to give them permanent reimbursement due to the fact that they've done a small study showing a reduction in opioid use associated with OMIDRIA.
And I would just say that, obviously, unfortunately, the opioid crisis continues, particularly now as the pandemic has accelerated. And so, there is a large impetus at CMS to ensure that opioid alternatives are being made available to patients. And that's hard to do when your drug is being bundled in with an overall cataract bundle. So and they're aware of that. So certainly that is and I've said before and I'll say this here that we certainly are looking at that path as well.
So dexamethasone
has is there any just generally data out there for nothing out of the ophthalmic conditions, but dexamethasone has been shown to reduce the need for painkillers or opioids, anything like that?
Yes. Dexamethasone is not DEXYCU. Dexamethasone is just a generic injectable. So that's to my knowledge, no, nobody's done a study on dexymethicone per se. DEXYCU is dexymethicone in our VeriSOME technology with extended delivery.
So we'll just leave it at that because I don't want to comment any further. But we are, as Scott said, we are looking at a number of shots on goal.
Okay. That's actually very interesting. I did not realize that. And then as it relates to the DABEOS trial, outside of sustained release that lasts for 6 months, which should help with patient adherence and compliance. Are you expecting any or should we be thinking about at least any efficacy benefits for UIP-nineteen oh one relative to anti VEGF mAbs that are already in the market, EYLEA, Lucentis, Beavu or have there been any small molecule anti VEGFs that have been able to mimic or show improved efficacy relative to approved biologics at least from an anecdotal standpoint?
I just there's limited head to head studies out there. I'm just kind of curious on any anecdotal or your thoughts on better efficacy.
Yes. So first of all, let me just say that simply showing equal efficacy to the current large molecules that are on the market, but extended delivery is a huge win. And again, and I'll answer your question about efficacy in just a moment. But again, I just I can't stress this enough. These patients with the current therapies have to come in every month or every other month, and in the case of Bayavu, potentially every 3 months, but and get their eyes injected for the rest of their lives.
That's an incredible burden to put on patients and offices, I might add. And so what happens is there's a preponderance of real world data, both from Europe as well as the U. S. That shows over time and these are large, large databases with published studies that have shown over time with current therapies, patients' eyesight continue to deteriorate. And the reason is more than likely, again, this is correlation, not positive, is that these patients just don't comply.
Actually, I'll take that back. They have shown that they just don't come in and get their eyes injected because you can see that from the claims data at the rate that they should, because it's hard. And frankly, who wants to get their eye injected every month, every other month or every 3rd month for the rest of their lives. So it's a real difficult problem. And that's why you see a number of drugs in development to get even further out in the injection timetable.
And then by comparison, of course, if you don't have to come in as frequently, but you get the same efficacy, you're not going to skip your doses as much. So theoretically, you should end up with better overall outcomes, meaning your vision doesn't deteriorate as much. Now again, that's going to take long term studies to prove that, but you can infer it and I want to be clear here, you can infer it from these large databases looking at the current drugs and the real world data that shows that their eyesight continues to deteriorate. So let me just stress again, we absolutely believe that being able to extend out to potentially 6 to 9 months before you have to get your eye injected again is a game changer.
Okay, perfect. Useful context. Thank you very much. Best of luck going forward.
Thank you.
Thank you. Our next question comes from the line of Yale Jen from Laidlaw and Company. Your line is now open.
Good morning and thanks for taking the questions and congrats on the progress. My first question is about DEXYCU. For this quarter versus the Q4 of last year, the revenue have jumped quite significantly. But to my understanding, the unit may not be that much different. I mean, there is difference, but they're not to the level of the revenues.
So is there a price increase for DEXYCU or how should we reconcile the differences here?
Yes. Actually, George, why don't you take that and then Scott can comment as well, shifting on the revenue versus demand.
Sure. Hi, Yale. Good morning. Yes, as I pointed out earlier, remember, there will continue to be a disconnect between underlying customer demand, which is customers buying from distributors and our sales, which is our purchases from us by the distributors. And so there's always going to be some disconnect there.
And so what we've tried to do in our disclosures is we recognize revenue under GAAP and that's what's reported and that's the sales to distributors. And then the underlying customer demand we disclosed separately, which gives a track on what the customers are buying from distributors. And unfortunately, there's always going to be a disconnect and we're at least for now not going not in a position to provide that reconciliation because I just think it complicates it. And there we have not put a price increase in for DEXYCU on your other questions. Scott, is there anything you want
to add
to that?
Yes, go ahead, Scott.
No, I think George covered it. I was just going to add that there has not been a price increase, but we've seen nice pickup in customer demand from Q4 to Q1 as we continue to pull out of the pandemic. And again, I mentioned earlier that we're seeing strength from our corporate alliance with ImprimisRx and then also from some of the contracts that we've recently signed. So including adding in the layer of the rebound from COVID, we're seeing a nice demand pickup.
Should we extrapolate maybe a little bit in terms of the increase of revenue, I mean the sales probably implies that the Impella Rx has more optimistic in terms of purchasing more products prepared for the as the inventory prepared for the future or that's not necessarily the case?
So, could you just go I'm not quite following the question. Are you saying that should we continue to see an uptick in demand due to the co promotion with Imprimis?
Just that in terms of that quite large increase of the purchase by the distributors, would that suggest that they are more optimistic on the future growth or demand and that's why they have make a bigger purchase versus before?
Yes. So let me answer it this way. As you know, we don't give forward guidance. So I want to put large caveats around this. It's always hard to predict what's going to happen in the future.
The pandemic is not 100 percent over, though we've made enormous progress. But it's not over yet. I will state though, however, as Scott said, we assuming that the pandemic doesn't get worse, the offices continue to open up, patients continue to show the momentum to come in as they are right now. And we are continuing to see and we expect to see continued growth with DEXYCU. It's a great product.
It always takes time to get a transition going, meaning from drops to new technology, which is DEXYCU, which is delivered at the very end of surgery with 1 injection. And as we've seen this, physicians more and more and the ambulatory surgery centers are getting comfortable using DEXYCU. In addition, as Scott said, ImprimisRx is really starting to kick in the game. Now it always takes time, typically 6 months on average for a rep to get fully productive out in the field. And that's exactly what we're seeing with ImprimisRx.
We signed our agreement in August and now we're starting to see some very nice momentum from their team and we're very appreciative. Our co promotion agreement with them is just going terrific.
Okay, great. That's very helpful. Just two quick ones. The first one is that in your prepared remarks, I think you mentioned potentially in licensing additional products. I'm just curious what will you consider as an ideal product in that for that pursuit?
Yes, good question. Business development is part of George's area. So George, why don't you take that question?
Sure. So Yale, I think on the other side of this financing, and we've really as you know, we focused on execution. We are very proud of the fact that we got 1901 into the clinic and moving forward. And Nancy highlighted a couple of additional indications for that program. Pardon me.
And since really since our financing in February, we have now started to strategically look at, okay, what are the next programs in wet AM I'm sorry, that were Durasert in particular can have an application in diseases of the eye. And so we're in the middle of a strategic process for that now. And I would say stay tuned. We'll look to update areas of approach perhaps as early as later this year as we identify additional molecules that we would like to move into development. We're being very deliberate.
But because of and I think the other key item here is as we've seen, it's not simple to deliver in the eye. We think we've got a real competitive advantage with DuraSert and we have a number of areas of focus and unmet need where we can we think we can have a real make a real difference with existing molecules and Durasert. And we'll come back and update hopefully later this year on where we're going with that.
Okay, great. That's very helpful. And maybe the last one here is that this is a very forward looking kind of situations, which is that 1901, which will be delivered, I guess, twice every year, but you do have the technology you can deliver drug almost for 3 years. So the question is that going forward, way forward, would there be was there a consideration that you might deliver a drug for in the for AMD or others for further infrequent dosing compared to the GLP-nineteen oh one?
Nancy, you want to take that? You might be muted.
I apologize. I was on mute because I want to minimize background noise when others are speaking. So yes, there's no doubt that we are looking at other ways to extend the duration of treatment and injections, mostly for other indications, which like diabetic retinopathy, which are probably better suited to a longer treatment because they're less severe diseases. And for wet AMD, that's not something we're going to evaluate right now. It's certainly something down the road if we're successful and we look like we're well into a Phase 3 potentially approved.
We'll evaluate if the market would want that. Right now, I can tell you that what we've consistently seen in market research data that we've done over the years is the sweet spot for some of these serious diseases like wet AMD, I can say other diseases like certainly uveitis, diabetic macular edema as examples. Doctors consistently state that they do like to have treatment options and 6 months is a nice sweet spot. Uveitis typically can go out to 3 years because it's an unpredictable disease and you don't know when they're going to flare. But they still want that treatment option, which is why we're developing YUTIQ 5.0.
So right now, we don't have plans to do another dose duration for wet AMD, but that's certainly all these things are going to be evaluated should we be successful with the Phase 1 and going into a Phase 2 study.
Okay, great. Thanks a lot again. Congrats on the quarter.
Thank you.
Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Nancy Lurkers, CEO for closing remarks.
Thank you everyone for your time. Thank you also for the great questions. We look forward to updating you next quarter and we're very excited about our current progress. Thank you very much. This concludes today's