EYEG: An Active 2020 with More to Come

By Beth Senko, CFA

NASDAQ:EYEG

READ THE FULL EYEG RESEARCH REPORT

EyeGate Pharmaceuticals EYEG is a late-stage clinical company developing better solutions to current treatments for post-surgical eye care and moderate to severe dry eye using OBG, its proprietary cross-linked formulation of sodium hyaluronate (HA).

2019 was a turning point for EyeGate Pharmaceuticals. In March, 2019, the Company announced it was putting work on hold for EGP-437, a candidate being studied for uveitis and two other indications. Since, then the Company focused all its efforts on its OBG (Ocular Bandage Gel) platform technology.

The focus is paying off. The Company has completed four clinical trials for OBG, three for PRK and one for PE (punctate epitheliopathies) and anticipates filing for FDA approval in PRK in 2020 and perhaps the PE indication as well.

EyeGate filed its IDE for OBG in PRK in May 2019 and began its pivotal trial in June. In November and December, the Company received top-line data showing superiority in its primary endpoint of superiority in wound healing over standard-of-care a bandage contact lens (BCL). In the study, by day 3, 80% of study eyes receiving OBG were completely healed, compared with 67% in the control group. EyeGate plans to file a de novo application for OBG in PRK by the end of June.

In the third quarter of 2019, EyeGate began a follow-on trial for OBG in PE, evaluating several different exploratory endpoints, with topline data expected in the first half of 2020. PE occur in many ocular inflammatory conditions such as dry eye, conjunctivitis, trauma/corneal abrasions, contact lens wear, chemical irritation and burns. An estimated 18 million people in the US are diagnosed with dry eye syndrome (DES).

In the US, artificial tears followed by anti-inflammatories (including corticosteroids) are front-line treatment for DES. While both are effective for most patients, they treat symptoms and not the cause of DES. In addition, artificial tears tend to relieve symptoms for a few hours at most and corticosteroids are not designed for long-term use. Restasis, Xiidra, and more recently Cequa, are topical anti-inflammatories that can be used long-term. The downside is expense – as much as $600/month – the products only treat symptoms and do not appear to treat the underlying causes of DES. In addition, the anti-inflammatories do not appear to work for a large proportion of patients, and many patients report stinging and burning sensation when the drops are applied.

EyeGate's follow-on trial for PE consists of 20 patients. Each patient had one eye randomized to treatment with OBG, the other to control (Allergan's Refresh) (AGN – NYSE). Enrollment was completed in January and the Company received positive preliminary top-line data at the end of March. The data show faster (10% improvement in OBG vs. no improvement in control at Day 7) and more significant (25% vs. 15%) improvement from baseline for OBG vs. control. The data appears to confirm results from the original pilot trial against a standard rewetting drop. Management is scheduled to meet with the FDA in early June to discuss next steps in filing for OBG in PE caused by dry eye. If successful, OBG will be the only FDA-approved lubricating eye drop with HA as an active ingredient.

We are adjusting our valuation target to reflect the 15-1 split along with slightly more moderate uptake assumptions related to the economic slowdown. Our valuation goes from $2.25 (pre-split) to $12.00 based on a 10-year DCF for PRK and dry eye markets with 20% royalties, 10% discount rate, 20% terminal EBIT margin, 25% tax rate and $8.2 million in net cash.

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