For EyeGate Pharmaceuticals, the licensing deal it signed last week with Valeant Pharmaceuticals International provides the necessary cash to push forward a uveitis drug that has been in limbo since EyeGate raised less than expected in its initial public offering.
EyeGate CEO Stephen From argues that it’s not just about the cash. It’s about the validation that a name like Valeant provides a small company. It’s also about proving that the company won’t extend beyond its own capabilities—and it won’t make the same mistakes twice, he says.
The cash does matter. Waltham, MA-based EyeGate is receiving an undisclosed upfront payment, milestones, and royalties by licensing to Valeant the worldwide rights to its drug. The treatment is a corticosteroid compound targeting uveitis, an inflammatory condition that can lead to lost vision or permanent blindness.
That’ll help the company pay for a second Phase 3 study in uveitis so it can seek regulatory approval. In turn, that means EyeGate has to share the benefits of the drug—which treats the tissue in the front of the eye—if it’s approved. Valeant also gained the same rights to the company’s system for delivering each of its drugs into the eye, called EyeGate II.
That’s worth it, From says, because EyeGate also gains access to the marketing and commercialization teams at Valeant, which is based in Montreal with U.S. headquarters in New Jersey.
“Do you know how many different disciplines are actually involved in marketing, commercializing, and distributing a drug?” From said in a telephone interview. “I didn’t want to have to struggle with that.”
EyeGate needed a partner in order to move forward with the trial for the drug, EPG-437, because it had less cash on the books than From had hoped. The company raised $4 million in a February IPO that brought EyeGate to the over-the-counter market. It was considerably less than the $25 million Eyegate had hoped to wring from an offering on the Nasdaq in 2014, which was canceled.
That cash strain stems partly from two problems the company faced as it grew, From says. In the early days after EyeGate was founded, it was seeking a treatment for uveitis, he says. Around 2008, it began focusing on using a formulation of the corticosteroid to resolve problems with dry eye.
Dry eye has a far larger patient population than uveitis, From says. However, it has been difficult to create an effective treatment, because dry eye is a syndrome and results in clinical trials vary depending on the trial and who is in it, From says. Those kinds of difficulties mean it is costly.
“Dry eye can just suck you dry very quickly,” From says. “Our biggest mistake as a really small company was going out to dry eye.”
Through 2014, EyeGate had raised about $54.1 million in equity and debt, according to its regulatory filings. Meanwhile, it has accumulated a deficit of about $56 million.
That’s what made the decision to return its focus to uveitis important, From says, and it’s why he says investors can trust his decision-making in the future. In addition to the deal with Valeant, EyeGate filed paperwork in June indicating its hope to raise as much as $15 million in a secondary offering.
“I did the right thing. I could have done another phase 3 and thrown the dice and hoped,” From says regarding dry eye. “The company would not have survived another failure. We retrenched, fought it through, and we’ve gotten where we are.”
Dry eye wasn’t the company’s only mistake, From says. EyeGate was founded based on technology from the University of Miami, and first emerged as a company in 2000 in France. It incorporated in the U.S. in 2004, and soon after From invested in a wet lab because he wanted the business to be able to develop its own drug formulations and not be dependent on contract research.
When the dry eye development failed, From says he had no choice but to sell the wet lab. “When I look at where we are today, we could have been much further ahead, but I don’t apologize for that,” he says.
Now, with four full-time employees, From is again hopeful that growth is ahead. His team has a formulation of a corticosteroid that it is testing in a Phase 2 trial to treat macular edema in the back of the eye, a more difficult area to tackle.
Meanwhile, the company’s device, EyeGate II, is key to treating the back-of-the-eye indication for macular edema, a condition that swells an area of the retina after fluid and protein deposits collect. The device makes direct contact with a patient’s eye and sends the drug through it using different amperage, with more electric current sending it further, From says.
The market seemed to respond to the news of Valeant and the macular edema test. EyeGate’s stock, which is traded on the OTCQB Venture Marketplace, rose $8.30 to $15 per share on July 14. The stock had traded down to $13.50 as of 10:16 a.m. in New York on July 15.
If the company is successful in its attempt to gain approval of its uveitis drug, it will look into other indications it can treat with the corticosteroid, From says. It will also consider using other methods of delivering drugs, such as proteins, he says.
“You can hopefully learn from what you’ve done in the past and hopefully build on it,” he says. “I don’t want to make the same mistakes I did in the past.”
And if the company finds other indications or molecules that can deliver its drugs, it will have options. Its deal with Valeant—a company that is such an active deal-maker, it has an acquisitions FAQ page—is only for uveitis.
“The terms reflect the uveitis market. They’re the right terms for what they got,” From says. “If we do extend the label, they have to buy into that.”
