Good morning. My name is Kevin and I’ll be your conference operator today. At this time, I would like to welcome everyone to the EyePoint Pharmaceuticals’ Fourth Quarter and Year End 2020 Financial Results and Recent Corporate Development Conference Call. There will be a question-and-answer session to follow with the completion of the prepared remarks.

Please be advised that this call is being recorded at the company's request. I would now like to turn the call over to George Elston, Chief Financial Officer of EyePoint Pharmaceuticals..

Thank you and thank you all for joining us on today's conference call to discuss EyePoint Pharmaceuticals’, fourth quarter and year end 2020 financial results and recent corporate developments. With me today is Nancy Lurker, President and Chief Executive Officer; Dr.

Jay Duker, Chief Strategic Scientific Officer, and Scott Jones, Chief Commercial Officer. Nancy will begin with a review of recent corporate updates. Dr. Duker will then discuss pipeline developments for EYP-1901. And Scott will comment on recent progress made on our commercial activities.

I will close with commentary on the fourth quarter and full year 2020 results. We will then open the call 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.eyepointpharma.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 time lines, 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 of our most recent annual report on Form 10-K, which is 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. Let me start by emphasizing the highly positive momentum that began in the fourth quarter of 2020 and has continued into 2021. These past several months have been remarkable and transformative for EyePoint Pharmaceuticals.

We are extremely pleased with a significant progress across our business illustrated by three noteworthy events. We advanced our exciting and potential blockbuster wet AMD drug candidate EYP-1901 into the clinic.

We substantially strengthened our balance sheet, and we grew demand for our commercial products despite the pandemic, negatively affecting patients visits to physicians. As you'll hear from Jay shortly, we successfully progressed our lead pipeline asset, EYP-1901, for the treatment of wet age-related macular degeneration into the clinic.

As a refresher, the wet AMD market for drugs in the U.S. is approximately $8 billion and growing at a compound annual growth rate of 8%. This is being driven by the ageing baby boomer population, as the disease primarily affects people over the age of 65.

While there are safe and effective medications available today, such as Eylea and Lucentis, there continues to be a significant need for extended delivery drugs that can avoid the monthly or bi-monthly eye injections.

We are targeting EYP-1901 as a potential, twice-yearly treatment for a majority of patients and we are eager to progress EYP-1901 through the clinic. We dosed the first patient in our DAVIO Phase 1 study, marking a major milestone towards advancing our clinical pipeline.

We're very excited about the progress we've made in delivering on our quick initiation for the Phase 1 trial thus far, and look forward to providing further updates with expected preliminary data in the second half of 2021. As you'll hear more about from George later on, we also made tremendous advancements in strengthening our balance sheet.

We significantly increased our cash position, marked by the successful completion of $115 million follow-on offering in February. That followed a $15.7 million equity investment by our Asia partner, Ocumension Therapeutics in December.

We also completed a royalty monetization agreement in December, with SWK Holdings, allowing us to pay down a portion of our debt obligation to CRG Holdings. We are now very well financed to execute on our critically important EYP-1901 wet AMD trial and potentially YUTIQ50.

Or twice-yearly uveitis drug candidate, as well as other clinical and commercial milestones. Despite the challenges of the COVID-19 pandemic, we're pleased to report an encouraging, sequential increase in customer demand, as Scott will discuss in more detail later on.

In the past quarter, we saw customer demand increases of 30% and 10% for DEXYCU and YUTIQ respectively, over Q3 2020. Although 2020 with a challenging year, EyePoint ended the year on a very strong note, and we are focused on carrying our positive momentum through 2021 and beyond.

As we look to complete enrollment, our EYP-1901 Phase 1 trial, we remain equally determined to continue driving revenues for our commercial products, DEXYCU and YUTIQ, maintaining a strong balance sheet and bolstering our clinical pipeline.

Before I turn the call over to my colleagues, I'd like to take a moment to thank the entire team at EyePoint Pharmaceuticals, our Board of Directors, and the many physicians and their staff, who use our products.

2020 was a very tough year and I'm grateful for the tireless efforts of EyePoint’s employees and customers on behalf of patients, despite the impact of COVID-19. Our ongoing commitment to ourselves and to the communities we serve is safety.

And we're proud to say we've come together as a company to overcome obstacles and achieved several vital goals during this time of upmost uncertainty. And we're looking forward to what we see as bright light at the end of the tunnel. I'll now turn the call over to Dr.

Jay Duker, our Chief Strategic Scientific Officer, to provide an update on our lead program, EYP-1901, as well as other pipelines initiatives.

Jay?.

Thank you, Nancy. And good morning. As you know, we are extraordinarily pleased with the progress so far on our EYP-1901 program for the potential treatment of patients with wet AMD. We were able to complete our IND submission and begin enrollment of our Phase 1 clinical study, the DAVIO trial, despite the challenges of the COVID-19 pandemic.

This took a tremendous amount of effort by our team and our external partners. Wet AMD is a progressive, chronic debilitating eye disorder that causes blurred vision and can culminate in a permanent central blind spot. The hallmark of wet AMD is the formation of abnormal blood vessels that leak fluid and blood into the macular area of the retina.

It's the leading cause of vision loss in people over 65 years of age in the United States and other developed countries. Despite several safe and effective FDA approved medications, there is significant need for longer lasting therapies to replace the relatively short duration of action of the current medications on the market.

As a reminder, EYP-1901 is a bioerodible formulation of our Durasert technology combined with vorolanib, the active drug, a small molecule tyrosine kinase inhibitor. Durasert is the sustained release delivery system for four FDA approved products.

After a single intravitreal injection, it can provide continuous, stable release of medication to the back of the eye. We believe that intravitreal EYP-1901 has the potential to safely treat chronic visual loss in patients with wet AMD.

As Nancy mentioned, in December 2020, we filed an IND application with the FDA to initiate a Phase 1 clinical trial in wet AMD patients. The IND was based on preclinical studies of the EYP-1901 administered into the eye that showed promising anti-VEGF activity with no serious safety concerns observed.

In January 2021, the IND was cleared by the FDA, and we initiated a Phase 1 trial with the first patient successfully dosed later that month. The Phase 1 trial is an open-label dose escalation volcanic study of three ascending doses with a total of 13 patients to be enrolled.

We firmly believe EYP-1901 has the potential to be a transformative and incredibly beneficial option for patients and physicians for the long-term treatment of wet AMD, and we're excited that the trial is actively enrolling. We have yet to see any negative impact on patient enrollment from COVID-19 in our Phase 1 trial thus far.

And assuming this remains the case, we anticipate preliminary data from the trial in the second half of 2021. Additionally, we continue to be excited by the potential of EYP-1901's application to other severe eye disorders, including diabetic retinopathy, and retinal vein occlusion, and we intend to explore these indications in the future.

In November 2020, we also reported positive data for YUTIQ and DEXYCU in four presentations at the American Academy of Ophthalmology 2020 Virtual Annual Meeting.

These presentations included statistically significant efficacy results from the second Phase 3 trial of YUTIQ and post cataract surgery, inflammatory reduction data from a multicenter retrospective study of real-world usage of DEXYCU. Two separate investigator-initiated studies for DEXYCU were also presented.

That demonstrated the benefits of DEXYCU versus postoperative eye drop treatments. Turning to our pipeline initiatives. We are actively exploring new applications for our Durasert technology along with potential product and technology in-licensing.

This includes YUTIQ 50 of potential twice yearly sustained delivery treatment for chronic non-infectious uveitis affecting the posterior segment of the eye using the same non-erodible Durasert formulation and corticosteroid as is in YUTIQ.

YUTIQ’s 50s 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 three-year intervals that YUTIQ currently provides.

We have identified a potential clinical pathway with the FDA for an sNDA filing, and we're currently evaluating the timeline investment requirements for trial completion. We look forward to providing an update on EYP-1901, 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 began, as you all know, EyePoint’s revenues were negatively affected throughout the COVID-19 pandemic. And like many other companies, 2020 was a challenging year for us. So, I'd like to thank the team for their resilience and commitment to our success.

For the fourth quarter of 2020, we're pleased to report an increase in customer demand for YUTIQ and DEXYCU. We're encouraged by this growth, despite the continuing effects of the pandemic on customer demand, due to decreased office visits and elective surgeries.

And despite the first quarter being weaker historically, we have been pleased with the continued demand of both products in Q1 2021. I will now review our commercial performance in more detail. Net product revenue for the fourth quarter was $4 million and $2.7 million for YUTIQ and DEXYCU respectively.

During this time, we saw customer demand of approximately 6,200 units for DEXYCU and approximately 500 units for YUTIQ representing increases of 30% and 10% respectively over Q3 2020 customer demand. Increased demand for DEXYCU in Q4 2020 continues to reflect the upward trajectory of elective surgeries toward pre-COVID levels.

The expansion of the available market based on our contracting strategy and a growing positive impact from our commercial alliance partner ImprimisRx. Imprimis brings an experienced cataract surgery field force, and we are beginning to see positive momentum from their efforts.

And we expect to see additional opportunities developed in 2021 based on their broad network and the cataract market. Turning to YUTIQ. The increase in demand was driven largely by two factors, increased patient access to care, especially in the large hospital environment and the expansion of our sales and marketing efforts into the retinal market.

Please note that YUTIQ did not experience the dramatic reduction in demand that we experienced with DEXYCU due to the COVID-19 pandemic. And we're pleased to see the strong Q4 demand growth.

Looking ahead for both products, we expect growth in demand will continue to be contingent upon the rollout of vaccines and the easing of restrictions in elective surgeries.

While it was difficult to project customer demand in 2021, we are optimistic that we will continue to see increased growth of sales and marketing efforts for YUTIQ and DEXYCU increase. ImprimisRx continues to gain experience with DEXYCU and we roll out the new siliconized needle for YUTIQ.

DEXYCU and YUTIQ 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. Again, I'd like to thank each and every team member and our many physicians for their continued support throughout 2020, and we're looking forward to 2021.

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 three months and full year ended, December 31, 2020 were included in the press release issued this morning. My comments today will be focused on a high-level review for the quarter.

As Nancy mentioned in December, Ocumension Therapeutics, a China-based ophthalmic pharmaceutical company and our Asia partner made a $15.7 million equity investment in EyePoint, purchasing approximately 3 million shares of EyePoint’s common stock.

In addition, we announced the royalty monetization agreement with SWK Holdings Corporation for royalties payable to EyePoint under our license agreement with Alimera Sciences for ILUVIEN. Under the agreement, we received a one-time $16.5 million payment from SWK in exchange for the rights to future royalties from the Alimera agreement.

$15 million of the net proceeds from this transaction were applied toward debt obligations with CRG Servicing and the remaining $1.5 million will be used to advance our pipeline programs. Now I'll turn to a summary of our fourth quarter financial results.

For the three months ended December 31, 2020, total net revenue was $7.1 million compared to $8.6 million for the three months ended December 31, 2019. This includes net product revenue for the three months ended December 31, 2020 was $6.7 million compared to net product revenue for the three months ended December 31, 2019 of $7.9 million.

Net revenue from licenses, royalties and collaborations for the three months ended December 31, 2020 totaled $0.5 million compared to $0.8 million for the corresponding quarter in 2019. Operating expenses for the three months ended December 31, 2020 totaled $19.9 million compared to $17.6 million in the prior year period.

This increase was driven by G&A expenses, increase in cost of sales and R&D expense being partially offset by reduction in sales and marketing expenses. Non-operating expense net totaled $2.7 million of net interest expense.

Net loss for the period was $15.5 million or a $1.07 per share compared to a net loss of $10.4 million or $0.98 per share for the prior year quarter. Turning to the full year ended December 31, 2020, total net revenue was $34.4 million compared to $20.4 million in the prior year.

This includes net product revenue for the full year ended December 31, 2020 of $20.8 million compared to $16.8 million in the previous year. Net revenue from royalties and collaborations for the full year was $13.6 million compared to $3.5 million in the corresponding period of 2019.

Operating expenses for the full year ended December 31, 2020, totaled $71.7 million versus $68.2 million in the prior year period. This increase was primarily due to increase in cost of sales, G&A expense and increase in R&D expenses partially offset by decrease in sales and marketing expense.

Non-operating expense, net, totaled $8.1 million and net loss was $45.4 million, or $3.54 per share, compared to a net loss of $56.8 million, or $5.44 per share, for the prior year period. Cash and cash equivalents at December 31, 2020 totaled $44.9 million compared to $22.2 million at December 31, 2019.

We expect the cash on hand at December 31, 2020 together with the approximate $108 million of net proceeds from the February 2021 public stock offering and expected net cash inflows from our product sales will enable us to fund our current and planned operations through the second quarter of 2022.

In conclusion, we are extremely proud of the work EyePoint has done in the fourth quarter of 2020 and into 2021 to strengthen our balance sheet and pivot to becoming a product pipeline focused company. Thank you all very much for listening this morning. I’ll now turn the call over to the operator for questions,.

[Operator Instructions] Our first question comes from Jennifer Kim with Cantor Fitzgerald..

Hi, thanks so much for taking my question. Congrats, guys. It was really impressive progress over the quarter..

Thank you..

I have a couple of question. Yes. My first question is for Scott, I know you said you still expect continued growth for the commercial business. I'm wondering – so consensus estimates currently have, I think, incorporated sales around the $45 million range.

I'm just wondering, is that a number that you're comfortable with currently? Or what's your general thinking about where consensus is that? My second question somewhat related is, were the gross margins in the fourth quarter, was that impacted mainly from the commercial alliance around DEXYCU? And then how should we think about gross margins going forward? And then my last few questions are for Jay for the 1901 product.

I'm just wondering, can you remind us what we should expect to see in the preliminary data and what you would consider a home run in terms of that early data? And then also, is there a bar in that first set of data that if you reach that bar, it could expedite expansion into new indications like DR and RVO? Or will there – or will more mature data be needed for you to pull that trigger? Thanks..

Jennifer, lots of questions. Good questions. Let me – I'll tackle the first one on the consensus on revenues, the $45 million. So right now, as we look into first quarter, first quarter actually going quite well. And so, we're comfortable with that number, pending any additional changes in trajectory due to the pandemic.

But right now, it does look like the country is opening up. We're seeing very nice momentum in first quarter. So, we're comfortable with where we are. George, I'll let you handle the gross margin questions..

Yes. So, in Q4, and it will be covered in our 10-K, but we had a onetime inventory adjustment that we wrote off in the fourth quarter that affected margins, which we don't expect to continue. And so, the Imprimis relationship, Jennifer, that expense – what we pay them is a commission that actually shows up as SG&A expense.

And so, any activities there don't affect margin. So, we had a onetime event that affected Q4. That's discussed in our K that will be filed, I believe, next week. And margins, we expect to continue to wait. As YUTIQ becomes a heavier weighting in that mix, we expect margins to do very well over time..

Yes. Let me also just add a comment. Our co-promotion with ImprimisRx is now really starting to ramp up nicely. So, we're quite pleased with how that alliance is going..

Okay. Great.

And then on the EYP-1901, what are you expecting in the preliminary data and what you would consider a home run? And could we see expansion into additional indications from the first early data set? Or will more mature data be needed?.

Okay.

Jay?.

Nancy, I think you have to take that one. I think Jay got delayed this morning..

Yes, okay. All right. So, let me answer it this way that we right now are on track with our clinical trial enrollment. We're continuing to state, we expect to see results in the back half of this year.

We are looking at potentially going into additional indications in very early Phase 1 studies, potentially this year, that's under active evaluation right now. And what we would see is a minimum threshold that we would hope to achieve would be 50% rescue at four months.

If you look at what some of the competitive products are at right now in the pipeline, to get at 50% or above in four months would be still a very good result. We, of course, are aiming for better than that. Our goal is to get to six months with at least 50% and potentially even higher, but you have a viable product at 50% rescue at four months.

Now let me – Jennifer, did I answer all your questions because you had quite a few wrapped in there?.

No. That was perfect. Thanks, so much guys. Congrats again..

Very good. All right..

Our next question comes from Dana Flanders with Guggenheim..

Great. Thank you very much for the questions. Just a quick commercial one from me.

Wondering if you could put any quantitative metrics around kind of where you are in terms of patient and salesforce access to docs at this point? It is get – I mean, it sounds like it's getting better, but just wondering kind of how close to normal you are? And then kind of a second question there, George.

I know you made a lot of tough decisions on costs last year.

With the growth you're expecting from the commercial portfolio, how close do you think the commercial business could get to breakeven this year?.

Scott, why don't you answer the access questions?.

Absolutely. So, on the DEXYCU side, the cataract surgery market is a little uneven. In many areas, it's back to 100%. And you still have certain states where access on the elective surgeries is – continues to be limited. But we are certainly much closer to getting back to normal than we were at any point during 2020.

On the YUTIQ side, the access – our access into the physician office is still limited, but patient access has improved dramatically. I think on the retinal physician side, they're back to near 100% outside of the teaching hospital environment. Some of the teaching hospitals are still limiting, some of the patient access.

But it certainly, in most states on both products, is marching toward a more normal trajectory than we've seen in many, many months..

George, do you want to pick up the question on expenses and costs and breakeven?.

Dana, that's a good question. And when we raised money last month, we did make some tough decisions. I think importantly, the commercial business is now positioned in 2021, assuming that COVID does not come back in force and that the reopenings continue. We've positioned the commercial business.

Each of the franchises, we expect them to become profitable as a stand-alone franchise this year. YUTIQ will happen a little sooner than DEXYCU. But that's how we've strategically positioned those franchises because it's important that any new equity will be on pipeline and then the commercial business stands alone.

The other piece, which I want to tie into this as well because we're expecting the question. Our cash projection assumes some very conservative assumptions on the commercial business as well.

And so, while we said we have – we've included in our press release this morning that we have cash through Q2 of 2022, that's our conservative estimate because COVID remains an overhang.

And obviously, we raised a significant amount of money that can get us quite ways, and we have no plans on raising cash here in the near term, certainly not this year. So, I just wanted to tie that in as well..

Okay. Okay, great. No, that’s helpful. And also, just maybe looking to kind of clarify some of the comments on YUTIQ 50. I wanted to make sure I just understood that.

Is that a program that you are going to be moving forward in development? Or should I take the comments you made that you're looking to partner that?.

Yes, Dana. Right now, we're anticipating that we're going to move forward with that. Potentially start that study this year. We held off a bit just because we were managing cash so tightly last year. But now we feel that we can certainly get that started this year.

As you may recall, and let me just repeat for everyone's sake that, that is going to be a very small study. We've had conversations with the FDA around that, somewhere between probably 45 patients in total. And then we just file it, and it's a six-month review clock.

So, we could get that filed early next year and then have it on the market as soon as late next year. So, our plan right now is to potentially get that started this year..

Okay, great. And maybe just my quick last one on EYP-1901. Can you just remind us the trigger factor on extending that study for the additional 12 patients? What doses those patients would be getting? And then how that would potentially impact kind of the start time for your next phase of development? Thank you..

Yes. I'll take that question. Right now, we are not anticipating we'll do that extended arm. That's partly because the – it's important that we get into a controlled clinical study. So, the thinking right now is we'll finish up Phase 1.

If the data are good, we'll go right into either a 2a and potentially, depending on what the data readout is, a pivotal study as well.

And then you had one other question tied in with that, what was that?.

It was just if you extended the additional 12 patients, would that impact the start of the next study, but it sounds like you kind of answered it already..

Yes. And let me just say this. Our goal with EYP-1901 is fast to market with the major caveat of safety first for patients and ensuring that we've got the right dose identified. That's the purpose of the Phase 1 study. Obviously, we're going to have to wait to see how the Phase 1 data rolls out. So, we can't make any predictions on that.

But our goal is, should those data look good, we would anticipate to start to move as quickly as we can into either a Phase 2a or pivotal trial..

Okay, thank you. That’s it for me. Congrats on all the progress..

Thank you..

Our next question comes from Yale Jen with Laidlaw and Company..

Good morning. Also add my congrats on the development. The first question probably is a housekeeping, probably for George.

With the cash in hand, would you guys consider retiring all of the debt or you want to keep some of those on your balance sheet?.

The cash we used Yale is really for development again going back to the notion of using this to advance 1901 and other pipeline programs forward. It wasn't our use of proceeds. That said, we are looking at alternatives because our balance sheet is now stronger and the commercial business is returning.

We do have alternatives potentially for our existing debt. But as we noted in the release and prior press releases, we were able to pay some of that down in December and make that a much more manageable number. And we continue to have a good relationship with our debt provider..

Okay, great. That’s very helpful. very helpful. Maybe two quick ones.

First one is for DEXYCU, in terms of the pass-through reimbursement status with the CMS, any updates on that?.

Yes, Scott wanted to take that..

Thanks for the question, Yale. We are still actively engaging both a legislative and a regulatory strategy on the pass-through both projects.

And both projects meaning, we have one project relating to the public health emergency and an extension to pass-through based on that and a second project based on more of the long-term payment for pass-through products in the ASC setting. Both of those are still proceeding.

We are certainly actively working with CMS as well on some other projects that we hope to have more information about as the physician rules and ASC hospital outpatient rules are written midyear this year. .

Okay. Maybe the last question here is about EYP-1901. The first is that would you guys report the completion of the patient enrollment once it's done? And a follow-up by that is that you have three doses, most likely the 2,000 and 3,000 micrograms, but those will be in the active therapeutical range? Thanks..

Okay. So, I'll take the first one. I'll have Dr. Dario Paggiarino, our Chief Medical Officer, take the second one. So yes, we will announce when full enrollment is hit. Okay. And Dario, why don't you take the questions about therapeutic dose for the three dose ranges..

Sure, thank you, Nancy. I hope you can hear me well. So yes, the two doses, the mid and high dose that you referred to, are being tested in the Phase 1 for safety.

And of course, the – those doses have been selected also on the basis that we think, based on the animal studies and PK studies we have conducted, that are actually doses that would allow us to deliver drug concentration sufficient to exert the clinical effect.

So, I think you're correct that those are probably the two doses that are more likely to move forward in the next study. Of course, granted that we proved the safety of the product, which we're very confident on. .

Okay, great, thanks. Once again congrats..

Thank you..

Thank you..

Our next question comes from Andrew D'Silva with B. Riley. .

Hey good morning. Thanks for taking my questions. Just a few quick ones. As it relates to accounting for the SKW royalty rights, how should we think about that from a P&L recognition standpoint? Just cadence as it will be – to the top line would be useful there. And then just a little bit more clarification on pass-through.

I think previously, it was thought that the extension could be in the coronavirus stimulus package that is working its way through Congress. I believe there's been additional just color on that more recently.

Is that included in what's recently been approved in the house?.

So, let me answer the last question first, and then George will take the first one. So, we can't comment on that right now. This is like, as you guys all know, it's like making sausage, so you're never quite sure what's going to fit out at the end.

We're obviously actively engaged in a number of different areas, as Scott said, to try to get this extended. And I'm fairly confident we can although there's no prediction, because we are pursuing both paths legislatively, and we do have support.

I will state, we do have support at the senatorial level and the house level for getting extension to this. I think it's fair for me to say the GAO just issued a report as well that talked about without extension. And once these drugs go into pass-through, the use drops dramatically, and that impacts patient care.

Remember, that's what this is all about. So, because of that GAO report issue, we also believe that gives us further support for why these drugs, which are highly useful, should not be put through a pass-through period where they lose their pass-through.

And as Scott said, the second area is we continue to work with CMS on an alternative pathway as well. George go ahead..

Yes, so thanks Andy. Although we did receive $16.5 million in the fourth quarter for the Alimera royalty, we actually didn't recognize any of that revenue because of accounting rules, which is a little frustrating, but it's – and I know it made a mess of some models out there.

And the short answer is that's going to be amortized over a number of years from an accounting perspective. It's likely going to be lower than what we have received in the past. And that's strictly accounting rule that's noncash. I don't have a strict number, but I would estimate something lower than what we saw quarterly on a historical basis.

And it's a little unusual, but it's – I'm not a technical expert, but that's where we sit today..

No, no, that's fine.

The $90,000 of royalty income, I'm assuming that was just related to SKW and not actually tied to the percent of sales you get from Alimera related to ILUVIEN, correct?.

Yes. No, we had no royalty income in Q4. That recognized revenue was related to an R&D collaboration. So, it was a fairly small number..

Okay. And then just more on the regulatory side of things.

Physician monetization with DEXYCU, where are you related to initiatives to actually get the product-specific injection reimbursement go established? And then with YUTIQ, I don't know if you mentioned this, but is stocking nearing customer demand again at this point? And if you could give any other color on YUTIQ around where you're seeing inventory levels and how you kind of think of the inventory demand dynamic playing out as the year progresses?.

Yes, sure.

Scott why don't you answer the injection code question?.

Sure. We have actually filed now for a new CPT code for that posterior chamber injection. It will be discussed at the May 2021 meeting. So, we'll have more information at that time..

And then as far as YUTIQ and inventory levels, let me just say this, that we did – we are in the process right now of launching a new siliconized needle. And because of that, inventories were drawn down a bit in 4Q. And so, we're seeing inventory levels in first quarter come back now more to normal.

So, we do not see inventories right now by any means over what is typically seen. So, the specialty distributors have now gotten in sync. I mean, we're two years into launch even with the pandemic. But with the pandemic coming back, they want to make sure as well that they've done a very good job of managing what to project.

So, we don't see significant swings up and down. The only thing just to be aware of is there was drawdown in 4Q as the silicon needle was preparing to get rolled out. We obviously informed them of that. And so now they're starting to stock up with that new needle. .

Okay. So that should actually be good for your first quarter, I imagine. So that's good color there. And I'll just put out my last two questions together.

Should we expect Imprimis' percent of total DEXYCU sales to increase on a percentage basis relative to what we saw in the fourth quarter? I mean, is that a fair assumption at least? You did note that it was material..

Yes..

Okay. And then how many patients just in the DAVIO trial have been rolled thus far? And that's it from me. Thank you very much. Best of luck. .

Yes. Good questions, Andy. We're not giving color around how many patients have enrolled other than to say that we are on track, and we're pleased with where we are. So just to remind everyone, it's a 13-patient trial. Obviously, it's not a lot. But nevertheless, we have fairly strict entry criteria.

So, you have to be careful that you get the right patients. We are pleased as well with it. We have enough – fair number of sites that we've opened up. So, based on that and the fact that pandemic is lightening, we're pleased with where we are in enrollment. And as I said, we'll issue a press release when we get to full enrollment..

Okay, great color. Thank you very much. Best of luck..

Thank you..

Our next question is a follow-up question from Yale Jen with Laidlaw and Company. .

Thanks for taking the call.

Just to follow the last question there, that in terms of amortization for the $16.5 million revenue, how long – how should we think about the duration of the amortizations will help us in the modeling?.

Yes. It's tough to give guidance on that, but it's roughly a five- to eight-year time line depending – five to ten, depending on structure. If you use ten as a conservative number and again, it's just accounting driven and it's a noncash event.

But we're still working – the nuances of accounting will unfold over time as the actual results start rolling through. But I think just from a modeling perspective, if you use 10 years, that will get you close and it will certainly be very....

[Indiscernible].

Yes..

That’s very helpful. Thanks..

And I’m not showing any further questions at this time. Ladies and gentlemen thank you for participating in today’s conference. This does conclude your program. And you may now disconnect. Everyone have a great day..