S-1/A 1 v399946_s1a.htm S-1/A

As filed with the Securities and Exchange Commission on February 4, 2015.

Registration No. 333-197725

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

AMENDMENT NO. 9 TO
FORM S-1
REGISTRATION STATEMENT

Under
THE SECURITIES ACT OF 1933



 

EYEGATE PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)



 

   
Delaware   2834   98-0443284
(State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

271 Waverley Oaks Road
Suite 108
Waltham, MA 02452
Telephone: (781) 788-9043

(Address, including zip code and telephone number,
including area code, of registrant’s principal executive offices)



 

Stephen From
President and Chief Executive Officer
Eyegate Pharmaceuticals, Inc.
271 Waverley Oaks Road
Suite 108
Waltham, MA 02452
Telephone: (781) 788-9043

(Name, address, including zip code and telephone number,
including area code, of agent for service)



 

Copies to:

 
Josef B. Volman
J. Fraser Collin
Burns & Levinson LLP
125 Summer Street
Boston, MA 02110
Telephone: (617) 345-3000
  Ivan Blumenthal
Merav Gershtenman
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
666 Third Avenue
New York, NY 10017
Telephone: (212) 935-3000


 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 
Large accelerated filer o   Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)   Smaller reporting company x

 

 


 
 

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CALCULATION OF REGISTRATION FEE

   
Title of Each Class of Securities to be Registered   Proposed Maximum
Aggregate
Offering Price(1)
  Amount of
Registration Fee(2)
Common Stock, $0.01 par value per share   $ 5,750,000     $ 669  
Underwriters’ Warrants to Purchase Common Stock(3)            
Common Stock Underlying Underwriters’ Warrants(4)   $ 312,500     $ 37  
Additional Underwriters’ Warrants to Purchase Common Stock(3)            
Common Stock Underlying Additional Underwriters’ Warrants(5)   $ 220,567     $ 26  
TOTAL   $ 6,283,067     $ 732 (6) 

(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. Includes offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any. Pursuant to Rule 416 under the Securities Act of 1933, as amended, the shares of common stock registered hereby also include an indeterminate number of additional shares of common stock as may from time to time become issuable by reason of stock splits, stock dividends, recapitalizations or other similar transactions.
(2) Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price of the securities registered hereunder to be sold by the registrant.
(3) No registration fee pursuant to Rule 457(g) under the Securities Act, as amended.
(4) Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(g) under the Securities Act, as amended. The warrants are exercisable at a per share exercise price equal to 125% of the public offering price.
(5) Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(g) under the Securities Act, as amended. The warrants are exercisable at a per share exercise price equal to the public offering price.
(6) Previously paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.


 
 

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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

   
PRELIMINARY PROSPECTUS   SUBJECT TO COMPLETION   DATED FEBRUARY 4, 2015

833,333 Shares
Common Stock

[GRAPHIC MISSING] 

This is an initial public offering of shares of common stock of Eyegate Pharmaceuticals, Inc. No public market currently exists for our shares. We are offering all of the shares of common stock offered by this prospectus. We anticipate the public offering price of our shares of common stock to be $6.00 per share.

All common share and per-common-share figures in this prospectus have been adjusted to reflect a 1-for-10.98 reverse stock split of our outstanding common stock effected on September 25, 2014.

We have applied to have our shares of common stock quoted on the OTCQB Venture Marketplace, or the OTCQB, and expect to be quoted under the symbol “EYEG.” Following completion of this offering and pending our approval to trade on the OTCQB, broker-dealers are expected to publish proprietary quotes in our stock on either the OTCQB or the OTCBB, or a combination of both.

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012, and, as such, we have elected to take advantage of certain reduced public company reporting requirements for this prospectus and future filings.

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 10 of this prospectus for a discussion of information that should be considered in connection with an investment in our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

   
  Per Share   Total
Public offering price   $             $          
Underwriting discounts and commissions(1)(2)   $     $  
Offering proceeds to us before expenses   $     $  
(1) Does not include a non-accountable expense allowance equal to 1% of the gross proceeds of this offering, excluding proceeds to us from our insiders, payable to Aegis Capital Corp., the representative of the underwriters. See “Underwriting” for a description of the compensation payable to the underwriters in connection with this offering.
(2) The underwriters in this offering will be entitled to an aggregate compensation of 8% of the gross proceeds received from our insiders, 2% will be paid in cash and we will issue underwriters’ warrants to purchase our common stock as for the remaining 6%.

Certain of our existing stockholders, as well as certain of our directors, or our insiders, have indicated an interest in purchasing an aggregate of up to approximately $3.7 million of shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no shares in this offering to any of these persons, or any of these persons may determine to purchase more, less or no shares in this offering. See “Underwriting” for a description of the compensation payable to the underwriters on proceeds received from our insiders.

We have granted a 45-day option to the underwriters to purchase up to 125,000 additional shares of common stock solely to cover over-allotments, if any.

The underwriters expect to deliver our shares to purchasers in the offering on or about             2015.

 
Aegis Capital Corp   Chardan Capital Markets, LLC

 
 

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TABLE OF CONTENTS

 
  Page
PROSPECTUS SUMMARY     1  
RISK FACTORS     10  
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS     42  
USE OF PROCEEDS     44  
DIVIDEND POLICY     45  
CAPITALIZATION     46  
DILUTION     49  
SELECTED FINANCIAL DATA     52  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     54  
BUSINESS     65  
MANAGEMENT     91  
EXECUTIVE COMPENSATION     99  
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS     109  
PRINCIPAL STOCKHOLDERS     112  
DESCRIPTION OF CAPITAL STOCK     115  
SHARES ELIGIBLE FOR FUTURE SALE     121  
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS     123  
UNDERWRITING     128  
LEGAL MATTERS     137  
EXPERTS     137  
WHERE YOU CAN FIND ADDITIONAL INFORMATION     137  
INDEX TO FINANCIAL STATEMENTS     F-1  

Neither we nor the underwriters have authorized anyone to provide you with information that is different from that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. When you make a decision about whether to invest in our common stock, you should not rely upon any information other than the information in this prospectus or in any free writing prospectus that we may authorize to be delivered or made available to you. Neither the delivery of this prospectus nor the sale of our common stock means that the information contained in this prospectus or any free writing prospectus is correct after the date of this prospectus or such free writing prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy the shares of common stock in any circumstances under which the offer or solicitation is unlawful.

Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market share, is based on information from our own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Special Note Regarding Forward-Looking Statements.”

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Eyegate and our logo are our pending trademarks that are used in this prospectus. This prospectus may also include other trademarks, tradenames and service marks that are the property of their respective holders. Solely for convenience, trademarks and tradenames referred to in this prospectus may appear without the ® and TM symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable holder will not assert its rights, to these trademarks and tradenames.

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PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information you should consider before investing in our common stock. You should read this prospectus carefully, especially the risks set forth under the heading “Risk Factors” and our financial statements and related notes included elsewhere in this prospectus, before making an investment decision. References in this prospectus, unless the context otherwise requires, to “Eyegate,” “our company,” “we,” “us” and “our” and other similar references refer to Eyegate Pharmaceuticals, Inc. and EyeGate Pharma S.A.S. and during the periods presented unless the context requires otherwise.

Overview

We are a clinical-stage specialty pharmaceutical company that is focused on developing and commercializing therapeutics and drug delivery systems for treating diseases of the eye. EGP-437, our first and only product in clinical trials, incorporates a reformulated topically active corticosteroid, dexamethasone phosphate, that is delivered into the ocular tissues through our proprietary innovative drug delivery system, the EyeGate® II Delivery System. EGP-437 is being developed under the 505(b)(2) New Drug Application, or NDA, regulatory pathway for drugs submitted for approval to the U.S. Food and Drug Administration, or FDA, which enables an applicant to rely, in part, on the FDA’s findings of safety and efficacy for an existing product, or published literature, in support of its NDA.

The EyeGate® II Delivery System and EGP-437, are designed to address two major issues in ophthalmic medicine: lack of patient compliance and safety. The EyeGate® II Delivery System features a compact, elegant, and easy-to-use device that we believe has the potential to deliver drugs non-invasively and quickly into the ocular tissues through the use of iontophoresis, which can accelerate the onset of action, dramatically reduce treatment frequency versus eye drops and sustain therapeutic effect. Iontophoresis employs the use of a low electrical current that promotes the migration of a charged drug substance across biological membranes. The current produces ions, which through electrorepulsion, drive a like-charged drug substance into the tissues. The EyeGate® II Delivery System is easy-to-use, only takes a few minutes to employ and has been utilized to administer more than 1,700 experimental treatments. We hold worldwide commercialization rights to the EyeGate® II Delivery System.

We are developing EGP-437 for the treatment of various inflammatory conditions of the eye, including uveitis, a debilitating form of intraocular inflammation of the anterior portion of the uvea, such as the iris and/or ciliary body and macular edema, an abnormal thickening of the macula associated with the accumulation of excess fluids in the retina. The EyeGate® II Delivery System has the potential to offer a non-invasive method of drug delivery as an alternative to the current delivery modalities used for treating ocular diseases, such as eye drops and ocular injections. In-office preparation is simple and efficient and can be completed by nursing or other office staff. Utilizing the EyeGate® II Delivery System, we have demonstrated in vivo (preclinical) the ability to deliver EGP-437 to the back-of-the-eye.

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Our Strategy

Our goal is to become a leading specialty pharmaceutical company focused on developing and commercializing therapeutics and drug delivery systems for treating diseases of the eye. The key elements of this strategy are to:

Complete trials for back-of-the-eye delivery with our EGP-437 Combination Product.  As an anti-inflammatory agent, our EGP-437 Combination Product has the potential to be used to treat back-of-the-eye diseases that have an inflammatory component, like macular edema. We are planning on initiating a dose curve trial to determine the optimum dose for back-of-the-eye delivery followed by a Phase 2 proof-of-concept trial for macular edema, a disease affecting the back-of-the-eye. We have begun preparatory work and plan to enroll the first subject by the end of the second quarter of 2015 for the dose curve trial. We expect to have top-line data from the Phase 2 proof-of-concept trial treating macular edema by the end of 2015.
Seek to continue clinical development of and obtain marketing approval for our EGP-437 Combination Product for the treatment of non-infectious anterior uveitis in the future.  Currently, we are devoting most of our efforts to the proof-of-concept trial for macular edema with our EGP-437 Combination Product. We will seek to continue development of our EGP-437 Combination Product for the treatment of non-infectious anterior uveitis in the future once we have raised additional funds.
Maximize commercial potential of our EGP-437 Combination Product.  We believe that medical specialists in the U.S. who treat macular edema or anterior uveitis patients are sufficiently concentrated that if our EGP-437 Combination Product receives marketing approval in the U.S., we could effectively promote our EGP-437 Combination Product to these specialists with a specialty sales and marketing group. Therefore, we may decide to build our own focused, specialty pharmaceutical sales force in order to commercialize our EGP-437 Combination Product in the U.S. We intend to enter into strategic collaborations for the development and commercialization of our EGP-437 Combination Product outside of the U.S.
Pursue other strategic collaborations.  We plan to evaluate opportunities to enter into collaborations that may contribute to our ability to advance our drug delivery platform and product candidates and to progress concurrently a range of discovery and development programs. We also plan to evaluate opportunities to in-license or acquire the rights to other products, product candidates or technologies for the treatment of eye diseases.

Risks Related to Our Business

An investment in our common stock involves a high degree of risk. Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors”. These risks represent challenges to the successful implementation of our strategy and to the growth and future profitability of our business. Some of these risks include the following:

We have incurred significant operating losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability. Our recurring losses from operations have raised substantial doubt regarding our ability to continue as a going concern, and as a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2013 with respect to this uncertainty.
We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
We may not successfully complete our planned posterior segment trials, the dose curve trial and the macular edema trial or we may experience significant delays in doing so.

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We may not receive additional funding in order to complete our planned confirmatory Phase 3 clinical trial and obtain marketing approval for the EGP-437 Combination Product, or we may experience significant delays in doing so, or if we obtain marketing approvals, we may thereafter fail to commercialize the EGP-437 Combination Product.
If clinical trials of the EGP-437 Combination Product or any other product candidate that we develop fail to demonstrate safety and efficacy to the satisfaction of the FDA, we may ultimately be delayed or unable to complete the development and commercialization of the EGP-437 Combination Product or any other product candidate. In our first Phase 3 trial for the treatment of non-infectious anterior uveitis against a positive control, prednisolone acetate ophthalmic suspension (1%), or PA, the standard of care, the dose of the EGP-437 Combination Product tested was just outside the pre-set non-inferiority margin and did not achieve statistical significance as compared to the positive control based on the primary efficacy endpoint.
Even if the EGP-437 Combination Product or any other product candidate that we develop receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success and the market opportunity for the EGP-437 Combination Product may be smaller than we estimate.
We may be unable to establish sales, marketing and distribution capabilities for EGP-437 Combination Product or any other product candidates that we may develop that may be approved.
We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.
We may be unable to obtain and maintain patent protection for our technology and products and our competitors could develop and commercialize technology and products similar or identical to ours, impairing our ability to successfully commercialize our technology.
Our future success depends on our ability to retain key executives.
We expect our common stock will be quoted on the OTCQB, which will limit the liquidity and price of our securities more than if our common stock was listed on a national securities exchange.

For further discussion of these and other risks you should consider before making an investment in our common stock, see the section titled “Risk Factors” beginning on page 10 of this prospectus.

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this prospectus;
exemption from complying with the auditor attestation requirements under Section 404 of the Sarbanes-Oxley Act, regarding the effectiveness of our internal controls over financial reporting;
reduced disclosure obligations regarding the company’s executive compensation arrangements in our periodic reports, proxy statements and registration statements; and
exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute arrangements not previously approved.

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended, or the Securities Act, which such fifth anniversary we expect to occur in 2019, or until such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual gross revenue,

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the date at which we become a large accelerated filer, or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens.

We have elected to take advantage of certain of the reduced disclosure obligations and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

We have irrevocably elected not to avail ourselves of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

We are also a “smaller reporting company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and have elected to take advantage of certain of the scaled disclosure available for smaller reporting companies.

Our Corporate Information

Our principal executive offices are located at 271 Waverley Oaks Road, Suite 108, Waltham, MA 02452, and our telephone number is (781) 788-9043. Our website address is www.eyegatepharma.com. Our website and the information contained in, or accessible through, our website will not be deemed to be incorporated by reference into this prospectus and does not constitute part of this prospectus. You should not rely on any such information in making your decision whether to purchase our common stock.

Recent Developments

On June 6, 2014 and July 17, 2014, we consummated two closings of private placements of convertible notes in the aggregate principal amount of approximately $995,000, which comprised the first tranche of a bridge financing, in order to raise capital to fund our operating expenses and capital expenditure requirements. During December 2014, we closed the second tranche of the bridge financing, in which we issued convertible promissory notes in the aggregate principal amount of approximately $288,000. In connection with the bridge financing, we also issued in a private placement warrants to purchase shares of our common stock. The convertible promissory notes issued in the bridge financing will convert into shares of our common stock upon the closing of this offering at a conversion price equal to 70% of the public offering price. In connection with this bridge financing, we amended and restated our outstanding convertible promissory notes issued in 2012 and 2013, which are further described in the “Description of Capital Stock — Convertible Promissory Notes” section, such that they will convert into shares of our common stock upon the closing of this offering.

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The Offering

Common stock offered by us    
    833,333 shares of our common stock.
Common stock to be outstanding after this offering    
    6,478,687 shares of our common stock.
Over-allotment option    
    We have granted the underwriters a 45-day option to purchase up to 125,000 additional shares of our common stock at the public offering price, less underwriting discounts and commissions.
Use of proceeds    
    We intend to use the net proceeds of this offering for research and development activities, including clinical trials with our EGP-437 Combination Product and for working capital and other general corporate purposes.
Dividend policy    
    We do not currently intend to declare dividends on shares of our common stock. See “Dividend Policy.”
Risk factors    
    You should read the “Risk Factors” section of this prospectus for a discussion of factors that you should consider carefully before deciding to invest in shares of our common stock.
Proposed OTCQB symbol    
    “EYEG.”
Proposed purchase by certain current stockholders    
    Certain of our existing stockholders, as well as certain of our directors, have indicated an interest in purchasing an aggregate of up to approximately $3.7 million of shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no shares in this offering to any of these persons, or any of these persons may determine to purchase more, less or no shares in this offering. See “Underwriting” for a description of the compensation payable to the underwriters on proceeds received from our insiders.

The number of shares of our common stock to be outstanding after this offering is based on 5,645,354 shares of our common stock outstanding as of February 2, 2015 (except for shares issuable upon conversion of accrued interest on our convertible promissory notes which are calculated through January 31, 2015), consisting of: (i) 201,787 shares of common stock outstanding on February 2, 2015, (ii) 3,497,478 shares of common stock into which all of our preferred stock (including anti-dilution shares) (the number of common shares to be issued for each Series as disclosed parenthetically) — Series A Preferred Stock (625,894), Series B Preferred Stock (737,648), Series C Preferred Stock (348,822), and Series D Preferred Stock (1,785,114) outstanding as of February 2, 2015, will be converted upon the completion of this offering, (iii) 1,239 shares of common stock into which a Series C Preferred Stock warrant (including anti-dilution shares) will be converted upon completion of this offering, (iv) 2,549 shares of common stock into which two Series D Preferred stock warrants (including anti-dilution shares) will be converted upon completion of this offering, (v) 1,070,323 shares of common stock to be issued following the exchange of all shares of common stock of EyeGate Pharma S.A.S. (including anti-dilution shares) for shares of our Series B Preferred Stock (525,004), Series C Preferred Stock (187,173) and Series D Preferred Stock (358,146) and subsequent conversion of such shares into our common stock upon completion of this offering, (vi) 861,049 shares of our common stock issuable upon the conversion of our convertible notes (including accrued interest) — 2012 Notes, as amended ($632,279), 2013 Notes, as amended ($1,626,271) and 2014 Notes ($1,357,903), into 150,544, 387,210 and 323,295 common shares, respectively, based on an assumed initial public offering price of $6.00 per share (the convertible notes will convert into shares of our common stock at a conversion price equal to 70% of the public offering price), and (vii) the exercise of two warrants to purchase an aggregate of 10,929 shares of our common stock;

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and excludes as of such date:

752,372 shares of common stock issuable upon exercise of options outstanding under our 2005 Equity Incentive Plan and 2014 Equity Incentive Plan, at a weighted-average exercise price of approximately $0.93 per share;
60,358 shares of our common stock issuable in the aggregate upon the exercise of options having an exercise price per share equal to the initial public offering price of this offering to be granted to two consultants upon or prior to the closing of this offering;
27,322 shares of our common stock issuable in the aggregate upon the exercise of options having an exercise price per share equal to the initial public offering price of this offering and to be granted as of the date immediately prior to the closing of this offering to employees and directors;
7,247 shares of our common stock issuable upon the exercise of an outstanding warrant to purchase shares of our common stock at an exercise price of $5.16 per share;
562,723 shares of common stock issuable upon the exercise of outstanding warrants to purchase shares of our common stock at an exercise price equal to the price per share at which the shares of common stock are sold in this offering, which were issued on June 6, 2014, July 17, 2014, December 19, 2014 and December 30, 2014, based on an assumed initial public offering price of $6.00 per share;
786,784 shares of common stock reserved for future issuance under our 2005 Equity Incentive Plan and 2014 Equity Incentive Plan; and
41,667 shares of common stock issuable upon exercise of warrants to be issued to the underwriters in connection with this offering, at an exercise price per share equal to 125% of the public offering price, as described in the “Underwriting — Underwriters’ Warrants” section of this prospectus.
36,761 shares of our common stock issuable upon the exercise of warrants to be issued to the underwriters in connection with this offering, at an exercise price equal to the initial public offering price of $6.00, in settlement of part of their fees of $220,567 divided by the offering price of $6.00, as described in the “Underwriting — Underwriters’ Warrants” section of this prospectus.

Unless otherwise indicated, this prospectus reflects and assumes the following:

the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws, which will occur immediately prior to the closing of this offering;
the conversion of all outstanding shares of our Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock, the exercise and conversion of a warrant to purchase shares of our Series C Preferred Stock and two warrants to purchase shares of our Series D Preferred Stock, and the exchange of all shares of common stock of EyeGate Pharma S.A.S. into shares of our Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock and the subsequent conversion of such shares all into 4,571,589 shares of our common stock (inclusive of all anti-dilution shares) immediately prior to the closing of the offering;
861,049 shares of our common stock issuable upon conversion of our 2012 Notes as amended, 2013 Notes as amended and 2014 Notes, as described in the “Description of Capital Stock” section;
the exercise of two warrants to purchase an aggregate of 10,929 shares of our common stock;
a one-for-10.98 reverse stock split of our common stock effected on September 25, 2014;
no exercise of the common stock warrant to purchase 7,247 shares of common stock described above;
no exercise of the common stock warrants issued on June 6, 2014, July 17, 2014, December 19 and December 30, 2014 described above;
no exercise of the underwriters’ warrants to be issued to the underwriters described above; and
no exercise by the underwriters of their option to purchase additional shares of our common stock to cover over-allotments, if any.

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SUMMARY FINANCIAL DATA

The following tables set forth, for the periods and as of the dates indicated, our summary financial data. The statements of operations data for the unaudited nine months ended September 30, 2014 and 2013, and for the years ended December 31, 2013 and 2012 are derived from our audited financial statements included elsewhere in the prospectus. You should read the following information together with the more detailed information contained in “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in the prospectus. Our historical results are not indicative of the results to be expected in the future.

       
  Nine Months Ended
September 30,
  Year Ended
December 31,
     2014   2013   2013   2012
     (unaudited)          
Operating expenses:
 
Research and development   $ 421,903     $ 881,277     $ 1,010,268     $ 3,034,397  
General and administrative     1,646,910       1,585,363       2,087,637       2,817,851  
Total operating expenses     2,068,813       2,466,640       3,097,905       5,852,248  
Other income (expense), net:
 
Research & development tax credit     15,812       10,645       24,520       32,748  
Interest income     720       1,511       2,186       11,127  
Extinguishment of research liability     240,000                                      
Interest expense     (264,040 )      (434,098 )      (611,386 )       
Change in warrant liability     876,753                    
Total other income (expense), net     869,245       (421,942 )      (584,680 )      43,875  
Net loss     (1,199,568 )      (2,888,582 )      (3,682,585 )      (5,808,373 ) 
Net income attributable to non-controlling interest     (157,928 )      (126,600 )      (196,862 )      (225,722 ) 
Net loss to the Company   $ (1,357,496 )    $ (3,015,182 )    $ (3,879,447 )    $ (6,034,095 ) 
Net loss per share basic and diluted:   $ (7.12 )    $ (16.35 )    $ (21.03 )    $ (33.07 ) 
Weighted-average number of common shares used in computing net loss per share basic and diluted:     190,516       184,417       184,431       182,449  
Pro forma information
 
Pro forma net loss attributable to common stockholders   $ (1,270,181 )          $ (3,808,669 )       
Pro forma net loss per share, basic and diluted (unaudited)   $ (0.24 )          $ (0.76 )       
Pro forma weighted average shares outstanding, basic and diluted (unaudited)     5,334,000             5,010,000        

     
  As of September 30, 2014
     Actual   Pro Forma(1)(2)   Pro Forma
As Adjusted
     (unaudited)   (unaudited)   (unaudited)
Balance Sheet Data:
                          
Cash and cash equivalents   $ 311,098     $ 605,742     $ 4,121,307  
Total current assets     352,057       646,701       4,162,266  
Total assets     1,609,533       1,904,177       5,419,742  
Accrued interest (included in accrued liabilities)     87,315                 
Convertible promissory notes due to shareholders     2,842,125                 
Total liabilities     4,844,222       1,914,782       1,914,782  
Temporary equity – convertible preferred stock     36,408,666              

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     As of September 30, 2014
     Actual   Pro Forma(1)(2)   Pro Forma
As Adjusted
     (unaudited)   (unaudited)   (unaudited)
Non-controlling interest   $ 6,658,504     $     $  
Common stock     2,018       56,454       64,787  
Additional paid in capital     10,054,250       56,291,068       59,798,300  
Accumulated deficit     (56,445,656 )      (56,445,656 )      (56,445,656 ) 
Accumulated other comprehensive income     146,353       146,353       146,353  
Total stockholders’ (deficit) equity   $ (46,301,859 )    $ (10,605 )    $ 3,504,960  

(1) Pro forma weighted average shares outstanding, basic and diluted, for the year ended December 31, 2013 does not give effect to the conversion of approximately $1.0 million and $288,000 of convertible notes issued during the nine months ended September 30, 2014 and December 2014, respectively. These convertible notes issued during the nine months ended September 30, 2014 and December 2014, respectively, would convert into an additional 253,866 and 69,429 shares of common stock as of January 31, 2014 and this accounts for the difference between the pro forma weighted average shares outstanding, basic and diluted, for the year ended December 31, 2013. The pro forma weighted average shares outstanding, basic and diluted, for the nine months ended September 30, 2014 does not give effect to the conversion of approximately $288,000 of Convertible Notes issued in December 2014.
(2) Includes proceeds of $7,080 from the exercise of a warrant and $287,564 of Convertible Notes issued in December 2014.

Pro forma net loss and pro forma net loss per share, basic and diluted, have been calculated after giving effect to (a) the conversion of our preferred stock outstanding on the dates of issuance into an aggregate of 3,497,478 shares of common stock as contemplated to occur upon the completion of this offering and (b) the conversion of our convertible notes into shares of common stock on the dates of issuance at a conversion rate of $4.20 per share. The pro forma net loss includes the elimination of the interest expense recognized on the convertible notes as this expense would not have been recognized if the convertible notes had been converted into shares of common stock on the date of issuance. The total convertible notes (including accrued interest thereon) outstanding as of December 31, 2014 was $3,316,453, which will convert into 861,049 shares of common stock upon the completion of this offering.

The preceding table sets forth our cash and cash equivalents and capitalization as of September 30, 2014 as follows:

on an actual basis;
on a pro forma basis to reflect (the number of common shares to be issued for each Series as disclosed parenthetically) (1) the conversion of all outstanding shares of our Series A Preferred Stock (625,894), Series B Preferred Stock (737,648), Series C Preferred Stock (348,822), and Series D Preferred Stock (1,785,114), the exercise and conversion of a warrant to purchase our Series C Preferred Stock (1,239) and two warrants to purchase our Series D Preferred Stock (2,549), and the exchange of all shares of common stock of EyeGate Pharma S.A.S. (presented as non-controlling interests) into the following shares of our Preferred Stock (inclusive of anti-dilution shares) — Series B Preferred Stock (525,004), Series C Preferred Stock (187,173) and Series D Preferred Stock (358,146) and the subsequent conversion of such shares into shares all into 4,571,589 shares of our common stock immediately prior to the closing of the offering, (2) the exercise of two warrants to purchase an aggregate of 10,929 shares of our common stock and (3) shares of our common stock issuable upon the conversion of our convertible notes (including accrued interest) — 2012 Notes, as amended ($632,279), 2013 Notes, as amended ($1,626,271) and 2014 Notes ($1,357,903), into 150,544, 387,210 and 323,295 common shares, respectively, based on an assumed initial public offering price of $6.00 per share. The convertible notes will convert into shares of our common stock at a conversion price equal to 70% of the public offering price as described in the “Description of Capital Stock” Section.

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on a pro forma as adjusted basis to give further effect to our issuance and sale of shares of common stock in this offering at an assumed initial public offering price of $6.00 per share after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The pro forma and pro forma as adjusted information is illustrative only, and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this information in conjunction with our financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information contained in this prospectus.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including our financial statements and related notes, before deciding whether to purchase shares of our common stock. If any of the following risks are realized, our business, financial condition, results of operations, and prospects could be materially and adversely affected. In that event, the price of our common stock could decline and you could lose part or all of your investment.

Risks Related to Our Financial Position and Need For Additional Capital

We have incurred significant operating losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

Since inception, we have incurred significant operating losses. Our net loss was approximately $1.12 million for the nine months ended September 30, 2014 and $3.7 million for the year ended December 31, 2013, $5.8 million for the year ended December 31, 2012, and $56.4 million from the period of inception (December 26, 2004) through September 30, 2014. To date, we have financed our operations primarily through private placements of our preferred stock and convertible promissory notes. We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and, beginning in 2008, clinical trials. We are still in the early stages of development of our product candidates, and we have not completed development of any drugs. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. Our recurring losses from operations have raised substantial doubt regarding our ability to continue as a going concern, and as a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2013 with respect to this uncertainty.

We anticipate that our expenses will continue to be significant with our planned clinical trial for our EGP-437 Combination Product, which consists of EGP-437 and our EyeGate® II Delivery System, including a dose curve trial and a macular edema trial. We expect to begin randomizing and treating patients in the dose curve trial by the end of the second quarter of 2015.

Our expenses will also increase if and as we:

pursue a confirmatory Phase 3 clinical trial evaluating the safety and efficacy of the EGP-437 Combination Product, for the treatment of non-infectious anterior uveitis;
Pursue a safety clinical trial evaluating corneal endothelial cell counts over a six-month period with the EGP-437 Combination Product;
Seek marketing approval for the EGP-437 Combination Product for anterior uveitis or any other indication in the U.S. whether alone or in collaboration with third parties;
pursue the development of the EGP-437 Combination Product for the treatment of additional indications or for use in other patient populations or, if it is approved, seek to broaden the label for the EGP-437 Combination Product;
continue the research and development of our other product candidates;
Seek to develop additional product candidates;
in-license or acquire the rights to other products, product candidates or technologies for the treatment of ophthalmic diseases;
seek marketing approvals for any product candidates that successfully complete clinical trials;
establish sales, marketing and distribution capabilities and scale up and validate external manufacturing capabilities to commercialize any products for which we may obtain marketing approval;
maintain, expand and protect our intellectual property portfolio;

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hire additional clinical, quality control, scientific and management personnel;
expand our operational, financial and management systems and personnel, including personnel to support our clinical development, manufacturing and planned future commercialization efforts and our operations as a public company; and
increase our insurance coverage as we expand our clinical trials and commence commercialization of the EGP-437 Combination Product.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Our expenses will increase if:

we are required by the U.S. Food and Drug Administration, or FDA, or foreign equivalents, to perform studies or clinical trials in addition to those currently expected;
if there are any delays in receipt of regulatory clearance to begin our planned dose curve trial or macular edema clinical trial; or
if there are any delays in enrollment of patients in or completing our clinical trials or the development of the EGP-437 Combination Product or any other product candidates that we may develop.

Our ability to become and remain profitable depends on our ability to generate revenue. We do not expect to generate significant revenue unless and until we obtain marketing approval for, and commercialize, the EGP-437 Combination Product, which may never occur. This will require us to be successful in a range of challenging activities, including:

raising additional funds to initiate and obtain favorable results from a confirmatory Phase 3 clinical trial for the EGP-437 Combination Product for the treatment of non-infectious anterior uveitis and for the endothelial cell count safety trial;
subject to obtaining favorable results from a confirmatory Phase 3 clinical trial for the EGP-437 Combination Product treating anterior uveitis patients, applying for and obtaining marketing approval for the EGP-437 Combination Product;
establishing sales, marketing and distribution capabilities, either ourselves or through collaboration or other arrangements with third parties, to effectively market and sell the EGP-437 Combination Product in the U.S.;
establishing collaboration, distribution or other marketing arrangements with third parties to commercialize the EGP-437 Combination Product in markets outside the U.S.;
achieving an adequate level of market acceptance of the EGP-437 Combination Product;
protecting our rights to our intellectual property portfolio related to the EGP-437 Combination Product; and
ensuring the manufacture of commercial quantities of the EGP-437 Combination Product.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

We expect to devote substantial financial resources to our ongoing and planned activities, particularly preparing for and initiating our planned clinical trial evaluating the EGP-437 Combination Product for the treatment of macular edema. In the future, we expect to raise additional financial resources for the continued clinical development of the EGP-437 Combination Product. In addition, if we obtain regulatory approval for

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any of our product candidates, we would need to devote substantial financial resources to commercialization efforts, including product manufacturing, marketing, sales and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

Our future capital requirements will depend on many factors, including:

the progress, costs and outcome of our planned clinical trial for the EGP-437 Combination Product and of any clinical activities required for regulatory review of the EGP-437 Combination Product outside of the U.S.;
the costs and timing of process development and manufacturing scale up and validation activities associated with the EGP-437 Combination Product;
the costs, timing and outcome of regulatory review of the EGP-437 Combination Product in the U.S., and in other jurisdictions;
the costs and timing of commercialization activities for the EGP-437 Combination Product if we receive marketing approval, including the costs and timing of establishing product sales, marketing, distribution and outsourced manufacturing capabilities;
subject to receipt of marketing approval, the amount of revenue received from commercial sales of the EGP-437 Combination Product;
the progress, costs and outcome of developing the EGP-437 Combination Product for the treatment of additional indications or for use in other patient populations;
our ability to establish collaborations on favorable terms, if at all, particularly manufacturing, marketing and distribution arrangements for our product candidates;
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and
the extent to which we in-license or acquire rights to other products, product candidates or technologies for the treatment of ophthalmic diseases.

As of September 30, 2014, we had cash and cash equivalents of $311,098. We believe that the net proceeds from this offering, together with our cash and cash equivalents as of September 30, 2014 and approximately $288,000 received in December 2014, will enable us to fund our operating expenses and capital expenditure requirements for the next twelve months. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. Our commercial revenues, if any, will be derived from sales of the EGP-437 Combination Product or any other products that we successfully develop, none of which we expect to be commercially available for several years, if at all. In addition, if approved, the EGP-437 Combination Product or any other product candidate that we develop or any product that we in-license may not achieve commercial success. Accordingly, we will need to obtain substantial additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.

Raising additional capital may cause dilution to our stockholders, including purchasers of our common stock in this offering, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, government or other third-party funding,

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collaborations, strategic alliances, licensing arrangements and marketing and distribution arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we cannot raise funds on acceptable terms, we may not be able to grow our business or respond to competitive pressures.

If we raise additional funds through government or other third-party funding, collaborations, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

We are an early-stage company with a limited operating history. Our operations to date have been limited to organizing and staffing our company, acquiring rights to intellectual property, business planning, raising capital, developing our technology, identifying potential product candidates, undertaking preclinical studies and, beginning in 2008, conducting clinical trials of the EGP-437 Combination Product. All of our product candidates, other than the EGP-437 Combination Product, are still in preclinical development. We have not yet demonstrated our ability to successfully complete development of a product candidate, obtain marketing approvals, manufacture at commercial scale, or arrange for a third party to do so on our behalf, or conduct sales, marketing and distribution activities necessary for successful product commercialization.

In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

We expect our financial condition and operating results to continue to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

Risks Related to the Discovery and Development of Our Product Candidates

We depend heavily on the success of the EGP-437 Combination Product, our most advanced product candidate, which we are developing for the treatment of non-infectious anterior uveitis and other disease indications. If we are unable to successfully raise additional funds to complete a confirmatory Phase 3 clinical trial and obtain marketing approval for the EGP-437 Combination Product for the treatment of non-infectious anterior uveitis, or experience significant delays in doing so, or if after obtaining marketing approvals, we fail to commercialize the EGP-437 Combination Product, our business will be materially harmed.

We have invested a significant portion of our efforts and financial resources in the development of the EGP-437 Combination Product for the treatment of patients with non-infectious anterior uveitis and for other ocular disease indications. There remains a significant risk that we will fail to successfully develop the EGP-437 Combination Product. In 2013, we completed a Phase 3 clinical trial to evaluate the safety, tolerability and efficacy of the EGP-437 Combination Product in patients with non-infectious anterior uveitis. Our development plan for the EGP-437 Combination Product consists of a confirmatory Phase 3 clinical trial evaluating the EGP-437 Combination Product for the treatment of non-infectious anterior uveitis and a separate clinical trial evaluating corneal endothelial cell counts six months post treatment of the EGP-437 Combination Product. We cannot accurately predict when or if the EGP-437 Combination Product will prove effective or safe in humans or whether

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it will receive marketing approval. Our ability to generate product revenues, which may never occur, will depend heavily on our obtaining marketing approval for and commercializing the EGP-437 Combination Product.

The success of the EGP-437 Combination Product will depend on several factors, including the following:

raising additional funds to initiate and obtain favorable results from a confirmatory Phase 3 clinical trial for the EGP-437 Combination Product and for the endothelial cell count safety trial;
applying for and receiving marketing approvals from applicable regulatory authorities for the EGP-437 Combination Product;
making arrangements with third-party manufacturers for commercial quantities of both the EGP-437 and the EyeGate® II Delivery System and receiving regulatory approval of our manufacturing processes and our third-party manufacturers’ facilities from applicable regulatory authorities;
establishing sales, marketing and distribution capabilities and launching commercial sales of the EGP-437 Combination Product, if and when approved, whether alone or in collaboration with others;
acceptance of the EGP-437 Combination Product, if and when approved, by patients, the medical community and third-party payors;
effectively competing with other therapies, including the existing standard of care;
maintaining a continued acceptable safety profile of the EGP-437 Combination Product following approval;
obtaining and maintaining coverage and adequate reimbursement from third-party payors;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity; and
protecting our rights in our intellectual property portfolio related to the EGP-437 Combination Product.

Successful development of the EGP-437 Combination Product for additional indications, if any, or for use in broader patient populations and our ability, if it is approved, to broaden the label for the EGP-437 Combination Product will depend on similar factors. If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize the EGP-437 Combination Product, which would materially harm our business.

If clinical trials of the EGP-437 Combination Product or any other product candidate that we develop fail to demonstrate safety and efficacy to the satisfaction of the FDA or other regulatory authorities or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be delayed or unable to complete, the development and commercialization of the EGP-437 Combination Product or any other product candidate.

Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, including our EGP-437 Combination Product, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

We will be required to demonstrate the safety of the EGP-437 Combination Product by assessing corneal endothelial cell counts at six months from treatment in order to support marketing approval of the EGP-437 Combination Product for the treatment of non-infectious anterior uveitis in the U.S. To meet this requirement in the future after raising additional funds, we plan to conduct a separate safety trial with no fewer than 100 patients who will be treated with the EGP-437 Combination Product and followed for six months post

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treatment. We cannot predict the results of this safety trial because we have no clinical data supporting the effect of our EGP-437 Combination Product on corneal endothelial cells six months post treatment.

In general, the FDA requires two adequate and well controlled pivotal clinical trials demonstrating effectiveness on a primary endpoint for marketing approval of a non-infectious anterior uveitis drug. The endpoint is based on total clearance of inflammatory cells in the anterior chamber of the eye. The trial must compare the EGP-437 Combination Product to standard of care. Our first Phase 3 trial evaluated the EGP-437 Combination Product for the treatment of non-infectious anterior uveitis against a positive control, the standard of care, prednisolone acetate ophthalmic suspension (1%), or PA. In our Phase 3 trial, the dose of the EGP-437 Combination Product tested was just outside the pre-set non-inferiority margin for intent-to-treat and per protocol populations and did not achieve statistical significance in the intent-to-treat population as compared to the positive control based on the primary efficacy endpoint.

We may fail to achieve success in a confirmatory Phase 3 clinical trial evaluating the EGP-437 Combination Product for the treatment of non-infectious anterior uveitis for a variety of potential reasons. Even if a confirmatory Phase 3 trial is successful in showing confirmatory data, the FDA may still require us to provide additional data to grant regulatory approval.

We would plan to conduct our confirmatory Phase 3 clinical trial at many clinical centers that were not included in our first Phase 3 trial. The introduction of new centers, and the resulting involvement of new treating physicians, can introduce additional variability into the conduct of the trials in accordance with their protocols and may result in greater variability of patient outcomes, which could adversely affect our ability to detect statistically significant differences between patients treated with the EGP-437 Combination Product and the standard of care control.

If, in our confirmatory Phase 3 clinical trial, we do not demonstrate non-inferiority as compared with the standard of care and if the FDA does not find this to be an acceptable means of meeting the requirements for marketing approval, we will not receive marketing approval for the EGP-437 Combination Product, and we will have to conduct another Phase 3 clinical trial if we wish to seek marketing approval for the EGP-437 Combination Product in the future.

The protocol for our planned confirmatory Phase 3 clinical trial and other supporting information are subject to review by the FDA and regulatory authorities outside the U.S. We do not plan on submitting the protocols for our second confirmatory Phase 3 clinical trial and our separate safety trial of the EGP-437 Combination Product to the FDA at any time prior to the raising of additional funds after the completion of this offering. We have not received guidance from other regulatory authorities outside the U.S. regarding the design of a confirmatory Phase 3 clinical trial.

Our confirmatory Phase 3 clinical trial will have a non-inferiority design. We may be unable to demonstrate non-inferiority against the standard of care, PA, which may cause us to undergo additional clinical trials or admit additional subjects to our trials delaying the time and increasing the expense it may take to commercialize our EGP-437 Combination Product.

Our confirmatory Phase 3 clinical trial will use a non-inferiority design rather than a superiority design. In order to meet our primary endpoint, we must show that patients treated with the EGP-437 Combination Product demonstrate non-inferiority according to pre-set non-inferiority margins as compared with the standard of care, PA. We may be unable to demonstrate non-inferiority against the standard of care. The design and conduct of non-inferiority trials, including selection of non-inferiority margins, account for many factors that can induce bias in the estimated effect of the standard of care in the non-inferiority trial and thus lead to bias in the estimated effect of the experimental treatment and perhaps lead to a trial design that does not ensure that the experimental treatment preserves a clinically acceptable fraction of the standard’s effect, which may result in a vulnerability of the integrity of a non-inferiority trial to the irregularities in trial conduct. Our choice of an endpoint based on total clearance of inflammatory cells in the anterior chamber of the eye means that success will depend to a significant degree on the accuracy of our assumptions about the total clearance of inflammatory cells in the anterior chamber of the eye in the comparator arms of our Phase 3 trial. Although we believe we have been conservative in our assumptions, if, for example, patients in the comparator arm of our trial have significantly different clearance of inflammatory cells than we expect, we may find that our trial is unfeasible or we may have to enroll more patients at additional cost and delay.

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If we experience any of a number of possible unforeseen events in connection with our clinical trials, potential marketing approval or commercialization of our product candidates could be delayed or prevented.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize the EGP-437 Combination Product or any other product candidates that we may develop, including:

clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;
the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;
any third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;
we may decide, or regulators or institutional review boards may require us, to suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;
the cost of clinical trials of our product candidates may be greater than we anticipate;
the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and
our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate the trials.

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not favorable or are only modestly favorable or if there are safety concerns, we may:

be delayed in obtaining marketing approval for our product candidates;
not obtain marketing approval at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;
be subject to additional post-marketing testing requirements; or
have the product removed from the market after obtaining marketing approval.

Our product development costs will also increase if we experience delays in testing or marketing approvals. We do not know whether any of our pre-clinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates.

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If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

We may not be able to initiate or continue clinical trials for the EGP-437 Combination Product or our other product candidates that we may develop if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the U.S. In addition, some of our competitors may have ongoing clinical trials for product candidates that treat the same indications as the EGP-437 Combination Product, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates.

Patient enrollment is affected by other factors including:

the severity of the disease under investigation;
the eligibility criteria for the study in question;
the perceived risks and benefits of the product candidate under study;
the efforts to facilitate timely enrollment in clinical trials;
the patient referral practices of physicians;
the ability to monitor patients adequately during and after treatment; and
the proximity and availability of clinical trial sites for prospective patients.

Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays, could require us to abandon one or more clinical trials altogether and could delay or prevent our receipt of necessary regulatory approvals. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.

If serious adverse or unacceptable side effects are identified during the development of the EGP-437 Combination Product or any other product candidates that we may develop, we may need to abandon or limit our development of EGP-437 Combination Product or such other product candidates.

If the EGP-437 Combination Product or any of our other product candidates are associated with serious adverse events or undesirable side effects in clinical trials or have characteristics that are unexpected, we may need to abandon their development or limit development to more narrow uses or subpopulations in which the serious adverse events, undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Although the EGP-437 Combination Product appeared to be well tolerated in our Phase 1/2 and Phase 3 non-infectious anterior uveitis trials, our Phase 2 and Phase 3 dry eye trials and our Phase 2 cataract surgery trial, we have no clinical safety data on corneal endothelial cell counts or patient exposure to EGP-437 for more than two treatments given one week apart. Many compounds that initially showed promise in clinical or early stage testing for treating ophthalmic disease have later been found to cause side effects that prevented further development of the compound.

We may not be successful in our efforts to use our EyeGate® II Delivery System or platform to build a pipeline of product candidates.

A key element of our strategy is to use our proprietary EyeGate® II Delivery System or platform to rationally design, engineer and generate a pipeline of products and progress these therapies through clinical development for the treatment of a variety of ophthalmic diseases. Our research and development efforts to date have resulted in a pipeline of additional product candidates directed at the treatment of ophthalmic diseases. Other than EGP-437, our product candidates all are in early preclinical research and have not been tested in humans. These and any other potential product candidates that we identify may not be suitable for continued preclinical or clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. If we do not successfully develop and commercialize our product candidates that we develop based upon our technological approach, we will not be able to obtain product revenues in future periods.

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We may expend our limited resources to pursue a particular product candidate or indication such as macular edema and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. To the extent our contemplated macular edema and dose curve trials are unsuccessful, we may not be able to raise additional funds for subsequent trials or pursuing other indications.

Risks Related to the Commercialization of Our Product Candidates

Even if the EGP-437 Combination Product or any other product candidate that we develop receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success and the market opportunity for the EGP-437 Combination Product may be smaller than we estimate.

If the EGP-437 Combination Product or any other product candidate that we develop receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. Current treatments that are used for anterior uveitis include topical corticosteroids such as Durezol® (Novartis AG), Lotemax® (Valeant Pharmaceuticals International, Inc.), Pred Forte® (Allergan, Inc.) and prednisolone acetate ophthalmic suspension (1%) (Novartis AG). These treatments are well established in the medical community, and doctors may continue to rely on these treatments rather than our EGP-437 Combination Product, if and when it is approved for marketing by the FDA.

The degree of market acceptance of the EGP-437 Combination Product or any other product candidate that we may develop, if approved for commercial sale, will depend on a number of factors, including:

the efficacy and potential advantages compared to alternative treatments, including the existing standard of care;
our ability to offer our products for sale at competitive prices, particularly in light of the lower cost of alternative treatments;
the convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
the strength of our marketing and distribution support;
the timing of market introduction of competitive products;
the availability of third-party coverage and adequate reimbursement, particularly by Medicare in light of the prevalence of anterior uveitis in persons over age 65;
the prevalence and severity of any side effects; and
any restrictions on the use of our products together with other medications.

Our assessment of the potential market opportunity for the EGP-437 Combination Product is based on industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do

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not guarantee the accuracy or completeness of such information. If the actual market for the EGP-437 Combination Product is smaller than we expect, our product revenue may be limited and it may be more difficult for us to achieve or maintain profitability.

If we are unable to establish sales, marketing and distribution capabilities, we may not be successful in commercializing the EGP-437 Combination Product or any other product candidates that we may develop if and when they are approved.

We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of therapeutic products. To achieve commercial success for any product for which we have obtained marketing approval, we will need to establish sales, marketing and distribution capabilities, either ourselves or through collaborations or other arrangements with third parties.

In the future, we plan to build a focused sales and marketing infrastructure to market or co-promote the EGP-437 Combination Product and possibly other product candidates that we develop in the U.S., if and when they are approved. There are risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of the EGP-437 Combination Product or any other product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

Factors that may inhibit our efforts to commercialize the EGP-437 Combination Product or any other product candidates on our own include:

our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe our products;
the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
unforeseen costs and expenses associated with creating an independent sales and marketing organization.

We expect to enter into arrangements with third parties to perform consulting, sales, marketing and distribution services in markets outside the U.S. We may also enter into arrangements with third parties to perform these services in the U.S. if we do not establish our own sales, marketing and distribution capabilities in the U.S. or if we determine that such third-party arrangements are otherwise beneficial. Our product revenues and our profitability, if any, under any such third-party sales, marketing or distribution arrangements are likely to be lower than if we were to market, sell and distribute the EGP-437 Combination Product or any other product candidates that we may develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute the EGP-437 Combination Product or any other product candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market the EGP-437 Combination Product or our other product candidates effectively. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our EGP-437 Combination Product or any other product candidates that we may develop.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

The development and commercialization of new drug products is highly competitive. We face competition with respect to the EGP-437 Combination Product and our other current product candidates, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that

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currently market and sell products or are pursuing the development of products for the treatment of the disease indications for which we are developing our product candidates. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

The current standard of care for non-infectious anterior uveitis include topical corticosteroids such as Durezol® (Novartis AG), Lotemax® (Valeant Pharmaceuticals International, Inc.), Pred Forte® (Allergan, Inc.) and prednisolone acetate ophthalmic suspension (1%) (Novartis AG).

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than the EGP-437 Combination Product or other product candidates that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.

In addition, our ability to compete may be affected in many cases by insurers or other third-party payors, particularly Medicare, seeking to encourage the use of generic products. Generic products are currently being used for the indications that we are pursuing, and additional products are expected to become available on a generic basis over the coming years. If the EGP-437 Combination Product or any other product candidate that we may develop achieves marketing approval, we expect that it will be priced at a significant premium over competitive generic products.

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Even if we are able to commercialize the EGP-437 Combination Product or any other product candidate that we may develop, the products may become subject to unfavorable pricing regulations, third-party coverage or reimbursement practices or healthcare reform initiatives, which could harm our business.

Our ability to commercialize the EGP-437 Combination Product or any other product candidates that we may develop successfully will depend, in part, on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government healthcare programs, private health insurers, managed care plans and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage and reimbursement may not be available for the EGP-437 Combination Product or any other product that we commercialize and, even if they are available, the level of reimbursement may not be satisfactory.

Inadequate reimbursement may adversely affect the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining and maintaining adequate reimbursement for our products may be difficult. We may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. If coverage and adequate reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize the EGP-437 Combination Product or any other product candidate for which we obtain marketing approval.

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There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or similar regulatory authorities outside the U.S. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the U.S. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that we develop would compromise our ability to generate revenues and become profitable.

The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the product in that country. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.

There can be no assurance that our product candidates or any products that we may in-license, if they are approved for sale in the U.S. or in other countries, will be considered medically reasonable and necessary for a specific indication, that they will be considered cost-effective by third-party payors, that coverage and an adequate level of reimbursement will be available, or that third-party payors’ reimbursement policies will not adversely affect our ability to sell our product candidates profitably.

Our strategy of obtaining rights to product candidates and approved products for the treatment of a range of ophthalmic diseases through in-licenses and acquisitions may not be successful.

We may expand our product pipeline through opportunistically in-licensing or acquiring the rights to other products, product candidates or technologies for the treatment of ophthalmic diseases. The future growth of our business may depend in part on our ability to in-license or acquire the rights to approved products, additional product candidates or technologies. However, we may be unable to in-license or acquire the rights to any such products, product candidates or technologies from third parties. The in-licensing and acquisition of pharmaceutical products is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire products, product candidates or technologies that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.

In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to in-license or acquire the rights to the relevant product, product candidate or technology on terms that would allow us to make an appropriate return on our investment. Furthermore, we may be unable to identify suitable products, product candidates or technologies within our area of focus. If we are unable to successfully obtain rights to suitable products, product candidates or technologies, our ability to pursue this element of our strategy could be impaired.

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Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we develop.

We face an inherent risk of product liability exposure related to the use of the EGP-437 Combination Product and any other product candidates that we develop in human clinical trials and will face an even greater risk if we commercially sell any products that we develop. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

decreased demand for any product candidates or products that we develop;
injury to our reputation and significant negative media attention;
withdrawal of clinical trial participants;
significant costs to defend the related litigation;
substantial monetary awards to trial participants or patients;
loss of revenue;
reduced time and attention of our management to pursue our business strategy; and
the inability to commercialize any products that we develop.

While we obtain insurance for each clinical trial we perform, we may not be adequately insured to cover all liabilities that we may incur. We will need to increase our insurance coverage as we expand our clinical trials. We will need to further increase our insurance coverage if we commence commercialization of the EGP-437 Combination Product or any other product candidate that receives marketing approval. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

Risks Related to Our Dependence on Third Parties

We may enter into collaborations with other third parties for the development or commercialization of our product candidates, including the EGP-437 Combination Product. If our collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.

We expect to utilize a variety of types of collaboration, distribution and other marketing arrangements with third parties to commercialize the EGP-437 Combination Product in markets outside the U.S. We also may enter into arrangements with third parties to perform these services in the U.S. if we do not establish our own sales, marketing and distribution capabilities in the U.S. or if we determine that such third-party arrangements are otherwise beneficial. We also may seek third-party collaborators for development and commercialization of other product candidates. Our likely collaborators for any sales, marketing, distribution, development, licensing or broader collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. We are not currently party to any such arrangement. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements.

Any future collaborations that we enter into, may pose a number of risks, including the following:

collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to these collaborations;
collaborators may not perform their obligations as expected;
collaborators may not pursue development and commercialization of our product candidates that receive marketing approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;

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collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates;
a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product or products;
disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would divert management attention and resources, be time-consuming and expensive;
collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and
collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.

Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner, or at all. If we do not receive the funding we expect under collaboration agreements, our development of our product candidates could be delayed and we may need additional resources to develop our product candidates. All of the risks relating to product development, regulatory approval and commercialization described in this prospectus also apply to the activities of our collaborators.

Additionally, subject to its contractual obligations to us, if a collaborator of ours were to be involved in a business combination, it might deemphasize or terminate the development or commercialization of any product candidate licensed to it by us. If one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and our perception in the business and financial communities could be harmed.

If we are not able to establish additional collaborations, we may have to alter our development and commercialization plans and our business could be adversely affected.

For some of our product candidates, we may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of therapeutic products. We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the U.S., the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative

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product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. We may also be restricted under future license agreements from entering into agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our product platform.

We rely, and expect to continue to rely, on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials.

We have relied on third parties, such as contract research organizations, or CROs, to conduct our completed trials of our EGP-437 Combination Product and do not plan to independently conduct clinical trials of the EGP-437 Combination Product or our other product candidates, including our planned Phase 3 clinical trial of our EGP-437 Combination Product. We expect to continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators, to conduct our clinical trials. These agreements might terminate for a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements, that would delay our product development activities.

Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly referred to as Good Clinical Practices for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.

We contract with third parties for the manufacture of the EGP-437 Combination Product for clinical trials and expect to continue to do so in connection with the commercialization of the EGP-437 Combination Product and for clinical trials and commercialization of any other product candidates that we may develop. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of the EGP-437 Combination Product or any other of our product candidates. We rely, and expect to continue to rely, on third parties to manufacture clinical and commercial supplies of the EGP-437 Combination Product, preclinical and clinical supplies of our other product candidates that we may develop and commercial supplies of products if and when any of our product candidates receives marketing approval. Our current and anticipated future dependence upon others for the manufacture of the EGP-437 Combination

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Product and any other product candidate or product that we develop may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis. In addition, any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval.

We currently rely exclusively on third-party manufacturers to assemble and prepare the EGP-437 Combination Product on a purchase order basis. We do not currently have any contractual commitments for commercial supply of bulk drug substance for EGP-437 or fill-finish services or for components of the EyeGate® II Delivery System. We also do not currently have arrangements in place for redundant supply or a second source for bulk drug substance for EGP-437 or for fill-finish services. The prices at which we are able to obtain supplies of EGP-437, fill-finish services and assemble the EyeGate® II Delivery System may vary substantially over time and adversely affect our financial results.

If our third-party manufacturers for the EGP-437 Combination Product fails to fulfill our purchase orders or should become unavailable to us for any reason, we believe that there are a limited number of potential replacement manufacturers, and we likely would incur added costs and delays in identifying or qualifying such replacements. We could also incur additional costs and delays in identifying or qualifying a replacement manufacturer for fill-finish services if our existing third-party manufacturer should become unavailable for any reason. We may be unable to establish any agreements with such replacement manufacturers or to do so on acceptable terms. Even if we could transfer manufacturing to a different third party, the shift would likely be expensive and time consuming, particularly since the new facility would need to comply with the necessary regulatory requirements and we would need FDA approval before using or selling any products manufactured at that facility.

In connection with our application for a license to market the EGP-437 Combination Product or other product candidates in the U.S., we may be required to conduct a comparability study if the product we intend to market is supplied by a manufacturer different from the one who supplied the product evaluated in our clinical studies. Delays in designing and completing this study to the satisfaction of the FDA could delay or preclude our development and commercialization plans and thereby limit our revenues and growth.

Reliance on third-party manufacturers entails additional risks, including:

The EGP-437 Combination Product and any other product candidates that we may develop may compete with other product candidates and products for access to a limited number of suitable manufacturing facilities that operate under current good manufacturing practices, or cGMP, regulations;
reliance on the third party for regulatory compliance and quality assurance;
the possible breach of the manufacturing agreement by the third party;
the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside the U.S. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products.

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Risks Related to Our Intellectual Property

If we are unable to obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.

Our success depends in large part on our ability to obtain and maintain patent protection in the U.S. and other countries with respect to our proprietary technology and products. We and our licensors have sought to protect our proprietary position by filing patent applications in the U.S. and abroad related to our novel technologies and product candidates. The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Maintaining patents in the U.S. is an expensive process and it is even more expensive to maintain patents and patent applications in foreign countries. As a result, it is possible that we and our licensors will fail to maintain such patents thereby reducing the rights of our portfolio.

The patent position of pharmaceutical, biotechnology and medical device companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and our licensors’ patent rights are highly uncertain. Our and our licensors’ pending and future patent applications may not result in patents being issued which protect our technology or products or which effectively prevent others from commercializing competitive technologies and products. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the U.S. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our owned or licensed patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. In particular, during prosecution of any patent application, the issuance of any patents based on the application may depend upon our ability to generate additional preclinical or clinical data that support the patentability of our proposed claims. We may not be able to generate sufficient additional data on a timely basis, or at all. Moreover, changes in either the patent laws or interpretation of the patent laws in the U.S. and other countries may diminish the value of our patents or narrow the scope of our patent protection.

Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The U.S. Patent Office recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

Moreover, we may be subject to a third-party pre-issuance submission of prior art to the U.S. Patent and Trademark Office, or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing

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third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

Even if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the U.S. and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.

Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents. In addition, in a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the medical device, biotechnology and pharmaceutical industries. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference or derivation proceedings before the U.S. Patent and Trademark Office. The risks of being involved in such litigation and proceedings may increase as our product candidates near commercialization and as we gain the greater visibility associated with being a public company. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. We may not be aware of all such intellectual property rights potentially relating to our product candidates and their uses. Thus, we do not know with certainty that the EGP-437 Combination Product or any other product candidate, or our commercialization thereof, does not and will not infringe or otherwise violate any third party’s intellectual property.

If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble

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damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

If we fail to comply with our obligations in our intellectual property licenses and funding arrangements with third parties, we could lose rights that are important to our business.

We are party to a license agreement that imposes, and, for a variety of purposes, we will likely enter into additional licensing and funding arrangements with third parties that may impose, diligence, development and commercialization timelines and milestone payment, royalty, insurance and other obligations on us. Under certain of our existing licensing agreements, we are obligated to pay royalties or make specified milestone payments on net product sales of the EyeGate® II Delivery System or related technologies to the extent they are covered by the agreements. We also are obligated under certain of our existing license agreements to pay maintenance and other fees. We also have diligence and development obligations under certain of those agreements that we are required to satisfy. If we fail to comply with our obligations under current or future license and collaboration agreements, our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture or market any product that is covered by these agreements or may face other penalties under the agreements. Such an occurrence could diminish the value of the product candidate being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology.

We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

Some of our employees were previously employed at universities or other biotechnology or pharmaceutical companies. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these employees or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be necessary to defend against these claims.

In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.

If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.

Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.

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If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the U.S. are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters

If we are not able to obtain required regulatory approvals, we will not be able to commercialize the EGP-437 Combination Product or any other product candidate that we may develop, and our ability to generate revenue will be materially impaired. The marketing approval process is expensive, time-consuming and uncertain. As a result, we cannot predict when or if we, or any collaborators we may have in the future, will obtain marketing approval to commercialize the EGP-437 Combination Product or any other product candidate.

The activities associated with the development and commercialization of our product candidates, including the EGP-437 Combination Product, including design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the U.S. and similar regulatory authorities outside the U.S. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We have not received approval to market the EGP-437 Combination Product or any other product candidate from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party CROs and consultants to assist us in this process.

The process of obtaining marketing approvals, both in the U.S. and abroad, is expensive and may take many years, especially if additional clinical trials are required, if approval is obtained at all. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety, purity and potency. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. The FDA or other regulatory authorities may determine that the EGP-437 Combination Product or any other product candidate that we may develop is not safe, effective or pure, is only moderately effective or has undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

The regulatory process can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved.

Failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.

In order to market and sell the EGP-437 Combination Product and any other product candidate that we may develop in other jurisdictions, we or our third-party collaborators must obtain separate marketing

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approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the U.S. generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the U.S., it is required that the product be approved for reimbursement before the product can be sold in that country. We or these third parties may not obtain approvals from regulatory authorities outside the U.S. on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the U.S. does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market.

Even if we, or any collaborators we may have in the future, obtain marketing approvals for the EGP-437 Combination Product or our other product candidates, the terms of those approvals, ongoing regulations and post-marketing restrictions may limit how we, or they, manufacture and market our products, which could materially impair our ability to generate revenue.

Once marketing approval has been granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation. We, and any collaborators we may have in the future, must therefore comply with requirements concerning advertising and promotion for any of our products for which we or they obtain marketing approval. Promotional communications with respect to prescription products are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Thus, if the EGP-437 Combination Product or any other product candidate that we may develop receives marketing approval, the accompanying label may limit the approved use of our product, which could limit sales of the product.

In addition, manufacturers of approved products and those manufacturers’ facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We, our contract manufacturers, our future collaborators and their contract manufacturers will also be subject to other regulatory requirements, including submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements regarding the distribution of samples to physicians, recordkeeping, and costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product such as the requirement to implement a risk evaluation and mitigation strategy.

We may be subject to substantial penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products.

Violations of the Federal Food, Drug, and Cosmetic Act relating to the promotion or manufacturing of prescription products may lead to investigations by the FDA, Department of Justice and state Attorneys General alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws. In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

restrictions on such products, manufacturers or manufacturing processes;
restrictions on the labeling or marketing of a product;
restrictions on product distribution or use;
requirements to conduct post-marketing studies or clinical trials;
warning letters;
withdrawal of the products from the market;
refusal to approve pending applications or supplements to approved applications that we submit;
recall of products;

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fines, restitution or disgorgement of profits or revenues;
suspension or withdrawal of marketing approvals;
refusal to permit the import or export of our products;
product seizure; or
injunctions or the imposition of civil or criminal penalties.

Our relationships with customers and third-party payors may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security, and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.

Healthcare providers, physicians and third-party payors in the U.S. and elsewhere will play a primary role in the recommendation and prescription of any product candidates, including the EGP-437 Combination Product, for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute any products for which we obtain marketing approval. In addition, we may be subject to transparency laws and patient privacy regulation by U.S. federal and state governments and by governments in foreign jurisdictions in which we conduct our business. The applicable federal, state and foreign healthcare laws and regulations that may affect our ability to operate include:

the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;
federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective implementing regulations, which imposes obligations, including mandatory contractual terms, on covered healthcare providers, health plans and healthcare clearinghouses, as well as their business associates, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; and
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

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Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, fines, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, it may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government funded healthcare programs.

Recently enacted and future legislation may affect our ability to commercialize and the prices we obtain for any products that are approved in the U.S. or foreign jurisdictions.

In the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could affect our ability to profitably sell or commercialize any product candidate, including the EGP-437 Combination Product, for which we obtain marketing approval or that we may in-license. The pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by legislative initiatives. Current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product.

In the U.S., the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, changed the way Medicare covers and pays for pharmaceutical products. Cost reduction initiatives and other provisions of this legislation could limit coverage of and reduce the price that we receive for any approved products. While the MMA applies only to product benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the MMA or other healthcare reform measures may result in a similar reduction in payments from private payors.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively PPACA. Among the provisions of PPACA of importance to our business, including, without limitation, our ability to commercialize and the prices we may obtain for any of our product candidates and that are approved for sale, are the following:

an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents;
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;
a new Medicare Part D coverage gap discount program, in which participating manufacturers must agree to offer 50% point-of-sale discounts off negotiated drug prices during the coverage gap period as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
expansion of healthcare fraud and abuse laws, including the federal False Claims Act and the federal Anti-Kickback Statute, and the addition of new government investigative powers, and enhanced penalties for noncompliance;
extension of manufacturers’ Medicaid rebate liability;
expansion of eligibility criteria for Medicaid programs; and
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program.

In addition, other legislative changes have been proposed and adopted since PPACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013. In January 2013, President Obama signed into law the American Taxpayer

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Relief Act of 2012, which, among other things, reduced Medicare payments to several types of providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding.

The pricing of prescription pharmaceuticals is also subject to governmental control outside the U.S. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our ability to generate revenues and become profitable could be impaired.

Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling certain products outside of the U.S. and require us to develop and implement costly compliance programs.

If we expand our operations outside of the U.S., we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the U.S. to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

Various laws, regulations and executive orders also restrict the use and dissemination outside of the U.S., or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the U.S., it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the U.S., which could limit our growth potential and increase our development costs.

The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.

If we or our third-party manufacturers fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur significant costs.

We and our third-party manufacturers are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

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Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees, this insurance may not provide adequate coverage against potential liabilities.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Further, with respect to the operations of our third-party contract manufacturers, it is possible that if they fail to operate in compliance with applicable environmental, health and safety laws and regulations or properly dispose of wastes associated with our products, we could be held liable for any resulting damages, suffer reputational harm or experience a disruption in the manufacture and supply of our product candidates or products.

Risks Related to Employee Matters and Managing Growth

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on the research and development, clinical and business development expertise of Stephen From, our President and Chief Executive Officer, as well as the other principal members of our management, scientific and clinical team and a number of third party consultants. Although we have entered into an employment agreement with Mr. From, he may terminate his employment with us at any time. We do not maintain “key person” insurance for any of our executives or other employees.

Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

Our business and operations would suffer in the event of system failures.

Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed.

We expect to expand our development capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug development, regulatory affairs and, if any of our product

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candidates receives marketing approval, sales, marketing and distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

Risks Related to Our Common Stock and This Offering

Because a small number of our existing stockholders own a majority of our voting stock, your ability to influence corporate matters will be limited

Following the completion of this offering, our executive officers, directors and greater than 5% stockholders, in the aggregate, will own approximately 66.5% of our outstanding common stock. Assuming an initial public offering price of $6.00 per share, if certain of our stockholders, including our existing principal stockholders, and their affiliated entities and certain of our directors purchase all the shares they have indicated an interest in purchasing in this offering, the number of shares of our common stock beneficially owned by our executive officers, directors and greater than 5% stockholders will, in the aggregate, increase to 74.6% of our common stock. As a result, such persons, acting together, will have the ability to control our management and affairs and substantially all matters submitted to our stockholders for approval, including the election and removal of directors and approval of any significant transaction. These persons will also have the ability to control our management and business affairs. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other stockholders.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws that will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

establish a classified board of directors such that only one of three classes of directors is elected each year;
allow the authorized number of our directors to be changed only by resolution of our board of directors;
limit the manner in which stockholders can remove directors from our board of directors;
establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;
require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;
limit who may call stockholder meetings;

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authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and
require the approval of the holders of at least the affirmative vote of all of our stockholders who would be entitled to cast to amend or repeal specified provisions of our certificate of incorporation or bylaws that will become effective upon the closing of this offering.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

If you purchase shares of common stock in this offering, you will suffer immediate dilution of your investment.

The initial public offering price of our common stock will be substantially higher than the pro forma net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our pro forma net tangible book value per share after this offering. To the extent outstanding options or warrants are exercised, you will incur further dilution. Based on an assumed initial public offering price of $6.00 per share, you will experience immediate dilution of $5.46 per share, representing the difference between our pro forma net tangible book value per share, after giving effect to this offering, and the assumed initial public offering price. In addition, purchasers of common stock in this offering will have contributed approximately 8.15% of the aggregate price paid for all purchases of our stock but the shares purchased in this offering will represent an aggregate of only approximately 12.86% of our total common stock outstanding after this offering.

An active trading market for our common stock may not develop.

Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters. An active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult for you to sell shares you purchase in this offering without depressing the market price for the shares or at all.

We expect our common stock will be quoted on the OTCQB, which will limit the liquidity and price of our common stock more than if our common stock was listed on the NASDAQ Capital Market, the NYSE MKT or another national securities exchange and result in our stockholders not receiving the benefit of our being subject to the listing standards of a national securities exchange.

We expect that our common stock will be quoted over-the-counter on the OTCQB, which is a FINRA-sponsored entity and operated inter-dealer automated quotation system for equity securities not included in a national securities exchange. Quotation of our common stock on the OTCQB will limit the liquidity and price of our common stock more than if our common stock were quoted or listed on the NASDAQ Capital Market or the NYSE MKT, which are national securities exchanges. In light of the size of the offering, moreover, there may only be a relatively small number of purchasers in the offering, and this would limit the liquidity of our common stock. Lack of liquidity will limit the price at which you may be able to sell your shares or your ability to sell your shares at all.

Since our securities will be quoted on the OTCQB, our securities holders may face significant restrictions on the resale of our securities due to state “Blue Sky” laws.

Each state has its own securities laws, often called “blue sky” laws, which (i) limit sales of securities to a state’s residents unless the securities are registered in that state or qualify for an exemption from registration, and (ii) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or the transaction must be exempt from registration. The applicable broker must be registered in that state. We

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do not know whether our common stock will be registered or exempt from registration under the laws of any state. Since our common stock will be quoted on the OTCQB, a determination regarding registration will be made by those broker-dealers, if any, who agree to serve as the market-makers for our common stock. There may be significant state blue sky law restrictions on the ability of investors to sell, and on purchasers to buy, our common stock. You should therefore consider the resale market for our common stock to be limited, as you may be unable to resell your common stock without the significant expense of state registration or qualification.

If our shares become subject to the penny stock rules, this may make it more difficult to sell our shares.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The OTCQB does not meet such requirements and if the price of our common stock is less than $5.00, our common stock will be deemed penny stocks. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that prior to effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stock holders may have difficulty selling their shares.

The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock in this offering.

Our stock price is likely to be volatile. The stock market in general and the market for smaller specialty pharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including:

the success of competitive products or technologies;
results of clinical trials of the EGP-437 Combination Product or any other product candidate that we may develop;
results of clinical trials of product candidates of our competitors;
regulatory or legal developments in the U.S. and other countries;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
the recruitment or departure of key scientific or management personnel;
the level of expenses related to any of our product candidates or clinical development programs;
the results of our efforts to discover, develop, acquire or in-license additional products, product candidates or technologies for the treatment of ophthalmic diseases, the costs of commercializing any such products and the costs of development of any such product candidates or technologies;
actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
variations in our financial results or those of companies that are perceived to be similar to us;
changes in the structure of healthcare payment systems;
market conditions in the pharmaceutical and biotechnology sectors;
general economic, industry and market conditions; and

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the other factors described in this “Risk Factors” section.

In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company. We also may face securities class-action litigation if we cannot obtain regulatory approvals for or if we otherwise fail to commercialize EGP-437. Such litigation, if instituted against us, could cause us to incur substantial costs to defend such claims and divert management’s attention and resources.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2013, we had federal net operating loss carryforwards of approximately $32.5 million, state net operating loss carryforwards of approximately $23.6 million and aggregate federal and state research and development tax credit carryforwards of approximately $895,000 available to reduce future taxable income. These federal and state net operating loss carryforwards and federal and state tax credit carryforwards which will expire at various dates through 2033, if not utilized. Utilization of these net operating loss and tax credit carryforwards may be subject to a substantial limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, and comparable provisions of state, local and foreign tax laws due to changes in ownership of our company that have occurred previously or that could occur in the future. Under Section 382 of the Code and comparable provisions of state, local and foreign tax laws, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change by value in its equity ownership over a three year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research and development tax credits, to reduce its post-change income may be limited. We have not completed a study to determine whether our initial public offering, our most recent private placement and other transactions that have occurred over the past three years may have triggered an ownership change limitation. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we generate taxable income, our ability to use our pre-change net operating loss and tax credits carryforwards to reduce U.S. federal and state taxable income may be subject to limitations, which could result in increased future tax liability to us.

Sales of a substantial number of shares of our common stock by our existing stockholders in the public market could cause our stock price to fall.

Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could significantly reduce the market price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities.

Based on shares of common stock outstanding as of February 2, 2015, upon the closing of this offering, we will have outstanding a total of 6,478,687 shares of common stock after this offering, assuming no exercise of the underwriters’ overallotment option and no exercise of outstanding options and warrants. Of these shares, only the shares of common stock sold in this offering by us, plus any shares sold upon exercise of the underwriters’ overallotment option, will be freely tradable without restriction in the public market immediately following this offering. Aegis Capital Corp., however, may, in its sole discretion, permit our officers, directors and other stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.

We expect that the lock-up agreements pertaining to this offering will expire 180 days from the date of this prospectus. After the lock-up agreements expire, up to an additional 5,512,608 shares of common stock will be eligible for sale in the public market of which 4,294,691 shares are held by directors, executive

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officers and other affiliates and will be subject to volume limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. In addition, shares of common stock that are either subject to outstanding options or reserved for future issuance under our employee benefit plans will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

In addition, we are registering the 41,667 shares of our common stock underlying the warrants to be issued to the underwriters in connection with this offering as described in the “Underwriting — Underwriters’ Warrants” section of this prospectus.

We are an “emerging growth company,” and a smaller reporting company and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
reduced disclosure obligations regarding executive compensation; and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We have taken advantage of reduced reporting burdens in this prospectus. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, the JOBS Act also provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to delay such adoption of new or revised accounting standards, and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for public companies that are not emerging growth companies.

We are also a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act and have elected certain scaled disclosure available for smaller reporting companies.

We have identified material weaknesses in our internal controls over financial reporting that, if not properly remediated, could result in material misstatements in our financial statements in future periods.

The Public Company Accounting Oversight Board or PCAOB, defines a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will

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not be prevented or detected on a timely basis. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

We have identified the following material weaknesses:

Lack of experienced accounting and financial reporting personnel to manage the complexities of SEC financial reporting which resulted in significant changes to the financial statements as a result of our audit.
Due to the limited number of people working in the office, many critical duties are combined and given to the available employees. Presently, a single individual prepares and signs checks, reconciles bank accounts, performs all payroll duties, and maintains the general ledger.
Lack of adequate disclosure controls resulted in large audit adjustments related to a material contract.

If we are unable to correct deficiencies in internal controls in a timely manner, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the SEC will be adversely affected. This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and generally materially and adversely impact our business and financial condition.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, FINRA rules and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.

We are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, we will be required to furnish a report by our management on our internal control over financial reporting. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. We are in the very early stages of the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 and to build an internal control structure designed to meet the requirements of a public company. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of

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internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses in our internal control over financial reporting, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, any future debt agreements that we may enter into, may preclude us from paying dividends without the lenders’ consent or at all. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are contained principally in “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “seek,” “aim,” “think,” “optimistic,” “strategy,” “goals,” “sees,” “new,” “guidance,” “future,” “continue,” “drive,” “growth,” “long-term,” “develop,” “possible,” “emerging,” “opportunity,” “pursue,” “could,” “can,” “would,” “expect,” “believe,” “anticipate,” “project,” “target,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

the timing and success of preclinical studies and clinical trials conducted by us and our development partners;
the ability to obtain and maintain regulatory approval of our product candidates, and the labeling for any approved products;
the scope, progress, expansion, and costs of developing and commercializing our product candidates;
the size and growth of the potential markets for our product candidates and the ability to serve those markets;
our expectations regarding our expenses and revenue, the sufficiency of our cash resources and needs for additional financing;
the rate and degree of market acceptance of any of our product candidates;
our expectations regarding competition;
our anticipated growth strategies;
our ability to attract or retain key personnel;
our ability to establish and maintain development partnerships;
our expectations regarding federal, state and foreign regulatory requirements;
regulatory developments in the U.S. and foreign countries;
our ability to obtain and maintain intellectual property protection for our product candidates;
the anticipated trends and challenges in our business and the market in which we operate; and
our use of proceeds from this offering.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

Any forward-looking statement made by us in this prospectus speaks only as of the date on which it is made. Except as required by law, we assume no obligation to update these statements publicly, or to update the reasons actual results could differ materially from those anticipated in these statements, even if new information becomes available in the future.

We discuss many of these risks in this prospectus in greater detail under the heading “Risk Factors.” Also, these forward-looking statements represent our estimates and assumptions only as of the date of this prospectus.

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Unless required by U.S. federal securities laws, we do not intend to update any of these forward-looking statements to reflect circumstances or events that occur after the statement is made.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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USE OF PROCEEDS

We estimate that our net proceeds from the sale of the common stock that we are offering will be approximately $3.5 million, assuming an initial public offering price of $6.00 per share, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters’ option to purchase additional shares in this offering is exercised in full, we estimate our net proceeds will be approximately $4.2 million. Each $1.00 increase (decrease) in the assumed initial public offering price of $6.00 per share would increase (decrease) the net proceeds to us from this offering by approximately $797,000, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of 1.0 million in the number of shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $5.5 million, assuming the assumed initial public offering price stays the same.

The principal purposes of this offering are to obtain additional capital to support our operations, create a public market for our common stock, facilitate our future access to the public equity markets and increase our visibility in our markets. We currently estimate that we will use the net proceeds from this offering, together with our existing cash and cash equivalents, as follows:

approximately $1.7 million to fund, through completion, a dose curve trial for back-of-the-eye delivery and a macular edema Phase 2 proof-of-concept trial using the EGP-437 Combination Product; and
the remainder for working capital and other general corporate purposes, which will include the pursuit of our other research and discovery efforts and could also include the acquisition or in-license of other products, product candidates or technologies.

Pending use of the proceeds as described above, we intend to invest the net proceeds of this offering in short-term, interest-bearing, investment-grade securities or certificates of deposit.

We believe that the expected net proceeds from this offering and our existing cash and cash equivalents, together with interest thereon, will be sufficient to fund our operations through the end of 2015, although we cannot assure you that this will occur.

The amounts and timing of our actual expenditures will depend on numerous factors, including the progress of our clinical trials, as well as the amount of cash used in our operations. We may find it necessary or advisable to use the net proceeds for other purposes, and we will have broad discretion in the application of the net proceeds and investors will be relying on the judgment of our management regarding the application of the net proceeds from this offering.

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DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain future earnings, if any, and all currently available funds for use in the operation of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in our current or future financing instruments.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2014 as follows:

on an actual basis.
on a pro forma basis to reflect (the number of common shares to be issued for each Series as disclosed parenthetically) (1) the conversion of all outstanding shares of our Series A Preferred Stock (625,894), Series B Preferred Stock (737,648), Series C Preferred Stock (348,822), and Series D Preferred Stock (1,785,114), the exercise and conversion of a warrant to purchase our Series C Preferred Stock (1,239) and two warrants to purchase our Series D Preferred Stock (2,549), and the exchange of all shares of common stock of EyeGate Pharma S.A.S. (presented as non-controlling interests) into the following shares of our Preferred Stock (inclusive of anti-dilution shares) — Series B Preferred Stock (525,004), Series C Preferred Stock (187,173) and Series D Preferred Stock (358,146) and the subsequent conversion of such shares all into 4,571,589 shares of our common stock immediately prior to the closing of the offering, (2) the exercise of two warrants to purchase an aggregate of 10,929 shares of our common stock and (3) 861,049 shares of our common stock issuable upon the conversion of our convertible notes (including accrued interest through January 31, 2015) — 2012 Notes, as amended ($632,279), 2013 Notes, as amended ($1,626,271) and 2014 Notes ($1,357,903), into 150,544, 387,210 and 323,295 common shares, respectively, based on an assumed initial public offering price of $6.00 per share. The convertible notes will convert into shares of our common stock at a conversion price equal to 70% of the public offering price as described in the “Description of Capital Stock” Section.
on a pro forma as adjusted basis to give further effect to our issuance and sale of shares of common stock in this offering at an assumed initial public offering price of $6.00 per share, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The pro forma and pro forma as adjusted information below is illustrative only, and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this information in conjunction with our financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information contained in this prospectus.

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  As of September 30, 2014
     Actual   Pro Forma   Pro Forma
As Adjusted
     (unaudited)   (unaudited)(1)(2)   (unaudited)
     (in thousands, except share and per share data)    
Balance Sheet Data:
                          
Cash   $ 311,098     $ 605,742     $ 4,121,307  
Short-term debt, including current portion of long-term debt and capital lease obligations     2,842,125              
Accrued interest (included in accrued liabilities caption)     87,315                 
Convertible preferred stock, $0.01 par value, Series A to D, 50,485,136 shares authorized; shares issued and outstanding: 33,465,749 actual; none pro forma or pro forma as adjusted
                          
Series A convertible preferred stock, $0.01 par value, 2,483,693 shares authorized; 2,483,693 shares issued and outstanding     254,525              
Series B convertible preferred stock, $0.01 par value, 13,819,649 shares authorized; 8,073,508 shares issued and outstanding     6,926,180              
Series C convertible preferred stock, $0.01 par value, 5,161,241 shares authorized; 3,351,156 shares issued and outstanding     5,745,127              
Series D convertible preferred stock, $0.01 par value 29,020,554 shares authorized; 19,557,392 shares issued and outstanding     23,482,834              
Non-controlling interests (None pro forma or pro forma as adjusted)     6,658,504              
Total convertible preferred stock and non-controlling interests     43,067,170              
Stockholders’ (deficit) equity:
                          
Common stock, $0.01 par value: 70,000,000 shares authorized; 201,787 shares issued and outstanding, actual; 70,000,000 shares authorized 5,645,354 shares issued and outstanding, pro forma; and 70,000,000 shares authorized 6,478,687 shares issued and outstanding, pro forma as adjusted     2,018       56,454       64,787  
Additional paid-in capital     10,054,250       56,291,068       59,798,300  
Accumulated deficit     (56,445,656 )      (56,445,656 )      (56,445,656 ) 
Shareholder notes receivable     (58,824 )      (58,824 )      (58,824 ) 
Accumulated other comprehensive income     146,353       146,353       146,353  
Total stockholders’ (deficit) equity     (46,301,859 )      (10,605 )      3,504,960  
Total Capitalization   $ (305,249 )    $ (10,605 )    $ 3,504,960  

(1) Includes exercise of a warrant with proceeds of $7,080.
(2) Includes proceeds of $287,564 on the issuance of convertible notes in December 2014.

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The number of shares of our common stock in the table above excludes, as of September 30, 2014:

752,372 shares of common stock issuable upon exercise of options outstanding under our 2005 Equity Incentive Plan and 2014 Equity Incentive Plan, at a weighted-average exercise price of approximately $0.93 per share;
60,358 shares of our common stock issuable in the aggregate upon the exercise of options having an exercise price per share equal to the initial public offering price of this offering to be granted to two consultants upon or prior to the closing of this offering;
27,322 shares of our common stock issuable in the aggregate upon the exercise of options having an exercise price per share equal to the initial public offering price of this offering and to be granted as of the date immediately prior to the closing of this offering to employees and directors;
7,247 shares of our common stock issuable upon the exercise of an outstanding warrant to purchase shares of our common stock at a price of $5.16 per share;
562,723 shares of common stock issuable upon the exercise of outstanding warrants to purchase shares of our common stock at an exercise price equal to the price per share at which the shares of common stock are sold in this offering, which were issued on June 6, 2014, July 17, 2014, December 19, 2014 and December 30, 2014, based on an assumed initial public offering price of $6.00 per share;
786,784 shares of common stock reserved for future issuance under our 2005 Equity Incentive Plan and 2014 Equity Incentive Plan; and
41,667 shares of common stock issuable upon exercise of warrants to be issued to the underwriters in connection with this offering, at an exercise price per share equal to 125% of the public offering price, as described in the “Underwriting — Underwriters’ Warrants” section of this prospectus.
36,761 shares of our common stock issuable upon the exercise of warrants to be issued to the underwriters in connection with this offering, at an exercise price equal to the initial public offering price of $6.00, in settlement of part of their fees of $220,567 divided by the offering price of $6.00, as described in the “Underwriting — Underwriters’ Warrants” section of this prospectus.

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock after this offering.

On September 30, 2014, we had a historical net tangible book deficit of $(3.2) million, or ($16.03) per share of common stock. Our historical net tangible book deficit per share represents total tangible assets less total liabilities divided by the number of shares of common stock outstanding at September 30, 2014.

On a pro forma basis, after giving effect to the conversion of all outstanding shares of our Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, the exercise and conversion of a warrant to purchase our Series C Preferred Stock and two warrants to purchase our Series D Preferred Stock, and the exchange of certain shares of common stock of EyeGate Pharma S.A.S. into shares of our Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock and the subsequent conversion of such shares all into 4,571,589 shares of our common stock immediately prior to the closing of this offering, and the exercise of currently outstanding warrants to purchase 10,929 shares of our common stock, and the issuance of 861,049 shares of our common stock upon the conversion of our 2012, 2013 and 2014 convertible promissory notes, additional paid-in capital, a component of stockholders’ equity (deficit), our pro forma net tangible book deficit as of September 30, 2014 would have been approximately $(11,000), or approximately $(0.00) per share of our common stock.

After giving further effect to the sale of shares of common stock that we are offering at an assumed initial public offering price of $6.00 per share, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of September 30, 2014 would have been approximately $3.50 million, or approximately $0.54 per share. This amount represents an immediate increase in pro forma net tangible book value of $16.57 per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of approximately $5.46 per share to new investors purchasing shares of common stock in this offering.

Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the initial public offering price per share paid by new investors. The following table illustrates this dilution:

   
Assumed initial public offering price per share            $ 6.00  
Historical net tangible book deficit per share as of September 30, 2014   $ (16.03 )          
Pro forma increase in historical net tangible book value per share attributable to the pro forma transactions described in preceding paragraphs
  $ 16.03        
Pro forma as adjusted net tangible book value per share as of September 30, 2014
  $ (0.00 )          
Increase in pro forma as adjusted net tangible book value per share attributable to new investors giving effect to this offering
  $ 0.54        
Pro forma as adjusted net tangible book value per share after giving effect to this offering         $ 0.54  
Dilution in pro forma as adjusted net tangible book value per share to new investors         $ 5.46  

Each $1.00 increase (decrease) in the assumed initial public offering price of $6.00 per share, would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by approximately $0.12, and dilution in pro forma net tangible book value per share to new investors by approximately $0.66, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us. Each increase of million shares in the number of shares offered by us would increase our pro forma as adjusted net tangible book value per share after this offering by approximately $0.67 per share and decrease the dilution to investors participating in this offering by

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approximately $0.67 per share, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option to purchase additional shares of our common stock in full in this offering, the pro forma as adjusted net tangible book value after the offering would be $0.64 per share, the increase in pro forma net tangible book value per share to existing stockholders would be $16.67 per share and the dilution per share to new investors would be $5.36 per share, in each case assuming an initial public offering price of $6.00 per share.

The following table summarizes on the pro forma as adjusted basis described above, as of September 30, 2014, the differences between the number of shares purchased from us, the total consideration paid to us in cash and the average price per share that existing stockholders and new investors paid. The calculation below is based on the assumed initial public offering price of $6.00 per share, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

         
  Shares Purchased   Total Consideration   Average
Price Per
Share
     Number   Percent   Amount   Percent
Existing stockholders     5,645,354       87,14 %    $ 56,347,522       91.85 %    $ 9.98  
Investors in this offering     833,333       12.86 %    $ 5,000,000       8.15 %    $ 6.00  
Total     6,478,687       100 %    $ 61,347,522       100 %    $ 9.47  

The foregoing tables and calculations exclude the following as of September 30, 2014:

752,372 shares of common stock issuable upon exercise of options outstanding under our 2005 Equity Incentive Plan and 2014 Equity Incentive Plan, at a weighted-average exercise price of approximately $0.93 per share;
60,358 shares of our common stock issuable in the aggregate upon the exercise of options having an exercise price per share equal to the initial public offering price of this offering to be granted to two consultants upon or prior to the closing of this offering;
27,322 shares of our common stock issuable in the aggregate upon the exercise of options having an exercise price per share equal to the initial public offering price of this offering and to be granted as of the date immediately prior to the closing of this offering to employees and directors;
7,247 shares of our common stock issuable upon the exercise of an outstanding warrant to purchase shares of our common stock at a price of $5.16 per share;
861,049 shares of common stock issuable upon the exercise of outstanding warrants to purchase shares of our common stock at an exercise price equal to the price per share at which the shares of common stock are sold in this offering, which were issued on June 6, 2014, July 17, 2014, December 19, 2014 and December 30, 2014, based on an assumed initial public offering price of $6.00 per share;
786,784 shares of common stock reserved for future issuance under our 2005 Equity Incentive Plan and 2014 Equity Incentive Plan; and
41,667 shares of common stock issuable upon exercise of warrants to be issued to the underwriters in connection with this offering, at an exercise price per share equal to 125% of the public offering price, as described in the “Underwriting — Underwriters’ Warrants” section of this prospectus.
36,761 shares of our common stock issuable upon the exercise of warrants to be issued to the underwriters in connection with this offering, at an exercise price equal to the initial public offering price of $6.00, in settlement of part of their fees of $220,567 divided by the offering price of $6.00, as described in the “Underwriting — Underwriters’ Warrants” section of this prospectus.

To the extent any of these outstanding options and warrants are exercised and, there will be further dilution to new investors. If all of such outstanding options and warrants had been exercised as of,

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February 2, 2015, the pro forma as adjusted net tangible book value per share after this offering would be $1.09, and total dilution per share to new investors would be $4.91.

If the underwriters exercise their over-allotment option to purchase additional 125,000 shares of our common stock in full in this offering:

the percentage of shares of common stock held by stockholders of our company prior to this offering will decrease to approximately 85% of the total number of shares of our common stock outstanding after this offering; and
the number of shares held by investors purchasing shares of our common stock in this offering will increase to, 958,333 or approximately 15% of the total number of shares of our common stock outstanding after this offering.

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SELECTED FINANCIAL DATA

The following tables set forth selected financial data. We derived the selected statement of operations data for the unaudited nine months ended September 30, 2014 and 2013 from our unaudited financial statements and related notes included elsewhere in this prospectus, and for the years ended December 31, 2013 and 2012, from our audited financial statements and related notes and the selected unaudited balance sheet data as of September 30, 2014 included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any future period.

The following selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.

       
  Nine Months Ended September 30,   Year Ended
December 31,
     (Unaudited)    
     2014   2013   2013   2012
Operating expenses:
                                   
Research and development   $ 421,903     $ 881,277     $ 1,010,268     $ 3,034,397  
General and administrative     1,646,910       1,585,363       2,087,637       2,817,851  
Total operating expenses     2,068,813       2,466,640       3,097,905       5,852,248  
Other income (expense), net:
 
Research & development tax credit     15,812       10,645       24,520       32,748  
Interest income     720       1,511       2,186       11,127  
Extinguishment of research liability     240,000                             
Change in warrant liability     876,753                                   
Interest expense     (264,040 )      (434,098 )      (611,386 )          
Total other income (expense), net     869,245       (421,942 )      (584,680 )      43,875  
Net loss     (1,199,568 )      (2,888,582 )      (3,682,585 )      (5,808,373 ) 
Net income attributable to non-controlling interest     (157,928 )      (126,600 )      (196,862 )      (225,722 ) 
Net loss to the Company   $ (1,357,496 )    $ (3,015,182 )    $ (3,879,447 )    $ (6,034,095 ) 
Net loss per share basic and diluted:   $ (7.12 )    $ (16.35 )    $ (21.03 )    $ (33.07 ) 
Weighted-average number of common shares used in computing net loss per share basic and diluted:     190,516       184,417       184,431       182,949  
Pro forma information
 
Pro forma net loss attributable to common stockholders   $ (1,270,181 )          $ (3,808,669 )       
Pro forma net loss per share, basic and diluted (unaudited)   $ (0.24 )          $ (0.76 )       
Pro forma weighted average shares outstanding, basic and diluted (unaudited)     5,334,000             5,010,000        

 
  September 30, 2014
     (Unaudited)
Balance Sheet Data:
        
Cash and cash equivalents   $ 311,098  
Total current assets     352,057  
Total assets     1,609,533  
Convertible promissory notes due to shareholders     2,842,125  

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     September 30, 2014
     (Unaudited)
Total liabilities     4,844,222  
Temporary equity – convertible preferred stock     36,408,666  
Temporary equity – non controlling interest     6,658,504  
Common stock     2,018  
Additional paid in capital     10,054,250  
Accumulated deficit     (56,445,656 ) 
Accumulated other comprehensive income     146,353  
Total stockholders’ deficit   $ (46,301,859 ) 

Pro forma weighted average shares outstanding, basic and diluted, for the year ended December 31, 2013 does not give effect to the conversion of approximately $1.0 million and $0.288 million of convertible notes issued during the nine months ended September 30, 2014 and December 2014, respectively. These convertible notes issued during the nine months ended September 30, 2014 and December 2014, respectively would convert into an additional 253,866 and 69,429 shares of common stock as of January 31, 2015 and this accounts for the difference between the pro forma weighted average shares outstanding, basic and diluted, for the year ended December 31, 2013. The pro forma weighted average shares outstanding, basic and diluted, for the nine months ended September 30, 2014 does not give effect to the conversion of approximately $288,000 of Convertible Notes issued in December 2014.

Pro forma net loss and pro forma net loss per share, basic and diluted, have been calculated after giving effect to (a) the conversion of our preferred stock outstanding on the dates of issuance into an aggregate of 3,497,478 shares of common stock as contemplated to occur upon the completion of this offering and (b) the conversion of our convertible notes into shares of common stock on the dates of issuance at a conversion rate of $4.20 per share. The pro forma net loss includes the elimination of the interest expense recognized on the convertible notes as this expense would not have been recognized if the convertible notes had been converted into shares of common stock on the date of issuance. The total convertible notes (including accrued interest thereon) outstanding as of January 31, 2015 was $3,616,453, which will convert into 861,049 shares of common stock upon the completion of this offering.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the “Summary Financial Data” and our financial statements and notes thereto appearing elsewhere in this prospectus. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this prospectus, including those set forth under “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

Overview

Eyegate Pharmaceuticals, Inc. was formed as a Delaware corporation on December 28, 2004. We were originally incorporated in 1998 under the name of Optis France S.A. in Paris France. At that time, the name of the French corporation was changed to EyeGate Pharma S.A.S. and became a subsidiary of Eyegate Pharmaceuticals, Inc.

We are a clinical-stage specialty pharmaceutical company that is focused on developing and commercializing therapeutics and drug delivery systems for treating diseases of the eye. EGP-437, our first and only product in clinical trials, incorporates a reformulated topically active corticosteroid, dexamethasone phosphate, that is delivered into the ocular tissues through our proprietary innovative drug delivery system, the EyeGate II Delivery System. EGP-437 is being developed under the 505(b)(2) New Drug Application, or NDA, regulatory pathway for drugs submitted for approval to the U.S. Food and Drug Administration, or FDA, which enables an applicant to rely, in part, on the FDA’s findings of safety and efficacy for an existing product, or published literature, in support of its NDA. The EyeGate II Delivery System and EGP-437, are designed to address two major issues in ophthalmic medicine: lack of patient compliance and safety. The EyeGate II Delivery System features a compact, elegant, and easy-to-use device that we believe has the potential to deliver drugs non-invasively and quickly into the ocular tissues through the use of iontophoresis, which can accelerate the onset of action, dramatically reduce treatment frequency versus eye drops and sustain therapeutic effect. The EyeGate® II Delivery System is easy-to-use, only takes a few minutes to employ and has been utilized to administer more than 1,700 experimental treatments. We hold worldwide commercialization rights to the EyeGate® II Delivery System.

As we are in our developmental stage, we have not generated any revenue. We have never been profitable and, from December 28, 2004 (inception) through September 30, 2014, our losses from operations have been $56.4 million. Our net loss was approximately $1.12 and $2.89 million for the nine months ended September 30, 2014 and 2013, respectively. Our net loss was approximately $3.7 and $5.8 million for the years ended December 31, 2013 and 2012, respectively. We expect to incur significant expenses and increasing operating losses for the foreseeable future as we continue the development and clinical trials of, and seek regulatory approval for, The EGP-437 Combination Product and any other product candidates we advance to clinical development. If we obtain regulatory approval for The EGP-437 Combination Product, we expect to incur significant expenses in order to create an infrastructure to support the commercialization of The EGP-437 Combination Product, including sales, marketing and distribution functions.

Following the closing of this offering, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need additional financing to support our continuing operations. We will seek to fund our operations through public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.

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Financial Overview

Research and Development Expenses

We expense all research and development expenses as they are incurred. Research and development expenses primarily include:

non-clinical development, preclinical research, and clinical trial and regulatory-related costs;
expenses incurred under agreements with sites and consultants that conduct our clinical trials;
expenses related to generating, filing, and maintaining intellectual property; and
employee-related expenses, including salaries, benefits, travel and stock-based compensation expense.

Substantially all of our research and development expenses to date have been incurred in connection with EGP-437. We expect our research and development expenses to increase for the foreseeable future as we advance EGP-437 through clinical development, including the conduct of our planned clinical trials. The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We are unable to estimate with any certainty the costs we will incur in the continued development of EGP-437. Clinical development timelines, the probability of success and development costs can differ materially from expectations. We may never succeed in achieving marketing approval for our product candidate.

The costs of clinical trials may vary significantly over the life of a project owing to, but not limited to, the following:

per patient trial costs;
the number of sites included in the trials;
the countries in which the trials are conducted;
the length of time required to enroll eligible patients;
the number of patients that participate in the trials;
the number of doses that patients receive;
the cost of comparative agents used in trials;
the drop-out or discontinuation rates of patients;
potential additional safety monitoring or other studies requested by regulatory agencies;
the duration of patient follow-up; and
the efficacy and safety profile of the product candidate.

We do not expect EGP-437 to be commercially available, if at all, for the next several years.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation. Our general and administrative expenses consisted primarily of payroll expenses for our full-time employees. Other general and administrative expenses include professional fees for auditing, tax, patent costs and legal services.

We expect that general and administrative expenses will increase in the future as we expand our operating activities and incur additional costs associated with being a publicly-traded company and maintaining compliance with exchange listing and Securities and Exchange Commission requirements. These increases will likely include higher consulting costs, legal fees, accounting fees, directors’ and officers’ liability insurance premiums and fees associated with investor relations.

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Total Other Income (Expense)

Total other income (expense) consists primarily of interest income we earn on interest-bearing accounts, and interest expense incurred on our outstanding debt including non-cash interest resulting from the accretion of original issue discount on certain of our outstanding notes. We also received the proceeds of certain research and development tax credits related to EyeGate Pharma S.A.S.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States (US GAAP). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the expenses during the reporting periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2 to our financial statements appearing elsewhere in this prospectus, we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Accrued Research and Development Expenses

As part of the process of preparing financial statements, we are required to estimate and accrue research and development expenses. This process involves the following:

communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost;
estimating and accruing expenses in our financial statements as of each balance sheet date based on facts and circumstances known to us at the time; and
periodically confirming the accuracy of our estimates with selected service providers and making adjustments, if necessary.

Examples of estimated research and development expenses that we accrue include:

fees paid to contract research organizations and investigative sites in connection with clinical studies;
fees paid to contract manufacturing organizations in connection with non-clinical development, preclinical research, and the production of clinical study materials; and
professional service fees for consulting and related services.

We base our expense accruals related to non-clinical development, preclinical studies, and clinical trials on our estimates of the services received and efforts expended pursuant to contracts with organizations/consultants that conduct and manage clinical studies on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts may depend on many factors, such as the successful enrollment of patients, site initiation and the completion of clinical study milestones. Our service providers invoice us as milestones are achieved and monthly in arrears for services performed. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates. To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period.

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However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical studies and other research activities.

Stock-Based Compensation

We have issued options to purchase our common stock. We account for stock based compensation in accordance with ASC 718, Compensation — Stock Compensation. ASC 718 establishes accounting for stock-based awards exchanged for employee services. Under the fair value recognition provisions of ASC 718, share based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service/vesting period. Determining the appropriate fair value model and calculating the fair value of stock-based payment awards require the use of highly subjective assumptions, including the expected life of the stock-based payment awards and stock price volatility.

We estimate the grant date fair value of stock options and the related compensation expense, using the Black-Scholes option valuation model. This option valuation model requires the input of subjective assumptions including: (1) expected life (estimated period of time outstanding) of the options granted, (2) volatility, (3) risk-free rate and (4) dividends. Because share-based compensation expense is based on awards ultimately expected to vest, it is reduced for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeiture rates differ from those estimates. We have estimated expected forfeitures of stock options based on our historical turnover rate and used these rates in developing a future forfeiture rate. If our actual forfeiture rate varies from our estimates, additional adjustments to compensation expense may be required in future periods. In general, the assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates, but the estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

No options were granted in 2013 or 2014.

The fair value of stock options issued to employees and non-employees during the year ended December 31, 2012 is measured using the following assumptions:

   
  Employees   Non-Employees
Expected volatility     73%       65% – 68%  
Expected dividend yield     0.00%       0.00%  
Expected term (in years)     6 years       7.10 to 9.23 years  
Risk-free rate     0.83%       1.18% – 1.78%  

Exercise price and fair value of common stock

The fair value of the shares of common stock that underlie the stock options we have granted under the various plans outstanding has historically been determined by our board of directors based upon information available to it at the time of grant. Because, prior to this offering, there has been no public market for our common stock, our board of directors determined the fair value of our common stock by utilizing, among other things, recent or contemporaneous valuation information available to it. All options have been granted at exercise prices not less than the fair value of the underlying shares on the date of grant.

Expected volatility

We compute volatility under the “calculated value method” of ASC 718 by utilizing the average of a peer group comprised of publicly-traded companies and expect to continue to do so until we have adequate historical data regarding the volatility of our traded stock price. The peer group was determined based upon companies considered to be direct competition or having been presented by independent parties as a“comparable” company based upon market sector. In determining a comparable, we have excluded “large-cap” entities.

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Expected term

Since adopting ASC 718, we have been unable to use historical employee exercise and option expiration data to estimate the expected term assumption for the Black-Scholes grant-date valuation. We have therefore utilized the “simplified” method, as prescribed by the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment , to estimate on a formula basis the expected term of our stock options considered to have “plain vanilla” characteristics.

Risk-free interest rate

We utilize the Federal Reserve Board’s published Treasury Constant Maturity rate which most closely matches the option term.

Expected dividend yield

Our Board of Directors historically has not declared cash dividends and does not expect to issue cash dividends in the future. We therefore use an expected dividend yield equal to zero.

Significant Factors Used in Determining the Fair Value of Our Common Stock

The fair value of the shares of common stock that underlie the stock options we have granted under the plan has historically been determined by our board of directors based upon information available to it at the time of grant. Prior to December 31, 2011, our board of directors did not conduct any formal valuation procedure or commission any third party valuation or appraisal in connection with its determinations of the fair value of its common stock. Our board of directors considered the most persuasive evidence of fair value to be the prices at which our securities were sold in actual arms’ length transactions. Our board of directors also considered numerous objective and subjective factors in the assessment of fair value, including reviews of our business and financial condition, the conditions of the industry in which we operate and the markets that we serve and general economic, market and United States and global capital market conditions, an analysis of publicly traded peer companies, the lack of marketability of our common stock, the likelihood of achieving a liquidity event for the shares of common stock underlying the stock options in question, such as an initial public offering or sale, the preferences and privileges of the preferred stock and common stock, the status of strategic initiatives being undertaken by our management and board of directors and, after December 31, 2011, independent third party valuations of our common stock. All options have been granted at exercise prices not less than the fair value of the underlying shares on the date of grant.

During the nine months ended September 30, 2014, we did not grant any options. During the year ended December 31, 2013, we did not grant any options. During fiscal year 2012, we granted options to purchase shares of our common stock as follows:

Equity-based compensation awards since January 1, 2012

       
Date of grant   Aggregate number of shares
subject to award
  Award recipients   Exercise
price
  Fair value
of common
stock
March 23, 2012     1,821 shares of common stock       a consultant     $ 3.29     $ 3.29  
November 1, 2012     8,355 shares of common stock       a director     $ 0.65     $ 0.65  
December 21, 2012
  
  
    50,541 shares of common stock
  
  
      2 executive employees,
4 non-executive employees
and 3 directors
    $ 0.65     $ 0.65  

Other Information

Net Operating Loss Carryforwards

As of December 31, 2013, we have federal and state income tax net operating loss (“NOL”) carryovers of approximately $32.5 million and $23.6 million, respectively, which will expire at various dates through 2033. As of December 31, 2013, we also has federal, state and foreign research and development tax credit carryforwards of approximately $895,000, $410,000, and $25,000, respectively, to offset future income taxes, which expire at various times through 2033.

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Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. We have not completed a study to determine the impact of this ownership change on our NOL carryforwards under Section 382 of the Code. If we experience a Section 382 ownership change in connection with this offering or as a result of future changes in our stock ownership, some of which changes are outside our control, the tax benefits related to the NOL carryforwards may be further limited or lost.

JOBS Act

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board (PCAOB) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (a) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more, (b) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering, (c) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years or (d) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.

Temporary Equity and Non-Controlling Interest

Certain of our convertible preferred stock issuances were directly sold by EyeGate S.A.S., resulting in a non-controlling interest. Such non-controlling interest and the related convertible preferred stock are classified as temporary equity on our consolidated balance sheet, and we record the interest in the earnings or loss of the subsidiary not attributable to us as net income (loss) attributable to non–controlling interests in the consolidated statements of operations and comprehensive loss.

Results of Operations

Comparison of three months ended September 30, 2014 and 2013

The following table summarizes the results of our operations for the three months ended September 30, 2014 and 2013:

     
  Three Months Ended September 30, (Unaudited)
     2014   2013   Change
Operating expenses:
 
Research and development   $ 111,600     $ 148,718     $ (37,118 ) 
General and administrative     480,450       550,760       (70,310 ) 
Total operating expenses     592,050       699,478       (107,428 ) 
Other income (expense), net:     942,308       (174,555 )      1,116,863  
Net income (loss)     350,258       (874,033 )      1,224,291  
Net income attributable to non-controlling interest     (40,666 )      (14,816 )      (25,850 ) 
Net income (loss) to the company   $ 309,592     $ (888,849 )    $ 1,198,441  

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Research and Development Expenses.  Research and development expenses were $0.112 million for the three months ended September 30, 2014 compared to $0.149 million for the three months ended September 30, 2013. The reduction of $0.037 million is primarily due to a reduction in clinical operations staff.

General and Administrative Expenses.  General and administrative expenses were $0.480 million for the three months ended September 30, 2014 compared to $0.551 million for the three months ended September 30, 2013. The reduction of $0.071 million primarily consisted of a reduction of a staff member for $0.087 million, offset by increases in legal expenses, accounting expenses and consulting expenses totaling of $0.016 million.

Other Income (Expense).  Total other income (expense) was $0.942 million and $(174,555) for the three months ended September 30, 2014 and 2013, respectively, and is mostly comprised of interest expense, except for 2014 which also includes the change in fair value of the warrant liability and an extinguishment of a research liability of $882,000 and $240,000, respectively, both of which did not exist in 2013.

Comparison of Nine Months Ended September 30, 2014 and 2013

The following table summarizes the results of our operations for the nine months ended September 30, 2014 and 2013:

     
  Nine Months Ended September 30,
(Unaudited)
     2014   2013   Change
Operating expenses:
 
Research and development   $ 421,903     $ 881,277     $ (459,374 ) 
General and administrative     1,646,910       1,585,363       61,547  
Total operating expenses     2,068,813       2,466,640       (397,827 ) 
Other income (expense), net:     869,245       (421,942 )      (1,291,187 ) 
Net (loss)     (1,199,568 )      (2,888,582 )      (1,689,014 ) 
Net income attributable to non-controlling interest     (157,928 )      (126,600 )      (31,328 ) 
Net (loss) to the company   $ (1,357,496 )    $ (3,015,182 )    $ (1,657,686 ) 

Research and Development Expenses.  Research and development expenses were $0.422 million for the nine months ended September 30, 2014 compared to $0.881 million for the nine months ended September 30, 2013. The reduction of $0.459 million is primarily due a decrease in clinical trials of our EGP-437 Combination Product in 2014. This was a reduction of costs of $0.264 million from the completion of the Phase 3 non-infectious anterior uveitis trial in April of 2013. There was a reduction in clinical operations staff and in Scientific Advisory Board fees. These reductions of costs account for $0.140 million. We also reduced research and development consultants by $0.049 million. The remaining cost reduction is due to clinical product not being produced, which resulted in a reduction of $0.006 million.

General and Administrative Expenses.  General and administrative expenses were $1.647 million for the nine months ended September 30, 2014 compared to $1.585 million for the nine months ended September 30, 2013. The increase of $0.062 million is primarily comprised of a loss on cancellation of Shareholders’ note receivable (treated as a compensatory charge) of $0.201 million offset by a decrease in payroll costs of $0.147 million and an increase in legal, accounting and consulting expenses of $0.08 million.

Other Income (Expense).  Total other income (expense) was $0.869 million and $(0.422) million for the nine months ended September 30, 2014 and 2013, respectively, except for 2014 which also includes the change in fair value of the warrant liability and an extinguishment of a research liability of $877,000 and $240,000, respectively, both of which did not exist in 2013. Additionally a reduction in interest expense was due to non-cash interest related to the discount on certain notes issued in 2012 and recognized in 2013.

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Comparison of Years Ended December 31, 2013 and 2012

The following table summarizes the results of our operations for the years ended December 31, 2013 and 2012:

     
  Year Ended December 31,
     2013   2012   Change
Operating expenses:
 
Research and development   $ 1,010,268     $ 3,034,397     $ (2,024,129 ) 
General and administrative     2,087,637       2,817,851       (730,214 ) 
Total operating expenses     3,097,905       5,852,248       (2,754,343 ) 
Other (expense), net:     (584,680 )      43,875       (628,555 ) 
Net (loss)     (3,682,585 )      (5,808,373 )      (2,125,788 ) 
Net income attributable to non-controlling interest     (196,862 )      (225,722 )      28,860  
Net (loss) to the company   $ (3,879,447 )    $ (6,034,095 )    $ (2,154,648 ) 

Research and Development Expenses.  Research and development expenses were $1.0 million for the year ended December 31, 2013 compared to $3.0 million for the year ended December 31, 2012. The reduction of $2.0 million in costs was primarily due to a decrease in clinical trials of our EGP-437 Combination Product in 2013. There was a reduction of costs of $1.7 million from the completion of the Phase 3 non-infectious anterior uveitis trial in April 2013. There was a further reduction in costs of $0.2 million from the completion of a proof-of-concept trial for our EGP-437 Combination Product in 2012. There was a reduction of $0.1 million associated to a reduction in manufacturing of product for the clinical trials and a reduction in consulting and research and development payroll related expenses.

General and Administrative Expenses.  General and administrative expenses were approximately $2.1 million for the year ended December 31, 2013, compared to $2.8 million for the year ended December 31, 2012. The decrease of approximately $0.7 million was primarily related to a drop in lease costs of $0.5 million from our move to a 2,390 square foot office space in January 2013 when our lease expired on a 12,200 square foot lab and office facility. Also, a reduction in payroll related costs of $0.3 million and a reduction in miscellaneous costs of $0.1 million including travel and conference expenses contributed to the decrease in costs from 2012 to 2013. These cost reductions were offset by an increase in costs of $0.2 million related to EGP-437 marketing studies, legal and accounting costs in 2013.

Other Income (Expense).  Total other income (expense) was ($584,680) for the year ended December 31, 2013 and primarily consisted of ($611,386) in interest expense which occurred as a result of us issuing convertible promissory notes in December 2012 and again in July and December 2013. These notes contain both a coupon interest expense as well as non-cash interest charges of approximately $533,000 resulting from original issue discount on the notes issued in 2012.

Upcoming Funding Requirements and Expectations.  We intend to use the net proceeds of this offering for research and development activities, including clinical trials of our EGP-437 Combination Product and for working capital and other general corporate purposes.

Liquidity and Capital Resources

We have funded our operations since inception through the issuance of convertible preferred stock and convertible promissory notes and, to a lesser extent, through research and development tax credits. Through December 31, 2013, we had raised a total of $52.3 million from such sales of our equity securities and debt instruments and through September 30, 2014, we had raised a total of $53.8 million from such sales of our equity securities and debt instruments.

At December 31, 2013, we had cash and cash equivalents totalling $0.5 million and at September 30, 2014, we had cash and cash equivalents totaling $0.3 million.

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The following table sets forth the primary sources and uses of cash for the nine months ended September 30, 2014 and 2013 and for the years ended December 31, 2012 and 2013:

       
  Nine month ended September 30,
(Unaudited)
  Year ended December 31,
     2014   2013   2013   2012
Cash used in operating activities   $ (514,482 )    $ (2,236,180 )    $ (2,957,615 )    $ (5,221,887 ) 
Cash used in investing activities                        
Cash provided by financing activities     288,790       1,456,844       1,461,009       (75,406 ) 

Comparison of Nine Months Ended September 30, 2014 and 2013

Operating Activities.  Net cash used in operating activities was $0.514 million for the nine months ended September 30, 2014, compared to net cash used in operating activities of $2.236 million for the nine months ended September 30, 2013. The primary use of cash was to fund operating losses of $1.20 million in 2014 off-set in part by $0.025 million in stock based compensation charges and a loss on cancellation of shareholders’ note receivable of $200,758 in 2014 and the fair value adjustment of Common Stock warrants of $877,000, and for the nine months ended September 30, 2013 net losses of $2.889 million offset in part by non-cash compensation charges $0.138 million and a decrease in restricted cash of $152,525, and non-cash interest expense of $386,650.

Financing Activities.  On February 28, 2014, we received proceeds of $446,151 from the issuance of unsecured convertible promissory notes under the 2013 Note Purchase Agreement. In April 2014, we received additional proceeds of $16,667 for additional 2013 Notes. In June and July 2014, we received Additional Proceeds of approximately $995,000 under the 2014 Notes. For the nine months ended September 30, 2013, we received proceeds of $490,803 and $968,970 from the issuance of unsecured convertible promissory notes under the 2012 and 2013 Note Purchase Agreement.

On June 6, 2014, we entered into a Convertible Promissory Note and Warrant Purchase Agreement (“2014 Note Purchase Agreement”), pursuant to which we could issue up to an aggregate principal amount of $2,000,000 of unsecured promissory notes (the “2014 Notes”) to certain stockholders. The 2014 Notes mature on June 6, 2015, and accrue interest at a rate of 12% per annum. In the event that we issue equity securities resulting in gross proceeds to us of at least $5 million prior to maturity, all outstanding principal and accrued and unpaid interest under the 2014 Notes will automatically convert into the class of equity securities issued in such offering, as applicable, in connection with the closing of the first sale of our equity securities at a conversion price equal to 70% of the sale price of such class of equity securities issued in such offering. In the event that we consummate a “Sale”, as defined therein, we will, while the 2014 Notes remain outstanding, at the election of the holders of two-thirds of the aggregate principal outstanding thereunder, immediately prior to the closing, convert all outstanding principal and interest under the 2014 Notes into shares of our Series D Preferred Stock at 70% of the Series D Preferred Stock original issuance price. In connection with the 2014 Note Purchase Agreement, we and each holder of the 2012 Notes and the 2013 Notes executed and delivered an amended and restated promissory note (collectively, the “Amended and Restated Notes”) in the principal amount of the sum of all outstanding principal and accrued and unpaid interest as of June 6, 2014. The Amended and Restated Notes have the same terms as the 2014 Notes. The 2014 Notes will convert into shares of our common stock upon the closing of this offering at a conversion price equal to 70% of the initial public offering price. We also issued to each holder of a 2014 Note and for the 2014 Note Holders that have a 2012 Note and/or a 2013 Note restated and amended, a warrant exercisable for our common stock if we consummate an initial public offering of our common stock (“IPO”) on or prior to December 31, 2014 or shares of our Series D Preferred Stock at the original issuance price if the IPO is not consummated on or prior to December 31, 2014 or if we are sold in 2014 in an M&A transaction consummated prior to the closing of the IPO. Under such scenario the number of warrants exercisable into Series D convertible stock would be approximately 2.1 million shares at an exercise price of $1.22 per share. The number of shares subject to such warrant shall be equal to (1) the sum of (a) the principal amount plus any accrued and outstanding interest of any Amended and Restated Notes of any holder or affiliates, as defined, and (b) the principal amount plus any accrued and outstanding interest of any 2014 Notes of such holder issued by us, divided by (2) the original issue price of the Series D Preferred Stock or common stock at the IPO price.

The Company determined that the amended debt agreements were classified as troubled debt restructurings or modifications accounted for as extinguishments, however since the note holders were also preferred stockholders the gain or loss was reflected as a component of stockholders equity. The warrants issued by the Company in connection with the June 6, 2014 debt and amended debt issuance have been

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classified as a liability instrument, since there is a variable component to the number of shares, the class of shares and the strike price depending upon future financing transactions of the Company.

The Company determined the fair value of the warrants issued on June 6, 2014 and July 17, 2014 was approximately $1,365,000, based upon the following assumptions:

The number of warrants to be issued and the exercise price will be determined based upon future events, including potential sale, liquidation or IPO transactions as described above. The Company utilized a probability weighting of potential outcomes to estimate the number of warrants issuable, the type of underlying security, and the exercise price and then a Black Scholes model to compute the estimated value of the warrant under each assumption.
Volatility – 70%
Term – 0.5 years for an IPO scenario; 5 years for an M&A or liquidation scenario
Dividends – 0%
Discount rate – 0.6 – 1.6%

The Company will record changes in the fair value of the warrants in the statement of operations at each reporting period. The change in the fair value of the warrants from for the three and nine months ended September 30, 2014 was approximately $881,000 and $877,000, respectively.

At September 30, 2014 the 2014 Notes and the amended and restated notes had a carrying value of $2.8 million and a face value of $3.1 million.

For the nine months ended September 30, 2014 we incurred $1.2 million of deferred offering costs relating to our recently activities in planning for our IPO.

Comparison of the Years Ended December 31, 2013 and 2012

Operating Activities.  Net cash used in operating activities was $2.96 million for the year ended December 31, 2013, compared to net cash used in operating activities $5.2 million for the year ended December 31, 2012. The primary use of cash was to fund operating losses of $3.7 million in 2013 off-set in part by $0.7 million in non-cash interest and compensation charges in 2013 and 2012 net losses of $5.8 million offset in part by non-cash compensation charges $0.4 million.

Financing Activities.  In December 2012, we issued convertible promissory notes (the “2012 Notes”) at a discount to existing investors. We received $525,000 in proceeds. The 2012 Notes were issued with an interest rate of 8% per annum, and we have a re-payment obligation of $1,058,270 in principal plus accrued interest. The 2012 Notes had an initial maturity date of December 10, 2013, which was initially extended to June 10, 2014 on December 2, 2013.

On July 20, 2013, we entered into a Convertible Promissory Note Purchase Agreement (“Note Purchase Agreement”), pursuant to which we could issue up to an aggregate principal amount of $1,500,000 of unsecured promissory notes to certain investors. On July 29, 2013, we issued $968,970 in convertible promissory notes, a second tranche of which were issued on February 28, 2014 in which we issued $463,059 in convertible promissory notes (collectively, the “2013 Notes”). The 2013 Notes accrued interest at the rate of 8% per annum and have a scheduled maturity date of July 29, 2014.

Funding Requirements and Other Liquidity Matters

Our EGP-437 Combination Product is still in clinical development. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we: