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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
For the fiscal year ended December 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-36554
Ocular Therapeutix, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
24 Crosby Drive
Bedford, MA
(Address of principal executive offices)
20-5560161
(I.R.S. Employer
Identification No.)
01730
(Zip Code)
(781) 357-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.0001 par value per share
Trading Symbol
OCUL
Name of each exchange on which registered
Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ⌧ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ⌧ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. ⌧ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). ⌧ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Non-accelerated filer
☒
Accelerated filer
Smaller reporting company
☒
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of June 30, 2020, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately
$478 million. The number of shares outstanding of the registrant’s class of common stock, as of March 1, 2021: 76,069,673.
DOCUMENTS INCORPORATED BY REFERENCE
Emerging growth company
☐
Part III of this Annual Report incorporates by reference information from the definitive Proxy Statement for the registrant’s 2021 Annual Meeting of
Stockholders, which is expected to be filed with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended
December 31, 2020.
Table of Contents
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
TABLE OF CONTENTS
PART I
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
PART II
Selected Financial Data
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Financial Statements and Supplementary Data
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
PART IV
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and
uncertainties. All statements, other than statements of historical facts, contained in this Annual Report on Form 10-K,
including statements regarding our strategy, future operations, future financial position, future revenues, projected costs,
prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “target,” “potential,” “goals,” “will,” “would,”
“could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words.
The forward-looking statements in this Annual Report on Form 10-K include, among other things, statements about:
● our ongoing and planned clinical trials, including our Phase 1 clinical trial of OTX-TIC for the reduction of
intraocular pressure in patients with primary open-angle glaucoma or ocular hypertension, our Phase 1 clinical trial of
OTX-TKI for the treatment of wet age-related macular degeneration, or wet AMD, our Phase 2 clinical trial of OTX-
CSI for the chronic treatment of dry eye disease; and our Phase 2 clinical trial for OTX-DED for the short-term
treatment of the signs and symptoms of dry eye disease;
● the preclinical and clinical development of our product candidate for the short-term treatment of the signs and
symptoms of dry eye disease and our intravitreal implant with protein-based or small molecule drugs, including
tyrosine kinase inhibitors, for the treatment of wet AMD, diabetic macular edema, or DME, and retinal vein occlusion,
or RVO;
● our commercialization efforts for our product DEXTENZA®;
● our plans to develop, seek regulatory approval for and commercialize DEXTENZA for additional indications,
including for the treatment of ocular itching associated with allergic conjunctivitis, for which we have been notified
by the Food and Drug Administration of a target action date under the Prescription Drug User Fee Act of October 18,
2021, and our other product candidates based on our proprietary bioresorbable hydrogel technology platform;
● our ability to manufacture DEXTENZA, ReSure® Sealant and our product candidates in compliance with current
Good Manufacturing Practices;
● our ability to manage a sales, marketing and distribution infrastructure to support the commercialization of
DEXTENZA;
● the timing of and our ability to submit applications and obtain and maintain regulatory approvals for DEXTENZA,
including the submission of a supplemental new drug application for the approval of the treatment of ocular itching
associated with allergic conjunctivitis as an additional indication, and other product candidates;
● our estimates regarding expenses; future revenue; the sufficiency of our cash resources; our ability to fund our
operating expenses, debt service obligations and capital expenditure requirements; and our needs for additional
financing;
● our plans to raise additional capital, including through equity offerings, debt financings, collaborations, strategic
alliances, licensing arrangements, royalty agreements and marketing and distribution arrangements;
● the potential advantages of DEXTENZA, ReSure Sealant, and our product candidates;
● the rate and degree of market acceptance and clinical utility of our products and our ability to secure and maintain
reimbursement for our products;
● our estimates regarding the market opportunity for DEXTENZA, ReSure Sealant and our other product candidates;
● our strategic collaboration, option and license agreement with Regeneron Pharmaceuticals, Inc. under which we are
collaborating on the development of an extended-delivery formulation of the vascular endothelial growth factor, trap
aflibercept, currently marketed under the brand name Eylea, for the treatment of wet AMD, DME and RVO;
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● our license agreement and collaboration with AffaMed Therapeutics Limited under which we are collaborating on the
commercialization of DEXTENZA and our product candidate OTX-TIC in mainland China and certain other Asian
countries;
● our capabilities and strategy, and the costs and timing of manufacturing, sales, marketing, distribution and other
commercialization efforts, with respect to DEXTENZA, ReSure Sealant and any additional products for which we
may obtain marketing approval in the future;
● our intellectual property position;
● our ability to identify additional products, product candidates or technologies with significant commercial potential
that are consistent with our commercial objectives, including potential opportunities outside the field of
ophthalmology;
● the impact of government laws and regulations;
● the costs and outcomes of legal actions and proceedings;
● uncertainty regarding the extent to which the COVID-19 pandemic and related response measures will adversely
affect our business, results of operations and financial condition; and
● our competitive position.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and
you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially
from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included
important factors in the cautionary statements included in this Annual Report on Form 10-K, particularly in the “Risk
Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we
make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions,
joint ventures, licensing agreements or investments we may make.
You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual
Report on Form 10-K completely and with the understanding that our actual future results may be materially different from
what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable law.
SUMMARY OF RISKS RELATED TO OUR BUSINESS
Our business, financial condition, results of operations and future growth prospects are subject to numerous risks and
uncertainties that you should be aware of before making an investment decision, as more fully described under the heading
“Risk Factors” and elsewhere in this Annual Report. These risks include, but are not limited to, the following:
● We have incurred significant losses since our inception. Our net losses were $60.0 million for the year ended
December 31, 2018, $86.4 million for the year ended December 31, 2019, and $155.6 million for the year ended
December 31, 2020. As of December 31, 2020, we had an accumulated deficit of $539.3 million. We expect to incur
operating losses over the next several years and may never achieve or maintain profitability.
● We will need substantial additional funding. If we are unable to raise capital when needed or on attractive terms, we
may be forced to delay, reduce or eliminate our research and development programs or our commercialization efforts.
● We depend heavily on the success of DEXTENZA and our product candidates. Our ability to generate product
revenues sufficient to achieve profitability is dependent on our successful commercialization of DEXTENZA for the
treatment of ocular inflammation and pain following ophthalmic surgery and our obtaining marketing approval for
and commercializing other products with significant market potential, including DEXTENZA for additional
indications.
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● DEXTENZA, ReSure Sealant and any product candidates for which we obtain marketing approval may become
subject to unfavorable pricing regulations, third-party coverage or reimbursement practices or healthcare reform
initiatives, which could harm our business. For example, DEXTENZA is currently scheduled to lose transitional pass-
through status in July 2022. If pass-through status were to lapse, DEXTENZA would no longer be reimbursed
separately from the ophthalmic surgery and our ability to generate revenues from the sales of DEXTENZA to
ambulatory surgical centers and hospital out-patient departments for the treatment of post-surgical ocular
inflammation and pain would be adversely affected.
● The COVID-19 pandemic has disrupted, and is expected to continue to adversely affect, our operations, including the
progress of our commercialization of DEXTENZA and our ability to generate revenue from sales of DEXTENZA or
ReSure Sealant. The COVID-19 pandemic may delay or adversely affect our clinical development activities,
including our ability to recruit or retain patients in our ongoing clinical trials. We cannot be certain of the overall
impact of COVID-19 on our business, financial condition and results of operations.
● Clinical trials of our product candidates may not be successful. We currently have several ongoing and planned
clinical trials, including our Phase 1 clinical trial of OTX-TKI for the treatment of wet age-related macular
degeneration, or wet AMD; our Phase 1 clinical trial of OTX-TIC for the reduction of intraocular pressure in patients
with primary open-angle glaucoma or ocular hypertension; our Phase 2 clinical trial of OTX-CSI for the chronic
treatment of dry eye disease; and our Phase 2 clinical trial for OTX-DED for the short-term treatment of the signs and
symptoms of dry eye disease. If these or other clinical trials of any 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 unable
to complete, the development and commercialization of such product candidate.
● We may not be successful in our efforts to develop products and product candidates based on our bioresorbable
hydrogel technology platform, other than DEXTENZA and ReSure Sealant, or to expand the use of our bioresorbable
hydrogel technology for treating additional diseases and conditions.
● We will depend heavily on our collaboration with Regeneron for the success of our extended-delivery hydrogel
formulation in combination with Regeneron’s large molecule VEGF-targeting compounds. If Regeneron does not
exercise its option, terminates our collaboration agreement or is unable to meet its contractual obligations, it could
negatively impact our business.
● If we are unable to establish and maintain adequate sales, marketing and distribution capabilities, scale up our
manufacturing processes and capabilities, maintain regulatory compliance for our manufacturing operations, obtain
and maintain patent protection for or gain market acceptance by physicians, patients and third-party payors and others
in the medical community of DEXTENZA, ReSure Sealant or any of our product candidates for which we obtain
marketing approval, or experience significant delays in doing so, our business will be materially harmed and our
ability to generate revenues from product sales will be materially impaired.
● Our products face and, if approved, our product candidates will face competition from generic and branded versions
of existing drugs, many of which have achieved widespread acceptance among physicians, payors and patients for the
treatment of ophthalmic diseases and conditions. In addition, because the active pharmaceutical ingredients in our
products and product candidates, other than those developed under the Regeneron collaboration, are available on a
generic basis, competitors will be able to offer and sell products with the same active pharmaceutical ingredient as our
products so long as these competitors do not infringe our patent rights.
● Even if we successfully obtain marketing approval for one or more of our product candidates, the approved product
will be subject to ongoing review and extensive regulation.
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Item 1.
Business
Overview of Ocular Therapeutix
PART I
We are a biopharmaceutical company focused on the formulation, development and commercialization of innovative
therapies for diseases and conditions of the eye using our proprietary, bioresorbable hydrogel platform technology. We use
this technology to tailor duration and amount of delivery of a range of therapeutic agents in our product candidates.
We currently incorporate therapeutic agents that have previously received regulatory approval from the U.S. Food
and Drug Administration, or FDA, including small molecules and proteins, into our hydrogel technology with the goal of
providing local programmed-release of drug to the eye. We believe that our local programmed-release drug delivery
technology has the potential to treat conditions and diseases of both the front and the back of the eye and can be
administered through a range of different modalities including intravitreal implants, suprachoroidal implants, intracameral
implants and intracanalicular inserts. We have product candidates in preclinical and clinical development designed to
utilize this technology to treat retinal diseases including wet age-related macular degeneration, or wet AMD; glaucoma and
ocular hypertension; and ocular surface diseases and conditions including dry eye disease and ocular itching associated
with allergic conjunctivitis. We also have two FDA-approved products in commercialization in the United States:
DEXTENZA®, an intracanalicular insert for the treatment of post-surgical ocular inflammation and pain, and ReSure®
Sealant, an ophthalmic device designed to prevent wound leaks in corneal incisions following cataract surgery.
Our earlier-stage assets include four programs in clinical development:
● OTX-TKI, an axitinib intravitreal implant administered by fine-gauge needle for the treatment of wet AMD;
● OTX-TIC, a travoprost intracameral implant for the reduction of intraocular pressure, or IOP, in patients with
glaucoma or ocular hypertension;
● OTX-CSI, a cyclosporine intracanalicular insert for the chronic treatment of dry eye disease; and
● OTX-DED, a dexamethasone intracanalicular insert for the short-term treatment of the signs and symptoms of
dry eye disease.
We have a collaboration with Regeneron Pharmaceuticals, Inc., or Regeneron, for the development and potential
commercialization of products containing our local programmed-release hydrogel in combination with Regeneron’s
vascular endothelial growth factor, or VEGF inhibitor, aflibercept, currently marketed under the brand name Eylea. We
also continue to assess the potential use of our hydrogel platform technology in other areas of the body.
Retinal Disease Programs
We are engaged in the development of formulations of our hydrogel administered via intravitreal injection to address
large markets for diseases and conditions of the back of the eye which we believe have significant growth potential. Our
initial development efforts for our retinal disease programs have focused on the use of our extended-delivery hydrogel in
combination with anti-angiogenic drugs, such as TKIs or protein-based anti-VEGF drugs, for the treatment of retinal
diseases such as wet AMD; diabetic macular edema, or DME; and retinal vein occlusion, or RVO. Our initial goal for these
programs is to provide extended delivery for at least six months, thereby reducing the frequency of the current monthly or
bi-monthly immediate release intravitreal anti-VEGF injection regimens for wet AMD and other retinal diseases.
OTX-TKI (axitinib intravitreal implant)
Our product candidate OTX-TKI is a preformed, bioresorbable hydrogel fiber implant incorporating a small
molecule tyrosine kinase inhibitor, or TKI, axitinib, with anti-angiogenic properties delivered by intravitreal injection
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and designed for a duration of six months or longer. TKIs have shown promise in the treatment of wet AMD. In the first
quarter of 2019, we began dosing patients in a multi-center, open-label, dose-escalation Phase 1 clinical trial in Australia
designed to evaluate the safety, durability and tolerability of OTX-TKI. We are evaluating biological activity by measuring
retinal thickness using spectral domain optical coherence tomography, or OCT, and following visual acuity over time. Two
cohorts were initially enrolled: a lower dose cohort of 200 µg with six subjects and a higher dose cohort of 400 µg with
seven subjects. We are actively enrolling a third cohort of 12 subjects, split between parallel arms of six subjects each.
Subjects in the first arm of the third cohort will receive a dose of 600 µg, and subjects in the second arm will receive a 400
µg dose combined with an anti-VEGF induction injection.
At the Angiogenesis, Exudations, and Degeneration Virtual Conference in February 2021, we presented interim data
from the Phase 1 clinical trial. In the Phase 1 clinical trial, OTX-TKI was observed to have a generally favorable safety
profile, with no reported ocular serious adverse events. Some subjects in the Phase 1 clinical trial have shown a decrease
in intraretinal or subretinal fluid by two months, and interim data suggests that OTX-TKI might have an extended duration
of action beyond that of the current standard of care.
We plan to initiate a prospective, randomized, controlled Phase 1 clinical trial in the United States under an
exploratory investigational new drug, or eIND, application in mid-2021 to evaluate a single implant 600 µg dose of OTX-
TKI (combined with an anti-VEGF induction injection) in comparison with a 2 mg dose of aflibercept. We have requested
a pre-investigational new drug, or IND, application meeting with the FDA to discuss the possibility of transitioning from
an eIND application to a traditional IND application.
Pending our receipt and review of the topline data from the Phase 1 clinical trial in Australia and related regulatory
discussions, we also plan to initiate a Phase 2 clinical trial in Australia to compare the administration of a single implant
600 µg dose of OTX-TKI (combined with an anti-VEGF induction injection) to a 2 mg dose of aflibercept dosed every 8
weeks as the comparator.
OTX-AFS (aflibercept suprachoroidal injection) in collaboration with Regeneron
As described above, in October 2016, we entered into a strategic collaboration, option and license agreement with
Regeneron for the development and potential commercialization of products using our local programmed-release hydrogel
in combination with, among other things, Regeneron’s large molecule VEGF-targeting compounds for the treatment of
retinal diseases, with the initial focus on the VEGF trap aflibercept. We and Regeneron amended this agreement in May
2020 to, among other things, transition joint efforts under the collaboration to the research and development of an
extended-delivery formulation of aflibercept to be delivered to the suprachoroidal space which we refer to as OTX-AFS.
Under the amended agreement, we have provided certain formulations to Regeneron who have agreed to perform
preclinical assessments of OTX-AFS.
Glaucoma Program
Our development efforts for our glaucoma program have focused on the use of our extended-delivery hydrogel in
combination with travoprost, an FDA-approved prostaglandin analog designed to lower elevated IOP. Our initial goal for
this program is to provide extended delivery over at least four months with a single treatment.
OTX-TIC (travoprost intracameral implant)
Our product candidate OTX-TIC is a bioresorbable hydrogel implant incorporating travoprost that is designed to be
administered by a physician as an intracameral injection with an initial target duration of drug release of four to six months.
We are currently conducting a multi-center, open-label, dose-escalation, proof-of-concept Phase 1 clinical trial to evaluate
the safety, biological activity, durability and tolerability of OTX-TIC compared to topical travoprost (eye drops) in patients
with primary open-angle glaucoma or ocular hypertension. The trial consists of four patient cohorts: cohort 1 is 5 subjects
who are receiving a 15 µg dose, cohort 2 is 4 subjects who are receiving a 26 µg dose, cohort 3 is 5 subjects who are
receiving a 15 µg with a fast-degrading implant, and cohort 4 is 5 subjects who are receiving a 5 µg with a fast-degrading
implant.
We presented interim data on all four patient cohorts at the Glaucoma360 Virtual Conference in January 2021. In
this Phase 1 clinical trial, with a single implant, several subjects were able to achieve a decrease in IOP at least as large as
that of the current standard of care. Many subjects exhibited an IOP-lowering effect of more than six months in
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cohorts 1 and 2 and between three and six months in cohorts 3 and 4, the cohorts in which the fast-degrading implant was
used. In the clinical trial, OTX-TIC was observed to have a generally favorable safety profile, with no reported ocular
serious adverse events. Corneal health, as measured by endothelial cell counts, pachymetry assessments and slit lamp
examinations did not indicate a clinically meaningful change from baseline.
In mid-2021, we plan to initiate a Phase 2 clinical trial to evaluate two formulations of OTX-TIC for the treatment of
glaucoma or ocular hypertension in patients compared to Durysta (Allergan). The non-study eye of each patient will
receive a topical prostaglandin daily. Certain subjects in the Phase 2 clinical trial will receive the same formulation used in
cohort 1 of the Phase 1 clinical trial, containing a 26 µg dose of drug and utilizing a standard implant, and others will
receive the same formulation used in cohort 4 of the Phase 1 clinical trial, containing a 5 µg dose of drug and utilizing a
fast-degrading implant.
Ocular Surface Disease Programs
We are engaged in the development of formulations of our hydrogel administered via intracanalicular inserts to
address large markets for diseases and conditions of the surface of the eye. Our initial development efforts are focused on
the use of our extended-delivery hydrogel in combination with well-known and well-understood drugs (cyclosporine and
corticosteroids) for the treatment of dry eye disease and allergic conjunctivitis.
Dry Eye Disease
OTX-CSI (cyclosporine intracanalicular insert)
Our product candidate, OTX-CSI, incorporates the FDA-approved immunomodulator cyclosporine as a
preservative-free active pharmaceutical ingredient into a hydrogel, drug-eluting intracanalicular insert. The product
candidate is designed for a duration of three to four months for patients suffering from moderate to severe dry eye and to be
administered by a physician as a bioresorbable intracanalicular insert.
In October 2020, we reported topline data from our five subject Phase 1 clinical trial evaluating OTX-CSI in the
treatment of dry eye disease. All subjects completed the 16-week study period with no drop-outs. There were no serious
adverse effects reported. The inserts were observed to be generally well-tolerated, and there were no adverse events of
stinging, irritation, blurred vision or tearing reported or observed.
In September 2020, we dosed the first patients in a Phase 2 clinical trial designed to assess the safety, tolerability,
and durability and to evaluate the efficacy of OTX-CSI for the chronic treatment of dry eye disease. The Phase 2 clinical
trial is a U.S.-based, randomized, double-masked, multi-center trial evaluating two different formulations of OTX-CSI
compared to a vehicle insert in approximately 140 subjects who are to be followed for a period of approximately 16 weeks.
Endpoints include tear production as measured by the Schirmer’s test; signs of dry eye disease as measured by corneal
fluorescein staining; and symptoms of dry eye disease as measured by the visual analog scale, or VAS, eye dryness severity
score and the VAS dry eye frequency score. We currently anticipate receiving topline data from this Phase 2 clinical trial
by year-end 2021.
OTX-DED (dexamethasone intracanalicular insert)
Our product candidate OTX-DED incorporates the FDA-approved corticosteroid dexamethasone as a preservative-
free active pharmaceutical ingredient in a hydrogel, drug-eluting intracanalicular insert. OTX-DED incorporates the same
active drug as DEXTENZA, but it includes a lower dose of the drug, delivers it via a smaller insert, and is designed to
release it over a period of two to three weeks, compared with up to thirty days in the case of DEXTENZA. We believe that
OTX-DED will address several of the current limitations of existing dry eye disease steroid treatments, the toxicity
associated with preservatives, and the potential for abuse of topical steroids.
In February 2021, we dosed the first patient in a U.S.-based prospective, randomized, double-masked, vehicle-
controlled Phase 2 clinical trial evaluating two different formulations of OTX-DED for the short-term treatment of the
signs and symptoms of dry eye disease compared to a hydrogel insert in approximately 150 subjects. We anticipate
receiving topline data from this Phase 2 clinical trial in the first half of 2022.
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Allergic Conjunctivitis
DEXTENZA (dexamethasone ophthalmic insert) for the Treatment of Ocular Itching Associated with Allergic Conjunctivitis
DEXTENZA, incorporating the corticosteroid dexamethasone, is our FDA-approved intracanalicular insert for the
treatment of post-surgical ocular inflammation and pain. We believe that allergic conjunctivitis represents a discrete
potential market for DEXTENZA as a physician administered, hands-free, therapy administered in the office setting and
designed to release preservative-free dexamethasone to the ocular surface for up to 30 days.
In April 2020, we reported topline results of a 96-subject, third pivotal Phase 3 clinical trial evaluating DEXTENZA
for the treatment of ocular itching associated with allergic conjunctivitis. DEXTENZA-treated subjects demonstrated a
statistically significant (p-value < 0.0001) difference in mean ocular itching scores, compared to vehicle-treated subjects, at
all three pre-specified time points.
In the fourth quarter of 2020, we filed a supplemental new drug application, or sNDA, for DEXTENZA to include
the treatment of ocular itching associated with allergic conjunctivitis as an additional indication. The FDA has accepted
our sNDA for filing and has established a target action date under the Prescription Drug User Fee Act, commonly known as
PDUFA, of October 18, 2021. If our sNDA is approved, we expect to launch DEXTENZA for the treatment of ocular
itching associated with allergic conjunctivitis in the first half of 2022.
Post-Surgical Ocular Inflammation and Pain
DEXTENZA (dexamethasone ophthalmic insert) 0.4 mg for intracanalicular use for the Treatment of Post-Surgical Ocular
Inflammation and Pain
As described above, DEXTENZA incorporates the FDA-approved corticosteroid dexamethasone as a preservative-
free active pharmaceutical ingredient into a hydrogel, drug-eluting intracanalicular insert for the treatment of post-surgical
ocular inflammation and pain. We commercially launched DEXTENZA in the United States in July 2019. DEXTENZA is
the first FDA-approved intracanalicular insert delivering dexamethasone to treat post-surgical ocular inflammation and
pain for up to 30 days with a single administration.
In September 2020, we announced that we had dosed the first patients in a Phase 3 clinical trial evaluating
DEXTENZA for the treatment of post-surgical ocular inflammation and pain in children following cataract surgery. This
planned clinical trial is a post-approval requirement of the FDA in accordance with the Pediatric Research Equity Act of
2003, in connection with the FDA’s prior approval of DEXTENZA for the treatment of inflammation and pain following
ophthalmic surgery in adults.
Additionally, we have received proposals for, and plan to support, several investigator-initiated trials evaluating
DEXTENZA in different clinical situations. To date, third-party clinical investigators have initiated over 25 trials to study
the use of DEXTENZA in cataract surgery, other ophthalmic surgeries and other potential indications. Seven of the trials
have completed enrollment, and the remaining trials are actively enrolling and treated patients are being followed.
ReSure Sealant
In 2014, we commercially launched ReSure Sealant in the United States as a device approved to prevent wound leaks
in corneal incisions following cataract surgery. In the pivotal clinical trials that formed the basis for FDA approval, ReSure
Sealant provided superior wound closure and a better safety profile than sutured closure.
The FDA required two post-approval studies as a condition for approval of our premarket approval, or PMA,
application for ReSure Sealant. The FDA has confirmed that first post-approval study, identified as the Clinical PAS, has
been completed. The second post-approval study, which we refer to as the Device Exposure Registry Study, was a
retrospective analysis of the IRIS Registry, comparing endophthalmitis rates from sites that purchased ReSure Sealant
versus those sites that did not. We completed the retrospective study in accordance with our agreement with the FDA and
submitted the final study report for the Device Exposure Registry Study to the FDA in January 2021. We anticipate
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that the FDA will review the report within 90 days of our submission and notify us as to whether our obligation to conduct
the post-approval study has been satisfied.
While ReSure Sealant remains commercially available in the United States, commercial and sales support for this
product are modest at this time. We have received only limited revenues from ReSure Sealant to date and anticipate only
limited sales for 2021.
AffaMed License Agreement
In October 2020, we entered into a license agreement and collaboration with AffaMed Therapeutics Limited, or
AffaMed, for the development and commercialization of DEXTENZA and OTX-TIC in mainland China, Hong Kong,
Macau, and Taiwan; South Korea; and the ASEAN markets (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the
Philippines, Singapore, Thailand and Vietnam). Under the terms of the agreement, we received an upfront payment of $12
million and are eligible to receive development, regulatory and commercial milestone payments and clinical development
support payments of up to $91 million in the aggregate, as well as royalties from future product sales. Royalties are tiered
and will range from the low teens to low twenty percent range. In return, we agreed to grant AffaMed exclusive rights to
develop and commercialize DEXTENZA for the treatment of post-surgical inflammation and pain following ophthalmic
surgery and ocular itching in patients with allergic conjunctivitis, and OTX-TIC for the reduction of elevated intraocular
pressure in patients with primary open-angle glaucoma or ocular hypertension in specified Asian markets. We retain the
right to develop and commercialize DEXTENZA and OTX-TIC in all other global markets.
Additional Potential Areas for Growth
We continue to leverage the potential of our hydrogel platform to explore areas for growth with our focus on
formulating, developing and commercializing innovative therapies for diseases and conditions of the eye. In September
2018, we entered into a second amended and restated license agreement, or Second Amended Agreement, with Incept
LLC, an intellectual property holding company, or Incept. The Second Amended Agreement expanded the scope of our
intellectual property license to include products delivered for the treatment of acute post-surgical pain or for the treatment
of ear, nose and/or throat diseases or conditions, subject to specified exceptions.
Market Background
Our clinical stage product candidates and our marketed products are based on a proprietary bioresorbable hydrogel
technology platform that uses polyethylene glycol, or PEG, as a key component. Bioresorbable materials gradually break
down in the body into non-toxic, water soluble compounds that are cleared by normal biological processes. PEG is used in
many pharmaceutical products and is widely considered to be safe and biocompatible. Our technology platform allows us
to tailor the physical properties, drug release profiles and bioresorption rates of our hydrogels to meet the needs of specific
clinical indications. We have used this platform to engineer each of our intracanalicular insert, intracameral implant, and
intravitreal implant product candidates; our suprachoroidal formulations; and ReSure Sealant. Our technical capabilities
include a deep understanding of the polymer chemistry of PEG-based hydrogels and the design of the specialized
manufacturing processes required to achieve a reliable, preservative-free and high purity product.
Product Pipeline
The following table summarizes the status of our key product development programs and DEXTENZA, our
marketed product. We hold worldwide exclusive commercial rights to the core technology underlying all of our products in
development and have not granted commercial rights to any marketing partners other than the option on commercial rights
we granted to Regeneron for the delivery of protein-based anti-VEGF drugs in our hydrogel depot for the
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treatment of retinal diseases and a license agreement and collaboration with AffaMed for the development and
commercialization of DEXTENZA and OTX-TIC in the geographies agreed to between the parties.
Our Strategy
We are pursuing three overall strategic goals: to make prescription eye drops obsolete; to make immediate release
back-of-the-eye injections obsolete; and to extend our hydrogel platform technology for use beyond the eye to other areas
of the body. The key tactics of our strategy to achieve these goals are:
● Advance our four core clinical development programs through Phase 2. We believe the greatest potential value
inflection points for us are the topline data readouts of the Phase 2 clinical trials of our four core clinical
development programs: OTX-TKI for the treatment of wet AMD, OTX-TIC for the treatment of glaucoma or
ocular hypertension, OTX-CSI for the treatment of dry eye disease, and OTX-DED for the short-term treatment
of the signs and symptoms of dry eye disease.
● Expand Commercialization of DEXTENZA for the treatment of ocular inflammation and pain following
ophthalmic surgery. We expect to grow our salesforce to increase our active number of accounts and penetrate
each account more deeply. We intend to focus sales efforts on ambulatory surgical centers, or ASCs, that
generate the largest volumes of cataract surgeries in the United States. We are also seeking to expand the label
for DEXTENZA—beginning with our sNDA to add ocular itching associated with allergic conjunctivitis as an
approved indication—to permit the product’s use outside of the surgical setting and into ophthalmologists’
offices.
● Apply our local programmed-release hydrogel-based technology to create additional proprietary solutions for
ophthalmic diseases and conditions. In collaboration with Regeneron, we are conducting preclinical research
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and development activities regarding an extended-delivery formulation of the VEGF trap aflibercept, currently
marketed under the brand name Eylea, to be delivered to the suprachoroidal space. We are assessing preclinical
product candidates for the ophthalmic space that leverage not only our proprietary PEG-based bioresorbable
hydrogel technology platform but also active pharmaceutical ingredients used in FDA-approved ophthalmic
drugs that are or are expected to become available on a generic basis. Finally, we are frequently in discussions
with other companies operating in the ophthalmic space regarding potential collaborations to combine our local
programmed-release hydrogel technology with their proprietary drug formulations to address additional diseases
and conditions of the eye.
● Address rest-of-world commercial opportunities through licensing and collaborations agreements. In the fourth
quarter of 2020, we announced a license agreement and collaboration with AffaMed for the development and
commercialization of DEXTENZA and OTX-TIC in specified Asian markets. From time to time, we may
consider additional arrangements with other companies to address markets outside of the United States.
● Utilize our hydrogel platform to enable local programmed-release of therapeutics to areas of the body outside
the eye. We have licensed certain of Incept’s intellectual property rights for the development of product
candidates for the treatment of acute post-surgical pain or for the treatment of ear, nose and/or throat diseases or
conditions, subject to specified exceptions. We intend to explore programs outside of the eye not only on our
own but also potentially through collaborations with third parties who have expertise and experience with other
therapeutics as well as other areas of the body.
Eye Disease
Eye disease can be caused by many factors and can affect both the front and back of the eye.
The front of the human eye consists of the cornea on the surface of the eye, the lens and the aqueous humor, which is
a transparent fluid that fills the anterior chamber between the lens and the cornea. The tissue surrounding the eye also
serves important functions. There is a natural opening, called a punctum, located in the inner portion of each upper and
lower eyelid near the nose. The puncta open into nasolacrimal ducts, which collect and drain tears. The conjunctiva is the
membrane covering the inside of the eyelids and the white part of the eye, known as the sclera. It helps to protect the eye
from microbes and to lubricate the eye. Diseases and conditions affecting the front of the eye have generally been treated
with either surgery or with medications delivered to the ocular surface by eye drops.
The back of the eye contains the retina, which is the light sensing layer of tissue; the vitreous humor, which is a
transparent gel that fills the vitreous chamber between the lens and the retina; and the optic nerve, which transmits visual
information from the retina to the brain. Eye disease can be caused by many factors and can affect both the front and back
of the eye. Intravitreal injections or oral pills have typically been used to deliver medications to the back of the eye.
Cross Section of Eye
Tear Drainage System
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We currently focus on some of the largest markets in ophthalmology. According to the Market Scope 2019 reports,
our product candidates seek to address select indications within segments of ophthalmology that, in the aggregate, account
for more than $20 billion global annual sales.
Retinal Diseases
One of the principal retinal diseases is wet AMD, a serious disease of the central portion of the retina, known as the
macula, that is responsible for detailed central vision and color perception. Wet AMD is characterized by abnormal new
blood vessel formation, referred to as neovascularization, which results in blood vessel leakage and retinal distortion. If
untreated, neovascularization in wet AMD patients typically results in formation of a scar under the macular region of the
retina. The current standard of care for wet AMD is treatment with drugs that target VEGF, one of several proteins
involved in neovascularization.
Wet AMD is the leading cause of blindness in people over the age of 55 in the United States and the European
Union. According to the 2019 Market Scope Retinal Disease Report, there are approximately 8.0 million people in the
United States who suffer from vision-threatening retinal diseases. This population is expected to grow at a 2.4% compound
annual growth rate through 2024.
Because eye drops are unable to carry effective drug concentrations to the back of the eye, intravitreal injections or
oral medications are used to deliver medications to this location. However, the frequency of intravitreal injection can be a
significant burden on patients, caregivers and clinicians. For example, the current treatment protocol for wet AMD
involves monthly or bi-monthly injections. Intravitreal injections can lead to patient discomfort, a transient increase in IOP,
and ocular inflammation and infection. Although serious adverse event rates after treatment with anti-VEGF compounds
are low, intravitreal injections can result in severe complications and damage to the retina and other structures of the eye,
such as ocular hemorrhage and tears in the retinal pigment epithelium.
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Market Data
The global market for retinal disease was approximately $13.0 billion in 2019 and was estimated to grow at
approximately 11% per year through 2024 according to Market Scope. The U.S. market accounted for just over 50% of the
global market or $6.8 billion in 2019.
The anti-VEGF market for the treatment of wet AMD consists predominantly of three drugs that are approved for
marketing and primarily prescribed for the treatment of wet AMD: Eylea, marketed in the United States by Regeneron;
Lucentis, marketed in the United States by Genentech; and Beovu, marketed in the United States by Novartis. Avastin, a
cancer treatment drug, marketed by Genentech, is also used off-label for the treatment of wet AMD.
Glaucoma
Glaucoma is a progressive and highly individualized disease in which elevated levels of IOP are associated with
damage to the optic nerve, which results in irreversible vision loss. According to the World Health Organization, glaucoma
is the second leading cause of blindness in the world. Ocular hypertension is characterized by elevated levels of IOP
without any optic nerve damage. Patients with ocular hypertension are at high risk of developing glaucoma.
Glaucoma impacts more than 2.7 million people age 40 or older in the United States. The primary goal of glaucoma
treatment is to slow the progression of this chronic disease by reducing IOP, and many medications can accomplish this.
Importantly, however, adherence to current topical glaucoma therapies is known to be particularly poor with reported rates
of non-adherence from 30% to 80%. These low compliance rates may be associated with disease progression and loss of
vision and may be part of the reason that glaucoma is a leading cause of blindness in people over 60 years of age.
In a healthy eye, fluid is continuously produced and drained to maintain pressure equilibrium and provide nutrients to
the ocular tissue. Excess fluid production or insufficient drainage of fluid in the front of the eye or a combination of these
problems causes increased IOP. The increased IOP associated with uncontrolled glaucoma results in degeneration of the
optic nerve in the back of the eye and loss of peripheral vision. Once glaucoma develops, it is a chronic condition that
requires life-long treatment.
Prostaglandins are the most commonly used class of medications to treat patients with glaucoma and are
administered via daily eye drops as the current standard of care. The ability of patients to use and place daily eye drops is
challenging. The products that we are developing are designed to address the issue of compliance by delivering a
prostaglandin analog, or PGA, formulated with our programmed release hydrogel to lower IOP for several months with a
single insert.
Market Data
The global market for glaucoma was estimated by Market Scope at $4.8 billion in 2019 with the U.S. market
representing $1.9 billion.
The market for drugs administered by eye drops for the treatment of glaucoma consists of both branded and generic
products. Branded products have maintained premium pricing and significant market share. These products include
Travatan Z (travoprost) marketed by Alcon and Lumigan (bimatoprost) marketed by Allergan. The relevant patents
covering travoprost expired in December 2014. Commonly used generic drugs include latanoprost and timolol.
Ocular Surface Diseases
Dry Eye Disease
Dry eye disease is a chronic, multifactorial disease affecting the tears and ocular surface that can result in dryness,
inflammation, irritation, pain, tear film instability, visual disturbance and ocular surface damage. Dry eye disease can have
a significant impact on quality of life and can potentially cause long-term damage to the ocular surface. Due to the impact
of dry eye disease on tear film dynamics, the condition can affect performance of common vision-related activities such as
reading, using a computer and driving, and can lead to complications associated with visual impairment. In addition, the
vast majority of dry eye patients experience acute episodic exacerbations of their symptoms, which are commonly referred
to as flares, at various times throughout the year. These flares can be triggered by
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numerous factors, including exposure to allergens, pollution, wind and low humidity, intense visual concentration such as
watching television and working at a computer, hormonal changes, contact lens wear, smoking and sleep deprivation,
which cause ocular surface inflammation and impact tear production and/or tear film stability.
There are approximately 17.2 million patients diagnosed with dry eye disease in the United States, according to the
Market Scope 2019 Dry Eye Products Market Report. Approximately 8.6 million of those patients are diagnosed with
moderate to severe dry eye while the remaining 8.6 million patients are diagnosed with episodic dry eye disease. The
prevalence of dry eye disease increases with age, and we expect that the number of dry eye disease cases will increase as
the U.S. population continues to age.
The current standard of care for moderate to severe dry eye disease is the use of artificial tears and topical
anti- inflammatory and immune modulating drugs administered by prescription eye drops. The anti-inflammatory and
immune modulating prescription drug market consists of Restasis®, for increasing tear production, marketed by Allergan;
Cequa™ for increasing tear production, marketed by Sun Ophthalmics in the United States; lifitegrast, for the treatment of
the signs and symptoms of dry eye disease, marketed by Novartis under the brand name Xiidra®; and off-label use of
corticosteroids. As each of Restasis and Xiidra have a relatively long onset of action, they are not generally used for the
short-term treatment of episodic dry eye flares. In addition, patients have reported significant issues with stinging and
burning when using several of the current treatments.
Market Data
The global market for dry ocular surface disease, which we refer to as dry eye disease, was estimated by Market
Scope at $5.1 billion in 2019 with the U.S. market representing $2.1 billion, composed of approximately $1.5 billion in
prescriptions and $0.6 billion in over-the-counter medications. Within the prescription category, Restasis recorded sales in
2019 of approximately $1.2 billion in the United States while Xiidra recorded estimated sales of $0.3 billion in the United
States.
Allergic Conjunctivitis
Allergic conjunctivitis, another ocular surface disease, is an inflammatory disease of the conjunctiva resulting
primarily from a reaction to allergy- causing substances such as pollen or pet dander. The primary sign of this inflammation
is redness and the primary symptom is acute itching. Allergic conjunctivitis ranges in clinical severity from relatively mild,
common forms to more severe forms that can cause impaired vision. According to a study on the management of seasonal
allergic conjunctivitis published in 2012 in the peer-reviewed journal Acta Ophthalmologica, allergic conjunctivitis affects
15% to 40% of the U.S. population. The first line of defense against allergic conjunctivitis is avoidance of the allergen. If
this is not successful, physicians typically prescribe a combination of a topical mast cell stabilizer and anti-histamine.
These treatments act to reduce the signs and symptoms of the early phase allergic reaction. For the subset of patients with
chronic or more severe forms of allergic conjunctivitis, anti-histamines and mast cell stabilizers are often not sufficient to
treat their signs and symptoms. These refractory patients are frequently treated with topical corticosteroids administered by
prescription eye drops.
It is estimated that up to 10 million people in the United States seek medical attention annually for the inflammatory
response associated with allergic conjunctivitis caused by both seasonal and perennial allergens.
Market Data
According to IMS Health data, approximately 6.1 million anti-allergy eye drop prescriptions were filled in the United
States in 2020, resulting in sales of approximately $401.2 million. The market to treat allergic conjunctivitis consists of
antihistamines, mast-cell stabilizers and steroid eye drops and consists of both branded and generic products. Branded
steroids include Lotemax and Alrex (loteprednol etabonate) marketed by Bausch & Lomb, and Durezol (difluprednate)
marketed by Alcon. Commonly used generic steroids include prednisolone, dexamethasone and fluorometholone. Pataday
and Patanol formerly led the prescription market in this category but have recently been made available as over-the-counter
products.
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Post-Surgical Ocular Inflammation and Pain
Ocular inflammation and pain are common side effects following ophthalmic surgery. Frequently performed
ophthalmic surgeries include cataract, refractive, vitreoretinal, cornea, and glaucoma procedures. Physicians prescribe anti-
inflammatory drugs, such as corticosteroids, which are typically administered through eye drops multiple times per day,
following ocular surgery as the standard of care. These drugs improve patient comfort and also accelerate recovery through
disruption of the inflammatory cascade resulting in decreased inflammation and reduced activity of the immune system.
Physicians also frequently prescribe non-steroidal anti-inflammatory drugs, or NSAIDs, as adjunctive or combination
therapy to supplement the use of corticosteroids. If left untreated, inflammation of the eye may result in further ocular
complications, including pain, scarring and vision loss.
Market Data
Market Scope has estimated that approximately 4.7 million ocular surgeries were to be performed in the United
States in 2020, of which approximately 3.2 million are estimated to be cataract surgeries. In 2021, Market Scope estimates
5.1 million cataract surgeries are to be performed. We focus our sales efforts on patients covered by Medicare Part B
which accounts for roughly 50% of all cataract surgeries or approximately 2 million surgeries annually. At the current
wholesale acquisition price of $538.83 per insert, we estimate that there is a near-term addressable market of approximately
$1 billion per year in the surgical space.
According to IMS Health data, approximately 17.7 million prescriptions were filled in the United States in 2020 for
anti-inflammatory drugs administered by prescription eye drops for ocular diseases and conditions, resulting in sales of
approximately $4.3 billion. These prescriptions consisted of approximately 7.4 million prescriptions and $580.0 million in
sales for single-agent corticosteroids, 2.8 million prescriptions and $293.4 million in sales for NSAIDs, 3.7 million
prescriptions and $262.7 million in sales for corticosteroid and antibiotic combination products and approximately
3.6 million prescriptions and $2.9 billion in sales of Restasis and Xiidra for dry eye disease.
The Use of Eye Drops and its Limitations
Eye drops are widely used to deliver medications directly to the ocular surface and to intraocular tissue in the front of
the eye. Eye drops are administrable by the patient or care provider, inexpensive to produce and treat the local tissue.
However, eye drops have significant limitations, especially when used for chronic diseases or when requiring frequent
administration, including:
● Lack of patient compliance. Eye drops require frequent administration. For example, steroids for ophthalmic use
require administration as frequently as four to six times daily and require tapered dosing over the course of the
therapy. As a result, patient compliance with required dosing regimens frequently suffers. According to a
published third-party study, more than 50% of glaucoma patients are not compliant with their prostaglandin
therapy and do not refill prescriptions as required or do not follow the prescribed regimen within six months of
initiating therapy. Poor patient compliance can lead to diminished efficacy and disease progression.
● Difficulty in administration. Eye drops are difficult to administer for many patients, in particularly the elderly,
due to physical or mental conditions such as arthritis or dementia. Difficulty in self-administering eye drops may
lead to bacterial contamination in the bottle resulting from incorrect usage, limited accuracy administering the
drops directly into the eye and the potential washout of drops from the eye. We believe that this also may play a
large role in lack of patient compliance and resulting diminished efficacy of treatment.
● Need for high concentrations. After eye drops are administered to the ocular surface, the tear film rapidly
renews. Most topically applied solutions are washed away by new tear fluid within 15 to 30 seconds. Because
contact time with the ocular surface is short, less than 5% of the applied dose actually penetrates to reach
intraocular tissues. As a result, eye drops generally require frequent administration at high drug concentrations to
deliver a meaningful amount of drug to the eye. This pulsed therapy results in significant variations in drug
concentrations over a treatment period, which we refer to as peak and valley dosing. At peak levels, the high
concentrations can result in side effects, such as burning, stinging, redness of the clear membrane covering the
white part of the eye, referred to as hyperemia, and spikes in IOP, which may lead to drug induced glaucoma. At
low concentration levels, the drug may not be effective, thus allowing the disease to progress.
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● Side effects of preservatives. To guard against contamination, many eye drops are formulated with antimicrobial
preservatives, most commonly benzalkonium chloride, or BAK. Patients on long term or chronic therapy, such
as glaucoma patients, often suffer reactions, which have been linked to BAK, including burning, stinging,
hyperemia, irritation and eye dryness. Less frequently, conjunctivitis or corneal damage may result.
As a result of these limitations, eye drops are often suboptimal as a therapeutic option for the treatment of many
diseases and conditions of the front of the eye.
Challenges of Back-of-the-Eye Injections
An intravitreal injection is a procedure to place a medication directly into the space in the back of the eye called the
vitreous cavity, which is filled with a jelly-like fluid called the vitreous humor gel. The procedure is usually performed by a
trained retina specialist in the office setting. Intravitreal injections are used to administer medications to treat a variety of
chronic conditions; wet AMD, DME and RVO are among the most common conditions treated with intravitreal anti-VEGF
drugs. Anti-VEGF drugs and steroids help to reduce fluid leakage associated with these disorders.
While anti-VEGF treatment regimens can be very effective therapies, there are a number of significant drawbacks,
driven primarily by the frequency of injections that typically range from every six to eight weeks. The actual injection at
the time of administration is uncomfortable for patients and can be a deterrent in terms of compliance. Then there is the
burden to both patients and their caregivers of regular office visits. These patients may not be mobile enough to travel to
the office on their own and therefore require not only the assistance of a caregiver but also transportation to and from the
office. And finally, while intravitreal injections are typically safe, there is the potential risk of endophthalmitis (infection in
the eye), inflammation, bleeding into the vitreous gel and retinal detachment that comes with injections.
As a result of these limitations, there is a significant unmet need for technologies that will allow for a longer
duration of effect and an overall reduced number of injections.
Ocular Wound Closure
According to the World Health Organization, cataracts are the leading cause of visual impairment eventually
progressing to blindness. According to the American Academy of Ophthalmology Cataract and Anterior Segment Panel’s
2011 Preferred Practice Pattern Guidelines, cataract extraction is the most commonly performed eye surgery in the United
States. Market Scope has estimated that in 2019 there were approximately 4.0 million cataract extractions performed in the
United States.
A cataract is a clouding of the lens inside the front of the eye. During cataract surgery, a patient’s cloudy natural lens
is removed and replaced with a prosthetic intraocular lens. Clear corneal incision that allows entry to the eye is the typical
method for performing cataract surgery. The most common post-surgical approach is to allow the incisions to self-seal, or
close, through normal biological processes. However, self-sealing incisions can open spontaneously, especially within 12 to
24 hours following surgery, when IOP fluctuates or as a result of the application of external pressure or manipulation. In
addition, incisions that are left to self-seal may leak, which can sometimes result in complications. Complications from
fluid leakage include the development of hypotony, or low IOP, which can lead to corneal decompensation and vision loss,
as well as the potential for infection. The implanted intraocular lens also may shift in position due to hypotony, leading to
reduced visual outcomes following surgery.
Sutures are the most widely used alternative method of wound closure. However, sutures do not completely prevent
fluid leakage, are time-consuming to place and have been associated with patient discomfort, corneal distortion, and
shallowing of the interior chamber. Sutures may also lead to astigmatism, a distortion of the cornea. An additional visit
may be required to remove sutures, thus adding time, inconvenience and expense to the surgical process. These
shortcomings limit the use of sutures in ophthalmic surgery. In a 2012 survey of ophthalmologists in the United States
conducted by Lachman Consulting LLC, a healthcare consulting firm, respondents indicated that they use sutures in
approximately 14% of cataract surgeries.
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The Ocular Therapeutix Approach
Our Hydrogel Technology Platform
We apply our expertise with an established bioresorbable hydrogel technology to the development of products for
local programmed-release of known, FDA-approved therapeutic agents for a variety of ophthalmic diseases and conditions
and to ophthalmic wound closure.
Our bioresorbable hydrogel technology is based on the use of a proprietary form of PEG. Our technical capabilities
include a deep understanding of the polymer chemistry of PEG-based hydrogels and the design of the highly specialized
manufacturing processes required to achieve a reliable, preservative-free and pure product. We tailor the hydrogel to act as
a vehicle for local programmed-release drug delivery to the eye and as an ocular tissue sealant.
We create our hydrogels by cross-linking PEG molecules to form a network that resembles a three-dimensional mesh
on a molecular level. Our PEG molecules are branched, with four to eight branches or arms. Each arm bears a reactive site
on its end. Our cross-linking chemistry uses a second molecule with four arms, bearing complimentary reactive sites on
each end, such that when combined with the PEG molecules, a network spontaneously forms. When swollen with water,
this molecular network forms a hydrogel. We design these hydrogels to slowly degrade in the presence of water, a process
called hydrolysis, by inserting a biodegradable linkage between the PEG molecule and the cross-linked molecule. By
appropriately selecting the number of arms of the PEG molecule and the biodegradable linkage, we can design hydrogels
with varying mechanical properties and bioresorption rates. Because the body has an abundance of water at a constant
temperature and pH level, hydrolysis provides a predictable and reproducible degradation rate. Our technology enables us
to make hydrogels that can bioresorb over days, weeks or several months. The figure below depicts the formation and
bioresorption of the hydrogel for ReSure Sealant.
Intracanalicular Inserts
A punctum is a natural opening located in the inner portion of the eyelid near the nose. There is a punctum in each of
the lower eyelids and the upper eyelids. The puncta open into nasolacrimal ducts, which collect and drain tears produced
by the eyes’ lacrimal glands. Tears produced in the lacrimal glands sweep across the eye surface and drain through the
puncta to the nasal cavity. The section of the nasolacrimal duct immediately beyond the puncta is called the vertical
canaliculus. Intracanalicular inserts that do not contain an active drug are commonly used for treatment of dry eye disease
by physically blocking tear drainage. Because intracanalicular inserts stay in contact with the tear film, they are well suited
for local programmed-release of drug to the eye.
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Intracanalicular insert shown positioned in the vertical canaliculus
Our intracanalicular inserts utilize our proprietary hydrogel technology and are embedded with an active drug.
Following insertion through the punctum, our inserts swell in tear fluid to fill the vertical canaliculus, which secures the
inserts in place. We design our inserts to release drug in a programmed fashion, tailored to each disease state, back through
the punctum to the surface of the eye. Over time the inserts liquefy and are cleared through the nasolacrimal duct. If
necessary due to excessive tearing, discomfort or improper placement, a healthcare professional can remove an
intracanalicular insert by a process of pushing the soft insert back through the punctum.
Our inserts allow incorporation of a variety of drugs with a controllable range of delivery durations and delivery
rates. For acute conditions, such as post-surgical ocular inflammation and pain and ocular itching associated with allergic
conjunctivitis, we have designed our intracanalicular inserts to provide a local programmed-release of therapeutic levels of
drug for the duration of treatment. For chronic diseases, such as glaucoma, we have designed our intracanalicular inserts
for repeat administration with extended dosing periods. We are concentrating our initial development efforts on
intracanalicular inserts incorporating active pharmaceutical ingredients that are approved by the FDA for the targeted
indication and that satisfy other specific selection criteria that we have developed.
We manufacture our intracanalicular inserts from dried PEG-based hydrogel formed into tiny rods that hold an active
pharmaceutical ingredient in a preservative-free formulation. We embed the active pharmaceutical ingredient in the pre-
hydrogel liquid formulation, which then solidifies to form a hydrogel containing the drug within. The relative size of one of
our intracanalicular inserts is shown in the figure below.
We provide the intracanalicular insert as a thin dry rod to facilitate insertion through the narrow punctal opening.
Upon hydration with tear fluid, the insert swells, softens, and conforms to roughly the size and shape of the vertical
canaliculus, to secure it in place. We incorporate the active pharmaceutical ingredient in the form of micronized particles
embedded directly in the hydrogel or as bioresorbable microspheres.
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We have included a fluorescent label, or marker, in our intracanalicular insert hydrogel to serve as a visualization aid
for the healthcare professional to confirm the insert’s presence. The viewer applies a blue handheld light and a clear yellow
filter aid to see the insert in the eyelid as shown in the figure below.
Because intracanalicular inserts stay in contact with the tear film, other companies have pursued the development of
intracanalicular punctum plugs containing active drugs for local programmed release to the ocular surface. However, these
earlier product designs had significant limitations with respect to drug capacity, drug release kinetics and patient comfort
and used non-degradable punctum plugs with a clear silicone hard rubber shell containing only a core with active drug.
These plugs typically extended outside of the punctal opening and secured themselves in place with an external cap. The
external cap was in constant contact with the surface of the eye, which may cause irritation and discomfort in some cases.
In addition, some prior designs resorted to plugging both the upper and lower puncta, which could cause excessive tearing
and patient discomfort. These designs did not incorporate a visualization agent to allow the patient and physician to assess
the presence of the plug.
In contrast to these prior approaches, we have designed our intracanalicular inserts to:
● incorporate the active pharmaceutical ingredient throughout the insert rather than just in a core to allow for
higher drug capacity and better control over drug release;
● be bioresorbable so that removal is not required for acute conditions and required infrequently for chronic
conditions;
● be soft and to fit beneath the punctal opening for patient comfort; and
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● include a fluorescent label to allow the healthcare professional and patient to visualize and assess the presence
of the insert.
We select the active pharmaceutical ingredients for our local programmed-release drug delivery product candidates,
including our intracanalicular inserts, based on criteria we have developed through our extensive experience with hydrogel
insert systems. Our active pharmaceutical ingredient selection criteria include:
● prior approval by the FDA for the targeted ophthalmic indication, except for our OTX-TKI program in which
the active pharmaceutical ingredient, axitinib, is not currently approved for an ophthalmic indication;
● expiration of relevant patent protection prior to or within our anticipated development timeline;
● high potency to minimize required drug load in the intracanalicular insert;
● availability from a qualified supplier; and
● compatibility with our drug delivery system.
We believe our intracanalicular insert, intracameral implant and intravitreal implant product candidates may offer a
range of favorable attributes as compared to eye drops and immediate release back-of-the-eye injections, including:
● Improved patient compliance. Our inserts and implants are placed by a healthcare professional and are designed
to provide local programmed-release of drug to the ocular surface. Because patients are not responsible for self-
administration of the drug and the inserts and implants dissipate over time and do not require removal for acute
conditions or frequent removal for chronic conditions, we believe our inserts and implants address the problem
of patient compliance.
● Ease of administration. We have designed our inserts and implants to provide the entire course of medication
with a single administration by a healthcare professional for acute conditions or for several months for chronic
conditions. We believe this avoids the need for frequent administration and the potential complications that
could result if doses are missed.
● Local programmed-release of drug. We have designed our inserts and implants to deliver drug in a programmed
fashion in order to avoid the peak and valley dosing and related side effects and spikes in IOP associated with
eye drops. We also believe programmed-release dosing may improve the therapeutic profile of the active
pharmaceutical ingredient because it eliminates periods of little or no drug presence between eye drop or back
of the eye injection administrations. Further, we are designing our products and product candidates so that their
drug release profiles can be tailored or programmed to match the treatment needs of the disease. For example,
steroids for ophthalmic purposes generally require administration over four weeks, with tapered dosing over this
period. In contrast, PGAs require administration in a steady fashion over the duration of treatment. Our inserts
and implants are designed to fully dissipate and can be removed if necessary by a healthcare professional.
● Avoidance of preservative side effects. Our inserts and implants do not involve the use of preservatives, such as
BAK, which have been linked to side effects including burning, stinging, hyperemia, irritation, eye dryness and,
less frequently, conjunctivitis or corneal damage.
Intracameral Implants
We are engaged in the clinical development of our hydrogel administered via intracameral injection to address retinal
diseases.
Intracameral implants refer to biodegradable or bioresorbable implants placed into the anterior chamber or front of
the eye for the treatment of ocular conditions. The implants are designed to be held in place by currents and gravity
present in the anterior chamber of an eye. As an example, in the case of OTX-TIC, the implant is designed to infuse with
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liquid, settle into the inferior angle of the eye and demonstrate little to no movement. The implants are preferably
polymeric, biodegradable and provide sustained release of at least one therapeutic agent to both the trabecular meshwork
and associated ocular tissue and the fluids within the anterior chamber of an eye.
Intravitreal Implants
We are engaged in the clinical development of our hydrogel administered via intravitreal injection to address the
large and growing markets for diseases and conditions of the back of the eye. Our intravitreal implant product candidates
consist of a PEG-based hydrogel suspension, which contains embedded micronized particles of active drug. We designed
the intravitreal implant to be injected and retained in the vitreous humor, as depicted in the figure below, to provide local
programmed-release intravitreal delivery of anti-VEGF compounds.
Our initial intravitreal implant development efforts are focused on the use of our programmed-release hydrogel in
combination with anti-angiogenic compounds such as protein-based anti-VEGF drugs or small molecule drugs, such as
TKIs, for the treatment of retinal diseases, including wet AMD, RVO and DME. Our initial goal for these programs is to
provide extended delivery of a protein-based large molecule or small molecule TKI targeting VEGF and other indications
over a six-month period or longer following administration of a bioresorbable hydrogel incorporating the drug by an
injection into the vitreous humor. This approach would reduce the frequency of the current monthly or bi-monthly
intravitreal injection regimen for wet AMD and other retinal diseases and potentially provide a more consistent, uniform
release of drug over the treatment period.
We believe TKIs are well suited for use with our platform given their high potency, multi-target capability, and
compatibility with a hydrogel vehicle. In the absence of a sophisticated drug delivery system, these drugs have been
difficult to deliver to the eye for acceptable timeframes at therapeutic levels without causing local and systemic toxicity
due to low drug solubility and notably short half-lives in solution. We believe our local drug delivery technology gives us
potential advantages in this regard.
We have designed our intravitreal implant for delivery using typically available syringes and fine gauge needles
compatible with the current standard of care. Once in the vitreous humor, the hydrogel is designed to retain properties of
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TKI and anti-VEGF compounds until they are released. We have designed the hydrogel to liquefy, dissolve and be cleared
from the eye through hydrolysis over time. We design our hydrogels to control the hydrogel biodegradation rate and, as a
result, the timing of TKI and anti-VEGF compound release.
By selecting a compound that is compatible with our hydrogel platform technology and that will have expiration of
relevant patents within the timeline of our development program, we avoid the need to license the TKI molecule, thus
retaining full worldwide rights to any products we develop.
Suprachoroidal Injections
The suprachoroidal space, which we refer to as the SCS, is a potential space between the sclera and choroid that
traverses the circumference of the posterior segment of the eye. The SCS is believed to be an attractive site for drug
delivery because drugs are able to target the choroid, retinal pigment endothelium and retina with high bioavailability while
maintaining low levels of drug elsewhere in the eye.
ReSure Sealant for Ocular Wound Closure
ReSure Sealant is our bioresorbable hydrogel device for wound closure following cataract surgery. A surgeon applies
ReSure Sealant as a liquid painted onto the corneal incision. Within about 15 seconds, the sealant cross-links and
transforms into a smooth, lubricious hydrogel that seals the wound. ReSure Sealant dissipates as healing progresses and
does not require removal. In the pivotal clinical trials that formed the basis for FDA approval, ReSure Sealant provided
superior wound closure and a better safety profile than sutured closure.
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Development Pipeline and Marketed Products
The following table summarizes important information about our key product development programs and our
marketed products, DEXTENZA and ReSure Sealant. We hold worldwide commercial rights to each of our product
candidates, DEXTENZA and ReSure Sealant.
Product / Program
Indication
Description
(Active Pharmaceutical
Ingredient)
Stage of
Development
Status
Preclinical Stage
Product Candidates
OTX-AFS
Early-Stage Clinical
Product
Candidates
OTX-TKI
OTX-TIC
OTX-CSI
OTX-DED
Late Stage Clinical
Product
Candidates
DEXTENZA
Approved Product
DEXTENZA
ReSure Sealant
Wet AMD,
DME and RVO
Suprachoroidal implant
(Aflibercept)
Preclinical
In collaboration with corporate
partner Regeneron.
Wet AMD
Intravitreal implant
(Axitinib)
Phase 1
Intracameral implant
(Travoprost)
Intracanalicular insert
(Cyclosporine)
Intracanalicular insert
(Dexamethasone)
Phase 1
Phase 2
Phase 2
Glaucoma or
ocular
hypertension
Treatment of dry
eye disease
Short-term
treatment of
signs and
symptoms of dry
eye disease
Australian Phase 1 clinical trial
ongoing. Plan to initiate Phase 1
trial in the United States under eIND
in Q2 2021. Plan to initiate a Phase
2 clinical trial in Australia, pending
the receipt and review of topline data
from the Phase 1 clinical trial in
Australia.
Phase 1 clinical trial ongoing. Plan
to commence Phase 2 clinical trial
mid-2021.
Phase 2 clinical trial ongoing;
topline data anticipated in Q4 2021.
Commenced Phase 2 clinical trial in
first quarter 2021; topline data
anticipated in first half 2022.
Allergic
conjunctivitis
Intracanalicular insert
(Dexamethasone)
sNDA filed
PDUFA target action date of
October 18, 2021.
Post-surgical
ocular
inflammation
and pain
Cataract incision
closure
Intracanalicular insert
(Dexamethasone)
Marketed
Product commercially launched in
the United States in July 2019.
Ocular sealant
Marketed
Product commercially launched in
the United States in February 2014.
Retinal Disease Programs
OTX-TKI (axitinib intravitreal implant)
Our current intravitreal implant development efforts are focused on the use of our sustained-release hydrogel in
combination with anti-angiogenic compounds, including anti-VEGF compounds, for the treatment of wet AMD. Our
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initial implants have delivered anti-VEGF compounds in vitro over our targeted four to six month period, which we believe
could make it possible to reduce the frequency of the current monthly or bi-monthly intravitreal injection regimen for wet
AMD. In addition, our preclinical studies demonstrated a sustained pharmacodynamic effect in vivo of over six months
with a small molecule TKI.
We believe axitinib is well suited for use with our platform given its high potency, multi-target capability, and
compatibility with a hydrogel vehicle. In the absence of a sophisticated drug delivery system, TKIs have been difficult to
deliver to the eye for acceptable time frames at therapeutic levels without causing local and systemic toxicity due to low
drug solubility and very short half-lives in solution. We believe our local programmed-release drug delivery technology
gives us potential advantages in this regard.
In Vitro and preclinical results
We have conducted in vivo pharmacokinetic and pharmacodynamic studies with hydrogels loaded with axitinib
injected intravitreally. Pharmacokinetic data showed retinal tissue drug concentrations in excess of 3,000 times the
published concentration needed to inhibit VEGF by 50% after six months and pharmacodynamic results show sustained
efficacy for six months.
Phase 1 clinical development
We are conducting an open-label, proof-of-concept Phase 1 clinical trial of OTX-TKI for the treatment of patients
with neovascular age related macular degeneration, or wet AMD, caused by excessive blood vessel growth in the back of
the eye due to VEGF. OTX-TKI is a bioresorbable hydrogel implant incorporating axitinib that is designed to be delivered
via intravitreal injection into the vitreous humor of the eye and has an initial target duration of drug release for
approximately six to nine months. Preclinical studies to date have demonstrated suppression of vascular leakage and good
pharmacokinetics in the relevant ocular tissues. The Phase 1 clinical trial was submitted to the Therapeutic Goods
Administration, Australia’s regulatory authority for therapeutic goods, in July 2018.
In the first quarter of 2019, we began dosing subjects in a Phase 1 clinical trial in Australia. This clinical trial is a
prospective, multi-center, open-label, does escalation study designed to evaluate the safety, durability, tolerability, and
biological activity of OTX-TKI. We are evaluating biological activity by following visual acuity over time and measuring
retinal thickness using standard optical coherence tomography, or OCT. Two cohorts have been enrolled, a lower dose
cohort of 200 μg of six subjects and a higher dose cohort of 400 μg of seven subjects. In the first two fully enrolled cohorts,
OTX-TKI was generally well tolerated and observed to have a favorable safety profile with no ocular serious adverse
events noted. In the higher dose cohort, OTX-TKI showed a decrease in central subfield retinal thickness as measured by
mean change in central subfield thickness values by decreases in intraretinal and/or subretinal fluid in some subjects.
We amended our clinical trial protocol to enroll two additional cohorts, cohort 3a consisting of six patients being
administered a 600 µg dose and cohort 3b consisting of six patients being administered a 400 µg dose plus an induction
injection of the anti-VEGF drug aflibercept. Cohort 3a is fully enrolled and patients are being monitored while cohort 3b is
still enrolling.
In February, interim data from this Phase 1 clinical trial of OTX-TKI was presented at the Angiogenesis, Exudation
and Degeneration 2021 Virtual conference hosted by the Bascom Palmer Eye Institute, University of Miami Health
System. We believe that OTX-TKI has demonstrated a preliminary signal of biological activity as observed by a clinically-
meaningful decrease in retinal fluid as measured by high resolution OCT that provides cross-sectional images of the
anatomical structure of the retina. As observed in cohort 2 (400 µg dose) and cohort 3a (600 µg dose), some subjects
showed a decrease in intraretinal or subretinal fluid by two months after injection. In cohort 3b (400 µg dose plus anti-
VEGF induction injection of aflibercept), two subjects were observed to have a decrease in intraretinal and/or subretinal
fluid as early as a week after injection.
In addition, the OTX-TKI implants in cohort 1 were observed to have biodegraded in all subjects within 9 to 10.5
months of injection. It has also been observed that the implants are able to be adequately monitored and that there is
limited to no movement of the implant in the anterior segment of the eye.
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These findings are supported by the graphs below that present the mean change in central subfield thickness, or
CSFT, and in best corrected visual acuity, or BCVA, across the four cohorts as well as specific patient images from cohorts
2, 3a and 3b showing declines in intraretinal and/or subretinal fluid over time.
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OTX-TKI has been observed to have a favorable safety profile and be generally well-tolerated to date. There have
been no ocular serious adverse events reported. Plasma concentrations of the active drug (axitinib) were measured to be
below the limit of quantification of assay, or BLQ < 0.1 ng/ml, at all sampled time points for all patients in cohorts 1 and 2.
This assessment indicates that there is no measurable systemic exposure to axitinib.
We believe that the interim data suggests that OTX-TKI is durable and may extend the duration of action beyond
several months. As noted in the table below, 50% of cohort 1 (200 µg dose) subjects, or 3 out of 6, and 57% of cohort 2
(400 µg dose) subjects, or 4 out of 7, did not require rescue medication at or before six months post-injection. Further,
several subjects in cohort 2 demonstrated durability of therapy for over 6 months and one subject demonstrated
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durability out to 13.5 months without rescue. In cohort 3a, one subject has demonstrated durability of therapy up to six
months so far. Follow-up remains ongoing for all cohorts.
Planned Phase 1 Clinical Trial (United States)
We also plan to initiate a randomized, masked Phase 1 clinical trial of up to 20 subjects in the United States under an
eIND application in mid-2021 to evaluate 15 subjects dosed with a 600 µg dose of OTX-TKI in comparison to 5 subjects
receiving a 2 mg dose of aflibercept every eight weeks for the treatment of wet AMD, DME and RVO. The clinical trial
will evaluate biological activity, as measured by CSFT and BCVA, tolerability and durability. We have requested a pre-IND
meeting with the FDA to discuss a possible plan to transition from an eIND application to a traditional IND application.
Planned Phase 2 Clinical Trial (Australia)
Pending our receipt and review of the topline data from the Phase 1 clinical trial in Australia and related regulatory
discussions, we plan to initiate a Phase 2 clinical trial in Australia to compare the administration of a single dose of 600 µg
OTX-TKI in combination with an anti-VEGF induction injection of a 2 mg dose of aflibercept, a current standard of care
anti-VEGF therapy, to a 2mg dose of aflibercept alone as the comparator. The Phase 2 clinical trial is anticipated to include
approximately 100 subjects with wet AMD but who have responded to current standard of care anti-VEGF treatment and
currently show an absence of fluid. The Phase 2 clinical trial will be designed to evaluate efficacy, as measured by CSFT
and BCVA, tolerability and durability.
Regulatory Pathway
If we receive positive data from the Phase 1 clinical trial in the United States, we plan to initiate a Phase 2 clinical
trial and two Phase 3 clinical trials in the United States for the treatment of wet AMD, DME and RVO. If our development
efforts are successful, we expect that we would submit an NDA under Section 505(b)(2) of the FDCA. See “—Government
Regulation—Section 505(b)(2) NDAs” for additional information.
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OTX-AFS (aflibercept suprachoroidal implant) in Collaboration with Regeneron
Regeneron Collaboration Agreement
In October 2016, we entered into a strategic collaboration, option and license agreement with Regeneron for the
development and potential commercialization of products using our extended-delivery hydrogel formulation in
combination with Regeneron’s large molecule VEGF-targeting compounds for the treatment of retinal diseases, with the
initial focus on the VEGF trap aflibercept, currently marketed under the brand name Eylea. We and Regeneron amended
this agreement in May 2020 to, among other things, transition joint efforts under the collaboration to the research and
development of an extended-delivery formulation of aflibercept to be delivered to the suprachoroidal space. We refer to
the collaboration, option and license agreement, as amended to date, as the Collaboration Agreement.
Under the terms of the Collaboration Agreement, we granted Regeneron an option, or the Option, to enter into an
exclusive, worldwide license under our intellectual property to develop and commercialize products using our hydrogel in
combination with Regeneron’s large molecule VEGF-targeting compounds, or Regeneron Licensed Products. The
Collaboration Agreement does not cover the development of any products that deliver small molecule drugs, including
TKIs, for any target including VEGF, or any products that deliver large molecule drugs other than those that target VEGF
proteins. Under the terms of the Collaboration Agreement, we and Regeneron agreed to conduct a joint research program
with the aim of developing an extended-delivery formulation of aflibercept that is suitable for advancement into clinical
development. Regeneron has agreed to pay our personnel and material costs of ours for specified preclinical development
activities in connection with the revised workplan, as well as costs of certain specialty equipment.
Under the terms of the Collaboration Agreement, Regeneron is responsible for funding an initial preclinical
tolerability study. If the Option is exercised, Regeneron will be obligated to conduct further preclinical development and
an initial clinical trial under a collaboration plan. We are obligated to reimburse Regeneron for certain development costs
during the period through the completion of the initial clinical trial, subject to a cap of $25 million, which cap may be
increased by up to $5 million under certain circumstances. We do not expect our funding requirements under the
collaboration to be material over the next twelve months. If Regeneron elects to proceed with further development beyond
the initial clinical trial, it will be solely responsible for conducting and funding further development and commercialization
of product candidates. If the Option is exercised, Regeneron is required to use commercially reasonable efforts to research,
develop and commercialize at least one Regeneron Licensed Product. Such efforts shall include initiating the dosing phase
of a subsequent clinical trial within specified time periods following the completion of the first-in-human clinical trial or
the initiation of preclinical toxicology studies, subject to certain extensions.
Under the terms of the Collaboration Agreement, Regeneron has agreed to pay us $10 million upon exercise of the
Option. If Regeneron elects to exercise the Option, we are also eligible to receive up to $145 million per Regeneron
Licensed Product upon the achievement of specified development and regulatory milestones, including successful results
from the first-in-human clinical trial; $100 million per Regeneron Licensed Product upon first commercial sale of such
Regeneron Licensed Product; and up to $50 million based on the achievement of specified sales milestones for all
Regeneron Licensed Products. In addition, we are entitled to tiered, escalating royalties, in a range from a high-single digit
to a low-to-mid teen percentage of net sales of Regeneron Licensed Products.
As amended, the Option is exclusive for twenty-four months following May 8, 2020. The field of the potential
license remains limited to Regeneron Licensed Products delivered by local administration to or around the eye for
diagnostic, therapeutic, or prophylactic purposes relating to ophthalmic diseases or conditions.
The Collaboration Agreement will automatically terminate upon the failure of Regeneron to conduct or complete
certain preclinical activities within specified timeframes or provide required notices regarding such certain preclinical
activities to us, in each case subject to specified exceptions, unless Regeneron exercises its Option, the matter has been
referred to the joint research committee, or the parties have otherwise agreed in writing. The Agreement will also
terminate if Regeneron has not exercised its Option prior to the expiration of the Option Period. If Regeneron has timely
exercised its Option, the Collaboration Agreement will expire on a Regeneron Licensed Product-by-Regeneron Licensed
Product and country-by-country basis upon the expiration of the later of 10 years from the date of first commercial sale in
such country or the expiration of all patent rights covering a Regeneron Licensed Product in such country. We have agreed
to grant Regeneron a fully paid-up, non-exclusive license to continue to develop and commercialize the Regeneron
Licensed Products following expiration. The Collaboration Agreement is terminable by Regeneron at its convenience, for
any or all of the Regeneron Licensed Products, upon prior written notice. Either party may, subject to a
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cure period, terminate the Collaboration Agreement in the event of the other party’s uncured material breach, in addition to
other specified termination rights.
Glaucoma Program
OTX-TIC (travoprost intracameral implant)
Our development efforts for our glaucoma program have focused on the use of our extended-delivery hydrogel in
combination with travoprost, an FDA-approved prostaglandin analog designed to lower elevated IOP. Our product
candidate OTX-TIC is a bioresorbable hydrogel implant incorporating travoprost that is designed to be administered by a
physician as an intracameral injection into the anterior chamber of the eye with an initial target duration of drug release of
four to six months.
In Vitro and Preclinical results
Preclinical studies to date have demonstrated clinically meaningful IOP lowering and good pharmacokinetics in the
aqueous humor.
Phase 1 clinical development
We are conducting a prospective, multi-center open-label, dose-escalation proof-of-concept Phase 1 clinical trial of
OTX-TIC in the United States that we initiated in the second quarter of 2018 for the treatment of patients with moderate to
severe glaucoma or ocular hypertension. The clinical trial is designed to evaluate the safety, biological activity, durability
and tolerability of OTX-TIC compared to topical travoprost (daily eye drops) in patients with open-angle glaucoma or
ocular hypertension. The clinical trial consists of four patient cohorts: cohort 1 is 5 subjects who are receiving a 15 µg
dose, cohort 2 is 4 subjects who are receiving a 26 µg dose, cohort 3 is 5 subjects who are receiving a 15 µg dose with a
fast-degrading implant, and cohort 4 is 5 subjects who are receiving a 5 µg dose with a fast-degrading implant. We
presented initial results from the first cohort, comprised of five patients, in this clinical trial at the Association of Research
and Vision of Ophthalmology (ARVO) meeting in April 2019 and the American Society of Cataract and Refractive Surgery
annual meeting in May 2019. This data demonstrated that, with a single implant, subjects were able to achieve IOP
lowering for up to thirteen months at a level at least as good as standard of care topical eye drop that was placed in each
subject’s non-study eye. In addition, the hydrogel carrier, as designed, biodegraded in five to seven months. There were no
clinically meaningful changes in corneal health as measured by endothelial cell evaluation and corneal pachymetry. Several
subjects reported low-grade inflammation and peripheral anterior synechiae that we believe may be addressable with
modifications to the implants.
At the Glaucoma360 2021 Virtual Conference, we presented interim results, presented below, from all four patient
cohorts in the Phase 1 clinical trial. We believe that OTX-TIC shows potential as a sustained-release therapy with a long
duration of action. OTX-TIC has demonstrated a clinically meaningful mean change from baseline as measured by IOP at
8:00 am, 10:00 am and 4:00 pm comparable to topical travoprost therapy as early as two days following injection across all
four cohorts. With regard to duration, three out of five subjects (60%) in cohort 1 and four out of four subjects (100%) in
cohort 2 exhibited duration of IOP-lowering effect comparable to travoprost therapy at six months. Two out of five subjects
(40%) in cohort 3 and one out of 2 subjects (50%) in cohort 4 assessed to date exhibited duration of IOP-lowering effect
comparable to travoprost at six months.
The OTX-TIC implant was observed to biodegrade in between five and seven months in cohorts 1 and 2. In cohorts 3
and 4, the fast-degrading implants biodegraded between three and five months. Within all four cohorts, implants were not
observed to move when viewed with a slit lamp biomicroscope and were visible at all examinations in all patients using
gonioscopy. Corneal health as measured by endothelial cell counts, pachymetry assessments, and slit lamp examinations
indicated no clinically meaningful changes from baseline in any of the four cohorts. IOP elevation were observed in three
subjects in cohort 3 at the approximate time of the implant resorption.
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Planned Phase 2 Clinical Trial
In mid-2021, we plan to initiate a Phase 2 clinical trial to evaluate formulations of OTX-TIC for the treatment of
open-angle glaucoma or ocular hypertension in patients. Certain subjects in the Phase 2 clinical trial will receive the same
formulation used in cohort 1 of the Phase 1 clinical trial, containing a 26 µg dose of drug and utilizing a standard implant,
and others will receive the same formulation used in cohort 4 of the Phase 1 clinical trial, containing a 5 µg dose of drug
and utilizing a fast-degrading implant. The Phase 2 clinical trial will be a randomized, double-masked, active-controlled
study with a total of approximately 105 subjects between three arms of approximately 35 subjects each. The control arm
will receive an injection of Durysta™. The non-study eye of each patient will receive topical prostaglandin daily. The trial
will evaluate IOP changes from baseline among other endpoints.
Regulatory Pathway
If our planned Phase 2 clinical trial is successful, we would then be required to successfully complete two well-
controlled Phase 3 clinical trials conducted under an IND to obtain marketing approval from the FDA. If we were to obtain
favorable results from these two pivotal clinical trials, we expect that we would submit an NDA to the FDA for marketing
approval of OTX-TIC under Section 505(b)(2) of the FDCA. See “—Government Regulation—Section 505(b)(2) NDAs.”
Ocular Surface Disease Programs
We are engaged in the development of formulations of our hydrogel administered via intracanalicular inserts to
address large markets for diseases and conditions of the surface of the eye. Our initial development efforts are focused on
the use of our extended-delivery hydrogel in combination with well-known and well-understood corticosteroids and
cyclosporine for the treatment of dry eye disease, allergic conjunctivitis and inflammation and pain following ophthalmic
surgery.
Dry Eye Disease
OTX-CSI (cyclosporine intracanalicular insert)
OTX-CSI incorporates the FDA-approved immunomodulator cyclosporine as a preservative-free active
pharmaceutical ingredient into a hydrogel, drug-eluting, intracanalicular insert. The product candidate is designed for
patients suffering from moderate to severe dry eye and to be administered by a physician as a bioresorbable
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intracanalicular insert. OTX-CSI is designed to release cyclosporine to the ocular surface for approximately three to four
months to increase tear production for the chronic treatment of dry eye disease.
Phase 1 clinical development
We filed an IND for OTX-CSI in the United States in December 2019 and initiated a Phase 1 clinical trial in the first
quarter of 2020. The Phase 1 clinical trial was a U.S.-based, open-label, single-center trial that included five subjects (ten
eyes) who were followed for approximately four months. The study was designed to evaluate the safety, tolerability and
durability of OTX-CSI and assess the biological activity by measuring signs and symptoms of dry eye disease over this
time period.
On October 8, 2020, we announced topline data from our Phase 1 clinical trial evaluating OTX-CSI in the chronic
treatment of dry eye disease. All subjects completed the 16-week study period with no drop-outs. There were no serious
adverse effects reported. The inserts were observed to be well-tolerated, and there were no adverse events of stinging,
irritation, blurred vision or tearing reported or observed.
Tear production as measured by the Schirmer’s test improved from mean values of 4.2 mm at baseline to 8.2 mm at
Week 12. One of five subjects (20%) had a greater than 10 mm increase from baseline in Schirmer’s score at Week 12.
Subjects saw an improvement in signs of dry eye disease as measured by corneal total fluorescein staining (a mean value of
6.7 at baseline, improved to a mean value of 2.7 at Week 12, on a scale of 0 to 15). Further, subjects saw an improvement
in symptoms of dry eye disease as measured by the VAS eye dryness severity score (a mean value of 51 at baseline,
improved to a mean value of 33 at Week 12, on a scale of 0 to 100) and the VAS dry eye frequency score (a mean value of
51 at baseline, improved to a mean value of 31 at Week 12, on a scale of 0 to 100). The onset of action of OTX-CSI was
seen as early as two weeks for both signs and symptoms of dry eye disease and was observed to continue over the sixteen-
week study period.
Phase 2 clinical development
In September 2020, we dosed the first patients in a Phase 2 clinical trial designed to assess the safety, tolerability
and durability and to evaluate the efficacy of OTX-CSI in the chronic treatment of dry eye disease. The Phase 2 clinical
trial is a U.S.-based, randomized, double-masked, multi-center, vehicle-controlled trial evaluating two different
formulations of OTX-CSI compared with a hydrogel vehicle insert in approximately 140 subjects who are to be followed
for a period of 16 weeks. Included patients must have been diagnosed with dry eye disease in both eyes for a period of
greater than six months and have a visual analog scale, or VAS, eye dryness severity score of greater than 30. The primary
endpoints are incidence of treatment-emergent adverse events and the absolute value and change from baseline at week 12
in tear production as measured by the Schirmer’s test. Secondary endpoints include signs of dry eye disease as measured
by corneal fluorescein staining and symptoms of dry eye disease as measured by the VAS eye dryness severity score and
the VAS dry eye frequency score.
Regulatory Pathway
We anticipate receiving topline data from our ongoing Phase 2 clinical trial in the fourth quarter of 2021. If our
planned Phase 2 clinical trial is successful, we would then be required to successfully complete two well-controlled Phase
3 clinical trials conducted under an IND to obtain marketing approval from the FDA. If our development efforts are
successful, we expect that we would submit an NDA under Section 505(b)(2) of the FDCA. See “—Government
Regulation—Section 505(b)(2) NDAs” for additional information.
OTX-DED (dexamethasone intracanalicular insert)
One of the causes of dry eye disease is inflammation. Topical anti-inflammatory drugs are used as one of several
therapies to treat dry eye disease and are administered by eye drops. As the understanding of dry eye disease, specifically
the inflammatory components of dry eye disease, has evolved, the use of corticosteroids has become a common to offer
short-term relief of signs and symptoms of the disease. Physicians typically prescribe a topical corticosteroid for a period
of two to four weeks, tapered over the course of delivery as the inflammation and symptoms subside. However, safety
limitations associated with the use of corticosteroids for dry eye disease have limited widespread adoption. We believe that
OTX-DED has potential as a short-term treatment of the signs and symptoms of dry eye disease caused by inflammation.
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OTX-DED incorporates the FDA-approved corticosteroid dexamethasone, its preservative-free active
pharmaceutical ingredient, into a hydrogel, drug-eluting intracanalicular insert. OTX-DED incorporates the same active
drug as DEXTENZA, but it includes a lower dose of the drug, delivers it via a smaller insert, and is designed to release it
over a period of two to three weeks.
Phase 2 clinical trial
We filed an IND in December 2020 for OTX-DED. In February 2021, we initiated a U.S.-based, randomized,
double-masked, vehicle-controlled, multi-center Phase 2 clinical trial evaluating two different-strength formulations of
OTX-DED (0.2 mg and 0.3 mg of dexamethasone) versus hydrogel implant in a total of approximately 150 subjects with
dry eye disease, approximately 50 patients per arm. The subjects will be followed for approximately two months after
randomization. This trial is designed to assess the safety and efficacy of these two formulations of OTX-DED for the short-
term treatment of signs and symptoms of dry eye disease. Included patients will be required to have diagnosed dry eye
disease in both eyes for at least six months, a VAS eye dryness severity score of at least 30 and bulbar conjunctival
hyperemia grade of at least 2 (Cornea Contact Lens Research Unit scale). The primary endpoint is mean change in bulbar
conjunctival hyperemia from baseline measured at 15 days post treatment by central reading center photographic
assessment. Secondary endpoints include eye dryness symptoms using VAS, total corneal fluorescein staining using the
National Eye Institute scale and adverse events, both ocular and non-ocular.
Regulatory Pathway
We anticipate receiving topline data from our ongoing Phase 2 clinical trial in the first half of 2022. If our planned
Phase 2 clinical trial is successful, we would then be required to successfully complete two well-controlled Phase 3 clinical
trials conducted under an IND to obtain marketing approval from the FDA. If our development efforts are successful, we
expect that we would submit an NDA under Section 505(b)(2) of the FDCA. See “—Government Regulation—Section
505(b)(2) NDAs” for additional information.
Allergic Conjunctivitis
We believe that allergic conjunctivitis represents a discrete potential market opportunity for preservative-free
DEXTENZA because it is a physician-administered, hands-free, therapy administered in the office setting and designed to
release the FDA-approved corticosteroid dexamethasone to the ocular surface for up to 30 days.
Although dexamethasone is clinically effective in the treatment of late-phase inflammatory allergic reactions, the
safety limitations associated with eye drop administration, including the potential to generate spikes in IOP due to the high
levels of drug due to potential patient abuse to treat this symptomatic condition, have limited its widespread adoption.
These elevations in IOP can lead to drug-induced glaucoma, although the incidence is low. Further, use of oral anti-
histamine medications as well as anti-histamine eye drops for allergic conjunctivitis may dry out the eye and exacerbate the
discomfort to some patients. Based on our clinical trial results to date, we believe that using DEXTENZA for allergic
conjunctivitis could create a low, tapered, consistent dose of dexamethasone, potentially minimizing or eliminating side
effects associated with the eye drop formulation, while retaining the drug’s anti-inflammatory effects.
Completed Phase 2 Clinical Trial
In November 2014, we completed a prospective, randomized, parallel-arm, vehicle-controlled, multicenter, double-
masked Phase 2 clinical trial evaluating the safety and efficacy of DEXTENZA for the treatment of allergic conjunctivitis.
We conducted this trial using a modified version of a controlled exposure model commonly used to assess anti-allergy
medications, Ora, Inc.’s modified Conjunctival Allergen Challenge (Ora-Cac®), which we refer to as the CAC Model. The
modified CAC achieves a very high transient dose exposure by placing allergen directly into the space between the eyelid
and the surface of the eye of the patient. We initially exposed patients to specified allergens to determine which allergens
resulted in an allergic response for the patients. If patient was responsive to a particular allergen, we continued to expose
the patient to that same allergen prior to each evaluation.
We enrolled 68 patients at two sites in the United States. We randomized patients in a 1:1 ratio to receive either
DEXTENZA or a placebo vehicle control intracanalicular insert without active drug. We evaluated patients using three
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allergen challenges in series for each of the two efficacy measures at 14, 28 and 42 days following placement of the
intracanalicular insert.
The primary efficacy measures for this trial were ocular itching graded by the patient and conjunctival redness
graded by the trial investigator, in each case based on a five point scale from zero to four. The primary efficacy measures
were differences between treatment groups of at least 0.5 units on the five point scale on day 14 for all three time
points measured in a day for both ocular itching and conjunctival redness and differences between treatment groups of at
least 1.0 unit for the majority of the three time points measured on 14 days post insertion for both ocular itching and
conjunctival redness. The secondary endpoints for this trial were similar to the primary efficacy endpoints, except that each
variable was assessed at 28 days and 42 days following placement of the intracanalicular insert.
We enrolled patients in this trial who were at least 18 years of age with a positive history of ocular allergies and a
positive skin test reaction to a perennial allergen and a seasonal allergen. We excluded patients from this trial if, among
other reasons, they had an active ocular infection or itching or conjunctival redness at screening.
We evaluated safety in all patients at each study visit with an assessment of general eye conditions, including visual
acuity and IOP, along with any adverse events.
Efficacy: In this trial, there was a statistically significant mean difference (p<0.05) between the DEXTENZA
treatment group and the vehicle group for both ocular itching and conjunctival redness at all three time points measured on
14, 28, and 42 days following placement of the intracanalicular insert. DEXTENZA met one of the two primary efficacy
endpoints. The DEXTENZA treatment group achieved a mean difference compared to the vehicle control group of more
than 0.5 units on a five point scale at 14 days post insertion for all three time points measured in a day for both ocular
itching and conjunctival redness. The DEXTENZA group did not achieve a mean difference compared to the vehicle
control group of 1.0 unit for the majority of the three time points measured on 14 days post insertion for either ocular
itching or conjunctival redness. However, in a pre-specified analysis group of a second site in the clinical trial, in which
DEXTENZA intracanalicular inserts were placed 48 to 72 hours following exposure to the allergen, rather than on the same
day, we observed a mean difference in ocular itching between the DEXTENZA group and the vehicle control group of
approximately 1.0 unit for the majority of three time points measured on 14 days.
The results of this trial for each of the three time points on day 14 following the insertion of the intracanalicular
insert for the DEXTENZA group and the vehicle control group are shown in the table below:
Parameter
Ocular Itching
Time
Point
DEXTENZA
Vehicle
3 min 1.80 (1.068) 2.58 (0.823)
5 min 1.72 (0.998) 2.70 (0.865)
7 min 1.65 (0.989) 2.53 (0.880)
15 min 1.53 (0.753) 2.23 (0.708)
20 min 1.54 (0.739) 2.21 (0.696)
Treatment
Difference
(P-value)
-0.78
(0.0031)
-0.98
(0.0002)
-0.88
(0.0007)
-0.51
(0.0100)
-0.70
(0.0006)
-0.67
(0.0008)
Conjunctival Redness
7 min 1.60 (0.753)
2.11 (0.727)
Safety: In this trial, there was one serious adverse event in the treatment arm, which was depression. This event was
not suspected to be related to treatment. The serious adverse event was not ocular in nature. In addition, there were a
variety of adverse events in both the DEXTENZA group and the vehicle control group, with nine ocular adverse events and
two non-ocular related adverse events in the DEXTENZA group and eight ocular adverse events and two non-ocular
adverse events in the vehicle control group. In the DEXTENZA group, the only adverse events that occurred more than
once were reduction in visual acuity and increased IOP, both of which occurred twice. The most common adverse events in
the vehicle control group were erythema of the eyelid, discharge from the eye and an increase in lacrimation, all of which
occurred twice. All adverse events were transient in nature and completely resolved by the end of the trial.
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Phase 3 Clinical Program
We met with the FDA in December 2014 to review the Phase 2 clinical trial results of DEXTENZA for the treatment
of allergic conjunctivitis and to discuss our planned Phase 3 clinical development program. Based on these discussions, we
have completed two Phase 3 clinical trials and initiated a third Phase 3 clinical trial in August 2019. Our first Phase 3
clinical trial assessed both ocular itching and conjunctival redness associated with allergic conjunctivitis. Our second and
third Phase 3 clinical trials have focused on the ocular itching indication.
First Phase 3 Clinical Trial
We initiated our first planned Phase 3 clinical trials in June 2015, and we reported topline efficacy results in October
2015. This first Phase 3 clinical trial was a prospective, randomized, parallel-arm, vehicle-controlled, multicenter, double-
masked trial. A total of 73 patients were enrolled in this trial and were randomized in a 1:1 ratio to receive either
DEXTENZA or a placebo vehicle control intracanalicular insert without active drug. This trial was conducted using the
CAC Model. We evaluated patients using three allergen challenges in series for each of two efficacy measures at days 7, 14
and 28 following placement of intracanalicular insert as described below. In this Phase 3 clinical trial, we placed the
intracanalicular inserts 48 to 72 hours after exposure to the allergen. In our completed Phase 2 clinical trial, we obtained
better efficacy results with this design protocol as noted in the description of the Phase 2 efficacy results above.
The primary efficacy measures for this trial were ocular itching graded by the patient and conjunctival redness
graded by the trial investigator, in each case based on a five point scale from zero to four. The primary efficacy endpoints
were the differences between the treatment group and the vehicle group of at least 0.5 units on the five point scale
measured on 7 days post-insertion of the intracanalicular insert for all three time points measured for both ocular itching
and conjunctival redness and differences of at least 1.0 unit for the majority of the three time points measured on 7 days
post-insertion of the intracanalicular insert for both ocular itching and conjunctival redness. The secondary endpoints were
similar to the primary efficacy endpoints except that each variable was assessed at day 14 and day 28 following insertion of
the intracanalicular insert. The primary efficacy measure of conjunctival redness is typically included in Phase 3 trials for
allergic conjunctivitis but has not been required for FDA approval of drugs for allergic conjunctivitis. Most commercially
available prescription medications for the treatment of allergic conjunctivitis have an ocular itching indication only. As
described below, ocular itching was the only primary efficacy endpoint in the second Phase 3 trial of DEXTENZA for the
treatment of allergic conjunctivitis, with conjunctival redness being moved to a secondary efficacy endpoint.
We enrolled patients in this trial who were at least 18 years of age with a positive history of ocular allergies and a
positive skin test reaction to a perennial allergen and a seasonal allergen. We excluded patients from this trial if, among
other reasons, they had an active ocular infection or itching or conjunctival redness at screening.
We evaluated safety in all patients at each study visit with an assessment of general eye conditions, including visual
acuity and IOP, along with any adverse events.
Efficacy: In this trial, there was a statistically significant mean difference (p<0.0001) between the DEXTENZA
treatment group and the placebo vehicle group for ocular itching at all three time points measured on 7 days post-
placement of the intracanalicular insert. DEXTENZA also met the primary efficacy endpoint for ocular itching. The
DEXTENZA treatment group achieved a mean difference compared to the vehicle group of greater than 0.5 units on a five
point scale on 7 days post-insertion at each time point and greater than 1.0 unit at a majority of the time points on 7 days
post-insertion for ocular itching. There was a statistically significant mean difference (p=0.01 or less) between the
DEXTENZA treatment group and the placebo vehicle group for conjunctival redness at all three time points measured on 7
days post-placement of the intracanalicular insert. However, the DEXTENZA group did not achieve the pre-specified
primary efficacy endpoints on 7 days post-insertion with respect to conjunctival redness.
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The results of this trial for each of the three time points on day 7 following placement of the intracanalicular insert
for the DEXTENZA group and the vehicle control group are shown in the table below:
Parameter
Ocular Itching
Time
Point
DEXTENZA
Vehicle
3 min 1.68 (1.032) 2.66 (0.861)
5 min
1.87 (1.04)
2.74 (0.69)
7 min 1.70 (0.938) 2.74 (0.679)
Conjunctival Redness
7 min 1.52 (0.641) 1.80 (0.764)
15 min 1.48 (0.698) 1.75 (0.786)
20 min 1.44 (0.710) 1.76 (0.766)
Treatment
Difference
(P-value)
-1.02
(<0.0001)
-0.87
(<0.0001)
-1.04
(0.0007)
-0.26
(0.1082)
-0.32
(0.0419)
-0.29
(0.0667)
Safety: There were no serious adverse events reported in this trial. There were a variety of adverse events in both
the DEXTENZA group and the vehicle control group, with three patients in the DEXTENZA treatment group with a total
of three ocular adverse events and one non-ocular adverse event and four patients in the vehicle control group with a total
of six ocular adverse events and one non-ocular adverse events. The most common ocular adverse event was increased
lacrimation, which was experienced by one patient in the DEXTENZA group and two patients in the vehicle control group.
Other treatment-related ocular adverse events included increased IOP in the DEXTENZA group, and blepharospasm in the
vehicle control group.
Second Phase 3 Clinical Trial
We initiated our second Phase 3 clinical trial of DEXTENZA for the treatment of allergic conjunctivitis in November
2015, and we reported topline efficacy results in June 2016. This second Phase 3 clinical trial was a prospective,
randomized, parallel-arm, vehicle-controlled, multicenter, double-masked trial. A total of 72 patients were enrolled in this
trial and randomized in a 1:1 ratio to receive either DEXTENZA or a placebo vehicle control intracanalicular insert without
active drug. This trial was conducted using the CAC Model. Patients were evaluated using three allergen challenges in
series for each of two efficacy measures at days 7, 14 and 28 following insertion of the intracanalicular insert. In this Phase
3 clinical trial, we placed the intracanalicular inserts 48 to 72 hours after exposure to the allergen.
The single primary efficacy measure for this trial was ocular itching graded by the patient based on a five point scale
from zero to four. The primary efficacy endpoints were the differences between the treatment group and the vehicle group
of at least 0.5 units on the five point scale 7 days post-insertion of the intracanalicular insert for all three time points
measured for ocular itching and differences of at least 1.0 unit for the majority of the three time points measured 7 days
post-insertion of the intracanalicular insert for ocular itching. The secondary endpoints for ocular itching were similar to
the primary efficacy endpoints except that each variable was assessed at day 14 and day 28 following placement of the
intracanalicular insert. The secondary endpoints for conjunctival redness were the differences between the treatment group
and the vehicle group of at least 0.5 units on the five point scale 7 days post-insertion of the intracanalicular insert for all
three time points measured and differences of at least 1.0 unit for the majority of the three time points measured 7 days
post-insertion of the intracanalicular insert.
We enrolled patients in this trial who are at least 18 years of age with a positive history of ocular allergies and a
positive skin test reaction to a perennial allergen and a seasonal allergen. We excluded patients from this trial if, among
other reasons, they had an active ocular infection or itching or conjunctival redness at screening.
We evaluated safety in all patients at each study visit with an assessment of general eye conditions, including visual
acuity and IOP, along with any adverse events.
Efficacy: In this trial, DEXTENZA did not meet the primary efficacy endpoint of ocular itching at the three time
points measured on day 7 post-placement of the intracanalicular insert. The mean difference in ocular itching in the
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DEXTENZA treatment group compared to the placebo group measured 7 days following insertion of the inserts, at 3, 5,
and 7 minutes was -0.18, -0.29, and -0.29 units, respectively, on a five point scale and did not achieve statistical
significance. In addition, the trial did not achieve the requirement of at least a 0.5 unit difference at all three time points 7
days following insertion of the inserts and at least a 1.0 unit difference at a majority of the three time points between the
treatment group and the placebo group 7 days following insertion of the inserts.
The trial also assessed conjunctival redness as a secondary endpoint. The differences in the mean scores in
conjunctival redness between the DEXTENZA treatment group and the placebo group 7 days following insertion of the
inserts at 7, 15 and 20 minutes were -0.35, -0.39 and -0.42, respectively.
The results of this trial for each of the three time points on day 7 following placement of the intracanalicular insert
for the DEXTENZA group and the vehicle control group are shown in the table below:
Parameter
Ocular Itching
Time
Point DEXTENZA
3 min 2.04 (1.088) 2.31 (1.115)
Vehicle
5 min
2.07 (1.1) 2.41 (1.039)
7 min 2.02 (1.131) 2.37 (1.129)
Treatment
Difference*
(P-value)
-0.18
(0.44)
-0.29
(0.223)
-0.29
(0.2611)
Safety: There were no serious adverse events reported in this trial. There were a variety of adverse events in both
the DEXTENZA group and the vehicle control group, with six patients in the DEXTENZA treatment group with a total of
six ocular and one non-ocular adverse events and 11 patients in the vehicle control group with a total of nine ocular and
eight non-ocular adverse events. The lower rate of ocular adverse events in the DEXTENZA group could potentially be
due to the presence of an anti-inflammatory active pharmaceutical ingredient. Ocular adverse events reported more than
one patient in either treatment group included increased IOP, which was experienced by two patients in the DEXTENZA
group, as well as dacryostenosis acquired and dacryocanaliculitis, each experienced by two patients in the vehicle control
group. Both cases of IOP increased were considered treatment related, as were both cases of dacryocanaliculitis and a
single case of dacryostenosis. All other ocular adverse events were reported by single patients in either the DEXTENZA or
vehicle control group, with most in the PV group considered treatment related.
Third Phase 3 Clinical Trial
In the third quarter of 2019, we began dosing patients in a 96-subject, pivotal Phase 3 clinical trial evaluating
DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis. This Phase 3 clinical trial was a
U.S.-based, multi-center, 1:1 randomized, double-masked, placebo-controlled trial designed to evaluate the safety and
efficacy of DEXTENZA versus a punctum plug using the CAC Model. The trial was designed to assess the effect of
DEXTENZA compared with a placebo on allergic reactions using a series of successive allergen challenges over a 30-day
period. The primary efficacy endpoint for this trial was ocular itching (subject-reported 5-point scale (0 to 4)) on day 8 at 3
minutes, 5 minutes and 7 minutes post-challenge and included subjects with seasonal and perennial allergens.
Efficacy: DEXTENZA-treated subjects demonstrated a statistically significant (p-value < 0.0001) difference in mean
ocular itching scores, compared to vehicle-treated subjects, at all three pre-specified time points (see the figure below). An
assessment of the secondary endpoint of ocular itching at all other visits (day 7, day 8 (morning), day 8 (afternoon at 10
minutes following exposure), day 14, and day 15 (morning and afternoon)) also showed that DEXTENZA-treated subjects
reported lower itching scores than vehicle-treated subjects at 3 minutes, 5 minutes, 7 minutes and 10 minutes post-exposure
to the allergen challenge (p-value <0.05 for all 21 time points except day 7 at 3 minutes).
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Primary Efficacy Endpoint Ocular Mean Itching Scores at Day 8 (PM)
*Statistically significant; P≤0.0001; Least Squared Means; Population: ITT = MCMC; Bars represent Standard Error
Safety: In the trial, DEXTENZA was generally observed to have a favorable safety profile and be well-tolerated. No
serious adverse events were observed. No subjects required rescue medication and no subjects experienced elevated IOP.
There were 8 ocular treatment-emergent adverse events in this trial (2 in the DEXTENZA group and 6 in the vehicle
group).
Overview of clinical trial data
Data received from the third Phase 3 clinical trial evaluating DEXTENZA for ocular itching associated with allergic
conjunctivitis was generally consistent with our observations in our prior Phase 2 and Phase 3a clinical trials using a
similar repeat CAC Model as reflected in the two figures below. For all analyses we have conducted, the subject is the unit
of analysis. For the Phase 2 clinical trial, the data shown is for the prespecified primary endpoint of ocular itching at day
15 using the Intent-to-Treat (ITT) population and utilizing the last observation carried forward (LOCF) methodology to
impute missing data. For the Phase 3 trials, the data shown is for the prespecified primary endpoint of ocular itching at day
8 using the ITT population and imputing missing data using the Markov Chain Monte Carlo (MCMC) multiple imputation
method. The two figures below reflect the Phase 3 data using the MCMC method with different bases for imputation. In
the first figure, the basis for imputation for the MCMC method is at the individual eye level. In the second figure, the basis
for imputation for the MCMC method is at the subject level (average of the two eyes). Both methods may be appropriate
and, in this case, yield similar conclusions. In certain data we have previously disclosed, we have presented analyses using
the MCMC method with the individual eye as the basis for imputation. However, the statistical analysis plan for each of
the three Phase 3 trials specifies that the basis for imputation for the MCMC method should be the subject level. Multiple
other methods of imputation were also performed in some of the Phase 3 studies—including LOCF, baseline observation
carried forward (BOCF), worse case observation (WCO), and observation only with no imputation—with similar clinical
conclusions.
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Primary Efficacy Endpoint – Eye Level Imputation
Mean Ocular Itching Scores Across All Studies
* Statistically Significant; P≤0.0025; Population: ITT + LOCF (Phase 2) & ITT + MCMC (Phase 3)
Primary Efficacy Endpoint – Subject Level Imputation
Mean Ocular Itching Scores Across All Studies
* Statistically Significant; P≤0.0025; Population: ITT + LOCF (Phase 2) & ITT + MCMC (Phase 3)
Regulatory Pathway
In the fourth quarter of 2020, we submitted an sNDA for DEXTENZA under Section 505(b)(2) of the FDCA (See
“—Government Regulation—Section 505(b)(2) NDAs” for additional information) to include the treatment of ocular
itching associated with allergic conjunctivitis as an additional approved indication. The FDA has accepted our sNDA for
filing and has established a target action date under PDUFA of October 18, 2021. We believe that the totality of the
efficacy and safety data across the Phase 2 trial and the three Phase 3 trials (n = 323 subjects), as well as the safety data
associated with the prior approval of DEXTENZA for the treatment of inflammation and pain following ophthalmic
surgery, represent a strong data package in support of the sNDA.
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If our sNDA is approved, we expect to launch DEXTENZA for the treatment of ocular itching associated with
allergic conjunctivitis in the first half of 2022.
Post-Surgical Ocular Inflammation and Pain
DEXTENZA (dexamethasone intracanalicular insert)
DEXTENZA incorporates the FDA-approved corticosteroid dexamethasone as a preservative-free active
pharmaceutical ingredient into a hydrogel, drug-eluting intracanalicular insert. Following FDA approval, we commercially
launched DEXTENZA for the treatment of post-surgical inflammation and pain in July 2019.
We selected dexamethasone as the active pharmaceutical ingredient for DEXTENZA because it:
● is approved by the FDA and has a long history of ophthalmic use;
● is available on a generic basis;
● is highly potent and is typically prescribed for prevention of ocular inflammation and pain following ocular
surgery;
● is available from multiple qualified suppliers; and
● has physical properties that are well suited for incorporation within our hydrogel technology.
Embedded within our DEXTENZA intracanalicular insert are dexamethasone drug particles that gradually erode and
release the drug in a programmed fashion until the drug is depleted. As the dexamethasone drug particles erode and the
hydrogel degrades by hydrolysis, the intracanalicular insert softens, liquefies and is cleared through the nasolacrimal duct.
We provide the DEXTENZA drug product in a preservative-free formulation in a sterile, single use package.
The standard regimen for dexamethasone eye drops following cataract surgery is an initial administration of four
times daily for one week, with a gradual tapering in the number of eye drops over a four-week period. Such a regimen is
often confusing to patients as they must remember to taper the number of times per day they administer the steroid, while
also taking multiple drops of other drugs, such as antibiotics and NSAIDs. We believe that local programmed-release of
drug to the eye may result in better control of ocular inflammation and pain as compared to prescription eye drops and that
a low dose amount may provide enhanced safety by eliminating spikes in IOP associated with high-dose steroid eye drops.
Overview of Clinical Development for Post-Surgical Ocular Inflammation and Pain
In March and April 2015, we reported topline results from two Phase 3 clinical trials for the treatment of post-
surgical ocular inflammation and pain. In the first Phase 3 clinical trial, DEXTENZA met both primary efficacy endpoints,
absence of pain at day 8 and absence of inflammatory cells at day 14, with statistical significance. In the second Phase 3
clinical trial, DEXTENZA met the primary efficacy endpoint for absence of pain at day 8 with statistical significance but
did not meet the primary efficacy endpoint for absence of inflammatory cells at day 14. We met with the FDA in April
2015 to discuss the path forward for seeking marketing approval of DEXTENZA for the treatment of post-surgical ocular
inflammation and pain.
In this pre-NDA clinical meeting, the FDA indicated that the existing data from our Phase 2 and two Phase 3 clinical
trials are appropriate to support an NDA submission for DEXTENZA for a post-surgical ocular pain indication. The FDA
further indicated that we would need additional data from a third Phase 3 clinical trial for the inflammation endpoint to
support the potential labeling expansion of DEXTENZA’s indications for use. We initiated a third Phase 3 clinical trial for
DEXTENZA for the treatment of post-surgical ocular inflammation and pain in October 2015. In September 2015, we
submitted to the FDA an NDA for DEXTENZA for the treatment of post-surgical ocular pain. In July 2016, we received a
complete response letter, or CRL, from the FDA regarding our NDA for DEXTENZA. We
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resubmitted our NDA for DEXTENZA for the treatment of post-surgical ocular pain in June 2018. In November 2018, we
received approval for the pain indication. In June 2019, we received approval for the inflammation indication.
Completed Phase 3 Clinical Trials
In 2014, we initiated a pivotal clinical trial program that consisted of two prospective, randomized, parallel-arm,
vehicle-controlled, multicenter, double-masked Phase 3 clinical trials evaluating the safety and efficacy of DEXTENZA for
the treatment of ocular inflammation and pain following cataract surgery. We initiated the first of these Phase 3 clinical
trials in February 2014 and the second trial in April 2014. Patient enrollment was completed in September 2014, and the
topline efficacy data from these clinical trials was reported in March and April 2015. We initiated a third Phase 3 clinical
trial in the October 2015. Patient enrollment in the third Phase 3 clinical trial was completed in May 2016 and the topline
efficacy data was reported in November 2016.
We enrolled 247 patients at 16 sites in the first Phase 3 clinical trial, 241 patients at 16 sites in the second Phase 3
clinical trial and 438 patients at 21 sites in the third Phase 3 clinical trial in the United States pursuant to our effective IND.
We randomized patients in a 2:1 ratio in the first two Phase 3 clinical trials and in a 1:1 ratio in the third Phase 3 clinical
trial to receive either DEXTENZA or a placebo vehicle control intracanalicular insert without active drug. We evaluated
patients at days 2, 4, 8, 14, 30 and 60 following surgery in the first two Phase 3 trials and at days 2, 4, 8, 14, and 30 in the
third Phase 3 clinical trial.
The two primary efficacy measures in these trials were absence of inflammatory cells in the anterior chamber of the
study eye when measured with a slit lamp biomicroscope and absence of pain in the study eye. To meet the efficacy end
point for absence of inflammatory cells, there needed to be a complete absence of inflammatory cells. In these trials,
absence of pain was based on a patient reported score of zero on a scale from zero to ten of ocular pain assessment. The
first primary efficacy endpoint for these trials was the difference in the proportion of patients in each treatment group with
absence of inflammatory cells in the anterior chamber of the study eye at day 14 following surgery. Pivotal clinical trials
for other ophthalmic steroid drugs approved by the FDA for marketing in the United States also have evaluated this
endpoint at day 14. The second primary efficacy endpoint for these trials was the difference in the proportion of patients in
each treatment group with absence of pain in the study eye at day 8 following surgery. For clarification of the endpoints,
the day of surgery and insertion of DEXTENZA or the placebo is considered to be day 1.
We evaluated as secondary efficacy measures the level of flare, an indicator of inflammation in the anterior chamber
of the study eye at each evaluation date until day 30 and absence of inflammatory cells in the anterior chamber of the study
eye and absence of pain in the study eye at each evaluation date other than the day used for the primary efficacy measure
until day 30. The secondary analyses on primary endpoints were intended to be exploratory assessments that can be used to
support the results from the primary endpoints. We enrolled patients in these two trials who were at least 18 years of age
undergoing unilateral clear corneal cataract surgery. We excluded patients from these trials if, among other reasons, they
had intraocular inflammation or ocular pain in the study eye at screening or had glaucoma or ocular hypertension.
We evaluated safety in all patients at each study visit with an assessment of general eye conditions, including visual
acuity and IOP, along with any adverse events.
Efficacy: In the first Phase 3 clinical trial, DEXTENZA met the primary efficacy endpoint with statistical
significance for the absence of cells in the anterior chamber compared to the vehicle control at day 14. 33.1% of
DEXTENZA treated patients showed an absence of inflammatory cells in the anterior chamber of the study eye on day 14
following drug product insertion, compared to 14.5% of those receiving placebo vehicle control intracanalicular inserts
(p=0.0018). DEXTENZA also met the primary efficacy endpoint with statistical significance for absence of pain compared
to the vehicle control at day 8. 80.4% of patients receiving DEXTENZA reported absence of pain in the study eye on day 8
following insertion of the drug product, compared to 43.4% of those receiving placebo vehicle control intracanalicular
inserts (p< 0.0001).
In the second Phase 3 clinical trial, DEXTENZA met the primary efficacy endpoint for absence of pain at day 8 with
statistical significance but did not meet the primary efficacy endpoint for absence of inflammatory cells at day 14. In the
second Phase 3 clinical trial, 77.5% of patients receiving DEXTENZA reported an absence of pain in the study eye on day
8 following insertion of the drug product, compared to 58.8% of those receiving placebo vehicle control intracanalicular
inserts, a difference which was statistically significant (p=0.0025). However, 39.4% of DEXTENZA
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treated patients showed an absence of inflammatory cells in the anterior chamber of the study eye on day 14 following drug
product insertion, compared to 31.3% of those receiving placebo vehicle control intracanalicular inserts, a difference which
was not statistically significant (p=0.2182).
In the third Phase 3 clinical trial, DEXTENZA met the primary efficacy endpoint with statistical significance for the
absence of cells in the anterior chamber compared to the vehicle control at day 14. 52.1% of DEXTENZA treated patients
showed an absence of inflammatory cells in the anterior chamber of the study eye on day 14 following drug product
insertion compared to 31.2% of those receiving placebo vehicle control intracanalicular inserts (p< 0.0001). DEXTENZA
also met the primary efficacy endpoint with statistical significance for absence of pain compared to the vehicle control at
day 8. 79.3% of patients receiving DEXTENZA reported absence of pain in the study eye on day 8 following insertion of
the drug product, compared to 61.3% of those receiving placebo vehicle control intracanalicular inserts (p< 0.0001).
Secondary analyses on primary endpoints for the three Phase 3 clinical trials were also completed. In the first Phase 3
clinical trial, statistically significant differences were seen for absence of pain at all time points (days 2, 4, 8, 14, 30 and 60)
in the DEXTENZA treatment group compared to the vehicle control group. Statistically significant differences were seen
for the absence of inflammatory cells at day 30 in the DEXTENZA treatment group compared to the vehicle control group,
and there were no statistically significant differences seen at the other time points. Statistically significant differences
between the DEXTENZA treatment group and the vehicle control group were seen for flare at days 8, 14 and 30.
In the second Phase 3 clinical trial, statistically significant differences were seen for absence of pain at days 2, 4, 14
and 30 in the DEXTENZA treatment group compared to the vehicle control group. A similar proportion of patients in the
DEXTENZA treatment group and the vehicle control group were observed to have an absence of inflammatory cells at
days 2, 4, 8, and 30. A statistically significant difference between treatment groups was not seen for the absence of
inflammatory cells until the day 60 visit, at which time a greater proportion of patients in the DEXTENZA treatment group
compared to the vehicle control group were observed to have an absence of inflammatory cells at day 60 (p=0.0012).
Statistically significant differences between the DEXTENZA treatment group and the vehicle control group were seen for
flare at days 14, 30 and 60.
In the third Phase 3 clinical trial, statistically significant differences were seen for absence of pain at all time points
(days 2,4, 14, and 30) in the DEXTENZA treatment group compared to the vehicle control group. Statistically significant
differences were seen for the absence of inflammatory cells at days 4, 8, and 30 but not seen at day 2. Statistically
significant differences between the DEXTENZA treatment group and the vehicle control group were seen for flare at all
measured time points (days 2, 4, 8, 14, and 30).
Safety: There were no ocular or treatment-related serious adverse events in the DEXTENZA treatment group in
either of the first two completed Phase 3 clinical trials. There was one ocular serious adverse event in the vehicle control
group in the first two completed Phase 3 clinical trials: hypopyon, or inflammatory cells in the anterior chamber. There
were two patients with three serious adverse events in the DEXTENZA treatment group in the first Phase 3 clinical trial
(1.2% incidence), compared with two patients with four serious adverse events in the vehicle control group (2.4%
incidence). There were two serious adverse events in the DEXTENZA treatment group in the second Phase 3 clinical trial
(1.3% incidence), compared with three serious adverse events in the vehicle control group (3.8% incidence). There were
three serious adverse events in the DEXTENZA treatment group in the third Phase 3 clinical trial (1.4% incidence),
compared with two serious adverse events in the vehicle control group (0.9% incidence). One serious adverse event in the
DEXTENZA group was ocular in nature (retinal detachment). None of the serious adverse events in either group were
deemed to be treatment-related.
Patients were randomized in a 2:1 ratio in the first two Phase 3 clinical trials and in a 1:1 ratio in the third Phase 3
clinical trial between the treatment group and the vehicle control group. In the first Phase 3 clinical trial, 98 adverse events
were noted in the DEXTENZA group and 59 adverse events were noted in the vehicle control group. In the second Phase 3
clinical trial, 74 adverse events were noted in the DEXTENZA group and 47 adverse events were noted in the vehicle
control group. In the third Phase 3 clinical trial, 91 adverse events were noted in the DEXTENZA group and 109 adverse
events were noted in the vehicle control group. All adverse events were either resolved or considered chronic/stable at the
time of subject exit from the study. We expect to be able to use the safety data from these Phase 3 trials to support our other
DEXTENZA clinical development programs, including for allergic conjunctivitis.
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Investigator-Initiated Trials
We have received proposals for, and plan to support, several investigator-initiated trials evaluating DEXTENZA in
different clinical situations. To date, third-party clinical investigators have initiated over 25 trials to study the use of
DEXTENZA in cataract surgery and other potential indications. Seven of the trials have completed enrollment, the
remaining trials are actively enrolling and treated patients are being followed.
Regulatory Pathway
In November 2018, we received FDA approval for DEXTENZA for the pain indication. In January 2019, we
submitted a sNDA for DEXTENZA for the treatment of post-surgical ocular inflammation. In June 2019, we received
FDA approval for DEXTENZA for the inflammation indication. Although we conducted our Phase 3 clinical trials of
DEXTENZA in patients who have undergone cataract surgery, these trials were intended to support, and DEXTENZA
ultimately received, a label for patients who have undergone any ocular surgery.
Post-Approval Studies
In September 2020, we announced that we had dosed the first pediatric patients in a Phase 3 clinical trial evaluating
DEXTENZA for the treatment of post-surgical ocular inflammation and pain in children following cataract surgery. This
planned clinical trial is a post-approval requirement of the FDA in accordance with the Pediatric Research Equity Act of
2003, in connection with the FDA’s prior approval of DEXTENZA for the treatment of inflammation and pain following
ophthalmic surgery in adults. The Phase 3 clinical trial is a U.S.-based, randomized, multicenter clinical trial in which we
intend to enroll approximately 60 subjects. It is designed to evaluate the safety and biological activity of DEXTENZA
compared to an active control, prednisolone acetate suspension eye drops, for the treatment of inflammation and pain
following ocular surgery for pediatric cataract in children between zero and three years of age. The primary endpoint is the
absence of pain at day eight post-treatment as measured by a FLACC (Face, Legs, Activity, Cry, Consolability) score of
zero.
Foreign Approvals
Outside the United States, we continue to assess whether to seek regulatory approval for DEXTENZA in markets
such as the European Union, Australia and Japan based on the market opportunity, particularly pricing, and the
requirements for marketing approval. Given our prioritization of the clinical development of our sustained-release product
candidates and our planned commercialization efforts for our initial intracanalicular insert product candidates in the United
States, we will need to engage a third parties to assist us in the approval process. We have entered into a license agreement
and collaboration with AffaMed for the development and commercialization of DEXTENZA, along with OTX-TIC, in
specified Asian markets. From time to time, we may consider additional arrangements with other companies to address
markets outside of the United States.
If we or our collaborators obtain regulatory approval to market and sell DEXTENZA in international markets, we
expect to utilize a variety of types of collaboration, distribution and other marketing arrangements with one or more third
parties to commercialize DEXTENZA. See “—Government Regulation—Review and Approval of Medical Devices in the
European Union” for additional information.
ReSure Sealant
ReSure Sealant is a topical liquid hydrogel that creates a temporary, adherent, soft and lubricious sealant to prevent
post-surgical leakage from clear corneal incisions that are made during cataract surgery. The main components of ReSure
hydrogel are water and PEG. ReSure hydrogel is completely synthetic, with no animal or human derived components. The
FDA granted marketing approval for ReSure Sealant in January 2014. We commercially launched ReSure Sealant in the
United States in February 2014.
ReSure Sealant provides a novel means of definitive wound closure in situations in which the surgeon observes a
wound leak at the conclusion of surgery and/or would otherwise use sutures. We believe ReSure Sealant offers important
benefits over sutures, including superior wound closure, a better safety profile and less follow-up.
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The market opportunity for a surgical sealant following cataract surgery may be modest because sutures are used in
a minority of cataract surgeries and, currently, there is no direct reimbursement for ReSure Sealant. While ReSure Sealant
remains commercially available in the United States, there is no sales support and only limited commercial support for this
product at this time. As a result, we do not expect to generate meaningful levels of revenue from the sale of ReSure
Sealant.
Product Design
A surgeon forms ReSure Sealant hydrogel by combining three components: PEG, a cross-linker and a diluent buffer
solution. The cross-linker interacts with the PEG molecules to form a molecular network that comprises the hydrogel. The
components are mixed to initiate the cross-linking reaction to form a biocompatible, resorbable hydrogel. The hydrogel is
approximately 90% water and is blue in color to help the surgeon visualize the sealant during application. The surgeon
applies the sealant to the corneal incision as a liquid using a soft foam-tipped applicator. The sealant forms a conformal
coating that adheres to the ocular tissue through mechanical interlocking of the hydrogel with the tissue surfaces. The blue
color fades within a few hours following surgery. The soft, pliable hydrogel remains on the corneal surface during the
critical wound healing period of one to three days and provides a barrier to fluid leakage. ReSure Sealant softens over time,
detaches and is sloughed off in the tears as a liquid or extremely soft gel pieces. ReSure Sealant is designed to completely
liquefy over a five to seven day duration. Complete epithelial healing takes place over this time period, providing long-
term wound closure.
We provide ReSure Sealant in a sterile, single patient use package. The package contains a tray with two elongated
mixing wells. Each well contains dried deposits of reactants, separated within the well. The package also contains one
plastic dropper bottle filled with diluent solution and two applicators. The device is stored at room temperature for easy
access.
ReSure Sealant Clinical Development
We conducted a pivotal clinical trial evaluating the safety and effectiveness of ReSure Sealant compared to sutures
for preventing incision leakage from clear corneal incisions. In connection with FDA approval of ReSure Sealant in
January 2014, we have agreed to conduct two post-approval studies. The first post-approval registry study was designed to
confirm whether ReSure Sealant can be used safely by physicians in a standard cataract surgery practice and to confirm the
incidence of pre-specified adverse ocular events in eyes treated with ReSure Sealant. The second post-approval study is
designed to ascertain the incidence of endophthalmitis in patients treated with ReSure Sealant.
Pivotal Clinical Trial
In 2013, we completed a prospective, randomized, parallel-arm, controlled, multicenter, subject-masked pivotal
clinical trial evaluating the safety and effectiveness of ReSure Sealant. In this trial, we enrolled 488 patients at 24 sites
across the United States. One patient was excluded prior to treatment because the surgeon was unable to achieve a dry
ocular surface for application of ReSure Sealant. As a result, we randomized 304 patients for treatment with ReSure
Sealant and 183 patients for treatment with sutures. Based on the trial protocol, 295 patients treated with ReSure Sealant
and 176 patients treated with sutures completed study follow-up without a significant protocol deviation that directly
affected the primary efficacy endpoint.
The primary efficacy endpoint was non-inferiority of ReSure Sealant to sutures for preventing incision leakage from
clear corneal incisions within the first seven days following cataract surgery. A non-inferiority determination requires that
the test product is not worse than the comparator by more than a small pre-specified margin. The non-inferiority margin for
the ReSure Sealant pivotal clinical trial was a percentage difference in leak rates between ReSure Sealant and sutures of
5%.
We randomized patients in a 5:3 ratio to receive either ReSure Sealant or sutures. All patients received a standardized
self-sealing incision.
Surgeons assessed incision leakage during the operation and during follow-up visits on days 1, 3, 7 and 28 after the
procedure. During the pre-randomization intraoperative evaluation, the surgeons assessed whether there was any leakage
based on a standard test called a Seidel test in conjunction with an application of force near the incision using a
standardized tool and technique. The surgeon slowly applied force using the standardized tool that we provided until a
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leak was observed or until a pre-specified maximum force of one ounce of force was reached. In the assessments conducted
during the operation, approximately 50% of leaks occurred spontaneously without application of force and 76% of leaks
occurred with the application of 0.25 ounces of force or less.
Based on assessments conducted immediately following surgery, using the same standardized leak testing tool and
technique, eyes receiving sutures leaked more frequently than eyes sealed with ReSure Sealant by a statistically significant
margin of more than 8 to 1 (p<0.0001). In this trial, ReSure Sealant demonstrated both non-inferiority and superiority
relative to the suture control based on the proportion of eyes with leakage within the first seven days after surgery. These
results are shown in the figures below.
ReSure Sealant treated patients had significantly lower adverse event and device-related adverse event rates than
patients treated with suture wound closure. We determined statistical significance based on a widely used, conventional
statistical method that establishes the p-value of clinical results. Typically, a p-value of 0.05 or less represents statistical
significance. In adverse events related to the study device, ReSure Sealant had a lower occurrence rate by a statistically
significant margin of 1.6% for ReSure Sealant compared to 30.6% for sutures (p<0.0001). There were no significant or
clinically relevant differences in the other safety endpoints, including slit lamp examination findings, between ReSure
Sealant and suture patients, thus indicating that ReSure Sealant is well tolerated. Only one ReSure Sealant treated patient
out of 299 (0.3%) had a wound healing assessment characterized as outside of normal limits at the day 7 assessment due to
the presence of mild stromal edema. No ReSure Sealant treated subjects were outside of normal limits at the day 28
assessment. In this trial, surgeons rated ReSure Sealant as “easy” or “very easy” to use for 94.1% of patients treated with
ReSure Sealant.
Post-Approval Studies
ReSure Sealant is classified in the United States as a class III medical device subject to the rules and regulation of
premarket approval by the FDA. Following our submission of a PMA application to the FDA for review and during the
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review process, the FDA completed compliance audits of our manufacturing facility and several of our pivotal clinical trial
sites. Before granting approval of the PMA application, the FDA sought input from the Ophthalmic Devices Advisory
Committee, a panel of physicians charged with reviewing results from our pivotal clinical trial. The FDA approved our
PMA application for ReSure Sealant in January 2014.
The FDA required two post-approval studies as a condition for approval of our premarket approval, or PMA,
application for ReSure Sealant. The first post-approval study, identified as the Clinical PAS, was to confirm that ReSure
Sealant can be used safely by physicians in a standard cataract surgery practice and to confirm the incidence of the most
prevalent adverse ocular events identified in our pivotal study in eyes treated with ReSure Sealant. We submitted the final
study report to the FDA in June 2016 and the FDA has confirmed the Clinical PAS has been completed.
The second post-approval study, which we refer to as the Device Exposure Registry Study, was a retrospective
analysis of the IRIS Registry, comparing endophthalmitis rates from sites that purchased ReSure Sealant versus those sites
that did not. We completed the retrospective study in accordance with our agreement with the FDA and submitted the final
study report for the Device Exposure Registry Study to the FDA in January 2021. We anticipate that the FDA will review
the report within 90 days of our submission and notify us as to whether our obligation to conduct the post-approval study
has been satisfied. Failure by us to conduct the required post-approval trial for ReSure Sealant to the FDA’s satisfaction
may result in withdrawal of the FDA’s approval of ReSure Sealant or other regulatory action.
Foreign Approvals
Outside the United States, we plan to assess whether to seek regulatory approval for ReSure Sealant in markets such
as the European Union, Australia and Japan based on the market opportunity, particularly pricing, and the requirements for
marketing approval. Given our prioritization of the clinical development of our sustained-release product candidates and
our planned commercialization efforts for our initial intracanalicular insert product candidates in the United States, we do
not currently plan to seek CE Mark approval to commercialize ReSure Sealant in the European Union. Outside of the
United States and the European Union, we will need to engage a third party to assist us in the approval process. If we
obtain regulatory approval to market and sell ReSure Sealant in international markets, we expect to utilize a variety of
types of collaboration, distribution and other marketing arrangements with one or more third parties to commercialize
ReSure Sealant. See “—Government Regulation—Review and Approval of Medical Devices in the European Union” for
additional information.
Sales, Marketing and Distribution
We plan to prioritize our commercialization efforts in the United States. We generally expect to retain commercial
rights in the United States to any of our local programmed-release drug delivery product candidates for front-of-the-eye
diseases and conditions for which we may receive marketing approvals and which we believe we can successfully
commercialize. In general, if we receive approval to market any of our product candidates in the United States, we plan to
then evaluate the regulatory approval requirements and commercial potential for any such product candidate in Europe,
Japan and other selected geographies. If we decide to commercialize our products outside of the United States, we expect
to utilize a variety of types of collaboration, distribution and other marketing arrangements with one or more third parties
to commercialize any product of ours that receives marketing approval.
ReSure Sealant
We commercially launched ReSure Sealant in the United States in February 2014. While ReSure Sealant remains
commercially available in the United States, there is no sales support and only modest commercial support for this product
at this time. We may decide to actively promote ReSure Sealant in the future with the current sales force that supports
DEXTENZA.
DEXTENZA
We sell DEXTENZA in the United States to a network of specialty distributors, who then resell DEXTENZA to
ASCs and hospital outpatient departments, or HOPDs. In connection with our commercial launch of DEXTENZA, we
have built a highly targeted, key account sales force that focuses on the ASCs responsible for the largest volumes of
cataract surgery in the United States and their affiliates, with an initial emphasis on the approximately two million cataract
procedures performed annually under Medicare Part B.
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We expect to grow our salesforce in 2021 to increase our active number of accounts and penetrate each account more
deeply. Our current field sales team consists of approximately 30 key account managers, or KAMs; nine Field
Reimbursement Managers, or FRMs; and three Regional Directors, or RDs. We intend to add up to six KAMs and up to
two FRMs, and we may add one RD, during the course of 2021.
We have entered into a license agreement and collaboration with AffaMed for the development and
commercialization of DEXTENZA, along with OTX-TIC, in specified Asian markets.
If our sNDA to include the treatment of ocular itching associated with allergic conjunctivitis as an additional
approved indication for DEXTENZA is approved, we expect to launch DEXTENZA for that indication in the first half of
2022. We expect initially to support the launch of DEXTENZA for this indication with our existing field force given the
high degree of overlap between surgeons performing cataract surgery and those that treat severe allergic conjunctivitis.
Following launch, we will consider the potential need for additional resources that may be required to support continued
commercialization.
Manufacturing
We fabricate devices and drug products for use in our clinical trials, research and development and commercial
efforts for all of our therapeutic product candidates using current Good Manufacturing Practices, or cGMP, at our facility
located in Bedford, Massachusetts. In June 2016, we entered into a new lease agreement for approximately 71,000 square
feet of a new facility in Bedford, Massachusetts that will include additional manufacturing space. We are evaluating the
potential relocation of our manufacturing operations to the new leased premises. We plan to maintain our existing
manufacturing space of approximately 20,000 square feet and extended the operating lease until June 2023.
We purchase active pharmaceutical ingredient drug substance from independent suppliers on a purchase order basis
for incorporation into our drug product candidates. We purchase our PEG and other raw materials from different vendors
on a purchase order basis according to our specifications. Multiple vendors are available for each component we purchase.
We qualify vendors according to our quality system requirements. We do not have any long term supply agreements in
place for any raw materials or drug substances. We do not license any technology or pay any royalties to any of our drug or
raw material vendors for the front-of-the-eye products.
We believe that our strategic investment in manufacturing capabilities allows us to advance product candidates at a
more rapid pace and with more flexibility than a contract manufacturer, although we will continue to evaluate outsourcing
unit operations for cost advantages. Our manufacturing capability also enables us to produce products in a cost-effective
manner while retaining control over the process and prioritize the timing of internal programs.
Our manufacturing capabilities encompass the full manufacturing process through quality control and quality
assurance and are integrated with our project teams from discovery through development and commercial release. This
structure enables us to efficiently transfer research stage product concepts into manufacturing. We have designed our
manufacturing facility and processes to provide flexibility for the manufacture of different product candidates. We
outsource sterilization services for our products.
We believe that we can scale our manufacturing processes to support DEXTENZA and ReSure Sealant sales as well
as development of our drug product candidates and the potential commercialization of such product candidates.
Intellectual Property
Our success depends in part on our ability to obtain and maintain proprietary protection for our products, product
candidates, technology and know-how, to operate without infringing the proprietary rights of others and to prevent others
from infringing our proprietary rights. We rely on patent protection, trade secrets, know-how, continuing technological
innovation and in-licensing opportunities to develop and maintain our proprietary position.
We actively protect our innovations by seeking patents and other forms of intellectual property to cover our
inventions. We also seek to in-license and acquire intellectual property to provide additional protection. As a result, we
have patents and/or patent applications pending for all of our commercial products and product candidates, as well as trade
secrets to protect proprietary manufacturing processes.
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Several patents and applications have been in-licensed from Incept. The license from Incept is limited to the fields of
human ophthalmic diseases and conditions, acute post-surgical pain and ear, nose and/or throat diseases or conditions. As
of February 26, 2021, we have licensed from Incept a total of 16 U.S. patents, 8 U.S. patent applications and foreign
counterparts of some of these patents and patent applications.
The following is a summary of patents and patent applications that cover our commercial products and potentially
cover our product candidates:
OTX-TKI (axitinib intravitreal implant) for Wet AMD, DME and RVO
We have licenses to several U.S. patents and patent applications with the potential to cover this product candidate:
three U.S. patents and issued patents in Australia, the European Union and Japan covering certain drug-release features of
the hydrogel implant in combination with its hydrogel composition, all of which are expected to expire in 2027; two
granted U.S. patents which are expected to expire in 2033 and 2034; and issued patents in Australia, Canada, China, Hong
Kong, the European Union, India, Japan and South Korea covering the process of making the hydrogel implant with its
drug release features and the resultant compositions that are expected to expire in 2032.
We own a pending patent application in the United States with the potential to cover this product candidate that, if
granted, is expected to expire in 2041.
OTX-TIC (travoprost intracameral implant) for glaucoma or ocular hypertension
We have licenses to a pending U.S. application and foreign patent applications pending in Australia, Brazil, Canada,
China, the European Union, Israel, India, Japan and Korea that potentially cover this product candidates that, if granted, are
expected to expire in 2037.
We own a pending patent application in the United States and under the Patent Cooperation Treaty, or PCT, with the
potential to cover this product candidate that, if granted, is expected to expire in 2042.
OTX-CSI (cyclosporine intracanalicular insert) for dry eye disease
We have licenses to three U.S. patents, patents which have issued in Australia, Canada, China and Japan, and
pending applications in the European Union and India that potentially cover this product candidate, all of which are
expected to expire in 2030 and cover compositions and methods of use of this product candidate. We own a pending patent
application in the United States with the potential to cover this product candidate that, if granted, is expected to expire in
2041.
OTX-DED (dexamethasone intracanalicular insert) for episodic dry eye disease
We have licenses to three U.S. patents, patents which have issued in Australia, Canada, China and Japan, and
pending applications in the European Union and India that potentially cover this product candidate, all of which are
expected to expire in 2030 and cover compositions and methods of use of this product candidate. We own a pending patent
application in the United States with the potential to cover this product candidate that, if granted, is expected to expire in
2041.
DEXTENZA ® (dexamethasone ophthalmic insert) 0.4 mg
We have licenses to three U.S. patents, patents which have issued in Australia, Canada, China and Japan, and
pending applications in the European Union and India, that cover this product, all of which are expected to expire in 2030
and cover compositions and methods of use of this product candidate.
We also recently acquired a U.S. patent application with the potential to cover this product that, if granted, is
expected to expire in 2036.
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DEXTENZA ® (dexamethasone ophthalmic insert) 0.4 mg for allergic conjunctivitis
We have licenses to three U.S. patents, patents which have issued in Australia, Canada, China and Japan, and
pending applications in the European Union and India, that potentially cover this product candidate, all of which are
expected to expire in 2030 and cover compositions and methods of use of this product candidate. We own a pending patent
application in the United States with the potential to cover this product candidate that, if granted, is expected to expire in
2041.
ReSure® Sealant
We have licenses to two U.S. patents that cover ReSure Sealant. One U.S. patent is expected to expire in 2024 and
covers the process of making and using hydrogel compositions. Our second U.S. patent is expected to expire in 2032 and
covers certain features of the ReSure Sealant package.
The existence of patent applications does not guarantee that a patent will issue, or that any patent that does issue will
cover the product or product candidate. Issued patents are subject to validity and infringement challenges by third parties
with uncertain chances of success.
The term of individual patents depends upon the legal term for patents in the countries in which they are granted. In
most countries, including the United States, the patent term is generally 20 years from the earliest claimed filing date of a
non-provisional patent application in the applicable country. In the United States, a patent’s term may, in certain cases, be
lengthened by patent term adjustment, which compensates a patentee for administrative delays by the United States Patent
and Trademark Office in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over a
commonly owned patent or a patent naming a common inventor and having an earlier expiration date. The Drug Price
Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to
five years beyond the expiration date of a U.S. patent as partial compensation for the length of time the drug is under
regulatory review while the patent is in force. A patent term extension cannot extend the remaining term of a patent beyond
a total of 14 years from the date of product approval, only one patent applicable to each regulatory review period may be
extended and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be
extended.
Similar provisions are available in the European Union and certain other foreign jurisdictions to extend the term of a
patent that covers an approved drug. In the future, if and when our product candidates receive approval by the FDA or
foreign regulatory authorities, we expect to apply for patent term extensions on issued patents covering those products,
depending upon the length of the clinical trials for each drug and other factors. The expiration dates referred to above are
without regard to potential patent term extension or other market exclusivity that may be available to us.
For patent applications covering our products and developmental candidates, we typically file patent applications
under the PCT which provides for the filing of a single application that preserves the right to file in national patent offices
in other countries up to 30 months from the first priority date.
We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be
difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with
our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of
our data.
Licenses
Incept, LLC
In January 2012, we entered into an amended and restated license agreement, which we refer to as either the Prior
Agreement or Original License, with Incept under which we hold an exclusive, worldwide, perpetual, irrevocable license
under specified patents and technology owned or controlled by Incept to make, have made, use, offer for sale, sell,
sublicense, have sublicensed, offer for sublicense and import, products delivered to or around the human eye for diagnostic,
therapeutic or prophylactic purposes relating to all human ophthalmic diseases or conditions. This license covers a
significant portion of the patent rights and the technology for ReSure Sealant and our hydrogel platform technology
product candidates. The agreement supersedes an April 2007 license agreement between us and Incept. Amar
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Sawhney, our former President and Chief Executive Officer and former Executive Chairman of the Board of Directors, is a
general partner of Incept.
On September 13, 2018, or the Effective Date, we entered into a second amended and restated license agreement, or
the Second Amended Agreement, with Incept. The Second Amended Agreement amends and restates in full the Prior
Agreement, to expand the scope of our intellectual property license and modify future intellectual property ownership and
other rights thereunder.
License Rights; Ownership of Intellectual Property. We and Incept have agreed to expand the field of use of the
exclusive, worldwide, perpetual, irrevocable license held by us under the Prior Agreement to include specified intellectual
property rights and technology owned or controlled by Incept to make, have made, use, offer for sale, sell, sublicense, have
sublicensed, offer for sublicense and import, (i) consistent with the Prior Agreement, products delivered to or around the
human eye for diagnostic, therapeutic or prophylactic purposes relating to all human ophthalmic diseases or conditions, or
the Ophthalmic Field of Use, and (ii) as a result of the expansion of the scope of the Original License, products delivered
for the treatment of acute post-surgical pain or for the treatment of ear, nose and/or throat diseases or conditions, subject to
specified exceptions, or the Additional Field of Use. We and Incept have further agreed to expand the field of use of the
Original License for certain patents, patent applications and other rights pertaining to shape-changing hydrogel
formulations thereunder, or the Shape-Changing IP, to include all fields except those involving the nerves and associated
tissues specified in the Second Amended Agreement.
We will solely own, without a license to Incept, all intellectual property rights conceived solely by one or more
individuals from our company, or the Company Individuals, after the Effective Date, subject to exceptions specified
therein. Subject to certain exceptions specified in the Second Amended Agreement, Incept will own and license to the us
(i) all intellectual property rights included in the Original License, or the Original IP, in the Ophthalmic Field of Use and
the Additional Field of Use, (ii) intellectual property rights in the field of drug delivery conceived solely by the Company
Individuals on or before the Effective Date, or Incept IP, and (iii) intellectual property rights in the field of drug delivery
conceived by one or more Company Individuals jointly with one or more individuals from Incept, including Dr. Sawhney,
or the Incept Individuals, after the Effective Date. These intellectual property rights are referred to as Joint IP, and,
collectively with the Original IP and the Incept IP, as the Licensed IP.
Financial Terms. We and any of our sublicensees are obligated to pay Incept royalties as follows under the
Agreement: (i) consistent with the Prior Agreement, a royalty equal to a low single-digit percentage of net sales by the us
or our affiliates of products, devices, materials, or components thereof, or Licensed Products, including or covered by
Original IP, excluding the Shape-Changing IP, in the Ophthalmic Field of Use; (ii) a royalty equal to a mid-single-digit
percentage of net sales by us or our affiliates of Licensed Products including or covered by Original IP, excluding the
Shape-Changing IP, in the Additional Field of Use; and (iii) a royalty equal to a low single-digit percentage of net sales by
us or our affiliates of Licensed Products including or covered by Incept IP or Joint IP in the field of drug delivery. Royalty
obligations under the Second Amended Agreement commence with the first commercial sale of a Licensed Product
described above and terminate upon the expiration of the last-to-expire patents included in the Licensed IP, as applicable.
Any sublicensee of us also will be obligated to pay Incept royalties on net sales of Licensed Products made by it and will
be bound by the terms of the Second Amended Agreement to the same extent as us. Additionally, at its sole discretion,
Incept may require, as a condition of any sublicense by us in the Additional Field of Use and in exchange for a reduction in
the royalties owed on net sales of Licensed Products described above, payments equal to a mid-teen percentage of any
upfront payment and, subject to certain conditions, other payments received by us from the sublicensee.
Patent Prosecution and Litigation. Incept will continue to have sole control and responsibility for ongoing
prosecution of patents included in the Original IP, and we will have sole control and responsibility for ongoing prosecution
of patents and patent applications included in or arising under the Incept IP or Joint IP. The parties have agreed to work
together in good faith to enter into a separate agreement under which, subject to certain limitations, we would assume
control of the prosecution of patents and patent applications included in or arising under the Shape-Changing IP. We have
the right, subject to certain conditions, to bring suit against third parties who infringe the patents included in the Original IP
in the Ophthalmic Field of Use or the Additional Field of Use, patents included in the Incept IP in the drug delivery filed,
patents included in the Joint IP in the drug delivery field, and patents included in the Shape-Changing IP in all fields except
as described above. We have also agreed, if requested by Incept, to enter into a joint defense and prosecution agreement
for the purpose of allowing the parties to share confidential and attorney-client
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privileged information regarding the possible infringement of one or more patents covered by the Second Amended
Agreement. We are responsible for all costs incurred in prosecuting any infringement action it brings.
Term and Termination. The Second Amended Agreement will expire on the later of (i) the expiration or disclaimer
by us of the last valid claim of an issued and unexpired patent included in the Licensed IP or (ii) the final unappealable
rejection or abandonment of the last pending patent application arising under the Licensed IP. Either party may terminate
the Second Amended Agreement in the event of the other party’s insolvency, bankruptcy or comparable proceedings, or if
the other party materially breaches the agreement and does not cure such breach during a specified cure period.
AffaMed License Agreement
On October 29, 2020, we entered into a license agreement, or the License Agreement, with AffaMed for the
development and commercialization of DEXTENZA regarding ocular inflammation and pain following cataract surgery
and allergic conjunctivitis, or collectively, the DEXTENZA Field, and for OTX-TIC, or collectively with DEXTENZA, the
AffaMed Licensed Products, regarding open-angle glaucoma and ocular hypertension, or collectively, the TIC Field and,
with the DEXTENZA Field, each a Field, in each case in mainland China, Taiwan, Hong Kong, Macau, South Korea, and
the countries of the Association of Southeast Asian Nations, or collectively, the Territories. We retain development and
commercialization rights for the AffaMed Licensed Products in the rest of the world.
Under the License Agreement, we granted AffaMed (i) a non-exclusive, royalty-free, non-sublicensable license
under certain of our intellectual property rights and know-how to use the AffaMed Licensed Products in connection with
specified activities in accordance with a development plan agreed between the parties and (ii) an exclusive, royalty-
bearing, sublicensable, non-transferable (subject to specified exceptions), license under certain of our intellectual property
rights and know-how to commercialize the AffaMed Licensed Products in the applicable Field in the Territories. We have
further agreed not to, and to cause its affiliates or agents not to, develop or commercialize in the Territories (i) the AffaMed
Licensed Products outside of the applicable Fields and (ii) any other product containing the same active pharmaceutical
ingredients as the AffaMed Licensed Products and administered into the anterior chamber of the eye, in each case without
AffaMed’s prior written consent. AffaMed has agreed not to, and to cause its affiliates or agents not to, engage in the
development, manufacture, or commercialization of any competing product in the Territories.
Under the terms of the License Agreement, we received upfront payments totaling $12 million in the fourth quarter
of 2020. We are also eligible to receive up to an additional $91 million in aggregate, inclusive of a low-seven-figure
clinical support payment, upon the achievement of certain development and commercial milestones. There can be no
guarantee, however, that any of these milestones will be achieved. We are also entitled to receive tiered, escalating
royalties on the net sales of the AffaMed Licensed Products ranging from a low-teen to low-twenties percentage. Royalties
under the License Agreement are payable on an AffaMed Licensed Product-by-AffaMed Licensed Product and
jurisdiction-by-jurisdiction basis and are subject to potential reductions in specified circumstances, subject to a specified
floor.
Pursuant to the terms of the License Agreement, we are generally responsible for expenses related to the
development of the AffaMed Licensed Products in the applicable Fields in the Territories, provided that AffaMed
(i) reimburse us a low-teen percentage of expenses incurred in connection with certain clinical trials conducted by us and
designed to support marketing approval of the AffaMed Licensed Product by FDA or the European Medicines Agency, or
the Global Studies; (ii) is solely responsible for expenses incurred in connection with territory-specific clinical trials that it
conducts in furtherance of the development plan agreed between the parties in the applicable Fields in the Territories, or the
Local Studies; and (iii) reimburse us in full for expenses incurred in connection with obtaining and maintaining regulatory
approvals of the AffaMed Licensed Products in the applicable Fields in the Territories. In the event AffaMed declines to
participate in a Global Study or to conduct a Local Study in any jurisdiction in which we determine to conduct such a
study, we are relieved of our obligation to provide AffaMed clinical data from such study, other than safety data, unless
AffaMed subsequently reimburses us in the amounts described above plus a prespecified premium.
AffaMed is further obligated, at its sole cost and expense, to use commercially reasonable efforts to commercialize
the AffaMed Licensed Products in the applicable Fields in the Territories. The License Agreement contemplates that the
parties negotiate and enter into a future agreement requiring us to use commercially reasonable efforts to manufacture
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and supply finished drug products in sufficient quantity for clinical development and commercialization of the AffaMed
Licensed Products in the applicable Fields in the Territories.
In accordance with its terms, the License Agreement expires upon the expiration of the last royalty term for the last
AffaMed Licensed Product in any applicable Field in the Territories. Either party may, subject to specified cure periods,
terminate the License Agreement in the event of the other party’s uncured breach. Either party may also terminate the
License Agreement under specified circumstances relating to the other party’s insolvency. During an established period
following a change of control of us or our entry into a global licensing agreement that includes the Territories with a third
party, we have the option to terminate the License Agreement, subject to a specified notice period and the repayment of any
costs and expenses incurred by AffaMed in connection with the License Agreement, including upfront and milestone
payments AffaMed has previously paid to us, at a prespecified premium. AffaMed has the right to terminate the License
Agreement at any time following the completion of a Phase 3 clinical trial to evaluate OTX-TIC.
Competition
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense
competition and a strong emphasis on proprietary products. While we believe that our technologies, knowledge, experience
and scientific resources provide us with competitive advantages, potential competitors include large pharmaceutical and
biotechnology companies, specialty pharmaceutical and generic drug companies, and compounding pharmacies. 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. Many of our potential competitors 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. These competitors also compete with us in recruiting and retaining
qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials,
as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies
may also prove to be significant competitors, particularly through collaborative arrangements with large and established
companies.
The key competitive factors affecting the success of each of our product candidates, if approved for marketing, are
likely to be efficacy, safety, method of administration, convenience, price, the level of generic competition and the
availability of coverage and adequate reimbursement from government and other third-party payors.
Because the active pharmaceutical ingredients in our product candidates are available on a generic basis, or are soon
to be available on a generic basis, competitors will be able to offer and sell products with the same active pharmaceutical
ingredient as our products so long as these competitors do not infringe the patents that we license. For example, our
licensed patents related to our intracanalicular insert product candidates largely relate to the hydrogel composition of the
intracanalicular inserts and certain drug-release features of the intracanalicular inserts. As such, if a third party were able to
design around the formulation and process patents that we license and create a different formulation using a different
production process not covered by our licensed patents or patent applications, we would likely be unable to prevent that
third party from manufacturing and marketing its product.
Competitors of our Intracanalicular Insert Product Candidates
Several competitors are developing sustained drug release products for the same ophthalmic indications as our retinal
implants, intracameral implants, intracanalicular insert and wound sealant products and product candidates, as set forth
below.
Competitors of our Retinal Implants
Our intravitreal implant for the treatment of wet AMD will compete with anti-VEGF compounds administered in
their current formulation and prescribed for the treatment of wet AMD as these agents can in some instances deliver one to
two months or more of therapeutic effect. They include Lucentis, Eylea, Beovu and off-label use of the cancer therapy
Avastin. Multiple companies, although all in early stages of development, are exploring ways to deliver anti-VEGF
products in a sustained-release fashion, including Clearside Biomedical, Inc., which is pursuing a TKI (axitinib)
administered into the suprachoroidal space; Eyepoint Pharmaceuticals, Inc., which is pursuing a sustained-release
bioerodible device containing a TKI (vorolanib) using its Durasert™ technology; Aerie Pharmaceuticals, which is
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pursuing development of a 4-6 month TKI implant (axitinib) using its Print® manufacturing technology; Graybug Vision,
Inc. which is pursuing a sustained-release microparticle depot TKI formulation (sunitinib) to extend therapeutic drug levels
in ocular tissue for up to six months; and Kodiak Sciences Inc., which is pursuing sustained release therapies based on its
anti-VEGF biopolymer conjugate technology. In addition, there are several companies pursuing gene therapy to treat
retinal diseases including Adverum Biotechnologies, Inc. and REGENXBIO Inc. There also are a number of companies
with products in development targeting the inhibition of the complement system to address retinal diseases, specifically
geographic atrophy including Apellis Pharmaceuticals, IVERIC bio, Inc., Annexion Biosciences, Gyroscope Therapeutics,
Genentech/Ionis and Janssen Pharmaceutical, among others.
Competitors of OTX-TIC
Allergan PLC, now owned by AbbVie, Inc., received approval in March 2020 of DURYSTA™, a biodegradable
bimatoprost intracameral implant consisting of a PGA and a biodegradable polymer matrix for the reduction of IOP in
patients with open-angle glaucoma or ocular hypertension. Allergan purchased ForSight VISION5 who was conducting a
Phase 2 clinical development of the Helios insert, a sustained-release ocular insert placed below the eyelid that delivers
bimatoprost for the treatment of glaucoma. Glaukos, Inc. is in Phase 3 trials with its iDose technology to deliver travoprost
for the treatment of glaucoma. In addition, several other companies have announced their intention to develop products for
treatment of glaucoma using sustained-release therapy, although each of these is at an early stage of development. Mati
Therapeutics has conducted a Phase 2 clinical development of an intracanalicular insert for the treatment of glaucoma.
Competitors of OTX-CSI and OTX-DED
A number of therapies are currently available for the treatment of DED in the United States. The most commonly used
treatments for DED in the United States are over-the-counter eye drops, often referred to as “artificial tears,” and three
FDA-approved prescription eye drop therapies: Restasis, Xiidra and Cequa. Artificial tears are intended to supplement
insufficient tear production or improve tear film instability, but are primarily saline-based and provide only temporary
relief. Restasis and Cequa, both calcineurin inhibitor immunosuppressants, and Xiidra, a LFA-1 antagonist, address chronic
inflammation associated with DED. Kala Pharmaceuticals received approval in 2020 and launched EYESUVIS™,
(loteprednol etabonate ophthalmic suspension) 0.25% for the short term (up to two weeks) treatment of the signs and
symptoms of dry eye disease. Other treatment options include ointments, gels, warm compresses, omega-3 fatty acid
supplements and a number of medical devices. We are aware of many other companies developing therapies for DED,
including Aerie Pharmaceuticals, Alcon, Aldeyra Therapeutics, Allergan, Aurinia Pharmaceuticals, Azura Ophthalmics,
Bausch Health (Novaliq), HanAll BioPharma, Johnson & Johnson, Mitotech, Novartis, Oyster Point Pharma, Parion
Sciences, ReGenTree, Silk Technologies, Sylentis, TearSolutions, and TopiVert Pharma.
Competitors of DEXTENZA
Icon Biosciences, Inc. received FDA approval of DEXYCU in February 2018. DEXYCU is an injection of
dexamethasone at the time of surgery into the posterior chamber of the eye (behind the iris) to treat inflammation
associated with cataract surgery. Icon Biosciences Inc. was subsequently bought by pSvidia Corporation in March 2018
and, at the same time, the new entity was renamed Eyepoint. Eyepoint launched DEXYCU commercially in the first
quarter of 2019.
Competitors of ReSure Sealant
ReSure Sealant is the first and only surgical sealant approved for ophthalmic use in the United States. Outside the
United States, Beaver Visitec is commercializing its product OcuSeal, which is designed to provide a protective hydrogel
film barrier to stabilize ocular wounds. This product has received a CE Mark in Europe but is not approved for use in the
United States. Sutures are the primary alternative for closing ophthalmic wounds. In addition, a technique called stromal
hydration, which involves the localized injection of a balanced salt solution at the wound edges, is often used to facilitate
the self-sealing of a wound.
Government Regulation
Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions,
including the European Union, extensively regulate, among other things, the research, development,
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testing, manufacture, quality control, clearance, approval, pricing, sales, reimbursement, packaging, storage,
recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and
import and export of pharmaceutical products and medical devices. The processes for obtaining regulatory approvals in the
United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and
regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.
Review and Approval of Drugs and Biologics in the United States
In the United States, the FDA approves and regulates drugs under the FDCA and related regulations. Drugs are also
subject to other federal, state and local statutes and regulations. Biological products are licensed for marketing under the
Public Health Service Act, or PHSA, and subject to regulation under the FDCA and related regulations, and other federal,
state and local statutes and regulations.
An applicant seeking approval to market and distribute a new drug or biological product in the United States must
typically undertake the following:
● completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s
good laboratory practice, or GLP, regulations;
● submission to the FDA of an IND, which must take effect before human clinical trials may begin;
● approval by an independent institutional review board, or IRB, representing each clinical site before each
clinical trial may be initiated;
● performance of adequate and well-controlled human clinical trials in accordance with Good Clinical Practices,
or GCP, to establish the safety and efficacy of the proposed drug product for each indication;
● preparation and submission to the FDA of a new drug application, or NDA, for a drug candidate product and a
biological licensing application, or BLA, for a biological product requesting marketing for one or more
proposed indications;
● review by an FDA advisory committee, where appropriate or if applicable;
● satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the
product, or components thereof, are produced to assess compliance with current Good Manufacturing Practices,
or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the
product’s identity, strength, quality and purity;
● satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of
clinical data;
● payment of user fees and securing FDA approval of the NDA or BLA; and
● compliance with any post-approval requirements, including the potential requirement to implement a Risk
Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post-approval studies.
Preclinical Studies
Preclinical studies include laboratory evaluation of the purity and stability of the manufactured drug substance or
active pharmaceutical ingredient and the formulated product, as well as in vitro and animal studies to assess the safety and
activity of the investigational product for initial testing in humans and to establish a rationale for therapeutic use. The
conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations. The results of
the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and
plans for clinical studies, among other things, are submitted to the FDA as part of an IND.
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Companies usually must complete some long-term preclinical testing, such as animal tests of reproductive adverse
events and carcinogenicity, and must also develop additional information about the chemistry and physical characteristics
of the investigational product and finalize a process for manufacturing the product in commercial quantities in accordance
with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the
candidate product and, among other things, the manufacturer must develop methods for testing the identity, strength,
quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies
must be conducted to demonstrate that the candidate product does not undergo unacceptable deterioration over its shelf life.
The IND and IRB Processes
Clinical trials involve the administration of the investigational product to human subjects under the supervision of
qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all
research subjects provide their voluntary informed consent in writing before their participation in any clinical trial. Clinical
trials are conducted under written study protocols detailing, among other things, the inclusion and exclusion criteria, the
objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A
protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.
An IND is an exemption from the FDCA that allows an unapproved product candidate to be shipped in interstate
commerce for use in an investigational clinical trial and a request for FDA authorization to administer an investigational
drug to humans. Such authorization must be secured prior to interstate shipment and administration of any new drug or
biologic that is not the subject of an approved NDA or BLA. In support of a request for an IND, applicants must submit a
protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.
The FDA requires a 30-day waiting period after the filing of each IND before clinical trials may begin. This waiting period
is designed to allow the FDA to review the IND to determine whether human research subjects will be exposed to
unreasonable health risks. At any time during this 30-day period, or thereafter, the FDA may raise concerns or questions
about the conduct of the trials as outlined in the IND and impose a clinical hold or partial clinical hold. In this case, the
IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin. For our intracanalicular
insert product candidates, we have typically conducted our initial and earlier-stage clinical trials outside the United States.
We generally plan to conduct our later stage and pivotal clinical trials of our intracanalicular insert product candidates in
the United States.
In addition to the foregoing IND requirements, an IRB representing each institution participating in the clinical trial
must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct
continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the
study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance
with FDA regulations. An IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it
represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate
has been associated with unexpected serious harm to patients.
The FDA’s primary objectives in reviewing an IND are to assure the safety and rights of patients and to help assure
that the quality of the investigation will be adequate to permit an evaluation of the drug’s effectiveness and safety and of
the biological product’s safety, purity and potency. The decision to terminate development of an investigational drug or
biological product may be made by either a health authority body such as the FDA, an IRB or ethics committee, or by us
for various reasons. Additionally, some trials are overseen by an independent group of qualified experts organized by the
trial sponsor, known as a data safety monitoring board, or DSMB, or committee. This group provides authorization for
whether or not a trial may move forward at designated check points based on access that only the group maintains to
available data from the study. Suspension or termination of development during any phase of clinical trials can occur if it is
determined that the participants or patients are being exposed to an unacceptable health risk. Other reasons for suspension
or termination may be made by us based on evolving business objectives and/or competitive climate.
Information about clinical trials must be submitted within specific timeframes to the National Institutes of Health, or
NIH, for public dissemination on its ClinicalTrials.gov website.
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Expanded Access to an Investigational Drug for Treatment Use
Expanded access, sometimes called “compassionate use,” is the use of investigational new drug products outside of
clinical trials to treat patients with serious or immediately life-threatening diseases or conditions when there are no
comparable or satisfactory alternative treatment options. The rules and regulations related to expanded access are intended
to improve access to investigational drugs for patients who may benefit from investigational therapies. FDA regulations
allow access to investigational drugs under an IND by the company or the treating physician for treatment purposes on a
case-by-case basis for: individual patients (single-patient IND applications for treatment in emergency settings and non-
emergency settings); intermediate-size patient populations; and larger populations for use of the drug under a treatment
protocol or Treatment IND Application.
When considering an IND application for expanded access to an investigational product with the purpose of treating
a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when all of
the following criteria apply: patient(s) have a serious or immediately life-threatening disease or condition, and there is no
comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition; the potential patient
benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or condition
to be treated; and the expanded use of the investigational drug for the requested treatment will not interfere initiation,
conduct, or completion of clinical investigations that could support marketing approval of the product or otherwise
compromise the potential development of the product.
Drug and biologic companies are required to make publicly available their policies for expanded access for
individual patient access to products intended for serious diseases. Sponsors are required to make such policies publicly
available upon the earlier of initiation of a Phase 2 or Phase 3 study; or 15 days after the drug or biologic receives
designation as a breakthrough therapy, fast track product, or regenerative medicine advanced therapy.
In addition, on May 30, 2018, the Right to Try Act was signed into law. The law, among other things, provides a
federal framework for certain patients to access certain investigational new drug products that have completed a Phase 1
clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can
seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access
program. There is no obligation for a drug manufacturer to make its drug products available to eligible patients as a result
of the Right to Try Act, but the manufacturer must develop an internal policy and respond to patient requests according to
that policy.
Human Clinical Studies in Support of an NDA or BLA
Clinical trials involve the administration of the investigational product to human subjects under the supervision of
qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all
research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are
conducted under written study protocols detailing, among other things, the inclusion and exclusion criteria, the objectives
of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated.
A sponsor may choose, but is not required, to conduct a foreign clinical trial under an IND. When a foreign clinical
trial is conducted under an IND, all FDA IND requirements must be met unless waived. When a foreign clinical trial is not
conducted under an IND, the sponsor must ensure that the trial complies with certain regulatory requirements of the FDA
in order to use the trial as support for an IND or application for marketing approval. Specifically, the FDA requires such
trials to be conducted in accordance with GCP, including review and approval by an independent ethics committee and
informed consent from subjects. The GCP requirements encompass both ethical and data integrity standards for clinical
trials. The FDA’s regulations are intended to help ensure the protection of human subjects enrolled in non-IND foreign
clinical trials, as well as the quality and integrity of the resulting data. They further help ensure that non-IND foreign trials
are conducted in a manner comparable to that required for IND trials.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
● Phase 1: The drug or biologic is initially introduced into a small number of healthy human subjects or patients
with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution,
excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.
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● Phase 2: The drug or biologic is administered to a limited patient population to identify possible adverse effects
and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to
determine dosage tolerance and optimal dosage.
● Phase 3: The drug or biologic is administered to an expanded patient population, generally at geographically
dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the
efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to
provide adequate information for the labeling of the product.
Phase 3 clinical trials are commonly referred to as “pivotal” trials, which typically denotes a trial which presents the
data that the FDA or other relevant regulatory agency will use to determine whether to approve a drug.
Progress reports detailing the safety results of the clinical trials must be submitted at least annually to the FDA and
more frequently if serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for any of
the following: serious and unexpected suspected adverse reactions; findings from other studies or animal or in vitro testing
that suggest a significant risk in humans exposed to the product candidate; and any clinically important increase in the case
of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The FDA will typically
inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.
Concurrent with clinical trials, companies often complete additional animal studies and must also develop additional
information about the chemistry and physical characteristics of the drug as well as finalize a process for manufacturing the
product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of
consistently producing quality batches of the drug candidate and, among other things, must develop methods for testing the
identity, strength, quality, purity, and potency of the final drug. Additionally, appropriate packaging must be selected and
tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable
deterioration over its shelf life.
Pediatric Studies
Under the Pediatric Research Equity Act of 2003, an application or supplement thereto must contain data that are
adequate to assess the safety and effectiveness of the drug product for the claimed indications in all relevant pediatric
subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and
effective. With enactment of the Food and Drug Safety and Innovation Act, or the FDASIA, in 2012, sponsors must also
submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric
study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests, and
other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then
review the information submitted, consult with each other, and agree upon a final plan. The FDA or the applicant may
request an amendment to the plan at any time. For drugs intended to treat a serious or life-threatening disease or condition,
the FDA must, upon the request of an applicant, meet to discuss preparation of the initial pediatric study plan or to discuss
deferral or waiver of pediatric assessments.
The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all
pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data
requirements. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals
are contained in the Food and Drug Administration Safety and Innovation Act, or FDASIA. The FDA maintains a list of
diseases that are exempt from PREA requirements due to low prevalence of disease in the pediatric population. Congress
amended the FDA Reauthorization Act of 2017, or FDARA. Previously, drugs that had been granted orphan drug
designation were exempt from the requirements of the Pediatric Research Equity Act. Under the amended section 505B,
beginning on August 18, 2020, the submission of a pediatric assessment, waiver or deferral will be required for certain
molecularly targeted cancer indications with the submission of an application or supplement to an application.
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Review of an NDA or BLA by the FDA
In order to obtain approval to market a drug or biological product in the United States, a marketing application must
be submitted to the FDA that provides data establishing the safety and effectiveness of the proposed drug product for the
proposed indication, and the safety, purity and potency of the biological product for its intended indication. The application
includes all relevant data available from pertinent preclinical and clinical trials, including negative or ambiguous results as
well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls
and proposed labeling, among other things. Data can come from company-sponsored clinical trials intended to test the
safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by
investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the
safety and effectiveness of the investigational drug product and the safety, purity and potency of the biological product to
the satisfaction of the FDA.
The NDA and BLA are thus the vehicles through which applicants formally propose that the FDA approve a new
product for marketing and sale in the United States for one or more indications. Every new product candidate must be the
subject of an approved NDA or BLA before it may be commercialized in the United States. Under federal law, the
submission of most applications is subject to an application user fee, which for federal fiscal year 2021 is $2,875,842 for an
application requiring clinical data. The sponsor of an approved application is also subject to an annual program fee, which
for fiscal year 2021 is $336,432. Certain exceptions and waivers are available for some of these fees, such as an exception
from the application fee for product candidates with orphan designation and a waiver for certain small businesses.
Following submission of an NDA or BLA, the FDA conducts a preliminary review of the application generally
within 60 calendar days of its receipt and strives to inform the sponsor by the 74th day after the FDA’s receipt of the
submission to determine whether the application is sufficiently complete to permit substantive review. The FDA may
request additional information rather than accept the application for filing. In this event, the application must be
resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts
it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has
agreed to specified performance goals in the review process of NDAs and BLAs. Under that agreement, 90% of
applications seeking approval of New Molecular Entities, or NMEs, are meant to be reviewed within ten months from the
date on which FDA accepts the application for filing, and 90% of applications for NMEs that have been designated for
“priority review” are meant to be reviewed within six months of the filing date. For applications seeking approval of
products that are not NMEs, the ten-month and six-month review periods run from the date that FDA receives the
application. The review process and the Prescription Drug User Fee Act goal date may be extended by the FDA for three
additional months to consider new information or clarification provided by the applicant to address an outstanding
deficiency identified by the FDA following the original submission.
Before approving an application, the FDA typically will inspect the facility or facilities where the product is or will
be manufactured. These pre-approval inspections may cover all facilities associated with an NDA or BLA submission,
including drug component manufacturing (e.g., active pharmaceutical ingredients), finished drug product manufacturing,
and control testing laboratories. The FDA will not approve an application unless it determines that the manufacturing
processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the
product within required specifications. Additionally, before approving an NDA or BLA, the FDA will typically inspect one
or more clinical sites to assure compliance with GCP. Under the FDA Reauthorization Act of 2017, the FDA must
implement a protocol to expedite review of responses to inspection reports pertaining to certain applications, including
applications for products in shortage or those for which approval is dependent on remediation of conditions identified in
the inspection report.
In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk
minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential
risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product,
seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or
potential adverse events, and whether the product is a new molecular entity.
The FDA may refer an application for a novel product to an advisory committee or explain why such referral was not
made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts,
that reviews, evaluates and provides a recommendation as to whether the application should be approved and
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under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such
recommendations carefully when making decisions.
Accelerated Approval Pathway
The FDA may grant accelerated approval to a drug for a serious or life-threatening condition that provides
meaningful therapeutic advantage to patients over existing treatments based upon a determination that the drug has an
effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated
approval for such a condition when the product has an effect on an intermediate clinical endpoint that can be measured
earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on
irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the
condition and the availability or lack of alternative treatments. Drugs granted accelerated approval must meet the same
statutory standards for safety and effectiveness as those granted traditional approval.
For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement,
radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of
clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An
intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the
clinical benefit of a drug, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on
intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where the
therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a
basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a drug.
The accelerated approval pathway is most often used in settings in which the course of a disease is long and an
extended period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate or
intermediate clinical endpoint occurs rapidly. The accelerated approval pathway is usually contingent on a sponsor’s
agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s
clinical benefit. As a result, a product candidate approved on this basis is subject to rigorous post-marketing compliance
requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical
endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies,
would allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for product
candidates approved under accelerated regulations are subject to prior review by the FDA.
The FDA’s Decision on an Application
On the basis of the FDA’s evaluation of the application and accompanying information, including the results of the
inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter, or CRL. An
approval letter authorizes commercial marketing of the product with specific prescribing information for specific
indications. A CRL generally outlines the deficiencies in the submission and may require substantial additional testing or
information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the
FDA’s satisfaction in a resubmission of the application, the FDA will issue an approval letter. The FDA has committed to
reviewing such resubmissions in two or six months depending on the type of information included. Even with submission
of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria
for approval.
If the FDA approves a product, it may limit the approved indications for use for the product, require that
contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including
Phase 4 clinical trials, be conducted to further assess the product candidate’s safety after approval, require testing and
surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution
restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and
profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-
market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding
new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and
FDA review and approval.
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Post-Approval Regulation
Drugs and biologics manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing
regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product
sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After
approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to
prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the
establishments at which such products are manufactured, as well as new application fees for supplemental applications
with clinical data.
In addition, manufacturers and other entities involved in the manufacture and distribution of approved products are
required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced
inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing
process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also
require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements
upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must
continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.
A product may also be subject to official lot release, meaning that the manufacturer is required to perform certain
tests on each lot of the product before it is released for distribution. If the product is subject to official release, the
manufacturer must submit samples of each lot, together with a release protocol showing a summary of the history of
manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may in
addition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the
FDA will conduct laboratory research related to the safety, purity, potency and effectiveness of pharmaceutical products.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and
standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously
unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing
processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new
safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of
distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
● restrictions on the marketing or manufacturing of the product, suspension of the approval, complete withdrawal
of the product from the market or product recalls;
● fines, warning letters or holds on post-approval clinical trials;
● refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of
product license approvals;
● product seizure or detention, or refusal to permit the import or export of products; or
● injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market.
Products may be promoted only for the approved indications and in accordance with the provisions of the approved label.
If a company is found to have promoted off-label uses, it may become subject to adverse public relations and
administrative and judicial enforcement by the FDA, the Department of Justice, or the Office of the Inspector General of
the Department of Health and Human Services, as well as state authorities. This could subject a company to a range of
penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially
restrict the manner in which a company promotes or distributes drug products.
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In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing
Act, or PDMA, and its implementing regulations, as well as the Drug Supply Chain Security Act, or DSCA, which regulate
the distribution and tracing of prescription drugs and prescription drug samples at the federal level, and set minimum
standards for the regulation of drug distributors by the states. The PDMA, its implementing regulations and state laws
limit the distribution of prescription pharmaceutical product samples, and the DSCA imposes requirements to ensure
accountability in distribution and to identify and remove counterfeit and other illegitimate products from the market.
Section 505(b)(2) NDAs
NDAs for most new drug products are based on two full clinical studies which must contain substantial evidence of
the safety and efficacy of the proposed new product. These applications are submitted under Section 505(b)(1) of the
FDCA. The FDA is, however, authorized to approve an alternative type of NDA under Section 505(b)(2) of the FDCA.
This type of application allows the applicant to rely, in part, on the FDA’s previous findings of safety and efficacy for a
similar product, or published literature. Specifically, Section 505(b)(2) applies to NDAs for a drug for which the
investigations made to show whether or not the drug is safe for use and effective in use and relied upon by the applicant for
approval of the application “were not conducted by or for the applicant and for which the applicant has not obtained a right
of reference or use from the person by or for whom the investigations were conducted.”
Thus, Section 505(b)(2) authorizes the FDA to approve an NDA based on safety and effectiveness data that were not
developed by the applicant. NDAs filed under Section 505(b)(2) may provide an alternate and potentially more expeditious
pathway to FDA approval for new or improved formulations or new uses of previously approved products. If the 505(b)(2)
applicant can establish that reliance on the FDA’s previous approval is scientifically appropriate, the applicant may
eliminate the need to conduct certain preclinical or clinical studies of the new product. The FDA may also require
companies to perform additional studies or measurements to support the change from the approved product. The FDA may
then approve the new drug candidate for all or some of the label indications for which the referenced product has been
approved, as well as for any new indication sought by the Section 505(b)(2) applicant.
If we obtain favorable results in our clinical trials, we plan to submit NDAs for our intracanalicular insert product
candidates under Section 505(b)(2).
Abbreviated New Drug Applications for Generic Drugs
In 1984, with passage of the Hatch-Waxman Amendments to the FDCA, Congress authorized the FDA to approve
generic drugs that are the same as drugs previously approved by the FDA under the NDA provisions of the statute.
Specifically, in order for an abbreviated new drug application, or ANDA, to be approved, the FDA must find that the
generic version is identical to the reference listed drug, or RLD, with respect to the active ingredients, the route of
administration, the dosage form, and the strength of the drug. At the same time, the FDA must also determine that the
generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to an RLD if “the
rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the
listed drug.”
Upon approval of an ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the
RLD in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the
“Orange Book.” Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the
RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of
therapeutic equivalence often results in substitution of the generic drug without the knowledge or consent of either the
prescribing physician or patient.
Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA until any applicable period of non-
patent exclusivity for the RLD has expired. The FDCA provides a period of five years of non-patent data exclusivity for a
new drug containing a new chemical entity. An NCE is a drug that contains no active moiety that has previously been
approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for the physiological or
pharmacological action of the drug substance. In cases where such exclusivity has been granted, an ANDA may not be
filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification,
in which case the applicant may submit its application four years following the original product approval.
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The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical
investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are
essential to the approval of the application. This three-year exclusivity period often protects changes to a previously
approved drug product, such as a new dosage form, route of administration, combination or indication.
The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new
clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and
are essential to the approval of the application. This three-year exclusivity period often protects changes to a previously
approved drug product, such as a new dosage form, route of administration, combination or indication. Three-year
exclusivity would be available for a drug product that contains a previously approved active moiety, provided the statutory
requirement for a new clinical investigation is satisfied. Unlike five-year NCE exclusivity, an award of three-year
exclusivity does not block the FDA from accepting ANDAs seeking approval for generic versions of the drug as of the date
of approval of the original drug product. The FDA typically makes decisions about awards of data exclusivity shortly
before a product is approved.
Hatch-Waxman Patent Certification and the 30-Month Stay
Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent with
claims that cover the applicant’s product or an approved method of using the product. Each of the patents listed by the
NDA sponsor is published in the Orange Book. When an ANDA applicant files its application to the FDA, the applicant is
required to certify to the FDA concerning any patents listed for the reference product in the Orange Book, except for
patents covering methods of use for which the ANDA applicant is not seeking approval. To the extent that the
Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to
certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an
ANDA applicant would.
Specifically, the applicant must certify with respect to each patent that:
● the required patent information has not been filed;
● the listed patent has expired;
● the listed patent has not expired, but will expire on a particular date and approval is sought after patent
expiration; or
● the listed patent is invalid, unenforceable or will not be infringed by the new product.
A certification that the new product will not infringe the already approved product’s listed patents or that such
patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed
patents or indicate that it is not seeking approval of a patented method of use, the ANDA application will not be approved
until all the listed patents claiming the referenced product have expired.
If the ANDA applicant or 505(b)(2) applicant has provided a Paragraph IV certification to the FDA, the applicant
must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted
for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice
of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph
IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the receipt
of the Paragraph IV notice, expiration of the patent, or a decision in the infringement case that is favorable to the ANDA
applicant.
To the extent that the Section 505(b)(2) applicant is relying on trials conducted for an already approved product, the
applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the
same extent that an ANDA applicant would. As a result, approval of a Section 505(b)(2) NDA can be stalled until all the
listed patents claiming the referenced product have expired, until any non-patent exclusivity, such as exclusivity for
obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired, and, in the
case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of
the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant.
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Biosimilars
The 2010 Patient Protection and Affordable Care Act, which was signed into law on March 23, 2010, or ACA,
included a subtitle called the Biologics Price Competition and Innovation Act of 2009 or BPCIA. That Act established a
regulatory scheme authorizing the FDA to approve biosimilars and interchangeable biosimilars. As of January 1, 2021, the
FDA has approved 29 biosimilar products for use in the United States. No interchangeable biosimilars, however, have
been approved. The FDA has issued several guidance documents outlining an approach to review and approval of
biosimilars. Additional guidance is expected to be finalized by FDA in the near term.
Under the BPCIA, a manufacturer may submit an application for licensure of a biologic product that is “biosimilar
to” or “interchangeable with” a previously approved biological product or “reference product.” In order for the FDA to
approve a biosimilar product, it must find that there are no clinically meaningful differences between the reference product
and proposed biosimilar product in terms of safety, purity, and potency. For the FDA to approve a biosimilar product as
interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the
same clinical results as the reference product, and for products administered multiple times that the biologic and the
reference biologic may be switched after one has been previously administered without increasing safety risks or risks of
diminished efficacy relative to exclusive use of the reference biologic.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years
following the date of approval of the reference product. The FDA may not approve a biosimilar product until 12 years from
the date on which the reference product was approved. Even if a product is considered to be a reference product eligible for
exclusivity, another company could market a competing version of that product if the FDA approves a full BLA for such
product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to
demonstrate the safety, purity and potency of their product. The BPCIA also created certain exclusivity periods for
biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed
“interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy
law.
Pediatric Exclusivity
Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides
for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity,
including the non-patent exclusivity. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data
that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be
effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the
additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within
the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are
extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which
the FDA cannot approve another application. With regard to patents, the six-month pediatric exclusivity period will not
attach to any patents for which an ANDA or 505(b)(2) applicant submitted a paragraph IV patent certification, unless the
NDA sponsor or patent owner first obtains a court determination that the patent is valid and infringed by the proposed
product.
Patent Term Restoration and Extension
A patent claiming a new drug product may be eligible for a limited patent term extension under the Hatch-Waxman
Act, which permits a patent restoration of up to five years for patent term lost during product development and the FDA
regulatory review. The restoration period granted is typically one-half the time between the effective date of an IND and
the submission date of an NDA, plus the time between the submission date of an NDA and the ultimate approval date.
Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s
approval date. Only one patent applicable to an approved drug product is eligible for the extension, and the application for
the extension must be submitted prior to the expiration of the patent in question. A patent that covers multiple drugs for
which approval is sought can only be extended in connection with one of the approvals. The United States Patent and
Trademark Office reviews and approves the application for any patent term extension or restoration in consultation with the
FDA.
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Review and Approval of Medical Devices in the United States
Medical devices in the United States are strictly regulated by the FDA. Under the FDCA, a medical device is defined
as an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article,
including a component part, or accessory which is, among other things: intended for use in the diagnosis of disease or other
conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals; or intended to affect the
structure or any function of the body of man or other animals, and which does not achieve its primary intended purposes
through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized
for the achievement of any of its primary intended purposes. This definition provides a clear distinction between a medical
device and other FDA regulated products such as drugs. If the primary intended use of the product is achieved through
chemical action or by being metabolized by the body, the product is usually a drug. If not, it is generally a medical device.
Unless an exemption applies, a new medical device may not be marketed in the United States unless and until it has
been cleared through filing of a 510(k) premarket notification, or 510(k), or approved by the FDA pursuant to a PMA
application. The information that must be submitted to the FDA in order to obtain clearance or approval to market a new
medical device varies depending on how the medical device is classified by the FDA. Medical devices are classified into
one of three classes on the basis of the controls deemed by the FDA to be necessary to reasonably ensure their safety and
effectiveness.
Class I devices are low risk devices for which reasonable assurance of safety and effectiveness can be provided by
adherence to the FDA’s general controls for medical devices, which include applicable portions of the FDA’s Quality
System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events and malfunctions
and appropriate, truthful and non-misleading labeling, advertising and promotional materials. Many Class I devices are
exempt from premarket regulation; however, some Class I devices require premarket clearance by the FDA through the
510(k) premarket notification process.
Class II devices are moderate risk devices and are subject to the FDA’s general controls, and any other special
controls, such as performance standards, post-market surveillance, and FDA guidelines, deemed necessary by the FDA to
provide reasonable assurance of the devices’ safety and effectiveness. Premarket review and clearance by the FDA for
Class II devices are accomplished through the 510(k) premarket notification procedure, although some Class II devices are
exempt from the 510(k) requirements. Premarket notifications are subject to user fees, unless a specific exemption applies.
Class III devices are deemed by the FDA to pose the greatest risk, such as those for which reasonable assurance of
the device’s safety and effectiveness cannot be assured solely by the general controls and special controls described above
and that are life-sustaining or life-supporting. A PMA application must provide valid scientific evidence, typically
extensive preclinical and clinical trial data and information about the device and its components regarding, among other
things, device design, manufacturing and labeling. PMA applications (and supplemental PMA applications) are subject to
significantly higher user fees than are 510(k) premarket notifications.
510(k) Premarket Notification
To obtain 510(k) clearance, a manufacturer must submit a premarket notification demonstrating that the proposed
device is “substantially equivalent” to a predicate device, which is a previously cleared 510(k) device or a pre-amendment
device that was in commercial distribution before May 28, 1976, for which the FDA has not yet called for the submission
of a PMA application. The FDA’s 510(k) clearance pathway usually takes from three to 12 months from the date the
application is submitted and filed with the FDA, but it can take significantly longer and clearance is never assured. The
FDA has issued guidance documents meant to expedite review of a 510(k) and facilitate interactions between applicants
and the agency. To demonstrate substantial equivalence, a manufacturer must show that the device has the same intended
use as a predicate device and the same technological characteristics, or the same intended use and different technological
characteristics and does not raise new questions of safety and effectiveness than the predicate device.
Most 510(k)s do not require clinical data for clearance, but the FDA may request such data.
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The FDA seeks to review and act on a 510(k) within 90 days of submission, but it may take longer if the agency
finds that it requires more information to review the 510(k). If the FDA determines that the device is substantially
equivalent to a predicate device, the subject device may be marketed. However, if the FDA concludes that a new device is
not substantially equivalent to a predicate device, the new device will be classified in Class III and the manufacturer will be
required to submit a PMA application to market the product. Devices of a new type that the FDA has not previously
classified based on risk are automatically classified into Class III by operation of section 513(f)(1) of the FDCA, regardless
of the level of risk they pose. To avoid requiring PMA review of low- to moderate-risk devices classified in Class III by
operation of law, Congress enacted section 513(f)(2) of the FDCA. This provision allows the FDA to classify a low- to
moderate-risk device not previously classified into Class I or II, a process known as the de novo process. A company may
apply directly to the FDA for classification of its device as de novo or may submit a de novo petition within 30 days of
receiving a not substantially equivalent determination.
Modifications to a 510(k)-cleared medical device may require the submission of another 510(k). Modifications to a
510(k)-cleared device frequently require the submission of a traditional 510(k), but modifications meeting certain
conditions may be candidates for FDA review under a Special 510(k). If a device modification requires the submission of a
510(k), but the modification does not affect the intended use of the device or alter the fundamental technology of the
device, then summary information that results from the design control process associated with the cleared device can serve
as the basis for clearing the application. A Special 510(k) allows a manufacturer to declare conformance to design controls
without providing new data. When the modification involves a change in material, the nature of the “new” material will
determine whether a traditional or Special 510(k) is necessary.
Any modification to a 510(k)-cleared product that would constitute a major change in its intended use or any change
that could significantly affect the safety or effectiveness of the device may, in some circumstances, requires the submission
of a PMA application, if the change raises complex or novel scientific issues or the product has a new intended use. A
manufacturer may be required to submit extensive pre-clinical and clinical data depending on the nature of the changes.
The FDA requires every manufacturer to make the determination regarding the need for a new 510(k) submission in
the first instance, but the FDA may review any manufacturer’s decision. If the FDA disagrees with the manufacturer’s
determination and requires new 510(k) clearances or PMA application approvals for modifications to previously cleared
products for which the manufacturer concluded that new clearances or approvals are unnecessary, the manufacturer may be
required to cease marketing or distribution of the products or to recall the modified product until it obtains clearance or
approval, and the manufacturer may be subject to significant regulatory fines or penalties. In addition, the FDA is currently
evaluating the 510(k) process and may make substantial changes to industry requirements.
Premarket Approval Application
The PMA application process for approval to market a medical device is more complex, costly, and time- consuming
than the 510(k) clearance procedure. A PMA application must be supported by extensive data, including technical
information regarding device design and development, preclinical studies, clinical trials, manufacturing and controls
information and labeling information that demonstrate the safety and effectiveness of the device for its intended use. After
a PMA application is submitted, the FDA has 45 days to determine whether it is sufficiently complete to permit a
substantive review. If the PMA application is complete, the FDA will file the PMA application. If the FDA accepts the
application for filing, the agency will begin an in-depth substantive review of the application. By statute, the FDA has 180
days to review the application although, generally, review of the application often takes between one and three years, and
may take significantly longer. If the FDA has questions, it will likely issue a first major deficiency letter within 150 days of
filing. It may also refer the PMA application to an FDA advisory panel for additional review, and will conduct a
preapproval inspection of the manufacturing facility to ensure compliance with the QSR, either of which could extend the
180-day response target. In addition, the FDA may request additional information or request the performance of additional
clinical trials in which case the PMA application approval may be delayed while the trials are conducted and the data
acquired are submitted in an amendment to the PMA. Even with additional trials, the FDA may not approve the PMA
application.
If the FDA’s evaluations of both the PMA application and the manufacturing facilities are favorable, the FDA will
either issue an approval letter authorizing commercial marketing or an approvable letter that usually contains a number of
conditions that must be met in order to secure final approval. If the FDA’s evaluations are not favorable, the FDA will deny
approval of the PMA application or issue a not approvable letter. The PMA application process, including the
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gathering of clinical and nonclinical data and the submission to and review by the FDA, can take several years, and the
process can be expensive and uncertain. Moreover, even if the FDA approves a PMA application, the FDA may approve
the device with an indication that is narrower or more limited than originally sought. The FDA can impose post-approval
conditions that it believes necessary to ensure the safety and effectiveness of the device, including, among other things,
restrictions on labeling, promotion, sale and distribution. After approval of a PMA application, a new PMA application or
PMA application supplement may be required for a modification to the device, its labeling, or its manufacturing process.
PMA application supplements often require submission of the same type of information as an initial PMA application,
except that the supplement is limited to information needed to support any changes from the device covered by the
approved PMA application and may or may not require as extensive technical or clinical data or the convening of an
advisory panel. The time for review of a PMA application supplement may vary depending on the type of change, but it
can be lengthy. In addition, in some cases the FDA might require additional clinical data.
PMA applications are subject to an application fee. For federal fiscal year 2021, the standard fee is $365,657 and the
small business fee is $91,414.
Investigational Device Exemption
A clinical trial is typically required for a PMA application and, in a small percentage of cases, the FDA may require
a clinical study in support of a 510(k) submission. A manufacturer that wishes to conduct a clinical study involving the
device is subject to the FDA’s IDE regulation. The IDE regulation distinguishes between significant and non-significant
risk device studies and the procedures for obtaining approval to begin the study differ accordingly. Also, some types of
studies are exempt from the IDE regulations. A significant risk device presents a potential for serious risk to the health,
safety, or welfare of a subject. Significant risk devices are devices that are substantially important in diagnosing, curing,
mitigating, or treating disease or in preventing impairment to human health. Studies of devices that pose a significant risk
require both FDA and an IRB approval prior to initiation of a clinical study. Non-significant risk devices are devices that
do not pose a significant risk to the human subjects. A non-significant risk device study requires only IRB approval prior to
initiation of a clinical study.
An IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing
that it is safe to test the device in humans and that the testing protocol is scientifically sound. An IDE application is
considered approved 30 days after it has been received by the FDA, unless the FDA otherwise informs the sponsor prior to
30 calendar days from the date of receipt, that the IDE is approved, approved with conditions, or disapproved. The FDA
typically grants IDE approval for a specified number of subjects to be enrolled at specified study centers. The clinical trial
must be conducted in accordance with applicable regulations, including but not limited to the FDA’s IDE regulations and
GCP. The investigators must obtain subject informed consent, rigorously follow the investigational plan and study protocol,
control the disposition of investigational devices, and comply with all reporting and record keeping requirements. A
clinical trial may be suspended or terminated by the FDA, the IRB or the sponsor at any time for various reasons, including
a belief that the risks to the study participants outweigh the benefits of participation in the trial. Approval of an IDE does
not bind the FDA to accept the results of the trial as sufficient to prove the product’s safety and efficacy, even if the trial
meets its intended success criteria.
Post-Marketing Restrictions and Enforcement
After a device is placed on the market, numerous regulatory requirements apply. These include but are not limited to:
● submitting and updating establishment registration and device listings with the FDA;
● compliance with the QSR, which require manufacturers to follow stringent design, testing, control,
documentation, record maintenance, including maintenance of complaint and related investigation files, and
other quality assurance controls during the manufacturing process;
● unannounced routine or for-cause device inspections by the FDA, which may include our suppliers’ facilities
labeling regulations, which prohibit the promotion of products for uncleared or unapproved or “off-label” uses
and impose other restrictions on labeling; and
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● post-approval restrictions or conditions, including requirements to conduct post-market surveillance studies to
establish continued safety data or tracking products through the chain of distribution to the patient level.
Under the FDA medical device reporting, or MDR, regulations, medical device manufacturers are required to report
to the FDA information that a device has or may have caused or contributed to a death or serious injury or has
malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device or a
similar device of such manufacturer were to recur. The decision to file an MDR involves a judgment by the manufacturer.
If the FDA disagrees with the manufacturer’s determination, the FDA can take enforcement action.
Additionally, the FDA has the authority to require the recall of commercialized products in the event of material
deficiencies or defects in design or manufacture. The authority to require a recall must be based on an FDA finding that
there is reasonable probability that the device would cause serious injury or death. Manufacturers may, under their own
initiative, recall a product if any material deficiency in a device is found. The FDA requires that certain classifications of
recalls be reported to the FDA within 10 working days after the recall is initiated.
The failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which
may include any of the following sanctions:
● untitled letters, warning letters, fines, injunctions or civil penalties;
● recalls, detentions or seizures of products;
● operating restrictions;
● delays in the introduction of products into the market;
● total or partial suspension of production;
● delay or refusal of the FDA or other regulators to grant 510(k) clearance or PMA application approvals of new
products;
● withdrawals of 510(k) clearance or PMA application approvals; or
● in the most serious cases, criminal prosecution.
To ensure compliance with regulatory requirements, medical device manufacturers are subject to market surveillance
and periodic, pre-scheduled and unannounced inspections by the FDA, and these inspections may include the
manufacturing facilities of subcontractors.
Review and Approval of Combination Products in the United States
Certain products may be comprised of components that would normally be regulated under different types of
regulatory authorities, and frequently by different Centers at the FDA. These products are known as combination products.
Specifically, under regulations issued by the FDA, a combination product may be:
● a product comprised of two or more regulated components that are physically, chemically, or otherwise
combined or mixed and produced as a single entity;
● two or more separate products packaged together in a single package or as a unit and comprised of drug and
device products;
● a drug or device packaged separately that according to its investigational plan or proposed labeling is intended
for use only with an approved individually specified drug or device where both are required to achieve the
intended use, indication, or effect and where upon approval of the proposed product the labeling of the
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approved product would need to be changed, e.g., to reflect a change in intended use, dosage form, strength,
route of administration, or significant change in dose; or
● any investigational drug or device packaged separately that according to its proposed labeling is for use only
with another individually specified investigational drug, device, or biological product where both are required to
achieve the intended use, indication, or effect.
Under the FDCA, the FDA is charged with assigning a center with primary jurisdiction, or a lead center, for review
of a combination product. That determination is based on the “primary mode of action” of the combination product. Thus,
if the primary mode of action of a device-drug combination product is attributable to the drug product, the FDA Center
responsible for premarket review of the drug product would have primary jurisdiction for the combination product. The
FDA has also established an Office of Combination Products to address issues surrounding combination products and
provide more certainty to the regulatory review process. That office serves as a focal point for combination product issues
for agency reviewers and industry. It is also responsible for developing guidance and regulations to clarify the regulation of
combination products, and for assignment of the FDA center that has primary jurisdiction for review of combination
products where the jurisdiction is unclear or in dispute.
Review and Approval of Medical Products in the European Union
In order to market any product outside of the United States, a company must also comply with numerous and varying
regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among
other things, clinical trials, marketing authorization, commercial sales and distribution of drug products. Whether or not it
obtains FDA approval for a product, the company would need to obtain the necessary approvals by the comparable foreign
regulatory authorities before it can commence clinical trials or marketing of the product in those countries or jurisdictions.
The approval process ultimately varies between countries and jurisdictions and can involve additional product testing and
additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might
differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction
does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or
jurisdiction may negatively impact the regulatory process in others.
Clinical Trial Approval
Pursuant to the European Clinical Trials Directive, a system for the approval of clinical trials in the European Union
has been implemented through national legislation of the member states. Under this system, an applicant must obtain
approval from the competent national authority of a European Union member state in which the clinical trial is to be
conducted. Furthermore, the applicant may only start a clinical trial after a competent ethics committee has issued a
favorable opinion. Clinical trial application must be accompanied by an investigational medicinal product dossier with
supporting information prescribed by the European Clinical Trials Directive and corresponding national laws of the
member states and further detailed in applicable guidance documents.
In April 2014, the EU adopted a new Clinical Trials Regulation (EU) No 536/2014, which is set to replace the
current Clinical Trials Directive 2001/20/EC. The new Clinical Trials Regulation will become directly applicable to and
binding in all 28 EU Member States without the need for any national implementing legislation. It will overhaul the current
system of approvals for clinical trials in the EU. Specifically, the new legislation aims at simplifying and streamlining the
approval of clinical trials in the EU. Under the new coordinated procedure for the approval of clinical trials, the sponsor of
a clinical trial will be required to submit a single application for approval of a clinical trial to a reporting EU Member State
(RMS) through an EU Portal. The submission procedure will be the same irrespective of whether the clinical trial is to be
conducted in a single EU Member State or in more than one EU Member State.
The Regulation was published on June 16, 2014 but has not yet become effective. In January 2020, the website of
the European Commission reported that the implementation of the Clinical Trials Regulation was dependent on the
development of a fully functional clinical trials portal and database, which would be confirmed by an independent audit,
and that the new legislation would come into effect six months after the European Commission publishes a notice of this
confirmation. The website indicated that the audit was expected to commence in December 2020. In late 2020, the EMA
indicated that it plans to focus on the findings of a system audit; improving the usability, quality and stability of the clinical
trial information system; and knowledge transfer to prepare users and their organizations for the new clinical trial system.
The EMA has indicated that the system will go live in December 2021.
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Marketing Authorization
To obtain marketing approval of a drug under European Union regulatory systems, an applicant must submit a
marketing authorization application, or MAA, either under a centralized or decentralized procedure. The centralized
procedure provides for the grant of a single marketing authorization by the European Commission that is valid for all
European Union member states. The centralized procedure is compulsory for specific products, including for medicines
produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy
products and products with a new active substance indicated for the treatment of certain diseases. For products with a new
active substance indicated for the treatment of other diseases and products that are highly innovative or for which a
centralized process is in the interest of patients, the centralized procedure may be optional.
Under the centralized procedure, the Committee for Medicinal Products for Human Use, or the CHMP, established at
the European Medicines Agency, or EMA, is responsible for conducting the initial assessment of a drug. The CHMP is also
responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions
to an existing marketing authorization. Under the centralized procedure in the European Union, the maximum timeframe
for the evaluation of an MAA is 210 days, excluding clock stops, when additional information or written or oral
explanation is to be provided by the applicant in response to questions of the CHMP. Accelerated evaluation might be
granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of view of public
health and in particular from the viewpoint of therapeutic innovation. In this circumstance, the EMA ensures that the
opinion of the CHMP is given within 150 days.
The decentralized procedure is available to applicants who wish to market a product in various European Union
member states where such product has not received marketing approval in any European Union member states before. The
decentralized procedure provides for approval by one or more other, or concerned, member states of an assessment of an
application performed by one member state designated by the applicant, known as the reference member state. Under this
procedure, an applicant submits an application based on identical dossiers and related materials, including a draft summary
of product characteristics, and draft labeling and package leaflet, to the reference member state and concerned member
states. The reference member state prepares a draft assessment report and drafts of the related materials within 210 days
after receipt of a valid application. Within 90 days of receiving the reference member state’s assessment report and related
materials, each concerned member state must decide whether to approve the assessment report and related materials.
If a member state cannot approve the assessment report and related materials on the grounds of potential serious risk
to public health, the disputed points are subject to a dispute resolution mechanism and may eventually be referred to the
European Commission, whose decision is binding on all member states.
Regulatory Data Protection in the European Union
In the EU, innovative medicinal products approved on the basis of a complete independent data package qualify for
eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity pursuant to
Directive 2001/83/EC. Regulation (EC) No 726/2004 repeats this entitlement for medicinal products authorized in
accordance the centralized authorization procedure. Data exclusivity prevents applicants for authorization of generics of
these innovative products from referencing the innovator’s data to assess a generic (abridged) application for a period of
eight years. During an additional two-year period of market exclusivity, a generic marketing authorization application can
be submitted and authorized, and the innovator’s data may be referenced, but no generic medicinal product can be placed
on the EU market until the expiration of the market exclusivity. The overall ten-year period will be extended to a maximum
of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for
one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to
bring a significant clinical benefit in comparison with existing therapies. Even if a compound is considered to be a new
chemical entity so that the innovator gains the prescribed period of data exclusivity, another company nevertheless could
also market another version of the product if such company obtained marketing authorization based on an MAA with a
complete independent data package of pharmaceutical tests, preclinical tests and clinical trials.
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Periods of Authorization and Renewals
A marketing authorization has an initial validity for five years in principle. The marketing authorization may be
renewed after five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent
authority of the EU Member State. To this end, the marketing authorization holder must provide the EMA or the competent
authority with a consolidated version of the file in respect of quality, safety and efficacy, including all variations introduced
since the marketing authorization was granted, at least six months before the marketing authorization ceases to be valid.
The European Commission or the competent authorities of the EU Member States may decide, on justified grounds relating
to pharmacovigilance, to proceed with one further five-year period of marketing authorization. Once subsequently
definitively renewed, the marketing authorization shall be valid for an unlimited period. Any authorization which is not
followed by the actual placing of the medicinal product on the European Union market (in case of centralized procedure) or
on the market of the authorizing EU Member State within three years after authorization ceases to be valid (the so-called
sunset clause).
Regulatory Requirements after a Marketing Authorization has been Obtained
In case an authorization for a medicinal product in the EU is obtained, the holder of the marketing authorization is
required to comply with a range of requirements applicable to the manufacturing, marketing, promotion and sale of
medicinal products. These include:
● Compliance with the EU’s stringent pharmacovigilance or safety reporting rules must be ensured. These rules
can impose post-authorization studies and additional monitoring obligations.
● The manufacturing of authorized medicinal products, for which a separate manufacturer’s license is mandatory,
must also be conducted in strict compliance with the applicable EU laws, regulations and guidance, including
Directive 2001/83/EC, Directive 2003/94/EC, Regulation (EC) No 726/2004 and the European Commission
Guidelines for Good Manufacturing Practice. These requirements include compliance with EU cGMP standards
when manufacturing medicinal products and active pharmaceutical ingredients, including the manufacture of
active pharmaceutical ingredients outside of the EU with the intention to import the active pharmaceutical
ingredients into the EU.
● The marketing and promotion of authorized drugs, including industry-sponsored continuing medical education
and advertising directed toward the prescribers of drugs and/or the general public, are strictly regulated in the
EU notably under Directive 2001/83EC, as amended, and EU Member State laws. Direct-to-consumer
advertising of prescription medicines is prohibited across the EU.
Review and Approval of Medical Devices in the European Union
The European Union has adopted numerous directives and standards regulating, among other things, the design,
manufacture, clinical trials, labeling, approval and adverse event reporting for medical devices. In the European Union, or
the EU, medical devices must comply with the Essential Requirements in Annex I to the currently applicable EU Medical
Devices Directive (Council Directive 93/42/EEC), or the Essential Requirements. Compliance with these requirements is a
prerequisite to be able to affix the CE Mark of Conformity to medical devices, without which they cannot be marketed or
sold in the European Economic Area, or EEA, comprised of the European Union member states plus Norway, Iceland, and
Liechtenstein.
To demonstrate compliance with the Essential Requirements a manufacturer must undergo a conformity assessment
procedure, which varies according to the type of medical device and its classification. Except for low risk medical devices,
where the manufacturer can issue a CE Declaration of Conformity based on a self-assessment of the conformity of its
products with the Essential Requirements, a conformity assessment procedure requires the intervention of a third-party
organization designated by competent authorities of a European Union country to conduct conformity assessments, or a
Notified Body. Notified Bodies are independent testing houses, laboratories, or product certifiers typically based within the
European Union and authorized by the European member states to perform the required conformity assessment tasks, such
as quality system audits and device compliance testing. The Notified Body would typically audit and examine the product’s
Technical File and the quality system for the manufacture, design and final inspection of the product before issuing a CE
Certificate of Conformity demonstrating compliance with the relevant Essential Requirements.
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Medical device manufacturers must carry out a clinical evaluation of their medical devices to demonstrate
conformity with the relevant Essential Requirements. This clinical evaluation is part of the product’s Technical File. A
clinical evaluation includes an assessment of whether a medical device’s performance is in accordance with its intended
use, and that the known and foreseeable risks linked to the use of the device under normal conditions are minimized and
acceptable when weighed against the benefits of its intended purpose. The clinical evaluation conducted by the
manufacturer must also address any clinical claims, the adequacy of the device labeling and information (particularly
claims, contraindications, precautions and warnings) and the suitability of related Instructions for Use. This assessment
must be based on clinical data, which can be obtained from clinical studies conducted on the devices being assessed,
scientific literature from similar devices whose equivalence with the assessed device can be demonstrated or both clinical
studies and scientific literature.
With respect to implantable devices or devices classified as Class III in the European Union, the manufacturer must
conduct clinical studies to obtain the required clinical data, unless relying on existing clinical data from similar devices can
be justified. As part of the conformity assessment process, depending on the type of devices, the Notified Body will review
the manufacturer’s clinical evaluation process, assess the clinical evaluation data of a representative sample of the device’s
subcategory or generic group, or assess all the clinical evaluation data, verify the manufacturer’s assessment of that data
and assess the validity of the clinical evaluation report and the conclusions drawn by the manufacturer.
Even after a manufacturer receives a CE Certificate of Conformity enabling the CE mark to be placed on it products
and the right to sell the products in the EEA countries, a Notified Body or a competent authority may require post-
marketing studies of the products. Failure to comply with such requirements in a timely manner could result in the
withdrawal of the CE Certificate of Conformity and the recall or withdrawal of the subject product from the European
market.
A manufacturer must inform the Notified Body that carried out the conformity assessment of the medical devices of
any planned substantial changes to the devices which could affect compliance with the Essential Requirements or the
devices’ intended purpose. The Notified Body will then assess the changes and verify whether they affect the product’s
conformity with the Essential Requirements or the conditions for the use of the devices. If the assessment is favorable, the
Notified Body will issue a new CE Certificate of Conformity or an addendum to the existing CE Certificate of Conformity
attesting compliance with the Essential Requirements. If it is not, the manufacturer may not be able to continue to market
and sell the product in the EEA.
In the European Union, medical devices may be promoted only for the intended purpose for which the devices have
been CE marked. Failure to comply with this requirement could lead to the imposition of penalties by the competent
authorities of the European Union Member States. The penalties could include warnings, orders to discontinue the
promotion of the medical device, seizure of the promotional materials and fines. Promotional materials must also comply
with various laws and codes of conduct developed by medical device industry bodies in the European Union governing
promotional claims, comparative advertising, advertising of medical devices reimbursed by the national health insurance
systems and advertising to the general public.
Additionally, all manufacturers placing medical devices in the market in the European Union are legally bound to
report any serious or potentially serious incidents involving devices they produce or sell to the competent authority in
whose jurisdiction the incident occurred. In the European Union, manufacturers must comply with the EU Medical Device
Vigilance System. Under this system, incidents must be reported to the relevant authorities of the European Union
countries, and manufacturers are required to take Field Safety Corrective Actions, or FSCAs, to reduce a risk of death or
serious deterioration in the state of health associated with the use of a medical device that is already placed on the market.
An incident is defined as any malfunction or deterioration in the characteristics and/or performance of a device, as well as
any inadequacy in the labeling or the instructions for use which, directly or indirectly, might lead to or might have led to
the death of a patient or user or of other persons or to a serious deterioration in their state of health. An FSCA may include
the recall, modification, exchange, destruction or retrofitting of the device. FSCAs must be communicated by the
manufacturer or its European Authorized Representative to its customers and to the end users of the device through Field
Safety Notices.
The legal framework currently applicable for medical devices in the European Union will soon be amended by
Medical Devices Regulation (Regulation (EU) 2017/745) adopted in 2017, which we refer to as the MDR and which
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repeals and replaces the EU Medical Devices Directive. Unlike directives, which must be implemented into the national
laws of the European Economic Area, or EEA, member states, the MDR will be directly applicable (i.e., without the need
for adoption of EEA member State laws implementing them) in all EEA member states and are intended to eliminate
current differences in the regulation of medical devices among EEA member states. The MDR, among other things, is
intended to establish a uniform, transparent, predictable and sustainable regulatory framework across the EEA for medical
and ensure a high level of safety and health.
Currently, the MDR is scheduled to become applicable on May 26, 2021. Once applicable, the MDR will, among
other things:
● strengthen the rules on placing devices on the market and reinforce surveillance once they are available;
● establish explicit provisions on manufacturers' responsibilities for the follow-up of the quality, performance and
safety of devices placed on the market;
● improve the traceability of medical devices throughout the supply chain to the end-user or patient through a
unique identification number;
● set up a central database to provide patients, healthcare professionals and the public with comprehensive
information on products available in the EU; and
● strengthen rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an
additional check by experts before they are placed on the market.
Brexit and the Regulatory Framework in the United Kingdom
On June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the EU, commonly referred to as
Brexit. Following protracted negotiations, the United Kingdom left the EU on January 31, 2020. Under the withdrawal
agreement, there is a transitional period until December 31, 2020 (extendable by up to two years). On December 24, 2020,
the United Kingdom and the European Union entered into a Trade and Cooperation Agreement. The agreement sets out
certain procedures for approval and recognition of medical products in each jurisdiction. Since the regulatory framework
for pharmaceutical products in the United Kingdom covering quality, safety and efficacy of pharmaceutical products,
clinical trials, marketing authorization, commercial sales and distribution of pharmaceutical products is derived from EU
directives and regulations, Brexit could materially impact the future regulatory regime which applies to products and the
approval of product candidates in the UK, as the UK legislation now has the potential to diverge from EU legislation. It
remains to be seen how Brexit will impact regulatory requirements for product candidates and products in the UK in the
long-term. The MHRA has recently published detailed guidance for industry and organizations to follow from January 1,
2021 now the transition period is over, which will be updated as the UK’s regulatory position on medicinal products
evolves over time.
Furthermore, while the Data Protection Act of 2018 in the United Kingdom that “implements” and complements the
European Union’s General Data Protection Regulation, or GDPR, has achieved Royal Assent on May 23, 2018 and is now
effective in the United Kingdom, it is still unclear whether transfer of data from the European Economic Area, or EEA, to
the United Kingdom will remain lawful under GDPR. The Trade and Cooperation Agreement provides for a transitional
period during which the United Kingdom will be treated like an European Union member state in relation to processing
and transfers of personal data for four months from January 1, 2021. This may be extended by two further months. After
such period, the United Kingdom will be a “third country” under the GDPR unless the European Commission adopts an
adequacy decision in respect of transfers of personal data to the United Kingdom. The United Kingdom has already
determined that it considers all of the EU 27 and EEA member states to be adequate for the purposes of data protection,
ensuring that data flows from the United Kingdom to the EU/EEA remain unaffected.
General Data Protection Regulation
The collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU,
including personal health data, is subject to the EU General Data Protection Regulation, or GDPR, which became effective
on May 25, 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that
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process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of
the individuals to whom the personal data relates, providing information to individuals regarding data processing activities,
implementing safeguards to protect the security and confidentiality of personal data, providing notification of data
breaches, and taking certain measures when engaging third-party processors. The GDPR also imposes strict rules on the
transfer of personal data to countries outside the EU, including the United States, and permits data protection authorities to
impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global
revenues, whichever is greater. The GDPR also confers a private right of action on data subjects and consumer
associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages
resulting from violations of the GDPR. Compliance with the GDPR will be a rigorous and time-intensive process that may
increase the cost of doing business or require companies to change their business practices to ensure full compliance.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and
other government authorities. Sales of products will depend, in part, on the extent to which the costs of the products will be
covered by third-party payors, including government health programs in the United States such as Medicare and Medicaid,
commercial health insurers and managed care organizations. The process for determining whether a payor will provide
coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay
for the product once coverage is approved. Third-party payors may limit coverage to specific products on an approved list,
or formulary, which might not include all of the approved products for a particular indication. Additionally, the
containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a
focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in
implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for
substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more
restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need
to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of
the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals. A payor’s decision
to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Third-party
reimbursement may not be sufficient to maintain price levels high enough to realize an appropriate return on investment in
product development.
Section 1833(t)(6) of the Social Security Act provides for temporary additional payments or “transitional pass-
through payments” for certain drugs and biological agents. As originally enacted by the Balanced Budget Refinement Act
of 1999, this provision required Centers for Medicare and Medicaid Services, or CMS, to make additional payments to
hospitals for current orphan drugs, as designated under section 526 of the FDCA; current drugs and biological agents and
brachytherapy sources used for the treatment of cancer; and current radiopharmaceutical drugs and biological products.
Transitional pass-through payments are also provided for certain new drugs, devices and biological agents that were not
paid for as a hospital outpatient department service as of December 31, 1996, and whose cost is “not insignificant” in
relation to the Outpatient Prospective Payment System payment for the procedures or services associated with the new
drug, device, or biological. Under the statute, transitional pass-through payments can be made for at least two years but not
more than three years.
We applied for a transitional pass-through reimbursement status on November 30, 2018 for DEXTENZA from CMS.
In May 2019, we received formal notification from CMS that it had approved transitional pass-through payment status and
established an interim billing code, known as a C-Code, for DEXTENZA that subsequently became effective on July 1,
2019. We also submitted an application to CMS for a J-Code for DEXTENZA in December 2018 and received a specific
and permanent J-Code J1096 in July 2019 which became effective on October 1, 2019. With the effectiveness of our
permanent J-Code for DEXTENZA as of October 1, 2019, our C-code is no longer in effect. J-Codes are familiar to both
medical practices and their billing staffs, as well as Medicare (Part B and Part C) and commercial insurers. As a result, J-
Codes generally allow for a simpler and more convenient reimbursement process. We expect pricing for DEXTENZA
while in pass-through payment status to be approximately $538 per insert, and we expect pass-through status to remain in
effect for up to three years from the effective date of the C-code, or July 1, 2019.
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To date, four of seven Medicare Administrative Contractors, or MACs, have established physician fee schedules for
the Category III Current Procedural Terminology, or CPT, procedure code 0356T currently in effect for the administration
of drug-eluting intracanalicular inserts, including DEXTENZA: Novitas Solutions, Inc., or Novitas; First Coast Service
Options, Inc., or First Coast; National Government Services, Inc., or NGS; and Wisconsin Physician Services, Inc, or WPS.
The professional fee for CPT code 0356T is now eligible for physician payment for each insertion, in accordance with the
applicable MAC’s fee schedule. Novitas covers Medicare patients in New Mexico, Texas, Colorado, Oklahoma, Arkansas,
Louisiana, Mississippi, New Jersey, Pennsylvania, Delaware, Virginia and the District of Columbia. First Coast covers
Medicare patients in Florida, Puerto Rico, and the U.S. Virgin Islands. NGS covers Medicare patients in Illinois,
Minnesota, Wisconsin, New York, Massachusetts, Connecticut, New Hampshire, Maine, Rhode Island, and Vermont.
Wisconsin Physician Services, Inc. covers Medicare beneficiaries in Iowa, Kansas, Missouri, Nebraska, Indiana and
Michigan. Combined, Novitas, First Coast, NGS and WPS cover over 60% of all Medicare beneficiaries. As of March 1,
2021, all seven MACs were reimbursing providers for intracanalicular insertions under CPT code 0356T despite only four
of them having published physician fee schedules for the procedure.
On November 4, 2020, we announced that our application to the American Medical Association CPT Editorial Panel,
or the Panel, for the creation of a Category I CPT procedure code had been granted. Category I CPT codes normally have a
standardized Medicare physician fee schedule. As a result, they can improve coverage and payment across all payers for
procedures performed in both the ASC and physician office settings. The Panel has agreed to create a permanent Category
I CPT procedure code, effective January 1, 2022, to replace CPT code 0356T currently in effect for the administration of
drug-eluting intracanalicular inserts including DEXTENZA.
In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries
provide that drug products may be marketed only after a reimbursement price has been agreed. Some countries may require
the completion of additional studies that compare the cost-effectiveness of a particular product candidate to currently
available therapies. For example, the European Union provides options for its member states to restrict the range of drug
products for which their national health insurance systems provide reimbursement and to control the prices of medicinal
products for human use. European Union member states may approve a specific price for a drug product or it may instead
adopt a system of direct or indirect controls on the profitability of the company placing the drug product on the market.
Other member states allow companies to fix their own prices for drug products, but monitor and control company profits.
The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result,
increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border
imports from low-priced markets exert competitive pressure that may reduce pricing within a country. Any country that has
price controls or reimbursement limitations for drug products may not allow favorable reimbursement and pricing
arrangements.
Healthcare Law and Regulation
Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription
of drug products that are granted marketing approval. Arrangements with providers, consultants, third-party payors and
customers are subject to broadly applicable fraud and abuse and other healthcare laws and regulations. Such restrictions
under applicable federal and state healthcare laws and regulations, include the following:
● the federal Anti-Kickback Statute 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 either the referral of an individual for, or the purchase, order or recommendation of, any good or service,
for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and
Medicaid;
● the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions,
against individuals or entities for knowingly presenting, or causing to be presented, to the federal government,
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, imposes criminal and civil
liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to
healthcare matters;
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● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its
implementing regulations, including the Final Omnibus Rule published in January 2013, also imposes
obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and
transmission of individually identifiable health information;
● the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a
material fact or making any materially false statement in connection with the delivery of or payment for
healthcare benefits, items or services;
● the Foreign Corrupt Practices Act, or FCPA, which prohibits companies and their intermediaries from making,
or offering or promising to make improper payments to non-U.S. officials for the purpose of obtaining or
retaining business or otherwise seeking favorable treatment;
● the federal transparency requirements under the ACA, known as the federal Physician Payments Sunshine Act,
will require certain manufacturers of drugs, devices, biologics and medical supplies to report to CMS within the
Department of Health and Human Services information related to payments and other transfers of value to
physicians and teaching hospitals and physician ownership and investment interests held by physicians and their
immediate family members; and
● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply
to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-
governmental third-party payors, including private insurers.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to
requiring drug manufacturers to report information related to payments to physicians and other health care providers or
marketing expenditures. State and foreign laws also govern the privacy and security of health information in some
circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus
complicating compliance efforts.
Healthcare Reform
A primary trend in the United States healthcare industry and elsewhere is cost containment. There have been a
number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and
biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical products, government
control and other changes to the healthcare system in the United States.
In March 2010, the United States Congress enacted the Patient Protection and Affordable Care Act, or ACA, which,
among other things, includes changes to the coverage and payment for products under government health care programs.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. In August 2011,
the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select
Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the
years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to
several government programs. These changes included aggregate reductions to Medicare payments to providers of up to
2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2030 under the Coronavirus Aid,
Relief, and Economic Security Act, or the CARES Act. The American Taxpayer Relief Act of 2012, among other things,
reduced Medicare payments to several providers and increased the statute of limitations period for the government to
recover overpayments to providers from three to five years. These laws may result in additional reductions in Medicare and
other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may
obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.
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Since enactment of the ACA, there have been, and continue to be, numerous legal challenges and Congressional
actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act of 2017,
which was signed by President Trump on December 22, 2017, Congress repealed the “individual mandate.” The repeal of
this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019.
Further, on December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual
mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate was
repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well. On December 18,
2019, the Court of Appeals for the Fifth Circuit affirmed the lower court’s ruling that the individual mandate portion of the
ACA is unconstitutional and it remanded the case to the district court for reconsideration of the severability question and
additional analysis of the provisions of the ACA. Thereafter, the U.S. Supreme Court agreed to hear this case. Oral
argument in the case took place on November 10, 2020. On February 10, 2021, the Biden Administration withdrew DOJ’s
support for this lawsuit. A ruling by the U.S. Supreme Court is expected sometime this year. Litigation and legislation over
the ACA are likely to continue, with unpredictable and uncertain results.
The Trump Administration also took executive actions to undermine or delay implementation of the ACA, including
directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or
delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states,
individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On January 28,
2021, however, President Biden rescinded those orders and issued a new Executive Order which directs federal agencies to
reconsider rules and other policies that limit Americans’ access to health care, and consider actions that will protect and
strengthen that access. Under this Order, federal agencies are directed to re-examine: policies that undermine protections
for people with pre-existing conditions, including complications related to COVID-19; demonstrations and waivers under
Medicaid and the ACA that may reduce coverage or undermine the programs, including work requirements; policies that
undermine the Health Insurance Marketplace or other markets for health insurance; policies that make it more difficult to
enroll in Medicaid and the ACA; and policies that reduce affordability of coverage or financial assistance, including for
dependents.
The costs of prescription pharmaceuticals have also been the subject of considerable discussion in the United States
To date, there have been several recent U.S. congressional inquiries, as well as proposed and enacted state and federal
legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between
pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program
reimbursement methodologies for drug products. To those ends, President Trump issued five executive orders intended to
lower the costs of prescription drug products but it is unclear whether, and to what extent, these orders will remain in force
under the Biden Administration. Further, on September 24, 2020, the Trump Administration finalized a rulemaking
allowing states or certain other non-federal government entities to submit importation program proposals to the FDA for
review and approval. Applicants are required to demonstrate that their importation plans pose no additional risk to public
health and safety and will result in significant cost savings for consumers. The FDA has issued draft guidance that would
allow manufacturers to import their own FDA-approved drugs that are authorized for sale in other countries (multi-market
approved products).
At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations
designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints,
discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some
cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care
authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products
and which suppliers will be included in their prescription drug and other health care programs. These measures could
reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that
additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for healthcare products and services, which could result in reduced demand for
our product candidates or additional pricing pressures.
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Human Capital
As of December 31, 2020, we had 181 full-time employees. The following table provides an overview of the
distribution of those employees:
Department
Research & Development
Sales & Marketing
Manufacturing
General & Administrative
Headcount
73
67
13
28
181
Total Employees
We are committed to inclusion and diversity and believe that these are important elements of our culture that enables
us to attract and retain a high quality workforce. As of December 31, 2020, our workforce was composed of 48% female
and 52% male, and 25% of the workforce was non-white.
The development, attraction and retention of employees is a critical success factor for us for the execution of our
business strategy and succession planning. To support the advancement of our employees, we offer training and
development programs encouraging advancement from within and continue to fill our team with strong and experienced
management talent. We leverage both formal and informal programs to identify, foster, and retain top talent at both the
corporate and operating unit level.
We provide employee wages and benefits that are competitive and consistent with the employee positions, skill
levels, experience, knowledge and geographic location. None of our employees are represented by labor unions or covered
by collective bargaining agreements. We consider our relationship with our employees to be good.
We value the health, safety and wellbeing of our employees and their families. In response to the COVID-19
pandemic, we have implemented significant changes that we determined were in the best interest of our employees, as well
as the communities in which we operate, and which comply with government regulations. This includes allowing a number
of our corporate employees to work remotely, as appropriate, while implementing significant safety measures designed to
protect the health of all those entering our office.
Our Corporate Information
We were incorporated under the laws of the State of Delaware in 2006. Our principal executive offices are located at
24 Crosby Drive, Bedford, MA 01730, and our telephone number is (781) 357-4000. Our manufacturing is located at 36
Crosby Drive, Suite 101, Bedford, MA 01730 and our research and development operations are located at 15 Crosby Drive,
Bedford, MA 01730. Our website address is www.ocutx.com.
Available Information
We make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d)
of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We make these reports available through our
website as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the SEC.
We also make available, free of charge on our website, the reports filed with the SEC by our executive officers, directors
and 10% stockholders pursuant to Section 16 under the Exchange Act as soon as reasonably practicable after copies of
those filings are provided to us by those persons. The information contained on, or that can be access through, our website
is not a part of or incorporated by reference in this Annual Report on Form 10-K.
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Item 1A.
Risk Factors
The following risk factors and other information included in this Annual Report on Form 10-K, including under the
heading “Summary of Risk Factors” in this Annual Report, should be carefully considered. The risks and uncertainties
described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we
presently deem less significant may also impair our business operations. Please see page 1 of this Annual Report on
Form 10-K for a discussion of some of the forward-looking statements that are qualified by these risk factors and the
summary of principal risks facing our business that follows. If any of the following risks occur, our business, financial
condition, results of operations and future growth prospects could be materially and adversely affected.
Risks Related to the Coronavirus Pandemic
The coronavirus (COVID-19) pandemic has disrupted, and is expected to continue to adversely affect, our operations,
including the progress of our commercialization of DEXTENZA and our ability to generate revenue from sales of
DEXTENZA or ReSure Sealant. In the future, it may have other adverse effects on our business and operations,
including potentially delaying one or more of our clinical trials. In addition, this pandemic initially caused substantial
disruption in the financial markets and has adversely impacted economies worldwide, both of which could result in
adverse effects on our business, operations and ability to raise capital.
The COVID-19 coronavirus pandemic, which began in December 2019 and has spread worldwide, has caused
many governments to implement measures to slow the spread of the outbreak through quarantines, strict travel restrictions,
heightened border scrutiny, and other measures. The outbreak and government measures taken in response have also had a
significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains
have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as
medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. The future
progression of the pandemic and its effects on our business and operations are uncertain.
We believe the COVID-19 pandemic has adversely affected, and we expect it to continue to adversely affect, the
progress of our commercialization of DEXTENZA and our ability to generate revenue from sales of DEXTENZA, as a
result of many factors, including:
● a decrease in patients attending routine ophthalmology appointments or undergoing elective surgical procedures,
including cataract surgery;
● diversion of healthcare resources away from elective surgical procedures, including cataract surgery, to focus on
pandemic concerns;
● potential interruptions in global shipping affecting the transport of raw materials used in the manufacture of our
product, drug product, patient samples and related literature; and
● the prolonged impact on travel that might continue to interrupt key commercialization activities, such as travel
by our key account managers, which could adversely impact the progress of our commercialization of
DEXTENZA.
The COVID-19 pandemic also has the potential to delay or otherwise adversely affect our clinical development
activities, including our ability to recruit or retain patients in our ongoing clinical trials, as a result of many factors,
including:
● diversion of healthcare resources away from the conduct of our clinical trials to focus on pandemic concerns,
including the availability of necessary materials, the attention of physicians serving as our clinical trial
investigators, access to hospitals serving as our clinical trial sites, and availability of hospital staff supporting
the conduct of our clinical trials;
● the inability or reluctance of patients enrolled in our clinical trials to visit clinical trial sites if patients are
affected by the virus or are fearful of traveling to our clinical trial sites because of the outbreak;
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● potential interruptions in global shipping affecting the transport of clinical trial materials, such as investigational
drug product, patient samples, and raw materials used in the manufacture of our product candidates; medical
and laboratory supplies used in our clinical trials or preclinical studies; or animals that are used for preclinical
testing, and other supplies used in our clinical trials and preclinical studies;
● the impact of personnel shortages, further limitations on travel, or other operational challenges that could
interrupt key clinical trial activities, such as clinical trial site initiations and monitoring and reporting activities,
travel by our employees, contract research organizations, or CROs, or patients to clinical trial sites, or the ability
of employees at our manufacturing facility to report to work, any of which could delay or adversely impact the
conduct or progress of our clinical trials or limit the amount of clinical data we will be able to report; and
● any future interruption of, or delays in receiving, supplies of clinical trial material from our manufacturing
facility due to stay-at-home orders, production slowdowns or stoppages, or disruptions in delivery systems.
Any negative impact that the COVID-19 pandemic has on recruiting or retaining patients in our clinical trials, the
ability to provide materials for our product candidates, the operations of our clinical trials, or the regulatory review process
could cause additional delays with respect to product development activities, which could materially and adversely affect
our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses,
affect our ability to raise additional capital, and have a material adverse effect on our financial results. For example, we
saw a slight slowdown in our enrollment in the fourth cohort of our Phase 1 clinical trial evaluating OTX-TIC due to
COVID-19. As a result, we provided topline data for this clinical trial in the first quarter of 2021 instead of the fourth
quarter of 2020 as originally planned. If similar delays affect our enrollment of our planned Phase 2 clinical trial for OTX-
TIC or any of our ongoing or planned clinical trials, the completion of such trials could be delayed.
Additionally, in May 2020, we disclosed the receipt of interim data regarding our ongoing Phase 1 clinical trial of
OTX-TKI for the potential treatment of wet AMD and other retinal diseases. The Phase 1 clinical trial is a multi-center,
open-label, dose-escalation study in Australia designed to evaluate the safety, biological activity, durability and tolerability
of OTX-TKI. At that time, two cohorts had been enrolled, a lower dose cohort of 200 µg and a higher dose cohort of 400
µg. We disclosed that, as of May 13, 2020, the first two patients in the second (400 µg) cohort had shown a clinically
meaningful reduction in intraretinal and/or subretinal fluid out to six months with a single implant. In July 2020, we
reported that the data collection and other administrative activities of the clinical trial site in Australia where these two
patients were being treated had been adversely impacted by the effects of the COVID-19 pandemic. Specifically, the
clinical trial site reported to us that one of these two patients showing a clinically meaningful reduction in intraretinal
and/or subretinal fluid had been treated with anti-VEGF medication at a site visit at month 4.5 (in mid-March 2020) and at
month 6 (in early May 2020). The administration of this anti-VEGF medication at the month 4.5 visit and at the month 6
visit was not entered into the clinical trial database until after a subsequent visit at month 7.5 in mid-June 2020. As a result,
this information was not available to or known by us in connection with our prior disclosures.
The COVID-19 pandemic continues to evolve and its ultimate scope, duration and effects are unknown. The extent of
the impact on our business, preclinical studies and clinical trials, commercialization activities and revenue will depend on
future developments, which are highly uncertain and cannot be predicted with confidence. These include, but are not
limited to, the duration of the outbreak; actions to contain the pandemic or treat its impact, such as travel restrictions,
vaccination campaigns, social distancing and quarantines or lock-downs in the United States and other countries; business
closures or business disruptions; and the effectiveness of actions taken in the United States and other countries to contain
and treat the disease.
The pandemic initially caused significant disruptions in the financial markets, and may cause additional disruptions in
the future, any of which could adversely impact our ability to raise additional funds through public offerings or private
placements or impact the volatility of our stock price and trading in our stock. Moreover, the pandemic has significantly
impacted economies worldwide, which could result in adverse effects on our business and operations. We cannot be certain
what the overall impact of the COVID-19 pandemic will be on our business and it has the potential to continue to adversely
affect our business, financial condition, results of operations, and prospects.
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Risks Related to Our Financial Position and Need for Additional Capital
We have incurred significant losses since our inception. We expect to incur losses over the next several years and may
never achieve or maintain profitability.
Since inception, we have incurred significant operating losses. Our net losses were $60.0 million for the year ended
December 31, 2018, $86.4 million for the year ended December 31, 2019 and $155.6 million for the year ended
December 31, 2020. As of December 31, 2020, we had an accumulated deficit of $539.3 million. We have financed our
operations primarily through private placements of our preferred stock, public offerings of our common stock, private
placements of our convertible notes and borrowings under credit facilities. We have devoted substantially all of our
financial resources and efforts to research and development, including preclinical studies and clinical trials, and the
commercialization of ReSure Sealant and DEXTENZA® for the treatment of ocular inflammation and pain following
ophthalmic surgery. Although we expect to continue to generate revenue from sales of ReSure Sealant and DEXTENZA,
we expect to continue to incur significant expenses and operating losses over the next several years. Our net losses may
fluctuate significantly from quarter to quarter and year to year.
We anticipate we will incur substantial expenses if and as we:
● continue to commercialize DEXTENZA in the United States;
● continue to develop and expand our sales, marketing and distribution capabilities for DEXTENZA and any of
our products or product candidates;
● continue to pursue the clinical development of DEXTENZA for additional indications;
● continue ongoing clinical trials of our product candidates OTX-TKI, OTX-TIC, OTX-CSI, and OTX-DED;
● initiate planned Phase 2 clinical trials for our product candidates OTX-TKI and OTX-TIC;
● conduct joint research and development under our strategic collaboration with Regeneron, for the development
and potential commercialization of products containing our extended-delivery hydrogel formulation in
combination with Regeneron’s large molecule, VEGF-targeting compounds to treat retinal diseases;
● conduct research and development activities on, and seek regulatory approvals for, DEXTENZA and OTX-TIC
in certain Asian countries pursuant to our license agreement and collaboration with AffaMed Therapeutics
Limited, or AffaMed;
● continue the research and development of our other product candidates;
● seek to identify and develop additional product candidates, including through additional preclinical development
activities associated with our front-of-the-eye and back-of-the-eye programs and potential opportunities outside
the field of ophthalmology;
● seek marketing approvals for any of our product candidates that successfully complete clinical development;
● scale up our manufacturing processes and capabilities to support sales of commercial products, our ongoing
clinical trials of our product candidates and commercialization of any of our product candidates for which we
obtain marketing approval, and expand our facilities to accommodate this scale up and any corresponding
growth in personnel;
● renovate our existing facilities including research and development laboratories, manufacturing space and office
space;
● maintain, expand and protect our intellectual property portfolio;
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● expand our operational, financial and management systems and personnel, including personnel to support our
clinical development, manufacturing and commercialization efforts and our operations as a public company;
● defend ourselves against legal proceedings;
● increase our product liability and clinical trial insurance coverage as we expand our clinical trials and
commercialization efforts; and
● continue to operate as a public company.
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 FDA or the European Medicines Agency, or EMA, to perform trials or studies in addition
to those currently expected;
● there are any delays in receipt of regulatory clearance to begin our planned clinical programs; or
● there are any delays in enrollment of patients in or completing our clinical trials or the development of our
product candidates.
Prior to our commercial launch of DEXTENZA in July 2019, ReSure Sealant was our only source of revenue from
product sales. However, sales of ReSure Sealant have not generated, and we do not anticipate that they will ever generate,
significant revenue. For us to become and remain profitable, we will need to continue to successfully commercialize
DEXTENZA and to successfully develop and commercialize other products with significant market potential. This will
require us or our current or future collaborators to be successful in a range of challenging activities, including:
● successfully continuing to commercialize DEXTENZA in the United States, including by further developing our
sales force, marketing and distribution capabilities;
● successfully completing clinical development of our product candidates, including DEXTENZA for additional
indications as well as OTX-TKI, OTX-TIC, OTX-CSI, and OTX-DED;
● obtaining marketing approval for these product candidates;
● manufacturing at commercial scale, marketing, selling and distributing DEXTENZA and any other products for
which we obtain marketing approval;
● achieving an adequate level of market acceptance of and obtaining and maintaining coverage and adequate
reimbursement from third-party payors for our products; and
● protecting our rights to our intellectual property portfolio.
Our ability to generate revenue from operations will depend, in part, on the timing and success of commercial sales
of DEXTENZA. However, the successful commercialization of DEXTENZA in the United States is subject to many risks.
The COVID-19 pandemic has reduced the number of elective ophthalmic surgeries performed since mid-March 2020.
Although we saw signs of a partial recovery in the number of cataract surgeries during the second half of 2020, we believe
the number of procedures currently being performed continues to be below the level performed prior to the COVID-19
pandemic. DEXTENZA is our first significant product launch, and we may not be able to continue to commercialize
DEXTENZA successfully. There are numerous examples of unsuccessful product launches and failures to meet
expectations of market potential, including by pharmaceutical companies with more experience and resources than we
have. We do not anticipate revenue from sales of DEXTENZA for the treatment of ocular inflammation and pain following
ophthalmic surgery will be sufficient for us to become profitable for several years, if ever. Furthermore,
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if we are unable to achieve our revenue estimates for DEXTENZA, our ability to raise additional capital may be negatively
impacted.
We may not succeed in our continued commercialization efforts and may never generate revenue that is sufficient to
achieve profitability. 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 our
stockholders to lose all or part of their 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 as we continue
to commercialize DEXTENZA for the treatment of ocular inflammation and pain following ophthalmic surgery and any
additional indications for which we receive marketing approval, including expanding our product manufacturing, sales,
marketing and distribution capabilities, and advance OTX-TKI, OTX-TIC, OTX-CSI, and OTX-DED through Phase 2
clinical development. We also expect to devote substantial financial resources as we conduct late stage clinical trials for
our local programmed-release drug delivery product candidates, including DEXTENZA for additional indications
including ocular itching associated with allergic conjunctivitis, and seek marketing approval for any such product candidate
for which we obtain favorable pivotal clinical results. In addition, we plan to devote significant financial resources to
conducting research and development and potentially seeking regulatory approval for our other product candidates.
Accordingly, we will need to obtain substantial additional funding to fully support our continuing operations and ongoing
commercialization efforts for DEXTENZA. 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.
As of December 31, 2020, we had cash and cash equivalents of $228.1 million, outstanding debt of $25.0 million, net
of unamortized discount, and $37.5 million aggregate principal amount of senior subordinated convertible notes plus
accrued interest of $4.2 million. We believe that our existing cash and cash equivalents of $228.1 million as of December
31, 2020, will enable us to fund our planned operating expenses, debt service obligations and capital expenditure
requirements through 2023. This estimate is based on our current operating plan which includes estimates of anticipated
cash inflows from DEXTENZA and ReSure Sealant product sales and cash outflows from operating expenses. These
estimates are subject to various assumptions including those related to the severity and duration of the COVID-19
pandemic, the revenues and expenses associated with the commercialization of DEXTENZA, variable expense reductions,
the pace of our research and clinical development programs, and other aspects of our business. We have based our estimate
on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect and
would therefore need to raise additional capital to support our ongoing operations or adjust our plans accordingly. Our
future capital requirements will depend on many factors, including:
● our ability to continue to commercialize and sell DEXTENZA in the United States;
● the costs, timing and outcome of regulatory review of our product candidates by the FDA, the EMA or other
regulatory authorities;
● the level of product sales from DEXTENZA and any additional products for which we obtain marketing
approval in the future;
● the costs of manufacturing, sales, marketing, distribution and other commercialization efforts with respect to
DEXTENZA and any additional products for which we obtain marketing approval in the future;
● the costs of expanding our facilities to accommodate our manufacturing needs and headcount;
● the progress, costs and outcome of our planned and ongoing clinical trials of our extended-delivery drug
delivery product candidates, in particular DEXTENZA for additional indications, OTX-TIC for the treatment of
glaucoma or ocular hypertension, OTX-TKI for the treatment of wet AMD, OTX-CSI for the chronic
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treatment of dry eye disease, and OTX-DED for the short-term treatment of the signs and symptoms of dry eye
disease;
● the scope, progress, costs and outcome of preclinical development and clinical trials of our other product
candidates;
● the extent of our debt service obligations and our ability, if desired, to refinance any of our existing debt on
terms that are more favorable to us;
● the amounts we are entitled to receive, if any, from Regeneron as potential option exercise fees, development,
regulatory and sales milestone payments and royalty payments and the amounts we are obligated to pay to
Regeneron as reimbursement if it chooses to exercise its option to advance a product candidate under our
collaboration agreement;
● the amounts we are entitled to receive, if any, from AffaMed as reimbursements for clinical trial expenditures,
development, regulatory, and sales milestone payments, and royalty payments under our license agreement with
AffaMed;
● the extent to which we choose to establish additional collaboration, distribution or other marketing arrangements
for our products and product candidates;
● the costs and outcomes of legal actions and proceedings;
● 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 acquire or invest in other businesses, products and technologies.
Conducting preclinical testing and clinical trials, seeking market approvals and commercializing products are time-
consuming, expensive and uncertain processes that take years to complete. We may never generate the necessary data or
results required to obtain regulatory approval of products with the market potential sufficient to enable us to achieve
profitability. We may not generate significant revenue from sales of any product for several years, if at all. 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, restrict our operations or require us to relinquish
rights to our technologies or products or product candidates.
Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to finance
our cash needs through equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, royalty
agreements, and marketing and distribution arrangements. We do not have any committed external source of funds,
although our collaboration agreement with Regeneron provides for Regeneron’s reimbursement of certain preclinical
expenses incurred by us under our collaboration agreement and for the potential receipt of option exercise, development,
regulatory and sales milestone and royalty payments and our license agreement with AffaMed provides for AffaMed’s
reimbursement of certain clinical expenses incurred by us in connection with our collaboration and for our potential receipt
of development and sales milestone payments and royalty payments. To the extent that we raise additional capital through
the sale of equity, preferred equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and
the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’
rights as holders of our common stock. 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. Our pledge of our assets as collateral to secure our obligations
under our credit facility pursuant to which we have a total borrowing capacity of $25.0 million, which has been fully drawn
down, or the Credit Facility may limit our ability to obtain additional debt financing. If we are unable to raise additional
funds through equity or debt financings when needed, we may be required
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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. The COVID-
19 pandemic initially caused significant disruptions in the financial markets, and may cause disruptions in the future, any
of which could adversely impact our ability to raise additional funds through equity or debt financings.
If we raise additional funds through collaborations, strategic alliances, licensing arrangements, royalty agreements,
or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue
streams, research programs, products or product candidates or grant licenses on terms that may not be favorable to us.
Our substantial indebtedness may limit cash flow available to invest in the ongoing needs of our business.
We have a significant amount of indebtedness. Under our Credit Facility, as amended to date, we have $25.0 million,
net of unamortized discount, of outstanding principal indebtedness. Under the accompanying credit and security
agreement, as amended and/or restated to date, the Credit Agreement, we were permitted to make interest-only payments
until January 1, 2021. Our obligations under the Credit Agreement are secured by all of our assets, including our
intellectual property. The Credit Agreement also includes customary affirmative and negative covenants, including
limitations on dispositions, mergers or acquisitions; incurring indebtedness, liens or encumbrances; paying dividends;
making certain investments; and engaging in certain other business transactions. In March 2019, we issued $37.5 million
aggregate principal amount of issued and outstanding senior unsubordinated convertible notes, or the Convertible Notes.
The Convertible Notes mature on March 1, 2026 and interest on the Convertible Notes is payable at maturity or if earlier
converted, repurchased or redeemed pursuant to their terms. We could in the future incur additional indebtedness beyond
such amounts, including by potentially amending our Credit Agreement.
Our substantial debt combined with our other financial obligations and contractual commitments could have
significant adverse consequences, including:
● requiring us to dedicate a substantial portion of cash and cash equivalents and marketable securities to the
payment of interest on, and principal of, our debt, which would reduce the amounts available to fund working
capital, commercialization expenditures associated with DEXTENZA, capital expenditures, product
development efforts and other general corporate purposes;
● obligating us to negative covenants restricting our activities, including limitations on dispositions, mergers or
acquisitions, encumbering our intellectual property, incurring additional indebtedness or liens, paying dividends,
making investments and engaging in certain other business transactions;
● limiting our flexibility in planning for, or reacting to, changes in our business and our industry; and
● placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing
options.
We intend to satisfy our current and future debt service obligations with our existing cash and cash equivalents,
anticipated product revenue from DEXTENZA and funds from external sources. However, we may not have sufficient
funds or may be unable to arrange for additional financing to pay the amounts due under our existing debt. Funds from
external sources may not be available on acceptable terms, if at all. In addition, a failure to comply with the conditions of
our Credit Agreement or the Convertible Notes could result in an event of default under those instruments. In the event of
an acceleration of amounts due under our Credit Agreement or the Convertible Notes as a result of an event of default,
including upon the occurrence of an event that would reasonably be expected to have a material adverse effect on our
business, operations, properties, assets or condition or a failure to pay any amount due, we may not have sufficient funds or
may be unable to arrange for additional financing to repay our indebtedness or to make any accelerated payments, and the
lenders could seek to enforce security interests in the collateral securing such indebtedness. In addition, the covenants
under our existing Credit Agreement and the pledge of our assets, including our intellectual property, as collateral limit our
ability to obtain additional debt financing.
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The elimination of LIBOR could adversely affect our business, results of operations or financial condition.
In July 2017, the head of the United Kingdom Financial Conduct Authority, or FCA, announced plans to phase out
the use of LIBOR by the end of 2021. In November 2020, the International Exchange Benchmark Administration, the
administrator of LIBOR, announced its decision to consult on ceasing the publication of rates for certain short-term LIBOR
tenors effective December 31, 2021, and for the remaining tenors effective June 30, 2023. Financial regulatory agencies
including the U.S. Federal Reserve and the FCA expressed support for announcement. Although the impact is uncertain at
this time, the elimination of LIBOR could have an adverse impact on our business, results of operations, or financial
condition. We may incur significant expenses to amend our LIBOR-indexed loans and other applicable financial or
contractual obligations, including our Credit Facility, to a new reference rate, which may differ significantly from LIBOR.
Accordingly, the use of an alternative rate could result in increased costs, including increased interest expense on our credit
facilities, and increased borrowing and hedging costs in the future. At this time, no consensus exists as to what rate or rates
may become acceptable alternatives to LIBOR and we are unable to predict the effect of any such alternatives on our
business, results of operations or financial condition.
Our limited operating history may make it difficult for our stockholders to evaluate the success of our business to date
and to assess our future viability.
We are an early-stage company. 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 clinical trials, manufacturing initial quantities of our products and
product candidates, and commercializing ReSure Sealant and DEXTENZA for the treatment of ocular inflammation and
pain following ophthalmic surgery. We have a limited history of commercializing products. To date, we have not generated
significant revenue from the sale of either ReSure Sealant or DEXTENZA or revenue that is sufficient to achieve
profitability. Consequently, any predictions about our future success or viability may not be as accurate as they could be if
we had a longer operating history.
In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other
known and unknown factors. We are in early stages of the process of transitioning 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, our stockholders should
not rely upon the results of any quarterly or annual periods as indications of future operating performance.
We have broad discretion in the use of our available cash and other sources of funding and may not use them
effectively.
Our management has broad discretion in the use of our available cash and other sources of funding and could spend
those resources 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 its use, our available cash may be
invested in a manner that does not produce income or that loses value.
Risks Related to Product Development
We depend heavily on the success of DEXTENZA and our product candidates. Clinical trials of our product candidates
may not be successful. If we are unable to successfully complete clinical development of and obtain marketing
approvals for our product candidates, or experience significant delays in doing so, or if after obtaining marketing
approvals, we fail to maintain marketing approval or fail to commercialize these product candidates, our business will
be materially harmed.
We have devoted a significant portion of our financial resources and business efforts to the development of our drug-
eluting intracanalicular insert products for diseases and conditions of the front of the eye and for our other product
candidates. In particular, we are investing substantial resources to complete the development of DEXTENZA for
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allergic conjunctivitis, OTX-TKI for wet AMD, OTX-TIC for glaucoma or ocular hypertension, OTX-CSI for the chronic
treatment of dry eye disease, and OTX-DED for the short-term treatment of the signs and symptoms of dry eye
disease. We have received a target action date under the Prescription Drug User Fee Act, commonly known as PDUFA, of
October 18, 2021, for our supplemental New Drug Application, or sNDA, to include ocular itching associated with allergic
conjunctivitis as an additional indication. We currently have several ongoing and planned clinical trials, including our
Phase 1 clinical trial of OTX-TKI, our Phase 1 clinical trial of OTX-TIC, our Phase 2 clinical trial of OTX-CSI, and our
Phase 2 clinical trial for OTX-DED. If these or other clinical trials of any 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 unable to complete,
the development and commercialization of such product candidate. We cannot accurately predict when or if any of our
product candidates will prove effective or safe in humans or whether our products and product candidates will receive
marketing approval or reach successful commercialization. Our ability to generate product revenues sufficient to achieve
profitability will depend heavily on our commercialization of DEXTENZA for the treatment of ocular inflammation and
pain following ophthalmic surgery and our obtaining marketing approval for and commercializing other products with
significant market potential, including DEXTENZA for additional indications.
The commercial success of our product DEXTENZA and our product candidates will depend on many factors,
including the following:
● successful completion of preclinical studies and clinical trials;
● applying for and receiving and maintaining marketing approvals from applicable regulatory authorities for our
product candidates;
● scaling up our manufacturing processes and capabilities to support additional or larger clinical trials of our
product candidates and commercialization of DEXTENZA or any of our product candidates for which we obtain
marketing approval;
● developing, validating and maintaining a commercially viable manufacturing process that is compliant with
current good manufacturing practices, or cGMP;
● developing our sales, marketing and distribution capabilities and launching commercial sales of our products
and product candidates, if and when approved, whether alone or in collaboration with others;
● partnering successfully with our current and future collaborators, including Regeneron and AffaMed;
● gaining acceptance of our products, if and when approved, by patients, the medical community and third-party
payors;
● effectively competing with other therapies;
● maintaining a continued acceptable safety profile of our products 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.
In certain cases, such as in our collaborations with Regeneron and AffaMed, many of these factors may be beyond
our control, including clinical development and sales, marketing and distribution efforts. If we or our collaborators 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 our products and product candidates, which would materially harm our business.
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If clinical trials of our intracanalicular insert, intravitreal implant, intracameral implant, or suprachoroidal implant
product candidates or any other product candidate that we develop fail to demonstrate safety and efficacy to the
satisfaction of the FDA, the EMA 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 such product candidate.
Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, including our
intracanalicular insert product candidates, 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 stage clinical trials, interim results of a clinical trial do not necessarily predict final results and results
from one completed clinical trial may not be replicated in a subsequent clinical trial with a similar study design. Some of
our completed studies were conducted with small patient populations, making it difficult to predict whether the favorable
results that we observed in such studies will be repeated in larger and more advanced clinical trials. 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.
In general, the FDA requires two adequate and well-controlled clinical trials to support the effectiveness of a new
drug for marketing approval. In a Phase 2 clinical trial of DEXTENZA that we completed in 2013 in which we were
evaluating DEXTENZA for post-surgical ocular inflammation and pain following cataract surgery, DEXTENZA did not
meet the primary efficacy endpoint for inflammation with statistical significance at the pre-specified time point at day
8. However, we did achieve statistical significance for this inflammation endpoint at days 14 and 30. Accordingly, we
measured the primary efficacy endpoint for inflammation in our completed Phase 3 clinical trials of DEXTENZA at day
14. In the first and third Phase 3 clinical trials, DEXTENZA met both primary endpoints for post-surgical ocular
inflammation and pain following cataract surgery with statistical significance. However, in the second Phase 3 clinical
trial, DEXTENZA met only one of the two primary efficacy endpoints with statistical significance. In this second trial,
DEXTENZA did not meet the primary endpoint relating to absence of inflammatory cells in the study eye at day 14.
We announced topline results from a third Phase 3 clinical trial of DEXTENZA for post-surgical ocular inflammation
and pain in November 2016, which we used to support the potential labeling expansion of DEXTENZA’s indications for
use. We modified the design of this third Phase 3 clinical trial compared to our two previous Phase 3 clinical trials of
DEXTENZA based on our learnings from these trials. In this trial, DEXTENZA successfully met its two primary efficacy
endpoints for inflammation and pain, achieving statistically significant differences between the treatment group and the
placebo group for the absence of inflammatory cells on day 14 and the absence of pain on day 8, respectively. Secondary
analyses on the primary efficacy measures have also been completed. DEXTENZA achieved each of the secondary
endpoints related to absence of inflammatory cells, absence of pain, and absence of anterior chamber flare with statistical
significance compared to placebo at each of the pre-specified time points, with the exception of the endpoint for the
absence of inflammatory cells at day 2 (which is the day following surgery). Based on the results of our third Phase 3
clinical trial of DEXTENZA and subsequent approval in November 2018 for the pain indication pursuant to the initial
NDA, we submitted an sNDA for DEXTENZA for the treatment of post-surgical ocular inflammation in January 2019, and
the FDA approved the sNDA in June 2019.
In our first Phase 3 clinical trial of DEXTENZA for allergic conjunctivitis, for which we announced topline results in
October 2015, DEXTENZA met one of the two primary endpoints. DEXTENZA achieved the primary endpoint for ocular
itching associated with allergic conjunctivitis but not the primary endpoint for conjunctival redness, in each case measured
on day 7 after insertion of the insert. The difference in the mean scores for ocular itching between the DEXTENZA group
and the placebo group was greater than 0.5 units on a five point scale at all time points on day 7 post-insertion and was
greater than 1.0 unit at a majority of the time points on day 7 post-insertion. The DEXTENZA group did not achieve these
pre-specified endpoints on day 7 post-insertion with respect to conjunctival redness. In our second Phase 3 clinical trial of
DEXTENZA for allergic conjunctivitis, for which we announced topline results in June 2016, DEXTENZA did not meet
the sole primary endpoint for ocular itching. The single primary endpoint of the second Phase 3 clinical trial was the
difference in the mean scores in ocular itching between the treatment group and the placebo comparator group at three time
points on day 7 following insertion of the inserts. While mean ocular itching was seen to be numerically lower (more
favorable) in the DEXTENZA treatment group compared to the placebo group measured at each of the three specified
times on day 7 following insertion of the inserts, at 3, 5, and 7 minutes by -0.18, -0.29, and -
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0.29 units, respectively, on a five point scale, this difference did not reach statistical significance. In addition, the trial did
not achieve the requirement of at least a 0.5 unit difference at all three time points on day 7 following insertion of the
inserts and at least a 1.0 unit difference at the majority of the three time points between the treatment group and the placebo
group on day 7 following insertion of the inserts. Further, in our prior Phase 2 clinical trial of DEXTENZA in which we
were evaluating DEXTENZA for allergic conjunctivitis, DEXTENZA met one of the two primary efficacy measures. The
DEXTENZA treatment group achieved a mean difference compared to the vehicle control group of more than 0.5 units on
a five point scale on day 14 for all three time points measured in a day for both ocular itching and conjunctival
redness. The DEXTENZA group did not achieve a mean difference compared to the vehicle control group of 1.0 unit for
the majority of the three time points measured on day 14 for either ocular itching or conjunctival redness. Post-hoc
analyses that we performed on the results of our two completed Phase 3 clinical trials for allergic conjunctivitis may not be
predictive of success in any future Phase 3 clinical trial. Although we believe that these analyses provide important
information regarding DEXTENZA and are helpful in understanding the results of this trial and determining the
appropriate criteria for future clinical trials, post-hoc analyses performed using an unlocked clinical trial database can
result in the introduction of bias and are given less weight by regulatory authorities than pre-specified analyses.
Even if we obtain favorable clinical trial results in an additional Phase 3 clinical trial of DEXTENZA for allergic
conjunctivitis, such as our third Phase 3 clinical trial, including meeting all primary efficacy measures, we may not obtain
approval for DEXTENZA to treat allergic conjunctivitis or ocular itching associated with allergic conjunctivitis, or the
FDA may require that we conduct additional clinical trials. For example, in April 2020, we announced the topline results
from our third Phase 3 clinical trial assessing ocular itching associated with allergic conjunctivitis in which DEXTENZA
achieved its primary endpoint as treated subjects demonstrated a statistically significant (p-value < 0.0001) difference in
mean ocular itching scores compared to vehicle-treated subjects at all three pre-specified time points compared with
placebo-treated subjects. We believe that this efficacy data, considered in totality with a favorable safety profile and the
data from the prior Phase 2, Phase 3a and Phase 3b clinical trials, provides the basis for a submission of an sNDA for
DEXTENZA to include the treatment of ocular itching associated with allergic conjunctivitis as an additional approved
indication. However, the FDA may not agree with our view of the clinical meaningfulness of the data. We understand that
the FDA has in the past considered, for trials similar to ours, clinical meaningfulness to be a 0.5 unit difference at all
relevant time points and at least a 1.0 unit difference at a majority of time points assessed. DEXTENZA did not achieve
these measures in the third Phase 3 clinical trial. Achievement of such differences is also affected by the statistical
methodology we utilize to review the clinical trial data. As previously disclosed, in our first Phase 3 clinical trial for the
treatment of ocular itching associated with allergic conjunctivitis, DEXTENZA achieved a 0.5 unit difference at all
relevant time points and at least a 1.0 unit difference at a majority of time points assessed using the Markov Chain Monte
Carlo, or MCMC, method where the basis for imputation was at the individual eye level. However, using the MCMC
method specified in the applicable statistical analysis plan—where the basis for imputation is at the subject level (average
of the two eyes)—DEXTENZA did not achieve all of these measures. If the FDA were to require that a product candidate
achieve these measures of clinical meaningfulness, approval of our sNDA could be delayed or prevented.
From time to time, we may decide to conduct clinical trials to assess patients’ clinical response to treatment and
choose not to power such trials to measure the applicable efficacy endpoints with statistical significance, as we did in our
Phase 2 clinical trials of our former product candidate OTX-TP for the treatment of glaucoma and ocular hypertension. In
addition, post-hoc analyses such as those that we performed on certain results of Phase 2 clinical trials of OTX-TP may not
be predictive of success in future clinical trials, including as a result of differences in trial design. Post-hoc analyses
performed using an unlocked clinical trial database can also result in the introduction of bias and are given less weight by
regulatory authorities than pre-specified analyses.
The success of our intracanalicular insert product candidates is dependent upon retention during the course of
intended therapy. As such, we may conduct non-significant risk investigational device exemption, or IDE, medical device,
or NSR, studies in the United States for our extended-delivery intracanalicular insert in an effort to increase the rate of
retention. All NSR studies that we have performed to date have involved placebo vehicle control intracanalicular inserts
without active drug. If we determine to make any future changes to the design or composition of our inserts, such changes
could affect the outcome of any subsequent clinical trials using these updated inserts. For example, in our Phase 2b clinical
trial of OTX-TP, we used a different version of intracanalicular insert than either of the inserts that we used in our Phase 2a
clinical trial of OTX-TP. Based on the results of our completed Phase 2a clinical trial, we designed the OTX-TP insert that
was used in our Phase 2b clinical trial to deliver drug over a 90 day period at the same daily rate as the two-month version
of the insert used in the Phase 2a clinical trial. To achieve this, we modified the design of the
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OTX-TP insert to enlarge it in order to enable the insert to carry a greater amount of drug. In addition, we incorporated
minor structural changes to improve retention rates. In our Phase 2b clinical trials, OTX-TP inserts could be visualized in
approximately 88% of eyes by the day 60 visit. By the day 90 visit, the ability to visualize OTX-TP had declined to
approximately 42% of eyes as the hydrogel softened, liquefied and had either advanced further down in the canaliculus or
had cleared through the nasolacrimal duct.
We are conducting additional NSR studies on additional modified insert designs, including a polyethylene glycol, or
PEG, tip on the proximal end of the insert that have been incorporated into the design of certain of our clinical trials. If the
retention rates for our inserts in future clinical trials are inadequate to ensure that the patient is receiving appropriate
therapy, we may not be able to obtain regulatory approvals or, even if approved, achieve market acceptance of our local
programmed-release drug delivery products.
The protocols for our clinical trials and other supporting information are subject to review by the FDA and regulatory
authorities outside the United States. For certain of our product candidates, we have chosen to conduct our initial or
earlier-stage clinical trials outside the United States. We generally plan to conduct our later stage and pivotal clinical trials
of our product candidates in the United States. The FDA, however, could require us to conduct additional studies or
require us to modify our planned pivotal clinical trials to receive clearance to initiate such trials in the United States or to
continue such trials once initiated. The FDA is not obligated to comment on our trial protocols within any specified time
period or at all or to affirmatively clear or approve our planned pivotal clinical trials. Subject to a waiting period of
30 days, we could choose to initiate our pivotal clinical trials in the United States without waiting for any additional period
for comments from the FDA.
We have conducted, and may in the future conduct, clinical trials for product candidates at sites outside the United
States, and the FDA may not accept data from trials conducted in such locations.
We have conducted, and may in the future choose to conduct, one or more of our clinical trials outside the United
States. We have often conducted our initial and earlier-stage clinical trials for our product candidates outside the United
States. We are currently conducting a Phase 1 clinical trial for our product candidate OTX-TKI for the treatment of wet
AMD in Australia, and pending our receipt and review of topline data in the Phase 1 clinical trial and related regulatory
discussions, we plan to initiate a Phase 2 clinical trial for OTX-TKI in Australia. We generally plan to conduct our later
stage and pivotal clinical trials of our product candidates in the United States.
Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of this data is
subject to conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and
performed by qualified investigators in accordance with ethical principles. The trial population must also adequately
represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that
the FDA deems clinically meaningful. In addition, while these clinical trials are subject to the applicable local laws, FDA
acceptance of the data will depend on its determination that the trials also complied with all applicable U.S. laws and
regulations. If the FDA does not accept the data from any trial that we conduct outside the United States, it would likely
result in the need for additional trials, which would be costly and time-consuming and would delay or permanently halt our
development of the applicable product candidates.
Other risks inherent in conducting international clinical trials include:
● foreign regulatory requirements that could restrict or limit our ability to conduct our clinical trials;
● administrative burdens of conducting clinical trials under multiple sets of foreign regulations;
● failure of enrolled patients to adhere to clinical protocols as a result of differences in healthcare services or
cultural customs;
● foreign exchange fluctuations;
● diminished protection of intellectual property in some countries; and
● political and economic risks relevant to foreign countries.
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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 our extended-delivery drug delivery product candidates 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;
● our third-party contractors may fail to comply with regulatory requirements or meet their 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; and
● 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.
For example, we applied for a deferral from the FDA for the requirement to conduct pediatric studies for
DEXTENZA for the treatment of post-surgical ocular inflammation and pain following cataract surgery until after approval
of such product in adult populations for that indication. While the FDA ultimately approved our request, if the FDA had
required us to conduct pediatric studies in advance of FDA approval in adult populations, we would have experienced
significant delays in our ability to obtain marketing approval for DEXTENZA for these indications, particularly in light of
our decision announced in November 2019 to postpone our clinical trial to evaluate DEXTENZA in pediatric subjects
following cataract surgery until the fourth quarter of 2020. We will face a similar risk if we seek a comparable deferral for
other product candidates or indications.
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 or unable to obtain marketing approval for our product candidates;
● 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.
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Our product development costs will also increase if we experience delays in testing or marketing approvals. We do
not know whether any of our preclinical 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.
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 our local programmed-release drug delivery product
candidates 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, the EMA or similar regulatory authorities outside the
United States. Although there is a significant prevalence of disease in the areas of ophthalmology in which we are focused,
we may nonetheless experience unanticipated difficulty with patient enrollment. For example, in the third quarter of 2017,
we initiated a Phase 1 clinical trial of OTX-TIC outside the United States. After several months, after not enrolling any
patients, we closed this trial in the second quarter of 2018. Additionally, we intended to initiate our ongoing Phase 1
clinical trial of OTX-TKI outside the United States in 2018, but we were unable to start dosing patients until the first
quarter of 2019.
A variety of factors affect patient enrollment, including:
● the prevalence and severity of the ophthalmic disease or condition 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;
● the proximity and availability of clinical trial sites for prospective patients;
● actual or threatened public health emergencies or outbreaks of disease (including, for example, the COVID-19
pandemic);
● the conduct of clinical trials by competitors for product candidates that treat the same indications as our product
candidates; and
● the lack of adequate compensation for prospective patients.
Delays can be more pronounced with later-stage clinical trials because they tend to be larger than early-stage trials.
For example, enrollment in our completed Phase 3 clinical trial of OTX-TP, the largest clinical trial we have conducted to
date, was significantly slower than expected. It had a target enrollment of 550 patients and was conducted at
approximately 49 sites in the United States.
Our inability to enroll a sufficient number of patients in any of 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.
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If serious adverse or unacceptable side effects are identified during the development or commercialization of our
extended-delivery drug delivery products or product candidates or any other product candidates that we may develop, we
may need to abandon or limit our development of such products or product candidates.
If DEXTENZA 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. In each of our first two
Phase 3 clinical trials of DEXTENZA for the treatment of post-surgical ocular inflammation and pain following cataract
surgery, there were two subjects that experienced serious adverse events in the DEXTENZA group in each trial, none of
which were ocular in nature or considered by the investigator to be related to the study treatment. In our third Phase 3
clinical trial of DEXTENZA for the treatment of post-surgical ocular inflammation and pain, there were three subjects that
experienced serious adverse events in the DEXTENZA group, one of which was ocular in nature and none of which were
considered by the investigator to be related to the study treatment. There was one ocular serious adverse event in the
vehicle control group in the three completed Phase 3 clinical trials, which was hypopyon, or inflammatory cells in the
anterior chamber. In our earlier Phase 2 clinical trial of DEXTENZA for the same indication, there were three serious
adverse events, none of which was considered by the investigator to be related to the study treatment. In the DEXTENZA
group of this Phase 2 clinical trial of DEXTENZA, the only adverse event that occurred more than once for the same
subject was reduced visual acuity, which occurred twice but was not considered by the investigator to be related to the
study treatment.
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. In addition, adverse events
which had initially been considered unrelated to the study treatment may later be found to be caused by the study
treatment.
We may not be successful in our efforts to develop products and product candidates based on our bioresorbable
hydrogel technology platform other than DEXTENZA and ReSure Sealant or expand the use of our bioresorbable
hydrogel technology for treating additional diseases and conditions.
We are currently directing most of our development efforts towards applying our proprietary, bioresorbable hydrogel
technology platform to products and product candidates that are designed to provide local programmed-release hydrogel-
based therapeutic agents to the eye using active pharmaceutical ingredients that are currently used in FDA-approved
ophthalmic drugs. We have a number of products and product candidates at various stages of development based on our
bioresorbable hydrogel technology platform and are exploring the potential use of our platform for other ophthalmic
diseases and conditions. These include intracanalicular inserts eluting drug product to the ocular surface; hydrogel drug
delivery implants designed to release therapeutic antibodies and small molecules such as TKIs to modulate the biological
activity of VEGF over a sustained period following administration by an intravitreal injection for the treatment of diseases
and conditions of the back of the eye, including wet AMD; and hydrogel drug delivery implants designed to release drug
product into the anterior chamber of the eye via an intracameral injection for the treatment of diseases and conditions of the
front of the eye. Our collaboration with Regeneron focuses on the development and potential commercialization of
products to be delivered to the suprachoroidal space containing our extended-delivery hydrogel formulation in combination
with Regeneron’s large molecule VEGF-targeting compounds for the treatment of retinal diseases.
Our existing product candidates and any other potential product candidates that we or our collaborators 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. We are also considering the future growth potential of the hydrogel platform technology in
new areas of the body. If we do not successfully develop and commercialize our products and product candidates that we or
our current or future collaborators develop based upon our technological approach, we will not be able to obtain substantial
product revenues or revenue from collaboration agreements, including our collaboration with Regeneron, in future periods.
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We may expend our limited resources to pursue a particular product, product candidate or indication 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.
As part of our restructuring plan announced in November 2019, we decided to defer certain development programs
as part of an initiative to reduce expenses and prioritize our resources to focus on commercializing DEXTENZA for post-
surgical ocular inflammation and pain as well as completing the ongoing Phase 3 clinical trial of DEXTENZA for the
treatment of ocular itching associated with allergic conjunctivitis, a Phase 1 clinical trial of OTX-TIC for the treatment of
glaucoma and ocular hypertension, and a Phase 1 clinical trial of OTX-TKI for the treatment of wet AMD. Our
prioritization of these programs, at the expense of others, during our restructuring may have delayed programs such as
OTX-CSI and OTX-DED that we are now seeking to develop.
Similarly, we are now prioritizing the continued commercialization of DEXTENZA and the advancement through
Phase 2 clinical development of each of OTX-TKI for the treatment of wet AMD, OTX-TIC for the treatment of glaucoma
or ocular hypertension, OTX-CSI for the chronic treatment of dry eye disease, and OTX-DED for the short-term treatment
of the signs and symptoms of dry eye disease. Although we believe such prioritization is currently the best use of our
resources, we may not be correct.
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 or product candidate, we may relinquish valuable rights to that product or 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 products or product candidate.
Risks Related to Manufacturing
We will need to upgrade and expand our manufacturing facility or relocate to another facility and to augment our
manufacturing personnel and processes in order to meet our business plans. If we fail to do so, we may not have
sufficient quantities of our products or product candidates to meet our commercial and clinical trial requirements.
We manufacture DEXTENZA, ReSure Sealant and our product candidates for use in clinical trials, research and
development and commercial efforts at our facility located in Bedford, Massachusetts. In order to meet our business plan,
which contemplates our scaling up manufacturing processes to support the commercialization of our current products and
the development and potential commercialization of our current and future product candidates, we will need to upgrade and
expand our existing manufacturing facility, or relocate to another manufacturing facility; add manufacturing, quality and
support personnel; ensure that new processes, systems, and facilities are qualified and validated; and ensure that any new
processes and systems are consistently implemented in our facility or facilities. The upgrade and expansion of our facility,
or the relocation to an additional facility, will require additional regulatory approvals including FDA audits of such new
processes, systems, and facilities. In addition, it will be costly and time-consuming to expand our facility or relocate to
another facility and recruit necessary additional personnel. If we are unable to expand our manufacturing facility or
relocate to another facility in compliance with regulatory requirements or to hire additional necessary manufacturing
personnel, we may encounter delays or additional costs in achieving our research, development and commercialization
objectives, including obtaining regulatory approvals of our product candidates and meeting customer demand for our
products, which could materially damage our business and financial position.
We must comply with federal, state and foreign regulations, including quality standards applicable to medical device
and pharmaceutical manufacturers, such as cGMP, which are enforced by the FDA through its facilities inspection program
and by similar regulatory authorities in other jurisdictions where we do business. These requirements include, among other
things, quality control, quality systems and the maintenance of records and documentation. For example, between March
2015 and May 2018, we received multiple Form 483s from the FDA
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containing inspectional observations relating to inadequate procedures for documenting follow-up information pertinent to
the investigation of complaints and for evaluation of complaints for adverse event reporting; process controls, analytical
testing and physical security procedures related to manufacture of our drug product for stability and commercial production
purposes; and procedures for manufacturing processes and analytical testing related to the manufacture of drug product for
commercial production. In each of July 2016 and July 2017, we also received a Complete Response Letter, or CRL, from
the FDA regarding our NDA for DEXTENZA pertaining to, among other things, the deficiencies in manufacturing
processes, controls, and analytical testing identified during pre-NDA approval inspections of our manufacturing facility
documented on Form 483s. We may be subject to similar inspections and requirements in connection with subsequent
applications for other product candidates or DEXTENZA for additional indications or in connection with periodic, routine
inspections for products for which we have received marketing authorization.
For example, as our facility is an approved pharmaceutical and medical device commercial manufacturing location,
we are subject to routine inspections and system audits in connection with, among other things, our Safety, Identity,
Strength, Purity, and Quality, or SISPQ; our process controls; and our standard operating procedures. If we fail to respond
or comply in a satisfactory manner with any directives or observations that we may receive from the FDA as a result of
inspections or informational requests, the FDA may take regulatory or other actions that would adversely impact our ability
to continue manufacturing our commercial products and clinical or preclinical product candidates or to otherwise hinder or
delay the clinical development and commercialization of our products and product candidates. In February 2021, the FDA
requested information and records from us relating to our DEXTENZA commercial manufacturing operations and quality
systems pursuant to Form 4003 in advance or in lieu of a drug inspection. In early March 2021, the FDA provided
confirmation of receipt of the records that had been requested from us. Due to the COVID-19 pandemic, this Form 4003
process could be performed in lieu of an onsite inspection. However, the process is ongoing, will take time to complete,
and is uncertain as to outcome. Regardless of the outcome of this informational request process, we could still be subject
to an onsite inspection.
The FDA or similar foreign regulatory authorities at any time also may implement new standards, or change their
interpretation and enforcement of existing standards, for the manufacture, packaging or testing of our products. Any failure
to comply with applicable regulations may result in fines and civil penalties, suspension of production, product seizure or
recall, imposition of a consent decree, or withdrawal of product approval, and would limit the availability of DEXTENZA,
ReSure Sealant and our product candidates that we manufacture.
Any manufacturing defect, failure against SISPQ, or error discovered after products have been produced and
distributed could result in significant consequences, including costly recall procedures, re-stocking costs, damage to our
reputation and potential for product liability claims.
If our sole clinical manufacturing facility is damaged or destroyed or production at this facility is otherwise interrupted,
our business and prospects would be negatively affected.
If our manufacturing facility or the equipment in it is damaged or destroyed, we may not be able to quickly or
inexpensively replace our manufacturing capacity or replace it at all. In the event of a temporary or protracted loss of this
facility or equipment, we might not be able to transfer manufacturing to another facility or to a third party. Even if we
could transfer our manufacturing to another facility or a third party, the shift would likely be expensive and time-
consuming, particularly since any new facility would need to comply with the necessary regulatory requirements and to be
inspected and qualified. We would also need FDA approval before any products manufactured at that facility could be
used for clinical or commercial supply. Such an event could delay our clinical trials or reduce our product sales.
Currently, we maintain insurance coverage against damage to our property and equipment in the amount of up to
$27.5 million and to cover business interruption and research and development restoration expenses in the amount of up to
$2.8 million. However, our insurance coverage may not reimburse us, or may not be sufficient to reimburse us, for any
expenses or losses we may suffer. We may be unable to meet our requirements for DEXTENZA, ReSure Sealant, or any of
our product candidates if there were a catastrophic event or failure of our current manufacturing facility or processes.
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We expect to continue to contract with third parties for at least some aspects of the production of our products and
product candidates. This increases the risk that we will not have sufficient quantities of our products or product
candidates or such quantities at an acceptable cost, which could delay, prevent or impair our development or
commercialization efforts.
We currently rely on third parties for some aspects of the production of DEXTENZA, ReSure Sealant and our
product candidates for commercialization and preclinical testing and clinical trials, including our supply of the active
pharmaceutical ingredient drug substance PEG, the molecule that forms the basis of our hydrogels, and other raw materials
and for sterilization of the finished product. In addition, while we believe that our existing manufacturing facility, or
additional facilities that we will be able to build, will be sufficient to meet our requirements for manufacturing
DEXTENZA, ReSure Sealant and any of our product candidates for which we obtain marketing approval, we may in the
future need to rely on third-party manufacturers for some aspects of the manufacture of our products or product
candidates.
We do not have any long-term supply agreements in place for the clinical or commercial supply of any drug
substances or raw materials for DEXTENZA, ReSure Sealant or any of our product candidates. We purchase drug
substance and raw materials, including the chemical constituents for our hydrogel, from independent suppliers on a
purchase order basis. Any performance failure or refusal to supply drug substance or raw materials on the part of our
existing or future suppliers could delay clinical development, marketing approval or commercialization of our products. If
our current suppliers do not perform as we expect, we may be required to replace one or more of these suppliers. In
particular, we depend on a sole source supplier for the supply of our PEG. This sole source supplier may be unwilling or
unable to supply PEG to us reliably, continuously and at the levels we anticipate or are required by the market. Although
we believe that there are a number of potential long-term replacements to our suppliers, including our PEG supplier, we
may incur added costs and delays in identifying and qualifying any such replacements.
Reliance on third parties for aspects of the supply of our products and product candidates entails additional risks,
including:
● reliance on the third party for regulatory compliance and quality assurance;
● the possible misappropriation of our proprietary information, including our trade secrets and know-how;
● the possible breach of an agreement by the third party; and
● the possible termination or nonrenewal of an agreement by the third party at a time that is costly or inconvenient
for us.
Third-party suppliers or manufacturers may not be able to comply with quality assurance standards, cGMP
regulations or similar regulatory requirements outside the United States. Our failure, or the failure of our third parties, 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 and product candidates.
Our potential future dependence upon others for the manufacture of our products and product candidates may
adversely affect our future profit margins and our ability to commercialize any products that receive regulatory approval on
a timely and competitive basis.
Risks Related to Commercialization
Even though DEXTENZA and ReSure Sealant have received marketing approval from the FDA and even if any of our
product candidates receives marketing approval, any of these products 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 these products may be smaller than we estimate.
DEXTENZA, ReSure Sealant, or any of our product candidates that receives marketing approval may fail to gain
market acceptance by physicians, patients, third-party payors and others in the medical community. We commercially
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launched ReSure Sealant in the first quarter of 2014 and DEXTENZA for the treatment of post-surgical ocular
inflammation and pain in July 2019 and cannot yet accurately predict whether either product will gain market acceptance
and become commercially successful. For example, we previously commenced commercialization in Europe of an earlier
version of ReSure Sealant that was approved and marketed as an ocular bandage. We recognized $0.1 million of revenue
from the commercialization of this product through 2012. However, we ceased our commercialization of the product in
2012 to focus on the ongoing clinical development of ReSure Sealant pursuant to FDA requirements. If our products do
not achieve an adequate level of acceptance, we may not generate significant product revenue and we may not become
profitable.
The degree of market acceptance of DEXTENZA, ReSure Sealant, or any product candidate for which we obtain
marketing approval will depend on a number of factors, including:
● the efficacy and potential advantages compared to alternative treatments;
● our ability to offer our products for sale at competitive prices, particularly in light of the lower cost of
alternative treatments;
● the clinical indications for which the product is approved;
● the convenience and ease of administration compared to alternative treatments, including the intracanalicular
insert retention rate for our intracanalicular insert products and product candidates;
● 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;
● timing of market introduction of competitive products;
● the availability of third-party coverage and adequate reimbursement and, for DEXTENZA and ReSure Sealant,
the lack of separate reimbursement when used as part of a cataract surgery procedure;
● the prevalence and severity of any side effects; and
● any restrictions on the use of our products together with other medications.
For example, because we have not conducted any clinical trials to date comparing the effectiveness of DEXTENZA
directly to currently approved alternative treatments for post-surgical ocular inflammation and pain following cataract
surgery, it is possible that the market acceptance of DEXTENZA could be less than if we had conducted such a trial. We
also have not conducted a clinical trial directly comparing the effectiveness of DEXTENZA to currently approved
alternative treatments for ocular itching associated with allergic conjunctivitis. Although market research we have
commissioned indicates that a majority of ophthalmologists believe DEXTENZA could become a new standard of care for
post-surgical ocular inflammation and pain due to its potential ability to improve compliance with limited toxicity
concerns, market acceptance for DEXTENZA could be substantially less than such research indicates, and we may not be
able to achieve the market share we anticipate.
Our assessment of the potential market opportunity for DEXTENZA, ReSure Sealant and our product candidates 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 not guarantee the accuracy or
completeness of such information. While we believe these industry publications and third-party research, surveys and
studies are reliable, we have not independently verified such data. If the actual market for DEXTENZA, ReSure Sealant or
any of our product candidates is smaller than we expect, our product revenue may be limited and it may be more difficult
for us to achieve or maintain profitability.
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If we are unable to establish and maintain adequate sales, marketing and distribution capabilities, we may not be
successful in commercializing DEXTENZA, ReSure Sealant, or any product candidates if and when they are approved.
We have limited experience in the sale, marketing and distribution of drug and device products. To achieve
commercial success for DEXTENZA, ReSure Sealant, and any product candidate for which we obtain marketing approval,
we will need to establish and maintain adequate sales, marketing and distribution capabilities, either ourselves or through
collaborations or other arrangements with third parties. We have built our own highly targeted, key account sales force for
DEXTENZA that focuses on ambulatory surgical centers responsible for the largest volumes of cataract surgery.
If we decide to commercialize any of our products outside of the United States, we would expect to utilize a variety
of collaboration, distribution and other marketing arrangements with one or more third parties to commercialize any
product that receives marketing approval. We expect that our existing sales force will be able to effectively market and sell
DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis, if our sNDA is approved. We also
intend to rely on Regeneron to commercialize our extended-delivery hydrogel formulation in combination with
Regeneron’s large molecule VEGF-targeting compounds.
Because we have not historically evaluated whether to seek regulatory approval for any of our products or product
candidates outside of the United States, pending potential receipt of regulatory approval for the applicable product
candidate in the United States, at this time we cannot be certain when, if ever, we will recognize revenue from
commercialization of our products or product candidates in any international markets. If we decide to commercialize our
products outside of the United States, we expect to utilize a variety of types of collaboration, distribution and other
marketing arrangements with one or more third parties to commercialize any product of ours that receives marketing
approval. These may include independent distributors, pharmaceutical companies or our own direct sales organization.
For example, we intend to rely on AffaMed to commercialize DEXTENZA and OTX-TIC, if approved for marketing, in
specified jurisdictions in Asia in connection with our collaboration agreement with AffaMed.
There are risks involved with both establishing our own sales, marketing and distribution capabilities and with
entering into arrangements with third parties to perform these services. We may not be successful in entering into
arrangements with third parties to sell, market and distribute our products or may be unable to do so on terms that are most
beneficial to us. Such third parties may have interests that differ from ours. We likely will have little control over such
third parties, and any of them may fail to devote the necessary resources and attention to market, sell and distribute our
products effectively. Our product revenues and our profitability, if any, under third-party collaboration, distribution or
other marketing arrangements, including our collaboration with Regeneron, may also be lower than if we were to sell,
market and distribute a product ourselves. On the other hand, recruiting and training a sales force is expensive and time-
consuming and could delay any product launch. If the commercial launch of any product or 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.
Other factors that may inhibit our efforts to commercialize products 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 lack of adequate number of physicians to use or
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.
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 DEXTENZA, ReSure Sealant or any of our product
candidates.
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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 and device products is highly competitive. We face
competition with respect to our products and product candidates, and will face competition with respect to any other
product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies,
specialty pharmaceutical companies and biotechnology companies worldwide. 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.
Our products and product candidates target markets that are already served by a variety of competing products based
on a number of active pharmaceutical ingredients. Many of these existing products have achieved widespread acceptance
among physicians, patients and payors for the treatment of ophthalmic diseases and conditions. In addition, many of these
products are available on a generic basis, and our products and product candidates may not demonstrate sufficient
additional clinical benefits to physicians, patients or payors to justify a higher price compared to generic products. In many
cases, insurers or other third-party payors, particularly Medicare, encourage the use of generic products. Given that we are
developing products based on FDA-approved therapeutic agents, our products and product candidates, if approved, will
face competition from generic and branded versions of existing drugs based on the same active pharmaceutical ingredients
that are administered in a different manner, typically through eye drops or intravitreal injections.
Because the active pharmaceutical ingredients in our products and product candidates, other than those developed
under the Regeneron collaboration, are available on a generic basis, or are soon to be available on a generic basis,
competitors will be able to offer and sell products with the same active pharmaceutical ingredient as our products so long
as these competitors do not infringe the patents that we license. For example, our licensed patents related to our
intracanalicular insert products and product candidates largely relate to the hydrogel composition of the intracanalicular
inserts and certain drug-release features of the inserts. As such, if a third party were able to design around the formulation
and process patents that we license and create a different formulation using a different production process not covered by
our licensed patents or patent applications, we would likely be unable to prevent that third party from manufacturing and
marketing its product.
Icon Biosciences, Inc. received FDA approval of DEXYCU in February 2018. DEXYCU is an injection of
dexamethasone into the anterior chamber of the eye to treat inflammation associated with cataract surgery. Other
companies have also advanced into Phase 3 clinical development biodegradable, programmed-release drug delivery
product candidates that could compete with our intracanalicular insert products and product candidates. ReSure Sealant is
the first and only surgical sealant approved as a device for ophthalmic use in the United States, but will compete with
sutures as an alternative method for closing ophthalmic wounds. Multiple companies, including our collaborator
Regeneron, are exploring in early-stage development alternative means to deliver anti-VEGF and TKI products in an
extended-delivery fashion to the back of the eye.
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 our
products. 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.
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.
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DEXTENZA, ReSure Sealant and any product candidates for which we obtain marketing approval 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 DEXTENZA, ReSure Sealant or any 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 and device 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 DEXTENZA,
ReSure Sealant 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, DEXTENZA, ReSure Sealant or 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
DEXTENZA, ReSure Sealant or any product candidates for which we obtain marketing approval.
There may be significant delays in obtaining coverage and reimbursement for newly approved drugs and devices,
and coverage may be more limited than the indications for which the drug is approved by the FDA or similar regulatory
authorities outside the United States. 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 United States. 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 FDA-
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 and device
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 or product candidate to other available
therapies. Adverse pricing limitations may hinder our ability to recoup our investment in one or more products or product
candidates, even if our product candidates obtain marketing approval.
DEXTENZA, ReSure Sealant or any product candidate for which we obtain marketing approval in the United States
or in other countries may not be considered medically reasonable and necessary for a specific indication, may not be
considered cost-effective by third-party payors, coverage and an adequate level of reimbursement may not be available,
and reimbursement policies of third-party payors may adversely affect our ability to sell our products and product
candidates profitably. ReSure Sealant is not separately reimbursed when used as part of a cataract surgery procedure,
which could limit the degree of market acceptance of this product by surgeons. DEXTENZA is currently
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considered a post-surgical product, in the same fashion as eye drops. However, if DEXTENZA were instead categorized
as an inter-operative product, it would not be subject to separate reimbursement in ambulatory surgical centers and hospital
out-patient departments, which could likewise limit its market acceptance. DEXTENZA is currently scheduled to lose
transitional pass-through status in July 2022. If pass-through status were to lapse, DEXTENZA would no longer be
reimbursed separately from the ophthalmic surgery and our ability to generate revenues from the sales of DEXTENZA to
ambulatory surgical centers and hospital out-patient departments for the treatment of post-surgical ocular inflammation and
pain would be adversely affected.
A specific and permanent J-Code for ophthalmic inserts containing dexamethasone including DEXTENZA is in
effect. Separately, a CPT procedure code has been established for the administration of drug-eluting intracanalicular inserts
to facilitate reimbursement for physicians for the procedure of inserting DEXTENZA into the canaliculus. There are no
assurances that we will be successful in maintaining reimbursement for DEXTENZA or of obtaining or maintaining
reimbursement for any products or product candidates for which we might receive marketing approval in the future.
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 our product candidates that we develop in
human clinical trials. We face an even greater risk for any products we develop and commercially sell, including
DEXTENZA and ReSure Sealant. 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.
We currently hold $10.0 million in U.S. product liability insurance coverage in the aggregate, with a per incident
limit of $10.0 million and approximately $15.0 million in product liability insurance in another jurisdiction in which we
operate, with a per incident liability limit of approximately $15.0 million. These policies may not be adequate to cover all
liabilities that we may incur. We will need to increase our insurance coverage as we expand our clinical trials and our sales
of DEXTENZA, ReSure Sealant and any product candidates for which we obtain marketing approval.
We will need to further increase our insurance coverage if we commence commercialization of any of our product
candidates for which we obtain 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 will depend heavily on our collaboration with Regeneron for the success of our extended-delivery hydrogel
formulation in combination with Regeneron’s large molecule VEGF-targeting compounds. If Regeneron does not
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exercise its option, terminates our collaboration agreement or is unable to meet its contractual obligations, it could
negatively impact our business.
In October 2016, we entered into a strategic collaboration, option and license agreement with Regeneron for the
development and potential commercialization of products containing our extended-delivery hydrogel formulation in
combination with Regeneron’s large molecule VEGF-targeting compounds. We and Regeneron amended this agreement in
May 2020 to, among other things, transition joint efforts under the collaboration to the research and development of an
extended-delivery formulation of aflibercept to be delivered to the suprachoroidal space. We refer to the collaboration,
option and license agreement, as amended to date, as the Regeneron Collaboration Agreement.
Our ability to generate revenues from the Regeneron Collaboration Agreement will depend on our and Regeneron’s
abilities to successfully perform the functions assigned to each of us under it. We did not receive any upfront payment
under the Regeneron Collaboration Agreement. Regeneron has agreed to pay personnel and material costs for specified
preclinical development activities under the collaboration, and Regeneron has an option to enter into an exclusive,
worldwide license, with the right to sublicense, under our intellectual property to develop and commercialize products
containing our extended-delivery hydrogel formulation in combination with Regeneron’s large molecule VEGF-targeting
compounds. Regeneron has agreed to pay us $10 million upon exercise of the option. As amended, the option is now
exclusive until May 8, 2022, twenty-four months from the effective date of the amendment. We are also entitled to receive
under the terms of the Regeneron Collaboration Agreement specified development, regulatory and sales milestone
payments, as well as royalty payments.
If Regeneron exercises the option, the Regeneron Collaboration Agreement will expire on a licensed product-by-
licensed product and country-by-country basis upon the expiration of the later of 10 years from the date of first commercial
sale in such country or the expiration of all patent rights covering the licensed product in such country. Regeneron may
terminate the Regeneron Collaboration Agreement at any time after exercise of the option upon 60 days’ prior written
notice. Either party may, subject to a cure period, terminate the Regeneron Collaboration Agreement in the event of the
other party’s uncured material breach, in addition to other specified termination rights.
If we are unable to achieve the preclinical milestones set forth in the collaboration plan, Regeneron may not exercise
the option, in which case we would not receive the $10 million payment in connection with such option and would have
incurred significant development expenses. Even if Regeneron does exercise its option, we or Regeneron may not be
successful in achieving the necessary preclinical, clinical, regulatory and sales milestones in connection with the
collaboration. Further, if Regeneron were to breach or terminate the Regeneron Collaboration Agreement or if Regeneron
elects not to exercise the option we granted it and not to proceed in the collaboration, we may not be able to obtain, or may
be delayed in obtaining, marketing approvals for intravitreal implant product candidates developed pursuant to the
Regeneron Collaboration Agreement and will not be able to, or may be delayed in our efforts to, successfully
commercialize our intravitreal implant product candidates. We may not be able to seek and obtain a viable, alternative
collaborator to partner with for the development and commercialization of the licensed products on similar terms or at all.
We have entered into collaborations with third parties to develop certain product candidates, and in the future may enter
into collaborations with third parties for the commercialization of DEXTENZA, ReSure Sealant or the development or
commercialization of our product candidates. If our collaborations are not successful, we may not be able to capitalize
on the market potential of these products or product candidates.
We have in the past entered into collaboration agreements with third parties, including our collaborations with
Regeneron and AffaMed, and expect to utilize a variety of types of collaboration, distribution and other marketing
arrangements with third parties to commercialize DEXTENZA, ReSure Sealant, or any of our product candidates for which
we obtain marketing approval in markets outside the United States. We also may enter into arrangements with third parties
to perform these services in the United States if we do not establish our own sales, marketing and distribution capabilities
in the United States for our products and product candidates or if we determine that such third-party arrangements are
otherwise beneficial. We also may seek additional 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. Other than our collaborations with Regeneron and AffaMed, we are not
currently party to any such arrangement. Our ability to generate revenues from
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these arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to
them in these arrangements.
Our collaborations with Regeneron and AffaMed pose, and any future collaborations likely will 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 products or product candidates that
receive marketing approval or may elect not to continue or renew development or commercialization programs
based on results of clinical trials or other studies, changes in the collaborators’ strategic focus or available
funding, or external factors, such as an acquisition, that divert resources or create competing priorities;
● 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 products or product candidates, might lead to additional responsibilities for us with respect
to products or 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
products or product candidates.
Collaboration agreements may not lead to the development or commercialization of products or product candidates
in the most efficient manner, or at all. If any collaborations that we enter into do not result in the successful development
and commercialization of products or if one of our collaborators terminates its agreement with us, we may not receive any
future research funding or milestone or royalty payments under the collaboration. If we do not receive the funding we
expect under these agreements, our development of our products or product candidates could be delayed
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and we may need additional resources to develop our products or product candidates. All of the risks relating to product
development, regulatory approval and commercialization described in this prospectus supplement 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 or 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 other product candidates, we may decide to collaborate with pharmaceutical, biotechnology and
medical device companies for the development and potential commercialization of those product candidates. 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 United States, 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 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.
We have conducted preclinical testing of protein-based anti-VEGF compounds in collaboration with Regeneron to
explore the feasibility of delivering their drugs in combination with our hydrogel. The initial drug selected for preclinical
testing under this collaboration was aflibercept, marketed under the brand name Eylea. We may explore broader
collaborations for the development and potential commercialization of our hydrogel technology in combination with other
large molecules with targets other than VEGF for the treatment of back-of-the-eye diseases and conditions.
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 will 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.
Although the majority of our clinical development is administered and managed by our own employees, we have relied,
and may continue to rely, on third parties for certain aspects of our clinical development, and those third parties may
not perform satisfactorily, including failing to meet deadlines for the completion of such trials.
Our employees have administered and managed most of our clinical development work, including our clinical trials
for ReSure Sealant and our clinical trials for DEXTENZA for the treatment of post-surgical ocular inflammation and pain
following cataract surgery. However, we have relied on third parties, such as CROs, to conduct clinical trials of certain of
our product candidates, including DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis,
and we may continue to do so. If we deem necessary, we may engage third parties, such as CROs, clinical data
management organizations, medical institutions and clinical investigators, to conduct or assist in our clinical trials or other
clinical development work. If we are unable to enter into an agreement with a CRO or other service provider when
required, our product development activities would be delayed.
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Our reliance on third parties for research and development activities reduces our control over these activities but does
not relieve us of our responsibilities. For example, we 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. For example, in May 2020, we disclosed the receipt of interim data
regarding our ongoing Phase 1 clinical trial of OTX-TKI for the potential treatment of wet AMD and other retinal diseases.
In July 2020, however, we received further, and partially contradictory, information from the clinical trial site where certain
patients were being treated. As the clinical trial site had not entered certain data concerning these patients into the clinical
trial database in a timely manner, complete information was not available to or known by us at the time of our prior
disclosures. We are also 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. If we engage third parties and they 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.
Risks Related to Our Intellectual Property
We may be unable to obtain and maintain patent protection for our technology and products, or the scope of the patent
protection obtained may not be sufficiently broad, such that 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 and our licensor’s ability to obtain and maintain patent protection in the
United States and other countries with respect to our proprietary technology and products. We and our licensor have
sought to protect our proprietary position by filing patent applications in the United States and abroad related to our novel
technologies, products and product candidates. Some of our licensed patents that we believe are integral to our hydrogel
technology platform have terms that extend through at least 2024. However, other broader patents within our patent
portfolio have already expired. Given the amount of time required for the development, testing and regulatory review of
new product candidates, patents protecting our candidates might expire before or shortly after such candidates are
commercialized. As a result, our patent portfolio would be less effective in excluding others from commercializing
products similar or identical to ours. The patent prosecution process is expensive and time-consuming, and we may not
have filed or prosecuted and 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.
In some circumstances, we do not have the right to control the preparation, filing and prosecution of patent
applications, or to enforce or maintain the patents, covering technology that we license from third parties. In particular, the
license agreement that we have entered into with Incept LLC, or Incept, an intellectual property holding company, which
covers a significant portion of the patent rights and the technology for ReSure Sealant and our product candidates, provides
that, with limited exceptions, Incept has sole control and responsibility for ongoing prosecution for certain patents
covered by the license agreement. In addition, although we have a right under the Incept license to bring suit against third
parties who infringe such licensed patents in our fields, other Incept licensees may also have the right to enforce these
patents in their own respective fields without our oversight or control. Those other licensees may choose to enforce our
licensed patents in a way that harms our interest, for example, by advocating for claim interpretations or agreeing on
invalidity positions that conflict with our positions or our interest. For example, three of our licensed patents related to
ReSure Sealant were invalidated and rendered unenforceable following their assertion by Integra LifeSciences Holdings
Corporation, another licensee of Incept. We also have no right to control the defense of such licensed patents if their
validity or scope is challenged before the U.S. Patent and Trademark Office, or USPTO, European Patent Office, or other
patent office or tribunal. Instead, we would essentially rely on our licensor to defend such challenges, and it may not do so
in a way that would best protect our interests. Therefore, certain of our licensed patents and applications may not be
prosecuted, enforced, defended or maintained in a manner consistent with the best interests of our business. If Incept fails
to prosecute, enforce or maintain such patents, or loses rights to those patents, our licensed patent portfolio may be reduced
or eliminated.
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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 patent rights, including our licensed patent rights, are
highly uncertain. Our and our licensor’s 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 United States. For example, unlike patent law in the United States, European patent law precludes the
patentability of methods of treatment of the human body and imposes substantial restrictions on the scope of claims it will
grant if broader than specifically disclosed embodiments. Moreover, we have no patent protection and likely will never
obtain patent protection for ReSure Sealant outside the United States and Canada. We have only three issued patents
outside of the United States that cover all three intracanalicular insert products and product candidates. We have three
licensed patent families in Europe and certain other parts of the world for our intravitreal drug delivery product candidates,
but only one patent issuance to date outside of the United States. Patents might not be issued and we may never obtain any
patent protection or may only obtain substantially limited patent protection outside of the United States with respect to our
products.
Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications
in the United States 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 licensor were the first to make the inventions claimed in
our licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of
such inventions. Databases for patents and publications, and methods for searching them, are inherently limited so it is not
practical to review and know the full scope of all issued and pending patent applications. As a result, the issuance, scope,
validity, enforceability and commercial value of our licensed patent rights are 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 United States 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. The Leahy-Smith America Invents Act, or the Leahy-
Smith Act, includes a number of significant changes to United States patent law. These include provisions that affect the
way patent applications are prosecuted and may also affect patent litigation. The USPTO 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. The first to file provisions limit the rights of an inventor to patent an invention if not the first to file an application
for patenting that invention, even if such invention was the first invention. 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. For example, the Leahy-Smith Act provides a new administrative tribunal known as the
Patent Trial and Appeals Board, or PTAB, that provides a venue for companies to challenge the validity of competitor
patents at a cost that is much lower than district court litigation and on timelines that are much faster. Although it is not
clear what, if any, long term impact the PTAB proceedings will have on the operation of our business, the initial results of
patent challenge proceedings before the PTAB since its inception in 2013 have resulted in the invalidation of many U.S.
patent claims. The availability of the PTAB as a lower-cost, faster and potentially more potent tribunal for challenging
patents could therefore increase the likelihood that our own licensed patents will be challenged, thereby increasing the
uncertainties and costs of maintaining and enforcing them. Moreover, if such challenges occur, as indicated above, we
have no right to control the defense. Instead, we would essentially rely on our licensor to consider our suggestions and to
defend such challenges, with the possibility that it may not do so in a way that best protects our interests.
We may be subject to a third-party preissuance submission of prior art to the USPTO, or become involved in other
contested proceedings such as 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
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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 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 products.
In the United States, the FDA does not prohibit physicians from prescribing an approved product for uses that are not
described in the product’s labeling. Although use of a product directed by off-label prescriptions may infringe our method-
of-treatment patents, the practice is common across medical specialties, particularly in the United States, and such
infringement is difficult to detect, prevent or prosecute. In addition, patents that cover methods of use for a medical device
cannot be enforced against the party that uses the device, but rather only against the party that makes them. Such indirect
enforcement is more difficult to achieve.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our licensed
patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in
loss of exclusivity 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 patent portfolio may not provide us with sufficient rights to
exclude others from commercializing products similar or identical to ours.
Because the active pharmaceutical ingredients in our products and product candidates other than those being
developed pursuant to the Regeneron Collaboration Agreement are available on a generic basis, or are soon to be available
on a generic basis, competitors will be able to offer and sell products with the same active pharmaceutical ingredient as our
products so long as these competitors do not infringe our patents or any patents that we license. These patents largely
relate to the hydrogel composition of our intracanalicular inserts and the drug-release design scheme of our inserts. As
such, if a third party were able to design around the formulation and process patents that we license and create a different
formulation using a different production process not covered by our patents or patent applications, we would likely be
unable to prevent that third party from manufacturing and marketing its product.
If we are not able to obtain patent term extensions in the United States under the Hatch-Waxman Act and in foreign
countries under similar legislation, thereby potentially extending the term of our marketing exclusivity for our product
and product candidates, our business may be impaired.
Depending upon the timing, duration and specifics of FDA marketing approval of our product candidates, one of the
U.S. patents covering each of such product candidates or the use thereof may be eligible for up to five years of patent term
restoration under the Hatch-Waxman Act. The Hatch-Waxman Act allows a maximum of one patent to be extended per
FDA-approved product. Patent term extension also may be available in certain foreign countries upon regulatory approval
of our product candidates. Nevertheless, we may not be granted patent term extension either in the United States or in any
foreign country because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of
relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the term of extension, as well as the
scope of patent protection during any such extension, afforded by the governmental authority could be less than we
request.
Further, our license from Incept does not provide us with the right to control decisions by Incept or its other licensees
on Orange Book listings or patent term extension decisions under the Hatch-Waxman Act. Thus, if one of our important
licensed patents is eligible for a patent term extension under the Hatch-Waxman Act, and it covers a product of another
Incept licensee in addition to our own product candidate, we may not be able to obtain that extension if the other licensee
seeks and obtains that extension first.
If we are unable to obtain patent term extension or restoration, or the term of any such extension is less than we
request, the period during which we will have the right to exclusively market our product may be shortened and our
competitors may obtain approval of competing products following our patent expiration sooner, and our revenue could be
reduced, possibly materially.
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We may become involved in lawsuits to protect or enforce our licensed patents or other intellectual property, which
could be expensive, time-consuming and unsuccessful.
Competitors may infringe our licensed patents or other intellectual property. As a result, to counter infringement or
unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. Under the
terms of our license agreement with Incept, we have the right to initiate suit against third parties who we believe infringe
on the patents subject to the license. 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 we have rights to 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 to develop, manufacture, market and sell our products and product
candidates and use our proprietary technologies without infringing the proprietary rights of third parties. There is
considerable intellectual property litigation in the biotechnology, medical device, and pharmaceutical industries. We may
become party to, or threatened with, infringement litigation claims regarding our products and technology, including claims
from competitors or from non-practicing entities that have no relevant product revenue and against whom our own patent
portfolio may have no deterrent effect. Moreover, we may become party to future adversarial proceedings or litigation
regarding our patent portfolio or the patents of third parties. Such proceedings could also include contested post-grant
proceedings such as oppositions, inter partes review, reexamination, interference or derivation proceedings before the
USPTO or foreign patent offices. The legal threshold for initiating litigation or contested proceedings is low, so that even
lawsuits or proceedings with a low probability of success might be initiated and require significant resources to
defend. Litigation and contested proceedings can also be expensive and time-consuming, and our adversaries in these
proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or
our licensor can. The risks of being involved in such litigation and proceedings may increase as our products or 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 products or product candidates and their
uses, or we may incorrectly determine that a patent is invalid or does not cover a particular product or product
candidate. Thus, we do not know with certainty that DEXTENZA, ReSure Sealant or any of our product candidates, or our
commercialization thereof, does not and will not infringe or otherwise violate any third party’s intellectual property.
We have been made aware by a third party of three patents relating to intracanalicular inserts that may relate to, and
potentially could be asserted against, our intracanalicular insert product and product candidates, including DEXTENZA.
We believe that DEXTENZA does not infringe the claims of one of more of these patents. We also believe that such
claims, if and to the extent they were asserted against our product candidates, would be subject to a claim of invalidity. We
initiated legal proceedings against one of these patents and administrative proceedings against the other two patents in
order to show that DEXTENZA does not infringe the claims of these patents or that these patents are invalid. We have
settled the legal proceedings related to one of these patents. The USPTO decided to proceed with the administrative
proceeding related to one of the patents while declining to do so for the other. In June 2020, the PTAB, after an inter
partes review, determined that we had proven by a preponderance of the evidence that all claims of such patent at issue
held by such third party were invalid; the third party has appealed this decision. We continue to believe that DEXTENZA
does not infringe the claims of the remaining patent and that, if and to the extent it were asserted against DEXTENZA,
such patent would be subject to a claim of invalidity. We have become aware that the USPTO has recently issued a patent
filed by this third party related to intracanalicular inserts containing dexamethasone. If this patent were asserted against
DEXTENZA or other of our product candidates, we believe such patent would be non-infringed and subject to a claim of
invalidity.
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
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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 damages and attorneys’ fees if we are found to have willfully infringed a
patent and could be forced to indemnify our customers or collaborators. A finding of infringement could also result in an
injunction that prevents us from commercializing our products or product candidates or forces us to cease some of our
business operations. In addition, we may be forced to redesign our products or product candidates, seek new regulatory
approvals and indemnify third parties pursuant to contractual agreements. 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.
Our license agreement with Incept, under which we license a significant portion of our patent rights and the
technology for DEXTENZA, ReSure Sealant and our product candidates, imposes royalty and other financial obligations
and other substantial performance obligations on us. We also may 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. 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 our product. 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.
Under the terms of our license agreement with Incept, we have agreed to assign to Incept our rights in certain patent
applications filed at any time in any country for which one or more inventors are under an obligation of assignment to
us. These assigned patent applications and any resulting patents are included within the specified patents owned or
controlled by Incept to which we receive a license under the agreement. Incept has retained rights to practice the patents
and technology licensed to us under the agreement for all purposes other than for researching, designing, developing,
manufacturing and commercializing products that are delivered to or around the human eye for diagnostic, therapeutic or
prophylactic purposes relating to ophthalmic diseases or conditions. As a result, termination of our agreement with Incept,
based on our failure to comply with this or any other obligation under the agreement, would cause us to lose a significant
portion of our rights to important intellectual property or technology upon which our business depends. Additionally, the
field limit of the license and the requirement that we assign to Incept our rights in certain patent applications may restrict
our ability to use certain of our licensed rights to expand our business outside of the specified fields. If we determine to
pursue a strategy of expanding the use of the hydrogel technology outside of the specified fields, we would need to
negotiate and enter into an amendment to our existing license agreement with Incept or a new license agreement with
Incept covering one or more additional such fields of use or utilize technologies that do not infringe on such licensed
rights. We may not be able to obtain any such required amendment or new license or to invent or otherwise access other
technology on commercially reasonable terms or at all.
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.
Many of our employees were previously employed at universities or other biotechnology, medical device or
pharmaceutical companies, including our competitors or potential competitors. 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
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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.
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 our technology, products 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
United States 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 and Marketing of Our Product Candidates and Other Legal Compliance
Matters
Even if we complete the necessary preclinical studies and clinical trials, the regulatory approval process is expensive,
time-consuming and uncertain and may prevent us from obtaining approvals for the commercialization of some or all
of our product candidates. If we or any current or future collaborator of ours is not able to obtain, or if there are delays
in obtaining, required regulatory approvals, we or they will not be able to commercialize our product candidates, and
our ability to generate revenue will be materially impaired.
The activities associated with the development and commercialization of our products and product candidates,
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 United
States and by the EMA and similar regulatory authorities outside the United States. Failure to obtain marketing approval
for a product candidate will prevent us from commercializing the product candidate. We have only received approval to
market DEXTENZA and ReSure Sealant in the United States, and have not received approval to market any of our product
candidates or to market DEXTENZA or ReSure Sealant in any jurisdiction outside the United States. Further, we have only
received approval to market DEXTENZA for the treatment of ocular inflammation and pain following ophthalmic surgery
and have not received approval to market DEXTENZA for any other indications. We may determine to seek a CE
Certificate of Conformity, which demonstrates compliance with relevant requirements and
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provides approval to commercialize ReSure Sealant in the European Union. If we are unable to obtain a CE Certificate of
Conformity for DEXTENZA, ReSure Sealant, or any of our product candidates for which we seek European regulatory
approval, we will be prohibited from commercializing such product or products in the European Union and other places
which require the CE Certificate of Conformity. In such a case, the potential market to commercialize our products may be
significantly smaller than we currently estimate.
The process of obtaining marketing approvals, both in the United States 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 and purity. 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, the EMA or other regulatory authorities may determine that our product
candidates are not safe or effective, are only moderately effective or have undesirable or unintended side effects, toxicities
or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use. In addition,
while we have had general discussions with the FDA concerning the design of some of our clinical trials, we have not
discussed with the FDA the specifics of the regulatory pathways for our product candidates.
As part of its review of the NDA for DEXTENZA for post-surgical ocular pain, the FDA completed inspections of
three sites from our two completed Phase 3 clinical trials for compliance with the study protocol and Good Clinical
Practices. During the first of these inspections, the FDA identified storage temperature excursions for the investigational
product that is labeled to be stored in a refrigerated condition between two degrees and eight degrees Celsius. We also had
previously addressed a minor temperature deviation report during the conduct of the Phase 3 trials and communicated a
response to the trial sites. In addition, while investigating the report stemming from the FDA inspection, several more
noteworthy temperature excursions were found to have occurred that had not been fully reported. Because of the limited
nature of the temperature excursions and historical product testing, including testing on product stored at elevated
temperatures, we believe it is unlikely that drug product performance was significantly impacted. We have also
implemented a corrective action plan to address clinical compliance and prevent recurrence in other clinical studies.
The FDA also completed two inspections of our manufacturing facility in connection with our NDA for
DEXTENZA for the treatment of post-surgical ocular pain. After each inspection, we received a Form 483 from the FDA
pertaining to deficiencies in our manufacturing processes identified during such inspection. After we responded to the
issues which had been identified with corrective action plans, we subsequently received CRLs from the FDA. We may be
subject to similar inspections in the future for DEXTENZA or for other product candidates for which we seek FDA
approval. For example, in February 2021, the FDA requested information and records from us relating to our DEXTENZA
commercial manufacturing operations and quality systems pursuant to Form 4003 in advance or in lieu of a drug
inspection. If we are unable to address any identified issues successfully or if the FDA determines that the actions we take
to remediate any identified issues to be inadequate, our ability to commercialize any products could be limited, which
could adversely affect our ability to achieve or sustain profitability.
Changes in marketing approval policies during the development period, changes in or the enactment of additional
statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the
approval or rejection of an application. The FDA, the EMA and regulatory authorities in other countries have substantial
discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for
approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data
obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any
marketing approval we or any current or future collaborator of ours ultimately obtains may be limited or subject to
restrictions or post-approval commitments that render the approved product not commercially viable.
Finally, disruptions at the FDA and other agencies may prolong the time necessary for new drugs to be reviewed
and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last
several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had
to furlough critical employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly
impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material
adverse effect on our business.
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Accordingly, if we or any current or future collaborator of ours experiences delays in obtaining approval or if we or
they fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed
and our ability to generate revenues will be materially impaired.
Failure to obtain marketing approval in foreign jurisdictions would prevent our products or product candidates from
being marketed abroad.
In order to market and sell DEXTENZA, ReSure Sealant or our product candidates in the European Union and many
other jurisdictions, including certain jurisdictions covered by our AffaMed collaboration, we or our third-party
collaborators must obtain separate marketing 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 United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many
countries outside the United States, it is required that the product be approved for reimbursement before the product can be
sold in that country. We or our collaborators may not obtain approvals from regulatory authorities outside the United States
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 United States does not ensure approval by regulatory
authorities in other countries or jurisdictions or by the FDA. However, a failure or delay in obtaining regulatory approval
in one country may have a negative effect on the regulatory approval process in other countries. We may not be able to file
for marketing approvals and may not receive necessary approvals to commercialize our products in any market.
Additionally, we could face heightened risks with respect to seeking marketing approval in the United Kingdom as a
result of the recent withdrawal of the United Kingdom from the European Union, commonly referred to as Brexit. Pursuant
to the formal withdrawal arrangements agreed between the United Kingdom and the European Union, the United Kingdom
withdrew from the European Union, effective December 31, 2020. On December 24, 2020, the United Kingdom and
European Union entered into a Trade and Cooperation Agreement. The agreement sets out certain procedures for approval
and recognition of medical products in each jurisdiction. Since the regulatory framework for pharmaceutical products in
the United Kingdom covering the quality, safety, and efficacy of pharmaceutical products, clinical trials, marketing
authorization, commercial sales, and distribution of pharmaceutical products is derived from European Union directives
and regulations, Brexit could materially impact the future regulatory regime that applies to products and the approval of
product candidates in the United Kingdom. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a
result of Brexit or otherwise, would prevent us from commercializing any product candidates in the United Kingdom
and/or the European Union and restrict our ability to generate revenue and achieve and sustain profitability. If any of these
outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or
European Union for any product candidates, which could significantly and materially harm our business.
Even if we, or any current or future collaborators, obtain marketing approvals for our product candidates, the terms of
approvals, ongoing regulations and post-marketing restrictions for our products may limit how we 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 current or future collaborators, must therefore comply with
requirements concerning advertising and promotion for any of our products for which we or our collaborators obtain
marketing approval. Promotional communications with respect to drug products, biologics, and medical devices 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 any of our product candidates receives marketing approval, the accompanying label may limit
the approved use of our product, which could limit sales of the product.
The FDA required two post-approval studies as a condition for approval of our premarket approval application for
ReSure Sealant. The first post-approval study, identified as the Clinical PAS, was to enroll at least 598 patients to confirm
that ReSure Sealant can be used safely by physicians in a standard cataract surgery practice and to confirm the incidence of
the most prevalent adverse ocular events identified in our pivotal study of ReSure Sealant in eyes treated with ReSure
Sealant. We submitted the final study report of the Clinical PAS to the FDA in June 2016, and the FDA has confirmed the
Clinical PAS has been completed. The second post-approval study, identified as the Device Exposure Registry Study, is
intended to link to the Medicare database to ascertain if patients are diagnosed or treated for
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endophthalmitis within 30 days following cataract surgery and application of ReSure Sealant. The Device Exposure
Registry Study is required to include at least 4,857 patients. In December 2015, CMS denied our application for a tracking
or research code for ReSure Sealant commercial use. In July 2016, the FDA approved the Device Exposure Registry Study
protocol. We are required to provide periodic reports to the FDA on the progress of this post-approval study until it is
completed. We initiated enrollment in this study in December 2016 and submitted our first progress report to FDA in
January 2017. Due to difficulties in establishing an acceptable way to link ReSure Sealant to the Medicare database and
lack of investigator interest, we have been unable to enroll trial sites and patients, collect patient data and report study data
to the FDA. On October 18, 2018, we received a warning letter from the FDA, dated October 17, 2018, relating to our
compliance with data collection and information reporting obligations in this study. We appealed the warning letter from
the FDA. In December 2018, the FDA rejected our appeal. A teleconference was held with the FDA in January 2019
resulting in tentative agreement on a proposed retrospective registry study of endophthalmitis rates to satisfy the Device
Exposure Registry Study requirements. In December 2019, we submitted the protocol for the agreed-upon retrospective
study and the prospective study outline, as required per the terms of the warning letter. We received feedback from the
FDA in February 2020 and responded to the FDA in March 2020. In May 2020, the FDA approved the protocol.
Subsequently, we received a close-out letter from the FDA dated September 2, 2020. We completed the retrospective study
in accordance with our agreement with the FDA and submitted the final study report for the Device Exposure Registry
Study to the FDA in January 2021. Following review of the results from these post-approval studies, any concerns with
respect to endophthalmitis that we are unable to address due to the lack of completion of the study would negatively affect
our ability to commercialize ReSure Sealant. Failure by us to conduct the Device Exposure Registry Study to the FDA’s
satisfaction may result in withdrawal of the FDA’s approval of ReSure Sealant or other regulatory action.
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
applicable to drug and biologic manufacturers or quality assurance standards applicable to medical device manufacturers,
which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of
records and documentation and reporting requirements. We, any contract manufacturers we may engage in the future, our
current or 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.
Accordingly, assuming we, or any current or future collaborators, receive marketing approval for one or more of our
product candidates, we, and any current or future collaborators, and our and their contract manufacturers will continue to
expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product
surveillance and quality control. If we, and any current or future collaborators, are not able to comply with post-approval
regulatory requirements, we, and any current or future collaborators, could have the marketing approvals for our products
withdrawn by regulatory authorities and our, or any current or future collaborators’, ability to market any products could be
limited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of compliance with
post-approval regulations may have a negative effect on our operating results and financial condition.
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 United States Federal Food, Drug, and Cosmetic Act, or the FDCA, relating to the promotion or
manufacturing of drug products, biologics or medical devices may lead to investigations by the FDA, Department of
Justice, or DOJ, and state attorneys general alleging violations of the FDCA, 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 of a product;
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● requirements to conduct post-marketing studies or clinical trials;
● warning letters or untitled letters;
● withdrawal of the products from the market;
● refusal to approve pending applications or supplements to approved applications that we submit;
● recall of products;
● 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 detention;
● injunctions or the imposition of civil or criminal penalties;
● damage to relationships with any potential collaborators;
● unfavorable press coverage and damage to our reputation; or
● litigation involving patients using our products.
Non-compliance with European Union requirements regarding safety monitoring or pharmacovigilance, and with
requirements related to the development of products for the pediatric population, can also result in significant financial
penalties. Similarly, failure to comply with the European Union’s requirements regarding the protection of personal
information can also lead to significant penalties and sanctions.
Our relationships with healthcare providers, physicians and third-party payors will be subject, directly or indirectly, to
applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which, in the event of a violation,
could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits
and future earnings.
Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and
prescription and use of DEXTENZA, ReSure Sealant and any product candidates for which we obtain marketing
approval. Our future arrangements with healthcare providers, physicians and third-party payors 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. Restrictions under applicable federal and state healthcare laws and regulations include the following:
● the federal Anti-Kickback Statute 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 or
arranging of, any good or service, for which payment may be made under a federal healthcare program such as
Medicare and Medicaid;
● the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui
tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be
presented, false or fraudulent claims for payment by a federal healthcare program or making a false statement or
record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to
the federal government, with potential liability including mandatory treble damages and significant per-claim
penalties, currently set at $5,500 to $11,000 per false claim;
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● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, 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 and its
implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to
safeguarding the privacy, security and transmission of individually identifiable health information;
● the federal Physician Payments Sunshine Act requires applicable manufacturers of covered products to report
payments and other transfers of value to physicians and teaching hospitals, with data collection beginning in
August 2013; and
● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and
transparency statutes, may apply to sales or marketing arrangements and claims involving healthcare items or
services reimbursed by non-governmental third-party payors, including private insurers.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require
product manufacturers to report information related to payments and other transfers of value to physicians and other
healthcare providers or marketing expenditures. State and foreign laws also govern the privacy and security of health
information in some circumstances, many of which differ from each other in significant ways and often are not preempted
by HIPAA, thus complicating compliance efforts.
If our operations or the operations of our present and future collaborators are found to be in violation of any of the
laws described above or any governmental regulations that apply to us or them, we or they may be subject to penalties,
including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties,
damages, fines, curtailment or restructuring of our operations could adversely affect our or their financial results. We are
developing and implementing a corporate compliance program designed to ensure that we will market and sell any future
products that we successfully develop from our product candidates in compliance with all applicable laws and regulations,
but we cannot guarantee that this program will protect us from governmental investigations or other actions or lawsuits
stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us and
we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our
business, including the imposition of significant fines or other sanctions.
Efforts to ensure that our business with third parties will comply with applicable healthcare laws and regulations will
involve substantial costs. For example, we are engaged in an ongoing effort to improve our healthcare compliance program
and establish a more robust compliance infrastructure. We may fail to establish appropriate compliance measures, and even
with a stronger program in place, 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, damages,
fines, imprisonment, exclusion of products from 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, they may be subject to criminal,
civil or administrative sanctions, including exclusions from government funded healthcare programs.
Current and future legislation or executive actions may increase the difficulty and cost for us and any current or future
collaborators to obtain marketing approval of and commercialize our products or product candidates and affect the
prices we, or they, may obtain.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes
and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval
of our drug candidates, restrict or regulate post-approval activities and affect our ability, or the ability of any future
collaborators, to profitably sell any drugs for which we, or they, obtain marketing approval. We expect that current laws, as
well as other healthcare reform measures that may be adopted in the future, may result in more rigorous
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coverage criteria and in additional downward pressure on the price that we, or any future collaborators, may receive for any
approved drugs.
Among the provisions of the Patient Protection and Affordable Care Act, or ACA, of potential importance to our
business and our drug candidates are the following:
● an annual, non-deductible 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;
● expansion of healthcare fraud and abuse laws, including the civil False Claims Act and the federal Anti-
Kickback Statute, new government investigative powers and enhanced penalties for noncompliance;
● a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-
of-sale discounts off negotiated prices to eligible beneficiaries during their coverage gap period, as a condition
for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
● extension of manufacturers’ Medicaid rebate liability;
● expansion of eligibility criteria for Medicaid programs;
● expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
● new requirements to report certain financial arrangements with physicians and teaching hospitals;
● a new requirement to annually report drug samples that manufacturers and distributors provide to physicians;
and
● a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative
clinical effectiveness research, along with funding for such research.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. In August 2011,
the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select
Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the
years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to
several government programs. These changes included aggregate reductions to Medicare payments to providers of up to
2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2029 unless additional
Congressional action is taken. The Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, suspended the
2% Medicare sequester from May 1, 2020 through December 31, 2020, and extended the sequester by one year, through
2030. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several 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 and otherwise affect
the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency
with which any such product candidate is prescribed or used.
Since enactment of the ACA, there have been, and continue to be, numerous legal challenges and Congressional
actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act of 2017, or
the TCJA, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to
carry a minimal level of health insurance, became effective in 2019. Further, on December 14, 2018, a U.S. District Court
judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable
feature of the ACA, and therefore because the mandate was repealed as part of the Tax Cuts and Jobs Act, the remaining
provisions of the ACA are invalid as well. On December 18, 2019, the Court of Appeals for the Fifth Circuit affirmed the
lower court’s ruling that the individual mandate portion of the ACA is unconstitutional and it
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remanded the case to the district court for reconsideration of the severability question and additional analysis of the
provisions of the ACA. Thereafter, the U.S. Supreme Court agreed to hear this case. Oral argument in the case took place
on November 10, 2020. On February 10, 2021, the Biden Administration withdrew the federal government’s support for
overturning the ACA. A ruling by the U.S. Supreme Court is expected sometime this year. Litigation and legislation over
the ACA are likely to continue, with unpredictable and uncertain results.
In addition, the CMS has proposed regulations that would give states greater flexibility in setting benchmarks for
insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits
required under the ACA for plans sold through such marketplaces. On November 30, 2018, CMS announced a proposed
rule that would amend the Medicare Advantage and Medicare Part D prescription drug benefit regulations to reduce out of
pocket costs for plan enrollees and allow Medicare plans to negotiate lower rates for certain drugs. Among other things,
the proposed rule changes would allow Medicare Advantage plans to use pre authorization, or PA, and step therapy, or ST,
for six protected classes of drugs, with certain exceptions, permit plans to implement PA and ST in Medicare Part B drugs;
and change the definition of “negotiated prices” while adding a definition of “price concession” in the regulations. It is
unclear whether these proposed changes we be accepted, and if so, what effect such changes will have on our business.
Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.
The Trump Administration also took executive actions to undermine or delay implementation of the ACA, including
directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or
delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states,
individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On January 28,
2021, however, President Biden issued a new Executive Order which directs federal agencies to reconsider rules and other
policies that limit Americans’ access to health care, and consider actions that will protect and strengthen that access.
Under this Executive Order, federal agencies are directed to re-examine: policies that undermine protections for people
with pre-existing conditions, including complications related to COVID-19; demonstrations and waivers under Medicaid
and the ACA that may reduce coverage or undermine the programs, including work requirements; policies that undermine
the Health Insurance Marketplace or other markets for health insurance; policies that make it more difficult to enroll in
Medicaid and the ACA; and policies that reduce affordability of coverage or financial assistance, including for dependents.
This Executive Order also directs the U.S. Department of Health and Human Services to create a special enrollment period
for the Health Insurance Marketplace in response to the COVID-19 pandemic.
The prices of prescription pharmaceuticals in the United States and foreign jurisdictions is subject to considerable
legislative and executive actions and could impact the prices we obtain for our products, if and when licensed.
The prices of prescription pharmaceuticals have also been the subject of considerable discussion in the United States.
To date, there have been several recent U.S. congressional inquiries, as well as proposed and enacted state and federal
legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between
pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program
reimbursement methodologies for products. To those ends, President Trump issued several Executive Orders intended to
lower the costs of prescription drug products. Certain of these Executive Orders are reflected in recently promulgated
regulations, including an interim final rule implementing President Trump’s most favored nation model, but such final rule
is currently subject to a nationwide preliminary injunction. It remains to be seen whether these Executive Orders and
resulting regulations will remain in force during the Biden Administration. Further, on September 24, 2020, the Trump
Administration finalized a rulemaking allowing states or certain other non-federal government entities to submit
importation program proposals to the FDA for review and approval. Applicants are required to demonstrate that their
importation plans pose no additional risk to public health and safety and will result in significant cost savings for
consumers. The FDA has issued draft guidance that would allow manufacturers to import their own FDA-approved drugs
that are authorized for sale in other countries (multi-market approved products).
At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations
designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints,
discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some
cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care
organizations and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical
products and which suppliers will be included in their prescription drug and other health care programs. These measures
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could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that
additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for healthcare products and services, which could result in reduced demand for
our product candidates or additional pricing pressures.
In countries outside of the United States, particularly the countries of the European Union, the pricing of prescription
pharmaceuticals is subject to governmental control. 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 business could be harmed, possibly materially.
Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or
inhibit our ability to collect and process data globally, and the failure to comply with such requirements could subject us
to significant fines and penalties, which may have a material adverse effect on our business, financial condition or
results of operations.
The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of information
worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Globally, virtually every
jurisdiction in which we operate has established its own data security and privacy frameworks with which we must comply.
For example, the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the
European Union, including personal health data, is subject to the EU General Data Protection Regulation, or the GDPR,
which took effect across all member states of the European Economic Area, or EEA, in May 2018. The GDPR is wide-
ranging in scope and imposes numerous requirements on companies that process personal data, including requirements
relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data
relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the
security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when
engaging third-party processors. The GDPR increases our obligations with respect to clinical trials conducted in the EEA
by expanding the definition of personal data to include coded data and requiring changes to informed consent practices and
more detailed notices for clinical trial subjects and investigators. In addition, the GDPR also imposes strict rules on the
transfer of personal data to countries outside the European Union, including the United States and, as a result, increases the
scrutiny that clinical trial sites located in the EEA should apply to transfers of personal data from such sites to countries
that are considered to lack an adequate level of data protection, such as the United States. The GDPR also permits data
protection authorities to require destruction of improperly gathered or used personal information and/or impose substantial
fines for violations of the GDPR, which can be up to four percent of global revenues or 20 million Euros, whichever is
greater, and it also confers a private right of action on data subjects and consumer associations to lodge complaints with
supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the
GDPR. In addition, the GDPR provides that European Union member states may make their own further laws and
regulations limiting the processing of personal data, including genetic, biometric or health data.
Similar actions are either in place or under way in the United States. There are a broad variety of data protection laws
that are applicable to our activities, and a wide range of enforcement agencies at both the state and federal levels that can
review companies for privacy and data security concerns based on general consumer protection laws. The Federal Trade
Commission and state Attorneys General all are aggressive in reviewing privacy and data security protections for
consumers. New laws also are being considered at both the state and federal levels. For example, the California Consumer
Privacy Act, or CCPA—which went into effect on January 1, 2020—is creating similar risks and obligations as those
created by GDPR, though the CCPA does exempt certain information collected as part of a clinical trial subject to the
Federal Policy for the Protection of Human Subjects, known as the Common Rule. Many other states are considering
similar legislation. A broad range of legislative measures also have been introduced at the federal level. Accordingly,
failure to comply with federal and state laws (both those currently in effect and future legislation) regarding privacy and
security of personal information could expose us to fines and penalties under such laws. There also is the threat of
consumer class actions related to these laws and the overall protection of personal data. Even if we are not determined to
have violated these laws, government investigations into these issues typically require the expenditure of significant
resources and generate negative publicity, which could harm our reputation and our business.
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Given the breadth and depth of changes in data protection obligations, preparing for and complying with these
requirements is rigorous and time intensive and requires significant resources and a review of our technologies, systems
and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that process or
transfer personal data collected in the European Union. The GDPR and other changes in laws or regulations associated
with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information from
our clinical trials, could require us to change our business practices and put in place additional compliance mechanisms,
may interrupt or delay our development, regulatory and commercialization activities and increase our cost of doing
business, and could lead to government enforcement actions, private litigation and significant fines and penalties against us
and could have a material adverse effect on our business, financial condition or results of operations.
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 United States and require us to develop and
implement costly compliance programs.
As we expand our operations outside of the United States, such as we have begun to do with our collaboration with
AffaMed, 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 United States 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 United States, 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. Further, the provision of benefits or advantages to physicians to
induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products
is also prohibited in the European Union. The provision of benefits or advantages to physicians is governed by the national
anti-bribery laws of European Union Member States, such as the U.K. Bribery Act 2010. Infringement of these laws could
result in substantial fines and imprisonment.
Payments made to physicians in certain European Union Member States must be publicly disclosed. Moreover,
agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his or
her competent professional organization and/or the regulatory authorities of the individual European Union Member States.
These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the
European Union Member States. Failure to comply with these requirements could result in reputational risk, public
reprimands, administrative penalties, fines or imprisonment.
If we expand our presence outside of the United States, 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 United States, 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.
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Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory
standards and requirements.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include
intentional failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with
manufacturing standards we have established, to comply with federal and state health-care fraud and abuse laws and
regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular,
sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations
intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or
prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs
and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the
course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a
code of business conduct and ethics, but it is not always possible to identify and deter employee misconduct, and the
precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or
losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in
compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in
defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the
imposition of significant fines or other sanctions.
If we, our collaborators or any third-party manufacturers we engage in the future fail to comply with environmental,
health and safety laws and regulations, we could become subject to fines or penalties or incur significant costs.
We, our collaborators and any third-party manufacturers we may engage in the future 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 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.
Although we maintain general liability insurance as well as workers’ compensation insurance to cover us for costs
and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance
may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability
or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or
radioactive materials.
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 any current or future collaborators or 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.
We might not be able to utilize a significant portion of our net operating loss carryforwards and research and
development tax credit carryforwards.
As of December 31, 2020, we had net operating loss, or NOL, carryforwards for federal and state income tax
purposes of $354.7 million and $274.9 million, respectively. The federal and state NOLs generated for annual periods
prior to January 1, 2018 begin to expire in 2026. Our federal NOLs generated for the years ended after December 31, 2018,
which amounted to a total of $229.1 million, can be carried forward indefinitely. As of December 31, 2020, we also had
available research and development tax credit carryforwards for federal and state income tax purposes of $9.2
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million and $5.0 million , respectively, which begin to expire in 2026 and 2025, respectively. These NOL and tax credit
carryforwards could expire unused and be unavailable to offset our future income tax liabilities. As described below under
the heading “Changes in tax laws or in their implementation or interpretation may adversely affect our business and
financial condition,” the Tax Cuts and Jobs Act of 2017, or the 2017 Tax Act, as amended by the CARES Act, includes
changes to U.S. federal tax rates and the rules governing NOL carryforwards that may significantly impact our ability to
utilize our net operating losses, or NOLs, to offset taxable income in the future. Nor is it clear how various states will
respond to the 2017 Tax Act; the Families First Coronavirus Response Act, or FFCR Act; or the CARES Act. In addition,
state NOLs generated in one state cannot be used to offset income generated in another state. Furthermore, the use of NOL
carryforwards may become subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, as
amended, or the Code, and similar state provisions in the event of certain cumulative changes in the ownership interest of
significant shareholders in excess of 50 percent over a three-year period. This could limit the amount of NOL
carryforwards that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual
limitation is determined based on the value of a company immediately prior to the ownership change. We have not
conducted a full study to assess whether a change of control has occurred or whether there have been multiple changes of
control since inception due to the significant complexity and cost associated with such a study. As a result, we are
uncertain as to whether we have completed one or more transactions since our inception which may have resulted in an
ownership change under Section 382 of the Code. In addition, there may be changes in our stock ownership, some of
which are outside of our control, that could result in ownership changes in the future. For these reasons, even if we attain
profitability, we may be unable to use a material portion of our NOLs and other tax attributes.
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 remain highly dependent on the research and development, clinical and business development expertise of our
principal members of our management, scientific and clinical team, including Antony Mattessich, our President and Chief
Executive Officer. Although we have entered into employment agreements with our executive officers, each of them may
terminate their 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.
We have in the past reduced the size of our organization, and we may be required to do so again in the future, which
may cause us to encounter difficulties in managing our business as a result of any such reduction, or attrition that may
occur following such reduction, which could disrupt our operations. In addition, we may not achieve anticipated
benefits and savings from such a reduction.
In November 2019, we reduced our workforce by 55 employees, representing approximately 22% of our workforce.
We completed the restructuring and recorded the restructuring charges in the fourth quarter of 2019. We may in the future
be required to reduce the size of our organization as part of an initiative to reduce expenses and reprioritize our use of
resources.
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Any restructuring and additional measures we might take to reduce costs could divert management attention, yield
attrition beyond our intended reduction if force, reduce employee morale, or cause us to delay, limit, reduce or eliminate
certain product development plans.
We expect to expand our development, regulatory and manufacturing 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 our drug development, clinical, regulatory affairs, manufacturing and our sales and marketing capabilities
to grow as we commercialize DEXTENZA and any product candidates that may receive marketing approval. 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. We relocated our corporate
headquarters to 24 Crosby Drive, Bedford, Massachusetts to accommodate our growth. We are evaluating expanding our
manufacturing operations into 15 Crosby Drive, Bedford, Massachusetts while maintaining our existing operations located
at 36 Crosby Drive, Bedford, Massachusetts. Due to our limited financial resources and our limited experience in
managing 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
Our executive officers, directors and principal stockholders, if they choose to act together, have the ability to control all
matters submitted to stockholders for approval.
Our executive officers, directors and principal stockholders, in the aggregate, beneficially own a large portion of our
capital stock. As a result, if these stockholders were to choose to act together, they would be able to control all matters
submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they
choose to act together, would control the election of directors and approval of any merger, consolidation or sale of all or
substantially all of our assets.
This concentration of voting power may:
● delay, defer or prevent a change in control;
● entrench our management and the board of directors; or
● delay or prevent a merger, consolidation, takeover or other business combination involving us on terms that
other stockholders may desire.
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 certificate of incorporation and our bylaws 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 our
stockholders might otherwise receive a premium for their 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:
● provide for 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;
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● limit the manner in which stockholders can remove directors from our board of directors;
● provide for 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;
● 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 75% of the votes that all our stockholders would be entitled to cast
to amend or repeal specified provisions of our certificate of incorporation or bylaws.
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.
We have recently been subject to legal proceedings related to the decline in our stock price, and we could be subject to
similar legal proceedings in the future, which could distract our management and could result in substantial costs or
large judgments against us.
The market prices of securities of companies in the biotechnology and pharmaceutical industry have been extremely
volatile and have experienced fluctuations that have often been unrelated or disproportionate to the operating performance
of these companies. These fluctuations could adversely affect the market price of our common stock. In the past, securities
class action litigation has often been brought against companies following periods of volatility in the market prices of their
securities.
In July 2017, we experienced a decline in our stock price following our announcement that we had received notice of
the FDA’s determination that it could not approve our NDA for DEXTENZA in its then present form. In 2017 and 2018,
class action lawsuits were filed against us and certain of our current and former executive officers and shareholder
derivative actions were filed against certain of our current and former executive officers, certain of our current and former
board members, and two of our investors and against the company as a nominal defendant. While these legal proceedings
were ultimately resolved in our and/or the applicable defendants’ favor, they were distracting and were both time-
consuming and costly to defend. Around this time, we also received subpoenas from the Securities and Exchange
Commission seeking documents and information concerning DEXTENZA, including related communications with the
FDA and investors; in May 2019, the SEC notified us that it had concluded its investigation.
Due to the volatility in our stock price, we may be the target of similar proceedings in the future. In connection with
such legal proceedings, we could incur substantial costs and such costs and any related settlements or judgments may not
be covered by insurance. We could also suffer an adverse impact on our reputation and a diversion of management’s
attention and resources, which could cause serious harm to our business, operating results and financial condition.
The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for
holders of our common stock.
Our stock price may be volatile. The stock market in general and the market for smaller biopharmaceutical
companies in particular have experienced extreme volatility that has often been unrelated to the operating performance.
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As a result of this volatility, our stockholders may not be able to sell their common stock at or above the price at which
they purchased it. The market price for our common stock may be influenced by many factors, including:
● our success in commercializing DEXTENZA, ReSure Sealant and any product candidates for which we obtain
marketing approval;
● the success of competitive products or technologies;
● results of clinical trials of our product candidates;
● results of clinical trials of product candidates of our competitors;
● regulatory or legal developments in the United States 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 and the efforts of our current and future collaborators to discover, develop, acquire or
in-license additional products, product candidates or technologies for the treatment of ophthalmic diseases or
conditions, 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;
● the ability to secure third-party reimbursement for our products or product candidates;
● changes in the structure of healthcare payment systems;
● market conditions in the pharmaceutical and biotechnology sectors;
● general economic, political and social, industry and market conditions; and
● 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 DEXTENZA or our other product candidates.
These proceedings and other similar litigation, if instituted against us, could cause us to incur substantial costs to defend
such claims and divert management’s attention and resources.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.
Persons who were our stockholders prior to our initial public offering continue to hold a substantial number of shares
of our common stock. If such persons sell, or indicate an intention to sell, substantial amounts of our common stock in the
public market, the trading price of our common stock could decline.
In addition, shares of common stock that are either subject to outstanding options or reserved for future issuance
under our stock incentive plans will become eligible for sale in the public market to the extent permitted by the provisions
of various vesting schedules and Rule 144 and Rule 701 under the Securities Act of 1933, as amended, and, in
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any event, we have filed a registration statement permitting shares of common stock issued on exercise of options to be
freely sold in the public market. 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.
Certain holders of our common stock have rights, subject to specified conditions, to require us to file registration
statements covering their shares or, along with certain holders of shares of our common stock issuable upon exercise of
warrants issued to lenders, to include their shares in registration statements that we may file for ourselves or other
stockholders. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our
common stock.
We are a “smaller reporting company” and the reduced disclosure requirements applicable to such companies may
make our common stock less attractive to investors.
We are a “smaller reporting company,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as
amended. We would cease to be a smaller reporting company if we have a non-affiliate public float in excess of $250
million and annual revenues in excess of $100 million, or a non-affiliate public float in excess of $700 million, determined
on an annual basis. As a smaller reporting company, we are permitted and intend to rely on exemptions from certain
disclosure requirements that are applicable to other public companies that are not smaller reporting companies. These
exemptions include:
● being permitted to provide only two years of audited consolidated financial statements in this Annual Report on
Form 10-K, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” disclosure;
● reduced disclosure obligations regarding executive compensation;
● not being required to furnish a contractual obligations table in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations”; and
● not being required to furnish a stock performance graph in our annual report.
We expect to continue to take advantage of some or all of the available exemptions until we cease to be a smaller
reporting 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.
We incur increased costs as a result of operating as a public company, and our management is now required to devote
substantial time to new compliance initiatives and corporate governance practices.
As a public company, we incur and will continue to incur significant legal, accounting and other expenses that we did
not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer
Protection Act, the listing requirements of The Nasdaq Global Market 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 devote a substantial amount
of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial
compliance costs and will make some activities more time-consuming and costly.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are required to furnish a report by
our management on our internal control over financial reporting. On January 1, 2020, we became subject to the
requirement to include an attestation report on internal control over financial reporting issued by our independent registered
public accounting firm because we were no longer an emerging growth company. Although the SEC has provided smaller
reporting companies relief from this requirement to include an attestation report in March 2020, to maintain compliance
with other provisions of Section 404, we will continue to document and evaluate our internal control over financial
reporting, which is both costly and challenging. In this regard, we will continue to dedicate internal resources, potentially
engage outside consultants and adopt a detailed work plan to assess and document the
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adequacy of 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 neither we nor, if required, our
independent registered public accounting firm will 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 or our independent registered public
accounting firm 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 consolidated 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 our stockholders’ 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, the terms of our Credit Agreement
and 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 our stockholders’ sole source of gain
for the foreseeable future.
General Risk Factors
Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer
security breaches, which could result in a material disruption of our product development programs.
Our internal computer systems and those of our current and any future collaborators, contractors or consultants are
vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication
and electrical failures. While we have not experienced any such material system failure, accident or security breach to date,
if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our
development programs and our business operations, whether due to a loss of our trade secrets or other proprietary
information or other similar disruptions. For example, the loss of clinical trial data from completed or future 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, our competitive position
could be harmed and the further development and commercialization of our products and product candidates could be
delayed.
Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial
condition.
Changes in tax law may adversely affect our business or financial condition. On December 22, 2017, President
Trump signed the 2017 Tax Act into law, which significantly revised the Internal Revenue Code of 1986, as amended. The
2017 Tax Act, among other things, contained significant changes to corporate federal income taxation, including the
reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, the limitation of the tax deduction
for net interest expense to 30% of adjusted earnings (except for certain small businesses), the limitation of the deduction
for NOLs to 80% of current year taxable income and elimination of NOL carrybacks, in each case, for losses arising in
taxable years beginning after December 31, 2017 (though any such NOLs may be carried forward indefinitely), the
imposition of one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, the
elimination of U.S. tax on foreign earnings (subject to certain important exceptions), the allowance of immediate
deductions for certain new investments instead of deductions for depreciation expense over time, and the modification or
repeal many business deductions and credits.
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As part of Congress’ response to the COVID-19 pandemic, the Families First Coronavirus Response Act, or FFCR
Act, was enacted on March 18, 2020, and the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was
enacted on March 27, 2020. Both contain numerous tax provisions. In particular, the CARES Act retroactively and
temporarily (for taxable years beginning before January 1, 2021) suspends application of the 80%-of-income limitation on
the use of NOLs, which was enacted as part of the 2017 Tax Act. It also provides that NOLs arising in any taxable year
beginning after December 31, 2017, and before January 1, 2021 are generally eligible to be carried back up to five years.
The CARES Act also temporarily (for taxable years beginning in 2019 or 2020) relaxes the limitation of the tax
deductibility for net interest expense by increasing the limitation from 30 to 50% of adjusted taxable income.
Regulatory guidance under the 2017 Tax Act, the FFCR Act and the CARES Act is and continues to be forthcoming,
and such guidance could ultimately increase or lessen impact of these laws on our business and financial condition. It is
also likely that Congress will enact additional legislation in connection with the COVID-19 pandemic, some of which
could have an impact on our company. In addition, it is uncertain if and to what extent various states will conform to the
2017 Tax Act, the FFCR Act or the CARES Act.
Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
Our facilities consist of leased office space, laboratory space and manufacturing facilities in Bedford, Massachusetts.
We occupy approximately 121,000 square feet of space. The lease for approximately 71,000 square feet of space expires in
July 2027, the lease for approximately 30,000 square feet of space expires in 2024, and the lease for approximately 20,000
square feet of space expires in 2023. We believe that our current facilities are suitable and adequate to meet our current
needs.
Item 3.
Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary
course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters
may arise from time to time that may harm our business. We are not presently a party to any material legal proceedings, nor
to the knowledge of management are any material legal proceedings threatened against us.
Item 4.
Mine Safety Disclosures
None.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer’s Purchases of Equity
Securities
Our common stock has been publicly traded on the Nasdaq Global Market under the symbol “OCUL” since July 25,
2014.
Holders
As of March 1, 2021, there were approximately 20 holders of record of our common stock. This number does not
include beneficial owners whose shares are held by nominees in street name.
Dividends
We have never declared or paid cash dividends on our common stock, and we do not expect to pay any cash
dividends on our common stock in the foreseeable future. In addition, the terms of our existing credit facility preclude us
from paying cash dividends without the consent of our lenders.
Recent Sales of Unregistered Securities
We did not sell any shares of our common stock, shares of our preferred stock or warrants to purchase shares of our
stock, or grant any stock options or restricted stock awards, during the year ended December 31, 2020 that were not
registered under the Securities Act of 1933, as amended, or the Securities Act, and that have not otherwise been described
in an Annual Report on Form 10-K or a Quarterly Report on Form 10-Q.
In February 2021, we issued an employee non-statutory stock options to purchase up to 150,000 shares of our
common stock outside our 2014 Stock Incentive Plan and under our 2019 Inducement Stock Incentive Plan as an
inducement material to the individual’s acceptance of an offer of employment with us in accordance with Nasdaq Listing
Rule 5635(c)(4). We intend to file a registration statement on a Form S-8 to register the shares of common stock
underlying this inducement award prior to the time at which the award becomes exercisable.
Purchase of Equity Securities
We did not purchase any of our registered equity securities during the period covered by this Annual Report on Form
10-K.
Item 6. Selected Financial Data
Not applicable.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together
with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-
K, including information with respect to our plans and strategy for our business and related financing, includes forward-
looking statements that involve risks and uncertainties and should be read together with the “Risk Factors” section of this
Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from
the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a biopharmaceutical company focused on the formulation, development and commercialization of innovative
therapies for diseases and conditions of the eye using our proprietary, bioresorbable hydrogel platform technology. We use
this technology to tailor duration and amount of delivery of a range of therapeutic agents in our product candidates.
We currently incorporate therapeutic agents that have previously received regulatory approval from the U.S. Food
and Drug Administration, or FDA, including small molecules and proteins, into our hydrogel technology with the goal of
providing local programmed-release of drug to the eye. We believe that our local programmed-release drug delivery
technology has the potential to treat conditions and diseases of both the front and the back of the eye and can be
administered through a range of different modalities including intravitreal implants, suprachoroidal implants, intracameral
implants and intracanalicular inserts. We have product candidates in preclinical and clinical development designed to
utilize this technology to treat retinal diseases including wet age-related macular degeneration, or wet AMD; glaucoma and
ocular hypertension; and ocular surface diseases and conditions including chronic and acute dry eye disease and ocular
itching associated with allergic conjunctivitis. We also have two FDA-approved products in commercialization in the
United States: DEXTENZA®, an intracanalicular insert for the treatment of post-surgical ocular inflammation and pain,
and ReSure® Sealant, an ophthalmic device designed to prevent wound leaks in corneal incisions following cataract
surgery. Our core pipeline assets include four development programs. We are currently evaluating two of these programs
in Phase 1 clinical trials: OTX-TKI, an intravitreal implant injected by fine-gauge needle of a hydrogel, anti-angiogenic
formulation of axitinib, a tyrosine kinase inhibitor, or TKI, for the treatment of wet AMD, and OTX-TIC, a travoprost
intracameral implant for the reduction of intraocular pressure, or IOP, in patients with primary open-angle glaucoma or
ocular hypertension. We have commenced Phase 2 clinical trials of OTX-CSI, a cyclosporine intracanalicular insert for the
chronic treatment of dry eye disease, and OTX-DED, a dexamethasone intracanalicular insert for the short-term treatment
of the signs and symptoms of dry eye disease.
We also have a collaboration with Regeneron Pharmaceuticals, Inc., or Regeneron, for the development and potential
commercialization of products containing our extended-delivery hydrogel in combination with Regeneron’s large molecule
vascular endothelial growth factor, or VEGF, inhibitor, aflibercept, currently marketed under the brand name Eylea. On
May 8, 2020, we entered into an amendment to our existing collaboration agreement with Regeneron. Pursuant to this
amendment, we and Regeneron have adopted a new workplan to transition joint efforts under the existing collaboration
agreement to the research and development of an extended-delivery formulation of aflibercept to be delivered to the
suprachoroidal space. Regeneron has agreed to pay for our personnel and material costs for specified preclinical
development activities in connection with the revised workplan, as well as costs of certain specialty equipment.
DEXTENZA is the first FDA-approved intracanalicular insert delivering dexamethasone to treat post-surgical ocular
inflammation and pain for up to 30 days with a single administration. We filed a supplemental New Drug Application, or
sNDA, in the fourth quarter of 2020 for an additional indication of DEXTENZA for the treatment of ocular itching
associated with allergic conjunctivitis. The FDA has accepted our sNDA for filing and has established a target action date
under the Prescription Drug User Fee Act, commonly known as PDUFA, of October 18, 2021.
In October 2020, we entered into a license agreement and collaboration with AffaMed Therapeutics Limited, or
AffaMed, for the development and commercialization of DEXTENZA and OTX-TIC in mainland China, Hong
Kong, Macau, and Taiwan; South Korea, and the ASEAN markets (Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand and Vietnam).
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We continue to assess the potential use of our hydrogel platform technology in other areas of the body.
Business Update Regarding COVID-19
The pandemic caused by an outbreak of a new strain of coronavirus, or the COVID-19 pandemic, that is affecting the
U.S. and global economy and financial markets and the related responses of government, businesses and individuals are
also impacting our employees, patients, communities and business operations. The implementation of travel bans and
restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders and shutdowns, for example, affected
our business in 2020. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact our
business, results of operations and financial condition and those of our customers, vendors, suppliers, and collaboration
partners in 2021 will depend on future developments that are highly uncertain and cannot be accurately predicted,
including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and
the economic impact on local, regional, national and international markets. Management continues to actively monitor this
situation and the possible effects on our financial condition, liquidity, operations, suppliers, industry, and workforce. In the
paragraphs that follow, we have described impacts of the COVID-19 pandemic on our clinical development programs. For
additional information on risks posed by the COVID-19 pandemic, please see “Item 1A — Risk Factors — Risks Related
to the Coronavirus Pandemic,” included elsewhere in this Annual Report on Form 10-K.
Financial Position
We have local programmed-release drug delivery product candidates in preclinical and clinical development, and we
have two FDA-approved products—DEXTENZA, an intracanalicular insert for the treatment of post-surgical ocular
inflammation and pain, and ReSure Sealant, an ophthalmic device designed to prevent wound leaks in corneal incisions
following cataract surgery—in commercialization in the United States. Our ability to generate product revenues sufficient
to achieve profitability will depend heavily on our continued commercialization of DEXTENZA for the treatment of ocular
inflammation and pain following ophthalmic surgery and our obtaining marketing approval for and commercializing other
products with significant market potential, including DEXTENZA for the treatment of ocular itching associated with
allergic conjunctivitis, OTX-TKI for the treatment of wet AMD, OTX-TIC for the treatment of glaucoma and ocular
hypertension, OTX-CSI for the chronic treatment of dry eye disease, and OTX-DED for the short-term treatment of the
signs and symptoms of dry eye disease. Since inception, we have incurred significant operating losses. Our net losses
were $155.6 million and $86.4 million for the years ended December 31, 2020 and 2019, respectively. As of December 31,
2020, we had an accumulated deficit of $539.3 million.
Our total cost and operating expenses were $80.3 million and $90.0 million for the years ended December 31, 2020
and 2019, respectively, including $7.5 million and $8.8 million, respectively, in non-cash stock-based compensation
expense. Our operating expenses have grown as we continue to support the commercial launch of DEXTENZA following
its entry into the market in July 2019; continue to pursue the clinical development of OTX-TKI, OTX-TIC, OTX-CSI,
OTX-DED, OTX-AFS and DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis; continue
the research and development of our other product candidates; and seek marketing approval for any such product candidate
for which we obtain favorable pivotal clinical trial results. We expect to incur substantial sales and marketing expenses in
connection with the ongoing DEXTENZA commercial launch and that of any of our other product candidates. In addition,
we will continue to incur additional costs associated with operating as a public company, including legal costs associated
with any pending legal proceedings.
Although we expect to generate revenue from sales of DEXTENZA and limited revenue from sales of ReSure
Sealant, we will need to obtain substantial additional funding to support our continuing operations and the
commercialization of DEXTENZA. If we are unable to raise capital or access our borrowing capacity 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 or 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.
Through December 31, 2018, we raised $337.7 million through the sale of common stock in various offerings and
$25.0 million through a credit facility.
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In November 2016, we entered into a controlled equity offering sales agreement, or the 2016 Sales Agreement, with
Cantor Fitzgerald & Co., or Cantor, under which we could offer and sell our common stock having aggregate proceeds of
up to $40.0 million from time to time. During 2019, we sold 1,318,481 shares of common stock pursuant to the 2016 Sales
Agreement, resulting in net proceeds of approximately $5.0 million after underwriting discounts and commissions and
expenses. As of February 25, 2019, we had no amounts remaining available for future sale under the 2016 Sales
Agreement. On February 28, 2019, pursuant to the 2016 Sales Agreement, we delivered a termination notice to Cantor,
terminating the 2016 Sales Agreement. Through March 31, 2019, we sold an aggregate of 6,330,222 shares of common
stock under the 2016 Sales Agreement, resulting in net proceeds of approximately $38.4 million after underwriting
discounts and commissions and other offering expenses.
On March 1, 2019, we issued $37.5 million of unsecured senior subordinated convertible notes, or the 2026
Convertible Notes. The 2026 Convertible Notes accrue interest at an annual rate of 6% of their outstanding principal
amount, payable at maturity, on March 1, 2026, unless earlier converted, repurchased or redeemed. The holders of the 2026
Convertible Notes may convert all or part of the outstanding principal amount of their 2026 Convertible Notes into shares
of our common stock, par value $0.0001 per share, prior to maturity and provided that no conversion results in a holder
beneficially owning more than 19.99% of our issued and outstanding common stock. The conversion rate is initially
153.8462 shares of our common stock per $1,000 principal amount of the 2026 Convertible Notes, which is equivalent to
an initial conversion price is $6.50 per share. The conversion rate is subject to adjustment in customary circumstances
such as stock splits or similar changes to our capitalization, none of which have occurred to date.
On April 5, 2019, we entered into an Open Market Sale AgreementSM, or the 2019 Sales Agreement, with Jefferies
LLC, or Jefferies, under which we may offer and sell shares of our common stock having an aggregate offering price of up
to $50.0 million from time to time through Jefferies, acting as agent. In the twelve months ended December 31, 2019, the
Company sold 7,337,459 shares of common stock under the 2019 Sales Agreement, resulting in net proceeds of
approximately $32.7 million, respectively, after commissions and expenses. In the twelve months ended December 31,
2020, the Company sold 2,984,381 shares of common stock under the 2019 Sales Agreement, resulting in net proceeds of
approximately $14.4 million, respectively, after commissions and expenses. From inception to December 31, 2020, we
have sold 10,321,840 shares of common stock under the 2019 Sales Agreement, resulting in net proceeds of approximately
$47.0 million after commissions and expenses.
In May 2020, we entered into an underwriting agreement with Jefferies and Piper Sandler & Co., or the
Underwriters, pursuant to which we issued and sold an aggregate of 9,409,091 shares of our common stock in an
underwritten public offering at a public offering price of $5.50 per share. We refer to this offering as the May 2020
Offering. After deducting underwriting discounts and commissions and offering expenses, we received net proceeds from
the May 2020 Offering of approximately $48.3 million.
In October 2020, we entered into an underwriting agreement with the Underwriters pursuant to which we issued and
sold an aggregate of 8,257,000 shares of our common stock in an underwritten public offering at a public offering price of
$9.75 per share. We refer to this offering as the October 2020 Offering. After deducting underwriting discounts and
commissions and offering expenses, we received net proceeds from the October 2020 Offering of approximately $75.4
million.
In December 2020, we entered into an underwriting agreement with the Underwriters pursuant to which we issued
and sold an aggregate of 4,283,750 shares of our common stock in an underwritten public offering at a public offering price
of $21.50 per share. We refer to this offering as the December 2020 Offering. After deducting underwriting discounts and
commissions and offering expenses, we received net proceeds from the December 2020 Offering of approximately $86.4
million.
We believe that our existing cash and cash equivalents of $228.1 million as of December 31, 2020, will enable us to
fund our planned operating expenses, debt service obligations and capital expenditure requirements through 2023. This
estimate is based on our current operating plan which includes estimates of anticipated cash inflows from DEXTENZA and
ReSure Sealant product sales and cash outflows from operating expenses. These estimates are subject to various
assumptions including those related to the severity and duration of the COVID-19 pandemic, the revenues and expenses
associated with the commercialization of DEXTENZA, the pace of our research and clinical development programs, and
other aspects of our business. These and other assumptions upon which we have based our estimate may prove to be
wrong, and we could use our capital resources sooner than we currently expect and would therefore need to
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raise additional capital to support our ongoing operations or adjust our plans accordingly. See “—Liquidity and Capital
Resources.”
Financial Operations Overview
Revenue
From our inception through December 31, 2020, we have generated limited amounts of revenue from the sales of our
products. We commenced sales of ReSure Sealant in the first quarter of 2014, but we have received only limited revenues
from ReSure Sealant to date and anticipate only limited sales for 2021. Until June 2019, ReSure Sealant was our only
source of revenue from product sales.
We began to recognize limited product revenue from DEXTENZA during the second quarter of 2019 with the first
commercial shipments to customers in June 2019. As further explained under “—Revenue Recognition—Product
Revenue, Net” below, we recognize revenue when we sell DEXTENZA in the United States to a network of specialty
distributors, who then resell the product to ambulatory surgical centers, or ASCs, and hospital outpatient departments, or
HOPDs. We refer to these resales from the specialty distributors to the ASCs and HOPDs as in-market unit sales. For the
first two months of 2021, in-market units sales neared 9,500, representing an increase of greater than 10% over the first
two months of the fourth quarter of 2020. We may generate revenue in the future if we continue to commercialize
DEXTENZA and develop and commercialize one or more of our product candidates and receive marketing approval for
any such product candidate or if we enter into longer-term collaboration agreements with third parties.
For the year ended December 31, 2020, three specialty distributor customers accounted for 42%, 29% and 12% of
our total revenue and three specialty distributor customers accounted for 45%, 33% and 15% of our total accounts
receivable. No other customer accounted for more than 10% of total revenue or accounts receivable for the year ended
December 31, 2020.
For the year ended December 31, 2019, two specialty distributor customers accounted for 27% and 11% of our total
revenue and three specialty distributor customers accounted for 39%, 18% and 11% of our total accounts receivable. No
other customer accounted for more than 10% of total revenue or accounts receivable for the year ended December 31,
2019.
Operating Expenses
Cost of Product Revenue
Cost of product revenue consists primarily of costs of DEXTENZA and ReSure product revenue, which include:
● Direct materials costs;
● Royalties;
● Direct labor, which includes employee-related expenses, including salaries, related benefits and payroll taxes,
travel and stock-based compensation expense for employees engaged in the production process;
● Manufacturing overhead costs, which includes rent, depreciation, and indirect labor costs associated with the
production process;
● Transportation costs; and
● Cost of scrap material.
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Research and Development Expenses
Research and development expenses consist primarily of costs incurred for the development of our product
candidates, which include:
● employee-related expenses, including salaries, related benefits and payroll taxes, travel and stock-based
compensation expense for employees engaged in research and development, clinical and regulatory and other
related functions;
● expenses incurred in connection with the clinical trials of our product candidates, including with the
investigative sites that conduct our clinical trials and under agreements with contract research organizations, or
CROs;
● expenses relating to regulatory activities, including filing fees paid to the FDA for our submissions for product
approvals;
● expenses associated with developing our pre-commercial manufacturing capabilities and manufacturing clinical
study materials;
● ongoing research and development activities relating to our core bioresorbable hydrogel technology and
improvements to this technology;
● facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance
of facilities, insurance and supplies;
● costs relating to the supply and manufacturing of product inventory, prior to approval by the FDA or other
regulatory agencies of our products; and
● expenses associated with preclinical development activities.
We expense research and development costs as incurred. We recognize external development costs based on an
evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our clinical
investigative sites.
Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of
external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical
trials and regulatory fees. We do not allocate employee and contractor-related costs, costs associated with our platform
technology, costs related to manufacturing or purchasing clinical trial materials, and facility expenses, including
depreciation or other indirect costs, to specific product development programs because these costs are deployed across
multiple product development programs and, as such, are not separately classified. We use internal resources in
combination with third-party CROs, including clinical monitors and clinical research associates, to manage our clinical
trials, monitor patient enrollment and perform data analysis for many of our clinical trials. These employees work across
multiple development programs and, therefore, we do not track their costs by program.
The successful development and commercialization of our products or product candidates is highly uncertain. This is
due to the numerous risks and uncertainties associated with product development and commercialization, including the
uncertainty of:
● the scope, progress, outcome and costs of our clinical trials and other research and development activities;
● the timing, receipt and terms of any marketing approvals;
● the efficacy and potential advantages of our products or product candidates compared to alternative treatments,
including any standard of care;
● the market acceptance of our products or product candidates; and
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● significant and changing government regulation.
Any changes in the outcome of any of these variables with respect to the development of our product candidates in
clinical and preclinical development could mean a significant change in the costs and timing associated with the
development of these product candidates. For example, if the FDA or another regulatory authority were to require us to
conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in
enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time
on the completion of clinical development of that product candidate. We anticipate that our research and development
expenses will increase in the future as we support our continued development of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs, including stock-based
compensation, for personnel in executive, finance, information technology, human resources and administrative functions.
General and administrative expenses also include insurance, facility-related costs and professional fees for legal, patent,
consulting and accounting and audit services.
We anticipate that our general and administrative expenses will increase in the future as we support our continued
development and commercialization of our product candidates. We also anticipate that we will continue to incur increased
accounting, audit, legal, regulatory, compliance, director and officer insurance costs as well as investor and public relations
expenses associated with being a public company.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of salaries and related costs for personnel in selling and marketing
functions as well as consulting and advertising and promotion costs. During the years ended December 31, 2020 and 2019,
we incurred limited marketing expenses in connection with ReSure Sealant, which we began commercializing in 2014.
Selling and marketing expenses for DEXTENZA increased in 2019 due to the product’s July 2019 commercial launch and
further increased in 2020 with the continued commercialization of DEXTENZA. We anticipate that our selling and
marketing expenses associated with DEXTENZA will continue to increase, particularly as we plan to grow our salesforce
supporting DEXTENZA in 2021.
Other Income (Expense)
Interest Income. Interest income consists primarily of interest income earned on cash and cash equivalents. In each
of 2020 and 2019, our interest income has not been significant due to the low rates of interest being earned on our invested
balances.
Interest Expense. Interest expense consists of interest expense on our debt. We borrowed $15.0 million in aggregate
principal amount in April 2014. We refer to the credit facility under which we drew down this indebtedness, as amended
over time, as our Credit Facility. In December 2015, we amended our credit and security agreement, which we refer to, as
amended, as our Credit Agreement, to increase the aggregate principal amount borrowed under our Credit Facility to $15.6
million, extend the interest-only payment period through December 2016, and extend the maturity date to December 1,
2019. In March 2017, we amended our Credit Agreement to increase the aggregate principal amount borrowed under our
Credit Facility to $18.0 million, extend the interest-only payment period through February 2018, and extend the maturity
date to December 1, 2020. In December 2018, we amended the Credit Agreement to increase the aggregate principal
amount borrowed under our Credit Facility to $25.0 million, extend the interest-only payment period through December
2020, and extend the maturity date to December 2023.
On March 1, 2019, we issued $37.5 million of the 2026 Convertible Notes. The 2026 Convertible Notes accrue
interest at an annual rate of 6% of their outstanding principal amount, payable in cash at maturity, on March 1, 2026, unless
earlier converted, repurchased or redeemed.
Change in Fair Value of Derivative Liability. In 2019, in connection with the issuance of our 2026 Convertible
Notes, we identified an embedded derivative liability, which we are required to measure at fair value at inception and then
at the end of each reporting period until the embedded derivative is settled. The changes in fair value are recorded through
the statement of operations and comprehensive loss and are presented under the caption change in fair value of
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derivative liability. Our derivative liability calculations are further described under the heading “—Critical Accounting
Policies and Significant Judgments and Estimates—Derivative Liability” below.
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in
the United States of America. The preparation of our consolidated financial statements and related disclosures requires us
to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and
expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. On an ongoing
basis, we evaluate our estimates and judgments, including those related to revenue recognition, accrued research and
development expenses and stock-based compensation. We base our estimates on historical experience, known trends and
events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in the notes to our consolidated financial
statements appearing elsewhere in this annual report, we believe the following accounting policies to be most critical to the
judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
We recognize product revenue from DEXTENZA for the treatment of post-surgical ocular inflammation and pain,
which we began selling to customers in June 2019, and ReSure Sealant. We have generated limited revenues from ReSure
Sealant to date and do not expect significant future sales.
In November 2018, the FDA approved DEXTENZA for the treatment of ocular pain following ophthalmic surgery.
We entered into a limited number of arrangements with specialty distributors in the United States to distribute
DEXTENZA. Accounting Standards Codification 606 – Revenue from Contracts with Customers, or Topic 606, applies to
all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance
arrangements and financial instruments. Under Topic 606, an entity recognizes revenue when its customer obtains control
of promised goods or services, in an amount that reflects the consideration which the entity expects to be entitled to in
exchange for those goods or services.
To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the
entity performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance
obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance
obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only
apply the five-step model to arrangements that meet the definition of a contract with a customer under Topic 606, including
when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we
transfer to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we
assess the goods or services promised within each contract, determines those that are performance obligations, and assesses
whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is
allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For a complete
discussion of accounting for product revenue, see Product Revenue, Net (below).
Product Revenue, Net— We derive our product revenues from the sale of DEXTENZA in the United States to
customers, which includes a limited number of specialty distributors, who then subsequently resell DEXTENZA to
physicians, clinics and certain medical centers or hospitals. In addition to distribution agreements with customers, we enter
into arrangements with government payers that provide for government mandated rebates and chargebacks with respect to
the purchase of DEXTENZA.
We recognize revenue on product sales when the customer obtains control of our product, which occurs at a point in
time (upon delivery to the customer). We have determined that the delivery of DEXTENZA to our customers constitutes a
single performance obligation. There are no other promises to deliver goods or services beyond what is specified in each
accepted customer order. We have assessed the existence of a significant financing component in the agreements with our
customers. The trade payment terms with our customers do not exceed one year and therefore we have elected to apply the
practical expedient and no amount of consideration has been allocated as a financing
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component. Product revenues are recorded net of applicable reserves for variable consideration, including discounts and
allowances.
Transaction Price, including Variable Consideration— Revenues from product sales are recorded at the net sales
price (transaction price), which includes estimates of variable consideration for which reserves are established.
Components of variable consideration include trade discounts and allowances, product returns, government chargebacks,
discounts and rebates, and other incentives, such as voluntary patient assistance, and other fee-for-service amounts that are
detailed within contracts between us and our customers relating to our sale of DEXTENZA. These reserves, as detailed
below, are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts
receivable or a current liability. These estimates take into consideration a range of possible outcomes which are probability-
weighted in accordance with the expected value method in Topic 606 for relevant factors such as current contractual and
statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and
payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled
based on the terms of the respective underlying contracts.
The amount of variable consideration which is included in the transaction price may be constrained, and is included
in the net sales price, only to the extent that it is probable that a significant reversal in the amount of the cumulative
revenue recognized under the contract will not occur in a future period. Actual amounts of consideration ultimately
received may differ from our estimates. If actual results in the future vary from our original estimates, we will adjust these
estimates, which would affect net product revenue and earnings in the period such variances become known.
Trade Discounts and Allowances—We compensate (through trade discounts and allowances) our customers for sales
order management, data, and distribution services. However, we have determined such services received to date are not
distinct from our sale of products to the customer and, therefore, these payments have been recorded as a reduction of
revenue within the statement of operations and comprehensive loss, as well as a reduction to trade receivables, net on the
consolidated balance sheets.
Product Returns— Consistent with industry practice, we generally offers customers a limited right of return for
product that has been purchased from us in certain circumstances as further discussed below. We estimate the amount of
our product sales that may be returned by our customers and record this estimate as a reduction of revenue in the period the
related product revenue is recognized, as well as within accrued expenses and other current liabilities, in the accompanying
consolidated balance sheets. We currently estimate product return reserves using available industry data and our own sales
information, including its visibility into the inventory remaining in the distribution channel. We have received no returns to
date and believe the returns of DEXTENZA will be minimal.
Government Chargebacks— Chargebacks for fees and discounts to qualified government healthcare providers
represent the estimated obligations resulting from contractual commitments to sell products to qualified U.S. Department
of Veterans Affairs hospitals and 340B entities at prices lower than the list prices charged to customers who directly
purchase the product from us. The 340B Drug Discount Program is a U.S. federal government program created in 1992
that requires drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at
significantly reduced prices. Customers charge us for the difference between what they pay for the product and the
statutory selling price to the qualified government entity. These allowances are established in the same period that the
related revenue is recognized, resulting in a reduction of product revenue and trade receivables, net. Chargeback amounts
are generally determined at the time of resale to the qualified government healthcare provider by customers, and we
generally issue credits for such amounts within a few weeks of the customer’s notification to us of the resale. Allowances
for chargebacks consist of credits that we expect to issue for units that remain in the distribution channel inventories at
each reporting period-end that we expect will be sold to qualified healthcare providers, and chargebacks that customers
have claimed, but for which we have not yet issued a credit.
Government Rebates— We are subject to discount obligations under state Medicaid programs and Medicare. These
reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and
the establishment of a current liability which is included in accrued expenses and other current liabilities on the
consolidated balance sheets. For Medicare, we also estimate the number of patients in the prescription drug coverage gap
for whom we will owe an additional liability under the Medicare Part D program. For Medicaid programs, we estimate the
portion of sales attributed to Medicaid patients and record a liability for the rebates to be paid to the respective state
Medicaid programs. Our liability for these rebates consists of invoices received for claims from prior quarters that have
not been paid or for which an invoice has not yet been received, estimates of claims for the current
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quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains
in the distribution channel inventories at the end of each reporting period.
Rebates— We offer rebate payments for which ASCs, HOPDs and other prescribers qualify by meeting purchase
volumes of DEXTENZA under our rebate program. We calculate rebate payment amounts due under this program based on
actual qualifying purchase and apply a contractual discount rate. The calculation of the accrual for rebates is based on an
estimate of claims that we expect to receive associated with product that has been recognized as revenue, but remains in the
distribution channel inventories at the end of each reporting period. The adjustments are recorded in the same period the
related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which
is included as an accrued expenses and other current liabilities on the consolidated balance sheets.
Other Incentives— Other incentives which we offer include voluntary patient assistance programs, such as the co-
pay assistance program, which are intended to provide financial assistance to qualified commercially-insured patients with
prescription drug co-payments required by payers. The calculation of the accrual for co-pay assistance is based on an
estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized as
revenue, but remains in the distribution channel inventories at the end of each reporting period. The adjustments are
recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the
establishment of a current liability which is included as an accrued expenses and other current liabilities on the
consolidated balance sheets.
Derivative Liability
The 2026 Convertible Notes allow the holders to convert all or part of the outstanding principal of their 2026
Convertible Notes into shares our common stock provided that no conversion results in a holder beneficially owning more
than 19.99% of our issued and outstanding common stock. The entire embedded conversion option is required to be
separated from the 2026 Convertible Notes and accounted for as a freestanding derivative instrument subject to derivative
accounting. Therefore, the entire conversion option is bifurcated from the underlying debt instrument and accounted for
and valued separately from the host instrument. We measure the value of the embedded conversion option at its estimated
fair value and recognize changes in the estimated fair value in other income (expense), net in the consolidated statements of
operations and comprehensive loss during the period of change. The embedded conversion is recognized as a derivative
liability in our consolidated balance sheet.
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Results of Operations
Comparison of the Years Ended December 31, 2020 and December 31, 2019
The following table summarizes our results of operations for the years ended December 31, 2020 and 2019:
Year Ended
December 31,
2020
2019
(in thousands)
Increase
(Decrease)
Revenue:
Product revenue, net
Total revenue, net
Costs and operating expenses:
Cost of product revenue
Research and development
Selling and marketing
General and administrative
Total costs and operating expenses
Loss from operations
Other income (expense):
Interest income
Interest expense
Change in fair value of derivative liability
Other income (expense), net
Total other income (expense), net
Net loss
Gross-to-Net Deductions
$ 17,403
17,403
$ 4,227
4,227
$ 13,176
13,176
2,083
28,694
26,614
22,859
80,250
(62,847)
2,325
41,091
24,491
22,122
90,029
(85,802)
(242)
(12,397)
2,123
737
(9,779)
22,955
168
(6,768)
(86,189)
(1,061)
(667)
(90,499)
8
(92,219)
$ (155,636) $ (86,372) $ (69,264)
1,229
(6,101)
4,310
(8)
(570)
(92,789)
—
We record DEXTENZA product sales net of estimated chargebacks, rebates, distribution fees and product returns.
These deductions are generally referred to as gross-to-net deductions. Our total gross-to-net provisions for the years
ended December 31, 2020 and 2019 were 22.2% and 16.3%, respectively, of gross DEXTENZA product sales. In 2020,
we introduced a rebate program under a purchase volume-discount program that primarily relates to the change over the
prior year in the gross-to-net provisions.
Chargebacks and Rebates
We record a provision for estimated chargebacks and rebates at the time we recognize DEXTENZA product sales
revenue and reduce the accrual when payments are made or credits are granted. Our chargebacks are related to a
pharmaceutical pricing agreement, a federal supply schedule agreement, a 340B prime vendor agreement, a Medicaid drug
rebate agreement and beginning in 2020, rebates under our purchase volume-discount programs.
Distribution Fees and Product Return Allowances
We pay our wholesalers a distribution fee for services they perform for us based on the dollar value of their purchases
of DEXTENZA. We record a provision for these charges as a reduction to revenue at the time of sale to the wholesaler and
we issue a credit memo to the wholesaler against its outstanding receivable to us.
We record a provision for returns upon sale of DEXTENZA to our wholesaler. When a return or claim is received, we
issue a credit memo to the wholesaler and reduce the corresponding liability.
Net Revenue
We generated $17.4 million of revenue during the year ended December 31, 2020 from sales of our products, of
which $15.7 million was attributable to sales of DEXTENZA and $1.7 million was attributable to sales of ReSure
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Sealant. We generated $4.2 million of product revenue during the year ended December 31, 2019, of which $2.2 million
was attributable to DEXTENZA and $2.0 million was attributable to sales of ReSure Sealant during the year ended
December 31, 2019. We began to recognize product revenue from DEXTENZA during the second quarter of 2019 with the
first commercial shipments to customers in June 2019. The growth in revenue for DEXTENZA was due to increased
market acceptance and commercialization efforts during 2020.
Research and Development Expenses
Direct research and development expenses by program:
OTX-TKI for wet AMD
OTX-TIC for glaucoma or ocular hypertension
OTX-CSI for treatment of dry eye disease
OTX-DED for the short-term treatment of the signs and
symptoms of dry eye disease
DEXTENZA for post-surgical ocular inflammation and
pain
DEXTENZA for ocular itching associated with allergic
conjunctivitis
ReSure Sealant
OTX-TP for glaucoma and ocular hypertension
Preclinical activities
Unallocated expenses:
Personnel costs
All other costs
Total research and development expenses
Year Ended
December 31,
2020
2019
Increase
(Decrease)
(in thousands)
$ 1,534 $
924
1,389
1,013
726
—
$
521
198
1,389
111
—
111
1,077
1,039
38
2,296
117
584
403
2,060
153
1,558
1,645
236
(36)
(974)
(1,242)
11,458
8,801
$ 28,694
20,068
12,829
$ 41,091
(8,610)
(4,028)
$ (12,397)
Research and development expenses were $28.7 million for the year ended December 31, 2020, compared to $41.1
million for the year ended December 31, 2019. The decrease of $12.4 million was primarily due to a decrease of $12.6
million in unallocated expenses. Unallocated research and development costs decreased $12.6 million for the year ended
December 31, 2020, compared to the year ended December 31, 2019 primarily due to a decrease in unallocated personnel
costs of $8.6 million and $4.0 million in all other costs as a result of the organizational restructuring that took place in
November 2019 which reduced personnel and deferred program costs. For the year ended December 31, 2020, we incurred
$8.0 million in direct research and development expenses for our product candidates compared to $6.5 million for the year
ended December 31, 2019. The increase of $1.5 million is related to timing and start of our various clinical trials for our
product candidates. We expect that clinical trial expenses will increase for our product candidates including for OTX-TKI
due to the planned initiation of Phase 1 and Phase 2 clinical trials in mid-2021, for OTX-TIC due to the planned initiation
of a Phase 2 clinical trial in mid-2021, for OTX-CSI due to the continuation of our Phase 2 clinical trial initiated in 2020,
and for OTX-DED due to the initiation of our Phase 2 clinical trial in February 2021.
Selling and Marketing Expenses
Personnel related (including stock-based compensation)
Professional fees
Facility related and other
Total selling and marketing expenses
2020
$ 17331
5,996
3,287
$ 26,614
2019
(in thousands)
$ 12,382
9,087
3,022
$ 24,491
$ 4,949
(3,091)
265
$ 2,123
Year Ended
December 31,
Increase
(Decrease)
Selling and marketing expenses were $26.6 million for the year ended December 31, 2020, compared to $24.5
million for the year ended December 31, 2019. The increase of $2.1 million was primarily due to an increase of $4.9
million in personnel costs, including stock-based compensation as the Company increased the field-based team to
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support the commercial launch of DEXTENZA, partially offset by a decrease of $3.1 million in professional fees including
consulting, trade shows, and conferences.
We expect our selling and marketing expenses to increase in 2021 and beyond, as we continue to support the
commercial launch of DEXTENZA and, if our sNDA is approved, support the planned commercial launch of DEXTENZA
for ocular itching associated with allergic conjunctivitis in the first half of 2022.
General and Administrative Expenses
Personnel related (including stock-based compensation)
Professional fees
Facility related and other
Total general and administrative expenses
2020
$ 11,688
8,886
2,285
$ 22,859
2019
(in thousands)
$ 11,352
8,257
2,513
$ 22,122
$
$
336
629
(228)
737
Year Ended
December 31,
Increase
(Decrease)
General and administrative expenses were $22.9 million for the year ended December 31, 2020, compared to $22.1
million for the year ended December 31, 2019. The increase of $0.7 million was primarily due to an increase of $0.6
million in professional fees.
Other Income (Expense), Net
Other expense, net was $92.8 million for the year ended December 31, 2020, compared to $0.6 million for the year
ended December 31, 2019. The change of $92.2 million, was due to an unrealized loss of $86.2 million on the change in
fair value of the derivative liability associated with the 2026 Convertible Notes and lower interest income of $1.1 million.
The change in fair value of the derivative liability was a loss in the amount of $86.2 million in 2020 as compared to a gain
of $4.3 million during the year ended December 31, 2019 due changes in the underlying assumptions of the derivative
liability, primarily related to an increase in our common stock price between December 31, 2020 and 2019. We expect the
change in fair value of the derivative liability will continue to fluctuate until it is settled based on the extent changes occur
in the underlying assumptions.
Liquidity and Capital Resources
Since inception, we have incurred significant operating losses. Our net losses were $155.6 million and $86.4 million,
for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of
$539.3 million.
We have generated limited revenue to date. In 2014, we began recognizing revenue from sales of ReSure Sealant.
We commercially launched DEXTENZA for post-surgical ocular inflammation and pain in July 2019. All of our other
sustained drug delivery products are in various phases of clinical and preclinical development. Our ability to generate
product revenues sufficient to achieve profitability will depend heavily on our continued commercialization of
DEXTENZA for the treatment of ocular inflammation and pain following ophthalmic surgery and our obtaining marketing
approval for and commercializing other products with significant market potential, including DEXTENZA for the
treatment of ocular itching associated with allergic conjunctivitis, OTX-TKI for wet AMD, OTX-TIC for glaucoma or
ocular hypertension, and OTX-CSI and OTX-DED for dry eye disease. While it is difficult to predict the extent or duration
of the impact of the global COVID-19 pandemic on future financial results, we anticipate current guidelines and
recommendations from the global health authorities, including the delay of elective surgeries, will impact revenue in 2021.
Through December 31, 2020, we have financed our operations primarily through private placements of our preferred
stock, public offerings of our common stock, private placements of our convertible notes and borrowings under credit
facilities, which has resulted in net proceeds of $637.2 million to us. As described above, we issued and sold an aggregate
of 21,949,841 shares of our common stock in the May 2020 Offering, the October 2020 Offering, and the December 2020
Offering. We received net proceeds from these offerings of approximately $210.0 million, after deducting underwriting
discounts and commissions and offering expenses.
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In April 2019, we entered into the 2019 Sales Agreement with Jefferies, acting as agent, for the issuance of up to
$50.0 million of our common stock. Through March 1, 2021, we have sold 10,321,840 shares of common stock under the
2019 Sales Agreement, resulting in net proceeds of approximately $47.0 million after commissions and expenses. We have
$1.3 million available for issuance as of March 1, 2021.
On March 2019, we issued $37.5 million of the 2026 Convertible Notes. The 2026 Convertible Notes accrue interest
at an annual rate of 6% of its outstanding principal amount, payable in cash at maturity on March 1, 2026, unless earlier
converted, repurchased or redeemed. The holders of the 2026 Convertible Notes may convert all or part of the outstanding
principal amount of their 2026 Convertible Notes into shares of our common stock, par value $0.0001 per share, prior to
maturity and provided that no conversion results in a holder beneficially owning more than 19.99% of our issued and
outstanding common stock. The conversion rate is initially 153.8462 shares of our common stock per $1,000 principal
amount of the 2026 Convertible Notes, which is equivalent to an initial conversion price is $6.50 per share. The
conversion rate is subject to adjustment in customary circumstances such as stock splits or similar changes to our
capitalization, none of which have occurred to date.
In April 2014, we borrowed $15.0 million in aggregate principal amount under our Credit Facility and used $1.9
million of this amount to repay $1.7 million aggregate principal amount of indebtedness and pay $0.2 million of other
amounts due in connection with our termination of a prior credit facility. In December 2015, we amended the Credit
Agreement to increase the aggregate principal amount borrowed under our Credit Facility to $15.6 million, extend the
interest-only payment period through December 2016, and extend the maturity date to December 1, 2019. In March 2017,
we amended the Credit Agreement to increase the aggregate principal amount borrowed under our Credit Facility to $18.0
million and extend the interest only period through February 1, 2018 and extend the maturity date to February 1, 2020. In
December 2018, we amended the Credit Agreement to increase the aggregate principal amount borrowed under our Credit
Facility to $25.0 million, extend the interest-only payment period through December 2020 and extend the to maturity to
date to December 2023. Amounts borrowed under the Credit Agreement are at a LIBOR base rate, subject to a 2.00% floor,
plus 7.25%. As of December 31, 2020, the interest rate was 9.25%. In addition, a final payment (exit fee) equal to 3.5% of
amounts drawn under the Credit Facility is due upon maturity. If we elect to prepay amounts borrowed under the Credit
Agreement, we would also owe a prepayment fee of 2.00% of amounts prepaid until December 2021 or 1.00% of amounts
prepaid thereafter. See “—Contractual Obligations and Commitments” for additional information.
As of December 31, 2020, we had cash and cash equivalents of $228.1 million, notes payable of $25.0 million face
value and senior subordinated convertible notes of $37.5 million par value, plus accrued interest of $4.2 million.
Cash Flows
Based on our current plans and forecasted expenses, which includes estimates related to anticipated cash inflows
from DEXTENZA and ReSure Sealant product sales and cash outflows from operating expenses, we believe that our
existing cash and cash equivalents, as of December 31, 2020, will enable us to fund our planned operating expenses, debt
service obligations and capital expenditure requirements through 2023. 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.
The following table summarizes our sources and uses of cash for each of the periods presented:
Cash used in operating activities
Cash used in investing activities
Cash provided by financing activities
Net increase in cash and cash equivalents
Year Ended December 31,
2020
2019
(in thousands)
$ (53,554) $ (77,578)
(2,238)
75,341
$ (4,475)
(841)
228,014
$ 173,620
Operating activities. Net cash used in operating activities was $53.6 million for the year ended December 31, 2020,
primarily resulting from our net loss of $155.6 million, partially offset by non-cash charges of $100.9 million and cash
provided by changes in our operating assets and liabilities of $1.1 million. Our net loss was primarily attributed to research
and development activities, selling and marketing costs and our general and administrative expenses partially
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offset by $17.4 million of revenue in the period. Our net non-cash charges during the year ended December 31, 2020
primarily consisted of the change in fair value of the derivative liability of $86.2 million, $7.5 million of stock-based
compensation expense, $4.4 million of non-cash interest expense and $2.8 million of depreciation expense. Net cash
provided by changes in our operating assets and liabilities during the year ended December 31, 2020 consisted primarily of
a $12.0 million in deferred revenue partially offset by the change in the working capital accounts and a $9.7 million
increase in accounts receivable.
Net cash used in operating activities was $77.6 million for the year ended December 31, 2019, primarily resulting
from our net loss of $86.4 million, partially offset by non-cash charges of $10.7 million and cash provided by changes in
our operating assets and liabilities of $1.9 million. Our net loss was primarily attributed to research and development
activities, selling and marketing costs and our general and administrative expenses partially offset by $4.2 million of
revenue in the period. Our net non-cash charges during the year ended December 31, 2019 primarily consisted of $8.8
million of stock-based compensation expense, $2.5 million of depreciation expense and non-cash interest expense partially
offset by the change in fair value of the derivative liability of $4.3 million. Net cash provided by changes in our operating
assets and liabilities during the year ended December 31, 2019 consisted primarily of a $1.7 million increase in accrued
expenses and deferred rent and a $2.3 million increase in accounts receivable.
Investing activities. Net cash used in investing activities was $0.8 million for the year ended December 31, 2020,
consisting of cash used to purchase property and equipment. Net cash used in investing activities was $2.2 million for the
year ended December 31, 2019, consisting of cash used to purchase property and equipment.
Financing activities. Net cash provided by financing activities for 2020 was $228.0 million and consisted primarily
of proceeds from the May 2020 Offering, the October 2020 Offering and the December 2020 Offering of an aggregate of
$210.0 million, net of underwriting discounts and commissions and offering expenses; proceeds from sales under the 2019
Sales Agreement of $14.4 million, net of commissions and other offering expenses; proceeds from the exercise of stock
options of $2.6 million; and proceeds from issuance of common stock pursuant to our employee stock purchase plan of
$0.8 million.
Net cash provided by financing activities for 2019 was $75.3 million and consisted primarily of proceeds from the
2026 Convertible Notes of $37.3 million and the 2016 Sales Agreement of $4.9 million, net of commissions and other
offering expenses and the 2019 Sales Agreement of $32.6 million, net of commissions and other offering expenses.
Funding Requirements
We expect to continue to incur losses in connection with our ongoing activities, particularly as we advance the
clinical trials of our products in development and increase our sales and marketing resources to support the DEXTENZA
launch and the potential launch of our product candidates, subject to receiving FDA approval.
We anticipate we will incur substantial expenses if and as we:
● continue to commercialize DEXTENZA in the United States;
● continue to develop and expand our sales, marketing and distribution capabilities for DEXTENZA and
any of our products or product candidates;
● continue to pursue the clinical development of DEXTENZA for additional indications;
● continue ongoing clinical trials of our product candidates OTX-TKI, OTX-TIC, OTX-CSI and OTX-
DED;
● initiate planned Phase 2 clinical trials for our product candidates OTX-TKI and OTX-TIC;
● conduct joint research and development under our strategic collaboration with Regeneron, for the
development and potential commercialization of products containing our extended-delivery hydrogel
formulation in combination with Regeneron’s large molecule, VEGF-targeting compounds to treat
retinal diseases;
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● conduct research and development activities on, and seek regulatory approvals for, DEXTENZA and
OTX-TIC in certain Asian countries pursuant to our license agreement and collaboration with AffaMed
Therapeutics Limited, or AffaMed;
● continue the research and development of our other product candidates;
● seek to identify and develop additional product candidates, including through additional preclinical
development activities associated with our front-of-the-eye and back-of-the-eye programs and potential
opportunities outside the field of ophthalmology;
● seek marketing approvals for any of our product candidates that successfully complete clinical
development;
● scale up our manufacturing processes and capabilities to support sales of commercial products, our
ongoing clinical trials of our product candidates and commercialization of any of our product
candidates for which we obtain marketing approval, and expand our facilities to accommodate this
scale up and any corresponding growth in personnel;
● renovate our existing facilities including research and development laboratories, manufacturing space
and office space;
● maintain, expand and protect our intellectual property portfolio;
● expand our operational, financial and management systems and personnel, including personnel to
support our clinical development, manufacturing and commercialization efforts and our operations as a
public company;
● defend ourselves against legal proceedings;
● increase our product liability and clinical trial insurance coverage as we expand our clinical trials and
commercialization efforts; and
● continue to operate as a public company.
Based on our current plans and forecasted expenses, which includes estimates related to anticipated cash inflows
from DEXTENZA and ReSure Sealant product sales and cash outflows from operating expenses, we believe that our
existing cash and cash equivalents, as of December 31, 2020, will enable us to fund our planned operating expenses, debt
service obligations and capital expenditure requirements through 2023. 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.
Our future capital requirements will depend on many factors, including:
● our ability to continue to commercialize and sell DEXTENZA in the United States;
● the costs, timing and outcome of regulatory review of our product candidates by the FDA, the EMA or
other regulatory authorities;
● the level of product sales from DEXTENZA and any additional products for which we obtain marketing
approval in the future;
● the costs of manufacturing, sales, marketing, distribution and other commercialization efforts with
respect to DEXTENZA and any additional products for which we obtain marketing approval in the
future;
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● the costs of expanding our facilities to accommodate our manufacturing needs and headcount;
● the progress, costs and outcome of our planned and ongoing clinical trials of our extended-delivery drug
delivery product candidates, in particular DEXTENZA for additional indications, OTX-TIC for the
treatment of glaucoma or ocular hypertension, OTX-TKI for the treatment of wet AMD, OTX-CSI for
the chronic treatment of dry eye disease, and OTX-DED for the short-term treatment of the signs and
symptoms of dry eye disease;
● the scope, progress, costs and outcome of preclinical development and clinical trials of our other product
candidates;
● the extent of our debt service obligations and our ability, if desired, to refinance any of our existing debt
on terms that are more favorable to us;
● the amounts we are entitled to receive, if any, from Regeneron as potential option exercise fees,
development, regulatory and sales milestone payments and royalty payments and the amounts we are
obligated to pay to Regeneron as reimbursement if it chooses to exercise its option to advance a product
candidate under our collaboration agreement;
● the amounts we are entitled to receive, if any, from AffaMed as reimbursements for clinical trial
expenditures, development, regulatory, and sales milestone payments, and royalty payments under our
license agreement with AffaMed;
● the extent to which we choose to establish additional collaboration, distribution or other marketing
arrangements for our products and product candidates;
● the costs and outcomes of legal actions and proceedings;
● 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 acquire or invest in other businesses, products and technologies.
Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to finance
our cash needs through equity offerings, debt financings, government or other third-party funding, collaborations, strategic
alliances, licensing arrangements, royalty agreements, and marketing and distribution arrangements. We do not have any
committed external source of funds, although our collaboration agreement with Regeneron provides for Regeneron’s
reimbursement of certain preclinical expenses incurred by us under our collaboration agreement and for our potential
receipt of option exercise, development, regulatory and sales milestone payments and royalty payments and our license
agreement with AffaMed provides for AffaMed’s reimbursement of certain clinical expenses incurred by us in connection
with our collaboration and for our potential receipt of development and sales milestone payments as well as royalty
payments. To the extent that we raise additional capital through the sale of equity or convertible debt securities, each
security holder’s ownership interest will be diluted, and the terms of these securities may include liquidation or other
preferences that adversely affect each security holder’s 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. The covenants
under our existing Credit Agreement, the pledge of our assets as collateral limit our ability to obtain additional debt
financing. If we raise additional funds through government or other third-party funding, collaborations, strategic alliances,
licensing arrangements, royalty agreements, 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. In addition, the COVID-19 pandemic has already caused significant disruptions in
the financial markets, and may continue to cause such disruptions, which could adversely impact our ability to raise
additional funds through equity or debt financings. 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
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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.
Since our inception in 2006, we have not recorded any U.S. federal or state income tax benefits for the net losses we
have incurred in each year or our earned research and development tax credits, due to our uncertainty of realizing a benefit
from those items. As of December 31, 2020, we had net operating loss, or NOL, carryforwards for federal and state income
tax purposes of $354.7 million and $274.9 million, respectively. The federal and state NOLs generated for annual periods
prior to January 1, 2018 begin to expire in 2026. Our federal NOLs generated for the years ended after December 31, 2018,
which amounted to a total of $229.1 million, can be carried forward indefinitely. As of December 31, 2020, we also had
available research and development tax credit carryforwards for federal and state income tax purposes of $9.2 million and
$5.0 million , respectively, which begin to expire in 2026 and 2025, respectively. We have not completed a study to assess
whether an ownership change, generally defined as a greater than 50% change (by value) in the equity ownership of our
corporate entity over a three-year period, has occurred or whether there have been multiple ownership changes since our
inception, due to the significant costs and complexities associated with such studies. Accordingly, our ability to utilize our
tax carryforwards may be limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be
utilized against future taxes. As a result, we may not be able to take full advantage of these carryforwards for federal and
state tax purposes.
Contractual Obligations and Commitments
Operating lease commitments
Credit Agreement
2026 Convertible Notes
Total
Total
$ 12,770
29,683
53,475
$ 95,928
Less Than
1 Year
$ 2,483
10,427
—
$ 12,910
3 to 5
Years
1 to 3
Years
(in thousands)
4,905
19,256
4,498
—
— 53,475
$ 57,973
$ 24,161
More than
5 Years
884
—
—
884
$
The table above includes our enforceable and legally binding obligations and future commitments at December 31,
2020, as well as obligations related to contracts that we are likely to continue, regardless of the fact that they may be
cancelable at December 31, 2020. Some of the figures that we include in this table are based on management’s estimates
and assumptions about these obligations, including their duration, and other factors. Because these estimates and
assumptions are necessarily subjective, the amounts we will actually pay in future periods may vary from those reflected in
the table.
We enter into contracts in the normal course of business to assist in the performance of our research and development
activities and other services and products for operating purposes. These contracts generally provide for termination on
notice, and therefore are cancelable contracts and not included contractual obligations and commitments.
Operating lease commitments represent payments due under our leases of office, laboratory and manufacturing space
in Bedford, Massachusetts and certain office equipment under operating leases that expire in July 2023, March 2024 and
July 2027. We expect lease costs under these commitments to total $2.5 million in 2021 and increase annually. We expect
total costs of approximately $12.8 million over the terms of our current leases.
Under our Credit Agreement, we have been permitted to make interest-only payments since December 2018.
Commencing in January 2021, we are required to make 36 equal monthly installments of principal in the amount of $0.7
million, plus interest, through December 2023.
On March 2019, we issued the 2026 Convertible Notes pursuant to a note purchase agreement, or the Purchase
Agreement, with Cap 1 LLC, an affiliate of Summer Road LLC. The 2026 Convertible Notes accrue interest at an annual
rate of 6% of its outstanding principal amount, payable at maturity, on March 1, 2026, unless earlier converted, repurchased
or redeemed. The holders of the 2026 Convertible Notes may convert all or part of the outstanding principal amount of
their 2026 Convertible Notes into shares of our common stock, par value $0.0001 per share, prior to maturity and provided
that no conversion results in a holder beneficially owning more than 19.99% of our issued and outstanding common stock.
The conversion rate is initially 153.8462 shares of our common stock per $1,000 principal amount of the 2026 Convertible
Notes, which is equivalent to an initial conversion price is $6.50 per share. The conversion rate is
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subject to adjustment in customary circumstances such as stock splits or similar changes to our capitalization. At our
election, we may choose to make such conversion payment in cash, in shares of common stock, or in a combination
thereof. Upon any conversion of any 2026 Convertible Note, we are obligated to make a cash payment to the holder of
such 2026 Convertible Note for any interest accrued but unpaid on the principal amount converted. Upon the occurrence of
a Corporate Transaction (as defined in the 2026 Convertible Notes), the holder of a 2026 Convertible Note is entitled, at
such holder’s option, to convert all of the outstanding principal amount of the 2026 Convertible Note in accordance with
the foregoing and receive an additional, “make-whole” cash payment in accordance with a table set forth in each 2026
Convertible Note.
Upon the occurrence of a Corporate Transaction, each holder of a 2026 Convertible Note has the option to require us
to repurchase all or part of the outstanding principal amount of such 2026 Convertible Note at a repurchase price equal to
100% of the outstanding principal amount of the 2026 Convertible Note to be repurchased, plus accrued and unpaid
interest to, but excluding, the repurchase date.
On or after March 1, 2022, if the last reported sale price of the common stock has been at least 130% of the
conversion rate then in effect for twenty of the preceding thirty trading days (including the last trading day of such period),
we are entitled, at our option, to redeem all or part of the outstanding principal amount of the 2026 Convertible Notes, on a
pro rata basis, at an optional redemption price equal to 100% of the outstanding principal amount of the 2026 Convertible
Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the optional redemption date.
The Purchase Agreement contains customary representations and warranties by us and the noteholder. The Purchase
Agreement does not include any financial covenants. Our obligations under the Purchase Agreement and the 2026
Convertible Notes are subject to acceleration upon the occurrence of specified events of default, including a default or
breach of certain contracts material to us and the delisting and deregistration of our common stock.
We have in-licensed a significant portion of our intellectual property from Incept, an intellectual property holding
company, under an amended and restated license agreement, or the License Agreement, that we entered into with Incept in
January 2012, which was most recently amended in September 2018. We are obligated to pay Incept a royalty equal to a
low-single-digit percentage of net sales made by us or our affiliates of any products, devices, materials, or components
thereof, or the Licensed Products, including or covered by Original IP (as defined in the License Agreement), excluding the
Shape-Changing IP (as defined in the License Agreement), in the Ophthalmic Field of Use (as defined in the License
Agreement). We are obligated to pay Incept a royalty equal to a mid-single-digit percentage of net sales made by us or our
affiliates of any Licensed Products including or covered by Original IP, excluding the Shape-Changing IP, in the Additional
Field of Use (as defined in the License Agreement). We are obligated to pay Incept a royalty equal to a low-single-digit
percentage of net sales made by us or our affiliates of any Licensed Products including or covered by Incept IP (as defined
in the License Agreement) or Joint IP (as defined in the License Agreement) in the field of drug delivery. Any sublicensee
of ours also will be obligated to pay Incept a royalty on net sales of Licensed Products made by it and will be bound by the
terms of the agreement to the same extent as we are. We are obligated to reimburse Incept for our share of the reasonable
fees and costs incurred by Incept in connection with the prosecution of the patent applications licensed to us under the
agreement. Our share of these fees and costs is equal to the total amount of such fees and costs divided by the total number
of Incept’s exclusive licensees of the patent application. We have not included in the table above any payments to Incept
under this license agreement as the amount, timing and likelihood of such payments are not known.
In October 2016, we entered into the Collaboration Agreement with Regeneron. If the Option is exercised,
Regeneron will be obligated to conduct further preclinical development and an initial clinical trial under a collaboration
plan. We are obligated to reimburse Regeneron for certain development costs during the period through the completion of
the initial clinical trial, subject to a cap of $25.0 million, which cap may be increased by up to $5.0 million under certain
circumstances. We have not included in the table above any payments to Regeneron under this Collaboration Agreement as
the timing of such payments are not known. Regeneron will be responsible for funding an initial preclinical tolerability
study, which Regeneron initiated in early 2018. We do not expect our funding requirements under our collaboration with
Regeneron to be material over the next twelve months. If Regeneron elects to proceed with further development beyond the
initial clinical trial, it will be solely responsible for conducting and funding further development and commercialization of
product candidates. On May 8, 2020, we entered into an amendment (the “Regeneron Amendment”) to the Collaboration
Agreement. Pursuant to the Regeneron Amendment, we and Regeneron have adopted a new workplan to transition joint
efforts under the Collaboration Agreement to the research and development of an extended-delivery formulation of
aflibercept to be delivered to the suprachoroidal space. Regeneron has agreed to pay
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our personnel and material costs for specified preclinical development activities in connection with the revised workplan,
as well as certain other costs. In addition, the Regeneron Amendment provides for the modification of the terms of the
Option previously granted to Regeneron under the Collaboration Agreement.
On October 29, 2020, we entered into the License Agreement with AffaMed. Pursuant to the terms of the License
Agreement, we are generally responsible for expenses related to the development and commercialization of DEXTENZA
regarding ocular inflammation and pain following cataract surgery and allergic conjunctivitis, or collectively, the
DEXTENZA Field, and for OTX-TIC, or collectively with DEXTENZA, the AffaMed Licensed Products, regarding open-
angle glaucoma and ocular hypertension, or collectively, the TIC Field and, with the DEXTENZA Field, each a Field, in
each case in mainland China, Taiwan, Hong Kong, Macau, South Korea, and the countries of the Association of Southeast
Asian Nations, or collectively, the Territories, provided that AffaMed (i) reimburse us a low-teen percentage of expenses
incurred in connection with certain clinical trials conducted by us and designed to support marketing approval of the
AffaMed Licensed Product by FDA or the European Medicines Agency, or the Global Studies; (ii) is solely responsible for
expenses incurred in connection with territory-specific clinical trials that it conducts in furtherance of the development plan
agreed between the parties in the applicable Fields in the Territories, or the Local Studies; and (iii) reimburse us in full for
expenses incurred in connection with obtaining and maintaining regulatory approvals of the AffaMed Licensed Products in
the applicable Fields in the Territories. In the event AffaMed declines to participate in a Global Study or to conduct a
Local Study in any jurisdiction in which we determine to conduct such a study, we are relieved of our obligation to provide
AffaMed clinical data from such study, other than safety data, unless AffaMed subsequently reimburses us in the amounts
described above plus a prespecified premium.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as
defined in the rules and regulations of the Securities and Exchange Commission, such relationships with unconsolidated
entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established
for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.
Recently Issued Accounting Pronouncements
Information regarding new accounting pronouncements is included in Note 2 – Summary of Significant Accounting
Policies to the current period’s consolidated financial statements.
Smaller Reporting Company Status
We are a “smaller reporting company,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as
amended. We would cease to be a smaller reporting company if we have a non-affiliate public float in excess of $250
million and annual revenues in excess of $100 million, or a non-affiliate public float in excess of $700 million, determined
on an annual basis. As a smaller reporting company, we are permitted and intend to rely on exemptions from certain
disclosure requirements that are applicable to other public companies that are not smaller reporting companies. These
exemptions include:
● being permitted to provide only two years of audited consolidated financial statements in this Annual Report on
Form 10-K, with correspondingly reduced “Management's Discussion and Analysis of Financial Condition and
Results of Operations” disclosure;
● reduced disclosure obligations regarding executive compensation; and
● not being required to furnish a contractual obligations table in “Management's Discussion and Analysis of
Financial Condition and Results of Operations”; and
● not being required to furnish a stock performance graph in our annual report.
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We expect to continue to take advantage of some or all of the available exemptions as long as we continue to qualify
as a smaller reporting company. We may cease to qualify as a smaller reporting company as early as June 30, 2021, which
would require us to comply with disclosure requirements that are applicable to other public companies that are not smaller
reporting companies following the filing of our Annual Report on Form 10-K for the year ending December 31, 2021, and
any portions of our definitive proxy statement relating to our 2022 Annual Meeting of Stockholders incorporated by
reference therein.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk related to changes in interest rates. As of December 31, 2020, we had cash and cash
equivalents of $228.1 million, which consisted of money market funds. We have policies requiring us to invest in high-
quality issuers, limit our exposure to any individual issuer, and ensure adequate liquidity. Our primary exposure to market
risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because
our investments are in short-term securities. Due to the short-term duration of our investment portfolio and the low risk
profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the
fair market value of our portfolio.
Item 8.
Financial Statements and Supplementary Data
Our consolidated financial statements, together with the report of our independent registered public accounting firm,
appear on pages F-1 through F-35 of this Annual Report on Form 10-K.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures as of December 31, 2020. The term “disclosure controls and
procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the
Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to
be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and
communicated to the company’s management, including its principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives
and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and
procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief
Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were
effective at the reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
for the company. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under
the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal
financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
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external purposes in accordance with generally accepted accounting principles and includes those policies and procedures
that:
● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the company;
● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and
● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of
our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control
—Integrated Framework (2013). Based on that assessment, our management concluded that, as of December 31, 2020, our
internal control over financial reporting was effective.
Changes in Internal Control Over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) occurred during the three months ended December 31, 2020 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
Item 9B.
Other Information
None.
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Item 10.
Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
PART III
The information required by this item will be set forth in our Proxy Statement for the 2021 Annual Meeting of
Stockholders and is incorporated in this Annual Report on Form 10-K by reference.
Delinquent Section 16(a) Reports
The information required by this item will be set forth in our Proxy Statement for the 2021 Annual Meeting of
Stockholders, if applicable, and is incorporated in this Annual Report on Form 10-K by reference.
Code of Ethics
We have adopted a code of business conduct and ethics that applies to our directors and officers (including our
principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing
similar functions) as well as our other employees. A copy of our code of business conduct and ethics is available on our
website. We intend to post on our website all disclosures that are required by applicable law, the rules of the Securities and
Exchange Commission or the Nasdaq Global Market concerning any amendment to, or waiver of, our code of business
conduct and ethics.
Director Nominees
The information required by this item will be set forth in our Proxy Statement for the 2021 Annual Meeting of
Stockholders and is incorporated in this Annual Report on Form 10-K by reference.
Audit Committee
We have separately designated a standing Audit Committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended, or the Exchange Act. Additional information regarding the Audit
Committee that is required by this item will be set forth in our Proxy Statement for the 2021 Annual Meeting of
Stockholders and is incorporated in this Annual Report on Form 10-K by reference.
Audit Committee Financial Expert
Our board of directors has determined that Bruce Peacock is the “audit committee financial expert” as defined by
Item 407(d)(5) of Regulation S-K of the Exchange Act and is “independent” under the rules of the Nasdaq Global Market.
Item 11.
Executive Compensation
The information required by this item will be set forth in our Proxy Statement for the 2021 Annual Meeting of
Stockholders and is incorporated in this Annual Report on Form 10-K by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be set forth in our Proxy Statement for the 2021 Annual Meeting of
Stockholders and is incorporated in this Annual Report on Form 10-K by reference.
Securities Authorized for Issuance under Equity Compensation Plans
The information required by this item will be set forth in our Proxy Statement for the 2021 Annual Meeting of
Stockholders and is incorporated in this Annual Report on Form 10-K by reference.
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Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be set forth in our Proxy Statement for the 2021 Annual Meeting of
Stockholders and is incorporated in this Annual Report on Form 10-K by reference.
Item 14.
Principal Accounting Fees and Services
The information required by this item will be set forth in our Proxy Statement for the 2021 Annual Meeting of
Stockholders and is incorporated in this Annual Report on Form 10-K by reference.
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Item 15.
Exhibits, Financial Statement Schedules
PART IV
The following financial statements are filed as part of this Annual Report on Form 10-K:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
F-2
F-4
F-5
F-6
F-7
F-8
No financial statement schedules have been filed as part of this Annual Report on Form 10-K because they are not
applicable, not required or because the information is otherwise included in our consolidated financial statements or notes
thereto.
The exhibits filed as part of this Annual Report on Form 10-K are set forth on the Exhibit Index immediately
following Item 16. The Exhibit Index is incorporated herein by reference.
Item 16.
Form 10-K Summary
None.
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EXHIBIT INDEX
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
Description of Exhibit
Restated Certificate of Incorporation of
the Registrant
Amended and Restated Bylaws of the
Registrant
Specimen Stock Certificate evidencing
the shares of common stock
Registration Rights Agreement, dated as
of March 1, 2019, by and among the
Registrant and the Purchasers identified
therein
Description of Securities Registered
under Section 12 of the Exchange Act
Incorporated by Reference
Form
8-K
File Number
001-36554
Date of
Filing
7/30/2014
Exhibit
Number
3.1
Filed
Herewith
8-K
001-36554
7/30/2014
3.2
S-1/A
333-196932
7/11/2014
4.1
10-K
001-36554
3/7/2019
4.2
10-K
001-36554
3/12/2020
4.3
10.1+
2006 Stock Incentive Plan, as amended
10.2+
10.3+
Form of Stock Option Agreement under
2006 Stock Incentive Plan
Form of Restricted Stock Agreement
under 2006 Stock Incentive Plan
S-1
S-1
S-1
333-196932
6/20/2014
10.1
333-196932
6/20/2014
10.2
333-196932
6/20/2014
10.3
10.4+
2014 Stock Incentive Plan
S-1/A
333-196932
7/11/2014
10.4
10.5+
10.6+
Form of Incentive Stock Option
Agreement under 2014 Stock Incentive
Plan
Form of Non-statutory Stock Option
Agreement under 2014 Stock Incentive
Plan
10.7+
Form of Restricted Stock Agreement
under 2014 Stock Incentive Plan
S-1/A
333-196932
7/11/2014
10.5
S-1/A
333-196932
7/11/2014
10.6
S-1/A
333-196932
7/11/2014
10.7
10.8+
2019 Inducement Stock Incentive Plan
10-Q
001-036554
11/12/2019
10.1
10.9+
Amendment to 2019 Inducement Stock
Incentive Plan
10.10+
10.11†
Form of Non-statutory Stock Option
Agreement under 2019 Inducement
Stock Incentive Plan
Amended and Restated License
Agreement, dated January 27, 2012,
between the Registrant and Incept LLC
X
10-Q
001-036554
11/12/2019
10.2
S-1
333-196932
6/20/2014
10.8
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Table of Contents
Exhibit
Number
10.12
Description of Exhibit
Lease Agreement dated September 2,
2009, by and between the Registrant and
RAR2-Crosby Corporate Center QRS,
Inc., as amended.
Incorporated by Reference
Form
S-1
File Number
333-196932
Date of
Filing
6/20/2014
Exhibit
Number
10.9
Filed
Herewith
10.13+
2014 Employee Stock Purchase Plan
S-1/A
333-196932
7/11/2014
10.10
10.14
10.15
10.16
10.17†
10.18
10.19+
Form of Indemnification Agreement by
and between the Registrant and each of
its directors and executive officers
Transition, Separation and Release of
Claims Agreement by and between the
Registrant and Dr. Amarpreet S.
Sawhney dated as of May 29, 2019
Lease Agreement dated June 17, 2016
between the WS NF 15 Crosby Drive,
LLC and the Registrant
Collaboration, Option and License
Agreement between the Registrant and
Regeneron Pharmaceuticals, Inc. dated
October 10, 2016
Open Market Sales AgreementSM, dated
as of April 5, 2019, by and between the
Registrant and Jefferies LLC
Employment Agreement, by and between
the Registrant and Philip Strassburger,
dated August 28, 2020
10.20
Consulting Agreement by and between
the Registrant and Dr. Amarpreet S.
Sawhney, dated as of May 29, 2019
10.21+
10.22+
Employment Agreement, by and between
the Registrant and Antony C. Mattessich,
dated as of June 20, 2017
Non-Statutory Stock Option Agreement,
by and between the Registrant and
Antony C. Mattessich dated as of June
20, 2017
10.23+
Employment Agreement, by and between
the Registrant and Donald Notman, dated
as of September 25, 2017
10.24
Second Amendment to Lease, by and
between the Registrant and CCC
Investors LLC, dated October 10, 2017
S-1
333-196932
6/20/2014
10.12
8-K
001-36554
5/30/2019
10.1
10-Q
001-36554
8/9/2016
10.1
10-Q
001-36554
11/9/2016
10.1
8-K
001-36554
4/5/2019
1.1
X
8-K
001-36554
5/30/2019
10.2
8-K
001-36554
6/22/2017
10.2
8-K
001-36554
6/22/2017
10.3
8-K
001-36554
9/25/2017
10.1
8-K
001-36554
10/16/2017
10.1
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Table of Contents
Exhibit
Number
10.25+
10.26†
10.27
10.28
10.29
10.30
10.31
Description of Exhibit
Form
File Number
Date of
Filing
Exhibit
Number
Filed
Herewith
Incorporated by Reference
Employment Agreement, by and between
the Registrant and Michael Goldstein,
dated as of September 25, 2017
Second Amended and Restated License
Agreement, dated September 13, 2018,
by and between the Registrant and Incept
LLC
Third Amended and Restated Credit and
Security Agreement dated December 21,
2018 by and among MidCap Financial
Trust, as administrative agent, the
Registrant, and the Lenders listed therein
First Amendment to Third Amended and
Restated Credit and Security Agreement,
dated as of February 21, 2019, by and
among the Registrant, MidCap Financial
Trust, as administrative agent, and the
Lenders listed therein
Second Amendment to Third Amended
and Restated Credit and Security
Agreement, by and among the
Registrant, MidCap Financial Trust, as
administrative agent, and the Lenders
listed therein
Subordination Agreement, dated as of
February 21, 2019, by and among the
Registrant, MidCap Financial Trust, as
administrative agent, and the Lenders
listed therein
Note Purchase Agreement (including
Form of Senior Subordinated
Convertible Note), dated as of February
21, 2019, by and among the Registrant
and the Purchasers listed therein
10-K
001-36554
3/8/2018
10.30
8-K
001-36554
9/19/2018
10.1
8-K
001-36554
12/28/2018
10.1
8-K
001-36554
2/22/2019
10.3
10-Q
001-36554
8/7/2019
10.5
8-K
001-36554
2/22/2019
10.4
8-K
001-36554
2/22/2019
10.1
10.32
Sublease, dated as of April 4, 2019, by
and among Ocular Therapeutix, Inc. and
Holcim (US) Inc.
10.33+
Employment Agreement, by and between
the Registrant and Patricia Kitchen,
dated as of April 21, 2019
10-Q
001-36554
5/10/2019
10.4
10-Q
001-36554
5/8/2020
10.1
153
Incorporated by Reference
Form
8-K
File Number
001-36554
Date of
Filing
5/14/2020
Exhibit
Number
10.1
Filed
Herewith
10-Q
001-36554
11/5/2020
10.1
Table of Contents
Exhibit
Number
10.34*
10.35*
10.36*
Description of Exhibit
Amendment to Collaboration, Option
and License Agreement, by and between
the Registrant and Regeneron, dated May
8, 2020
License Agreement, by and between the
Registrant and AffaMed Therapeutics
Limited, dated as of October 29, 2020
Supplement to License Agreement, by
and between the Registrant and AffaMed
Therapeutics Limited, dated as of
January 18, 2021
21.1
Subsidiaries of the Registrant
23.1
Consent of PricewaterhouseCoopers LLP
X
X
X
X
X
X
X
X
X
X
X
X
X
X
31.1
31.2
32.1
32.2
Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as amended
Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as amended
Certification of principal executive officer pursuant to 18 U.S.C. §1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Certification of principal financial officer pursuant to 18 U.S.C. §1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File
because XBRL tags are embedded within the Inline XBRL document)
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Database
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
104
The cover page from this Annual Report on Form 10-K, formatted in Inline XBRL and contained in
Exhibit 101
† Confidential treatment has been granted as to certain portions, which portions have been omitted and separately filed
with the Securities and Exchange Commission.
+ Management contract or compensatory plan or arrangement filed in response to Item 15(a)(3) of the Instructions to the
Annual Report on Form 10-K.
* Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
154
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 11, 2021
OCULAR THERAPEUTIX, INC.
By: /s/ Donald Notman
Donald Notman
Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following
persons on behalf of the registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Antony Mattessich
Antony Mattessich
/s/ Donald Notman
Donald Notman
/s/ Charles Warden
Charles Warden
/s/ Jeffrey S. Heier, M.D.
Jeffrey S. Heier, M.D.
/s/ Seung Suh Hong, PH.D.
Seung Suh Hong, PH.D.
/s/ Richard L. Lindstrom, M.D.
Richard L. Lindstrom, M.D.
/s/ Bruce A. Peacock
Bruce A. Peacock
/s/ Leslie Williams
Leslie Williams
President and Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
March 11, 2021
March 11, 2021
Chairman of the Board
March 11, 2021
Director
Director
Director
Director
Director
March 11, 2021
March 11, 2021
March 11, 2021
March 11, 2021
March 11, 2021
Table of Contents
OCULAR THERAPEUTIX, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
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Page
F-2
F-4
F-5
F-6
F-7
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Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Ocular Therapeutix, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Ocular Therapeutix, Inc. and its subsidiary (the
“Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive
loss, of changes in stockholders’ equity (deficit) and of cash flows for the years then ended, including the related notes
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the
results of its operations and its cash flows for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such
opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts
or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of the Derivative Liability
As described in Note 4 to the consolidated financial statements, the Company’s derivative liability balance was $98.3
million as of December 31, 2020 and the change in fair value recorded in other income (expense), net was expense of $86.2
million. The derivative liability was recorded at fair value upon the issuance of the 2026 convertible notes and is
subsequently remeasured to fair value at each reporting period. The derivative liability was initially valued and remeasured
using a “with-and-without” method. The “with-and-without” methodology involves valuing the whole instrument on an as-
is basis and then valuing the instrument without the embedded conversion option. The difference between the entire
instrument with the embedded conversion option compared to the instrument without the embedded conversion option is
the fair value of the derivative, recorded as the derivative liability. The fair value of the 2026
F-2
Table of Contents
convertible notes with and without the conversion option is estimated using a binomial lattice approach. The main inputs to
valuing the 2026 convertible notes with the conversion option as of December 31, 2020 include the Company’s stock price
on the valuation date, the expected annual volatility of the Company’s stock and the bond yield.
The principal considerations for our determination that performing procedures relating to the valuation of the derivative
liability is a critical audit matter are the significant judgment by management to determine the fair value of the derivative
liability using a binomial lattice model; this in turn led to a high degree of auditor judgment, subjectivity, and effort in
performing procedures and in evaluating the audit evidence obtained related to the valuation of the derivative liability and
management’s significant assumption related to the bond yield. In addition, the audit effort involved the use of
professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included, among others, (i) the involvement of
professionals with specialized skill and knowledge to assist in developing an independent range of fair values for the
derivative liability and (ii) comparing the independent estimate to management’s fair value estimate to evaluate the
reasonableness of management’s assumptions. Developing the independent estimate involved testing the completeness and
accuracy of the inputs provided by management and evaluating management’s assumptions related to bond yield based on
observable market yield movements.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 11, 2021
We have served as the Company’s auditor since 2008.
F-3
Table of Contents
OCULAR THERAPEUTIX, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Restricted cash
Operating lease assets
Total assets
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Operating lease liabilities
Notes payable, net of discount, current
Total current liabilities
Other liabilities:
Operating lease liabilities, net of current portion
Derivative liability
Deferred revenue
Notes payable, net of discount
2026 convertible notes, net
Total liabilities
Commitments and contingencies (Note 15)
Stockholders’ equity (deficit):
December 31,
2020
December 31,
2019
$
$
$
$
$
$
228,057
12,252
1,201
4,650
246,160
8,095
1,764
5,844
261,863
2,709
14,307
1,358
8,290
26,664
7,548
98,313
12,000
16,936
24,307
185,768
54,437
2,548
954
2,231
60,170
10,151
1,764
6,655
78,740
3,268
7,635
1,126
—
12,029
8,905
12,124
—
25,007
24,305
82,370
Preferred stock, $0.0001 par value; 5,000,000 shares authorized and no shares issued
or outstanding at December 31, 2020 and December 31, 2019, respectively
Common stock, $0.0001 par value; 100,000,000 shares authorized and 75,996,732
and 50,333,559 shares issued and outstanding at December 31, 2020 and
December 31, 2019, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity (deficit)
Total liabilities and stockholders’ equity (deficit)
—
—
8
615,338
(539,251)
76,095
261,863
$
5
379,980
(383,615)
(3,630)
78,740
$
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
OCULAR THERAPEUTIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
Revenue:
Product revenue, net
Total revenue, net
Costs and operating expenses:
Cost of product revenue
Research and development
Selling and marketing
General and administrative
Total costs and operating expenses
Loss from operations
Other income (expense):
Interest income
Interest expense
Change in fair value of derivative liability
Other income (expense), net
Total other income (expense), net
Net loss and comprehensive loss
Net loss per share, basic and diluted
Weighted average common shares outstanding, basic and diluted
Year Ended December 31,
2020
2019
$
17,403
17,403
$
4,227
4,227
2,325
41,091
24,491
22,122
90,029
(85,802)
2,083
28,694
26,614
22,859
80,250
(62,847)
168
(6,768)
(86,189)
1,229
(6,101)
4,310
(8)
(570)
(86,372)
(1.91)
45,273,231
—
(92,789)
(155,636) $
(2.56) $
$
$
60,752,225
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
OCULAR THERAPEUTIX, INC.
(In thousands, except share data)
Balances at December 31, 2018
Issuance of common stock upon exercise of stock options
Issuance of common stock in connection with employee stock purchase plan
Issuance of common stock upon public offering, net of issuance costs
Stock-based compensation expense
Net loss
Balances at December 31, 2019
Issuance of common stock upon exercise of stock options
Issuance of common stock in connection with employee stock purchase plan
Issuance of common stock upon public offering, net of issuance costs
Stock-based compensation expense
Net loss
Balances at December 31, 2020
Common Stock
—
—
$
Additional
Paid-in
Par Value Capital
$ 333,114
4
78
—
451
—
37,578
1
8,759
—
0
—
379,980
5
2,585
1
747
—
224,495
2
—
7,531
—
8
$ 615,338
$
Shares
41,518,091
28,583
130,945
8,655,940
50,333,559
567,776
161,175
24,934,222
—
—
75,996,732
Accumulated
Deficit
Total
Stockholders’
Equity
(Deficit)
$ (297,243) $
—
—
—
—
(86,372)
(383,615)
(155,636)
$ (539,251) $
35,875
78
451
37,579
8,759
(86,372)
(3,630)
2,586
747
224,497
7,531
(155,636)
76,095
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
OCULAR THERAPEUTIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense
Non-cash interest expense
Change in fair value of derivative liability
Depreciation and amortization expense
Loss on disposal of property and equipment
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses and other current assets
Inventory
Operating lease assets
Accounts payable
Accrued expenses
Deferred revenue
Operating lease liabilities
Net cash used in operating activities
Cash flows from investing activities:
Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of 2026 convertible notes, net of issuance costs
Proceeds from exercise of stock options
Proceeds from issuance of common stock pursuant to employee stock purchase plan
Proceeds from the Paycheck Protection Program Loan
Repayment of the Paycheck Protection Program Loan
Proceeds from issuance of common stock upon public offering, net
Net cash provided by financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental disclosure of cash flow information:
Cash paid for interest
Supplemental disclosure of non-cash investing and financing activities:
Additional right of use asset and related lease liability
Additions to property and equipment included in accounts payable and accrued expenses at
balance sheet dates
Derivative liability in connection with issuance of 2026 convertible notes
Public offering costs included in accounts payable and accrued expenses at balance sheet dates
Year Ended December 31,
2020
2019
$ (155,636)
$ (86,372)
7,531
4,415
86,189
2,773
—
(9,704)
(2,419)
(247)
811
(452)
2,311
12,000
(1,125)
(53,554)
(841)
(841)
8,759
3,683
(4,310)
2,530
7
(2,347)
(518)
(737)
733
124
1,714
—
(844)
(77,578)
(2,238)
(2,238)
—
2,585
747
3,201
(3,201)
224,682
228,014
173,620
56,201
$ 229,821
37,275
78
451
—
—
37,537
75,341
(4,475)
60,676
$ 56,201
$
$
$
$
$
2,354
$
2,298
— $
2,044
$
91
214
— $ 16,434
42
184
$
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
OCULAR THERAPEUTIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
1. Nature of the Business and Basis of Presentation
Ocular Therapeutix, Inc. (the “Company”) was incorporated on September 12, 2006 under the laws of the State of
Delaware. The Company is a biopharmaceutical company focused on the formulation, development and commercialization
of innovative therapies for diseases and conditions of the eye using its proprietary, bioresorbable hydrogel platform
technology. The Company’s product pipeline candidates provide differentiated drug delivery solutions that reduce the
complexity and burden of the current standard of care by creating local programmed-release alternatives. Since inception,
the Company’s operations have been primarily focused on organizing and staffing the Company, acquiring rights to
intellectual property, business planning, raising capital, developing its technology, identifying potential product candidates,
undertaking preclinical studies and clinical trials, manufacturing initial quantities of its products and product candidates
and building the initial sales and marketing infrastructure for the commercialization of the Company’s approved products
and product candidates and launching its initial product.
The Company is subject to risks common to companies in the biotechnology industry including, but not limited to,
new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with
government regulations, regulatory approval and compliance, reimbursement, uncertainty of market acceptance of products
and the need to obtain additional financing. Recently approved products will require significant sales, marketing and
distribution support up to and including upon their launch. Product candidates currently under development will require
significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory
approval, prior to commercialization.
As of December 31, 2020, the Company had two FDA-approved products in commercialization in the United States:
DEXTENZA® (dexamethasone insert) 0.4mg, an intracanalicular insert for the treatment of post-surgical ocular
inflammation and pain, and ReSure® Sealant, an ophthalmic device designed to prevent wound leaks in corneal incisions
following cataract surgery. While ReSure Sealant is commercially available in the United States, it does not receive sales
support and has not in the past generated, nor is it anticipated to in the future to generate, material revenues. The
Company’s other product candidates are in clinical stage development. There can be no assurance that the Company’s
research and development will be successfully completed, that adequate protection for the Company’s intellectual property
will be obtained, that any products developed will obtain necessary government regulatory approval and adequate
reimbursement or that any approved products will be commercially viable. Even if the Company’s product development
efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The
Company operates in an environment of rapidly changing technology and substantial competition from pharmaceutical and
biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants. The
Company may not be able to generate significant revenue from sales of any product for several years, if at all. Accordingly,
the Company will need to obtain additional capital to finance its operations.
The Company has incurred losses and negative cash flows from operations since its inception, and the Company
expects to continue to generate operating losses and negative cash flows from operations in the foreseeable future. As of
December 31, 2020, the Company had an accumulated deficit of $539,251. The Company believes that its existing cash
and cash equivalents of $228,057, as of December 31, 2020, along with its current operating plan, which includes revenues
from the sale of DEXTENZA, will enable it to fund its planned operating expenses, debt service obligations and capital
expenditure requirements through at least the next 12 months. The future viability of the Company beyond that point is
dependent on its ability to generate cash flows from the sale of DEXTENZA and raise additional capital to finance its
operations. The Company will need to finance its operations through public or private securities offerings, debt financings
or other sources, which may include licensing, collaborations or other strategic transactions or arrangements. Although the
Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such
additional financing on terms acceptable to the Company, if at all. If the Company is unable to obtain funding, the
Company could be forced to delay, reduce or eliminate some or all of its research and development programs for product
candidates, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects,
or the Company may be unable to continue operations.
.
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Table of Contents
The accompanying consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America (“GAAP”).
Risks and Uncertainties
The Company is monitoring the potential impact of the COVID-19 pandemic, if any, on the carrying value of certain
assets. To date, the Company has not experienced a material business disruption, nor has it incurred impairment of any
assets as a result of the COVID-19 pandemic. The extent to which these events may impact the Company’s business will
depend on future developments, which are highly uncertain and cannot be predicted at this time. The duration and intensity
of the COVID-19 pandemic and any resulting disruption to the Company’s operations is uncertain, and the Company will
continue to assess the impact of the COVID-19 pandemic on its financial position.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements reflect the operations of the Company and its wholly-owned
subsidiary. All intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during
the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include,
but are not limited to, revenue recognition, and the fair value of derivatives. Estimates are periodically reviewed in light of
changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates.
Cash Equivalents
The Company considers all short-term, highly liquid investments with original maturities of ninety days or less at
date of purchase to be cash equivalents. Cash equivalents, which primarily consist of money market accounts, are stated at
fair value.
Revenue Recognition
Product Revenue
The Company recognizes product revenue from DEXTENZA for the treatment of post-surgical ocular inflammation
and pain, which it began selling to customers in June 2019, and ReSure Sealant. The Company has generated limited
revenues from ReSure Sealant to date and does not expect significant future sales.
In November 2018, the FDA approved DEXTENZA for the treatment of ocular pain following ophthalmic surgery.
The Company entered into a limited number of arrangements with specialty distributors in the United States to distribute
DEXTENZA. The Company recognizes revenue in accordance with Accounting Standards Codification 606 – Revenue
from Contracts with Customers (“Topic 606”). Topic 606 applies to all contracts with customers, except for contracts that
are within the scope of other standards, such as leases, insurance arrangements and financial instruments. Under Topic 606,
an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects
the consideration which the entity expects to be entitled to in exchange for those goods or services.
To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the
entity performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance
obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance
obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The
Company only applies the five-step model to arrangements that meet the definition of a contract with a customer under
Topic 606, including when it is probable that the Company will collect the consideration it is entitled to in exchange for the
goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the
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scope of Topic 606, the Company assesses the goods or services promised within each contract, determines those that are
performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as
revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the
performance obligation is satisfied. For a complete discussion of accounting for product revenue, see Product Revenue,
Net (below).
Product Revenue, Net— The Company derives its product revenues from the sale of DEXTENZA in the United
States to customers, which includes a limited number of specialty distributors, who then subsequently resell DEXTENZA
to physicians, clinics and certain medical centers or hospitals. In addition to distribution agreements with customers, the
Company enters into arrangements with government payers that provide for government mandated rebates and chargebacks
with respect to the purchase of DEXTENZA.
The Company recognizes revenue on product sales when the customer obtains control of the Company's product,
which occurs at a point in time (upon delivery to the customer). The Company has determined that the delivery of
DEXTENZA to its customers constitutes a single performance obligation. There are no other promises to deliver goods or
services beyond what is specified in each accepted customer order. The Company has assessed the existence of a
significant financing component in the agreements with its customers. The trade payment terms with the Company’s
customers do not exceed one year and therefore the Company has elected to apply the practical expedient and no amount of
consideration has been allocated as a financing component. Product revenues are recorded net of applicable reserves for
variable consideration, including discounts and allowances.
Transaction Price, including Variable Consideration— Revenues from product sales are recorded at the net sales
price (transaction price), which includes estimates of variable consideration for which reserves are established.
Components of variable consideration include trade discounts and allowances, product returns, government chargebacks,
discounts and rebates, and other incentives, such as voluntary patient assistance, and other fee-for-service amounts that are
detailed within contracts between the Company and its customers relating to the Company’s sale of DEXTENZA. These
reserves, as detailed below, are based on the amounts earned, or to be claimed on the related sales, and are classified as
reductions of accounts receivable or a current liability. These estimates take into consideration a range of possible
outcomes which are probability-weighted in accordance with the expected value method in Topic 606 for relevant factors
such as current contractual and statutory requirements, specific known market events and trends, industry data, and
forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the
amount of consideration to which it is entitled based on the terms of the respective underlying contracts.
The amount of variable consideration which is included in the transaction price may be constrained, and is included
in the net sales price, only to the extent that it is probable that a significant reversal in the amount of the cumulative
revenue recognized under the contract will not occur in a future period. Actual amounts of consideration ultimately
received may differ from the Company’s estimates. If actual results in the future vary from the Company’s original
estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such
variances become known.
Trade Discounts and Allowances—The Company compensates (through trade discounts and allowances) its
customers for sales order management, data, and distribution services. However, the Company has determined such
services received to date are not distinct from the Company’s sale of products to the customer and, therefore, these
payments have been recorded as a reduction of revenue within the statement of operations and comprehensive loss, as well
as a reduction to accounts receivables, net on the consolidated balance sheets.
Product Returns— Consistent with industry practice, the Company generally offers customers a limited right of
return for product that has been purchased from the Company in certain circumstances as further discussed below. The
Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a
reduction of revenue in the period the related product revenue is recognized, as well as within accrued expenses and other
current liabilities, in the accompanying consolidated balance sheets. The Company currently estimates product return
reserves using available industry data and its own sales information, including its visibility into the inventory remaining in
the distribution channel. The Company has received no returns to date and believes the returns of DEXTENZA will be
minimal.
Government Chargebacks— Chargebacks for fees and discounts to qualified government healthcare providers
represent the estimated obligations resulting from contractual commitments to sell products to qualified U.S. Department
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of Veterans Affairs hospitals and 340B entities at prices lower than the list prices charged to customers who directly
purchase the product from the Company. The 340B Drug Discount Program is a U.S. federal government program created
in 1992 that requires drug manufacturers to provide outpatient drugs to eligible health care organizations and covered
entities at significantly reduced prices. Customers charge the Company for the difference between what they pay for the
product and the statutory selling price to the qualified government entity. These allowances are established in the same
period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivables, net.
Chargeback amounts are generally determined at the time of resale to the qualified government healthcare provider by
customers, and the Company generally issues credits for such amounts within a few weeks of the Customer’s notification
to the Company of the resale. Allowance for chargebacks consist of credits that the Company expects to issue for units that
remain in the distribution channel inventories at each reporting period-end that the Company expects will be sold to
qualified healthcare providers, and chargebacks that customers have claimed, but for which the Company has not yet issued
a credit.
Government Rebates— The Company is subject to discount obligations under state Medicaid programs and
Medicare. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of
product revenue and the establishment of a current liability which is included in accrued expenses and other current
liabilities on the consolidated balance sheets. For Medicare, the Company also estimates the number of patients in the
prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program.
For Medicaid programs, the Company estimates the portion of sales attributed to Medicaid patients and records a liability
for the rebates to be paid to the respective state Medicaid programs. The Company’s liability for these rebates consists of
invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received,
estimates of claims for the current quarter, and estimated future claims that will be made for product that has been
recognized as revenue, but which remains in the distribution channel inventories at the end of each reporting period.
Rebates— The Company offers rebate payments for which ambulatory surgical centers, hospital out-patient
departments and other prescribers qualify by meeting quarterly purchase volumes of DEXTENZA under the Company’s
rebate program. The Company calculates rebate payment amounts due under this program quarterly, based on actual
qualifying purchase and applies a contractual discount rate. The calculation of the accrual for rebates is based on an
estimate of claims that the Company expects to receive associated with product that has been recognized as revenue, but
remains in the distribution channel inventories at the end of each reporting period. The adjustments are recorded in the
same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a
current liability which is included as an accrued expenses and other current liabilities on the consolidated balance sheets.
Other Incentives— Other incentives which the Company offers include voluntary patient assistance programs, such
as the co-pay assistance program, which are intended to provide financial assistance to qualified commercially-insured
patients with prescription drug co-payments required by payers. The calculation of the accrual for co-pay assistance is
based on an estimate of claims and the cost per claim that the Company expects to receive associated with product that has
been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period. The
adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue
and the establishment of a current liability which is included as an accrued expenses and other current liabilities on the
consolidated balance sheets.
Collaboration Revenue
To determine the appropriate amount of revenue to be recognized for arrangements the Company determines are
within the scope of Topic 606, the Company performs the following steps: (i) identify the contract(s) with its customer; (ii)
identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price
to the performance obligations in the contract; and (v) recognize revenue when or as each performance obligation is
satisfied.
The Company accounts for a contract with a customer that is within the scope of Topic 606 when all of the following
criteria are met: (i) the arrangement has been approved by the parties and the parties are committed to perform their
respective obligations; (ii) each party’s rights regarding the goods and/or services to be transferred can be identified; (iii)
the payment terms for the goods and/or services to be transferred can be identified; (iv) the arrangement has commercial
substance; and (v) collection of substantially all of the consideration to which the Company will be entitled in exchange for
the goods and/or services that will be transferred to the customer is probable. The Company also
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determines the term of the contract based on the period in which the Company and its customer have present and
enforceable rights and obligations for purposes of identifying the performance obligations and determining the transaction
price.
The Company evaluates contracts that contain multiple promises to determine which promises are distinct. Promises
are considered to be distinct and therefore, accounted for as separate performance obligations, provided that: (i) the
customer can benefit from the good or service either on its own or together with other resources that are readily available to
the customer and (ii) the promise to transfer the good or service to the customer is separately identifiable from other
promises in the contract. In assessing whether a promise is distinct, the Company considers factors such as whether: (i) the
Company provides a significant service of integrating goods and/or services with other goods and/or services promised in
the contract; (ii) one or more of the goods and/or services significantly modifies or customizes, or are significantly
modified or customized by one or more of the other goods and/or services promised in the contract; and (iii) the goods
and/or services are highly interdependent or highly interrelated. Individual goods or services (or bundles of goods and/or
services) that meet both criteria for being distinct are accounted for as separate performance obligations. Promises that are
not distinct at contract inception are combined and accounted for as a single performance obligation. Options to acquire
additional goods and/or services are evaluated to determine if such option provides a material right to the customer that it
would not have received without entering into the contract. If so, the option is accounted for as a separate performance
obligation. If not, the option is considered a marketing offer which would be accounted for as a separate contract upon the
customer’s election.
The transaction price is generally comprised of an upfront payment due at contract inception and variable
consideration in the form of payments for the Company’s goods and services and materials and milestone payments due
upon the achievement of specified events. Other payments the Company could be entitled to include tiered royalties earned
when customers recognize net sales of licensed products. The Company considers the existence of any significant financing
component within its arrangements and have determined that a significant financing component does not exist in its
arrangements as substantive business purposes exist to support the payment structure other than to provide a significant
benefit of financing. The Company measures the transaction price based on the amount of consideration to which the
Company expects to be entitled in exchange for transferring the promised goods and/or services to the customer. The
Company utilizes either the expected value method or the most likely amount method to estimate the amount of variable
consideration, depending on which method is expected to better predict the amount of consideration to which the Company
will be entitled. Amounts of variable consideration are included in the transaction price to the extent that it is probable that
a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with
the variable consideration is subsequently resolved. With respect to arrangements that include payments for a development
or regulatory milestone payment, the Company evaluates whether the associated event is considered likely of achievement
and estimates the amount to be included in the transaction price using the most likely amount method. Milestone payments
that are not within the Company’s control or the licensee, such as those dependent upon receipt of regulatory approval, are
not considered to be likely of achievement until the triggering event occurs. At the end of each reporting period, the
Company re-evaluates the probability of achievement of each milestone and any related constraint, and if necessary, adjust
its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which
would affect revenue and net loss in the period of adjustment. For arrangements that include sales-based royalties,
including milestone payments based upon the achievement of a certain level of product sales, wherein the license is
deemed to be the sole or predominant item to which the payments relate, the Company recognizes revenue upon the later
of: (i) when the related sales occur or (ii) when the performance obligation to which some or all of the payment has been
allocated has been satisfied (or partially satisfied). Consideration that would be received for optional goods and/or services
is excluded from the transaction price at contract inception.
The Company recognizes as an asset the incremental costs of obtaining a contract with a customer if the costs are
expected to be recovered. The Company has elected a practical expedient wherein it recognizes the incremental costs of
obtaining a contract as an expense when incurred if the amortization period of the asset that it otherwise would have
recognized is one year or less. To date, the Company has not incurred any incremental costs of obtaining a contract with a
customer.
Inventory
The Company values its inventories at the lower of cost or estimated net realizable value. The Company determines
the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out
basis. The Company performs an assessment of the recoverability of capitalized inventory during each
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reporting period, and it writes down any excess and obsolete inventories to their estimated realizable value in the period in
which the impairment is first identified. Such impairment charges, should they occur, are recorded within cost of product
revenue. The determination of whether inventory costs will be realizable requires estimates by management. If actual
market conditions are less favorable than projected by management, additional write-downs of inventory may be required,
which would be recorded as a cost of product revenue in the consolidated statements of operations and comprehensive loss.
The Company capitalizes inventory costs associated with the Company’s products after regulatory approval when,
based on management’s judgment, future commercialization is considered probable and the future economic benefit is
expected to be realized. Inventory acquired prior to receipt of marketing approval of a product candidate is expensed as
research and development expense as incurred. Inventory that can be used in either the production of clinical or
commercial product is expensed as research and development expense when selected for use in a clinical manufacturing
campaign. Inventory produced that will be used in promotional marketing campaigns is expensed to selling and marketing
expense when it is selected for use in a marketing program.
Inventory consisted of the following:
Raw materials
Work-in-process
Finished goods
Restricted Cash
December 31,
2020
$
384
232
585
$ 1,201
2019
217
148
589
954
$
$
As of December 31, 2020 and 2019, the Company held restricted cash of $1,764, respectively, on its consolidated
balance sheet. The Company held restricted cash as security deposits for the lease of its manufacturing space and corporate
headquarters.
The Company’s statements of cash flows include restricted cash with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period total amounts shown on such statements. A reconciliation of the cash, cash
equivalents, and restricted cash reported within the balance sheet that sum to the total of the same amounts shown in the
statement of cash flows is as follows:
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash as shown on the
statements of cash flows
December 31, December 31,
2020
$ 228,057
1,764
$
2019
54,437
1,764
$ 229,821
$
56,201
Concentration of Credit Risk and of Significant Suppliers and Customers
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash
and cash equivalents and accounts receivable. The Company has all cash and cash equivalents balances at one accredited
financial institution, in amounts that exceed federally insured limits. The Company does not believe that it is subject to
unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
The Company is dependent on a small number of third-party manufacturers to supply products for research and
development activities in its preclinical and clinical programs and for sales of its products. The Company’s development
programs as well as revenue from future sales of its product sales could be adversely affected by a significant interruption
in the supply of any of the components of these products.
For the year ended December 31, 2020, three specialty distributor customers accounted for 42%, 29% and 12% of
the Company’s total revenue and three specialty distributor customers accounted for 45%, 33% and 15% of the
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Company’s total accounts receivable. No other customer accounted for more than 10% of total revenue or accounts
receivable for the year ended December 31, 2020.
For the year ended December 31, 2019, two specialty distributor customers accounted for 27% and 11% of the
Company’s total revenue and three specialty distributor customers accounted for 39%, 18% and 11% of the Company’s
total accounts receivable. No other customer accounted for more than 10% of total revenue or accounts receivable for the
year ended December 31, 2019.
Fair Value Measurements
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that
would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for
the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques
used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of
the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
● Level 1—Quoted prices in active markets for identical assets or liabilities.
● Level 2—Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for
similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or
liabilities, or other inputs that are observable or can be corroborated by observable market data.
● Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to
determining the fair value of the assets or liabilities, including pricing models, discounted cash flow
methodologies and similar techniques.
The Company’s cash equivalents at December 31, 2020 and 2019 were carried at fair value determined according to
the fair value hierarchy described above (Note 3). The Company’s derivative liability at December 31, 2020 and 2019 was
carried at fair value determined according to the fair value hierarchy described above and classified as a Level 3
measurement. The carrying value of accounts receivable, prepaid expenses and other current assets, accounts payable and
accrued expenses approximate their fair value due to the short-term nature of these assets and liabilities.
The carrying value of the Company’s variable interest rate notes payable (Note 9) are recorded at amortized costs,
which approximates fair value due to their short-term nature.
On March 1, 2019, the Company issued $37,500 aggregate principal amount of unsecured senior subordinated
convertible notes (the “2026 Convertible Notes”) (Note 5) which is carried, net of derivative liability, at its amortized cost
of $24,307 at December 31, 2020. The estimated fair value of the 2026 Convertible Notes was $129,362 and $36,849 at
December 31, 2020 and 2019. The fair value of the 2026 Convertible Notes was estimated utilizing a binomial lattice
model which requires the use of Level 3 unobservable inputs. The main input when determining the fair value for
disclosure purposes is the bond yield which is updated each period to reflect the yield of a comparable instrument issued as
of the valuation date. The estimated fair value presented is not necessarily indicative of an amount that could be realized in
a current market exchange. The use of alternative inputs and estimation methodologies could have a material effect on
these estimates of fair value.
Derivative Liability
The 2026 Convertible Notes allow the holders to convert all or part of the outstanding principal of their 2026
Convertible Notes into shares of the Company’s common stock provided that no conversion results in a holder beneficially
owning more than 19.99% of the issued and outstanding common stock of the Company. The entire embedded conversion
option is required to be separated from the 2026 Convertible Notes and accounted for as a freestanding derivative
instrument subject to derivative accounting. Therefore, the entire conversion option is bifurcated from the underlying debt
instrument and accounted for and valued separately from the host instrument. The Company measures the value of the
embedded conversion option at its estimated fair value and recognizes changes in the estimated fair value in other income
(expense), net in the consolidated statements of operations and comprehensive loss
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during the period of change. The embedded conversion is recognized as a derivative liability in the Company’s
consolidated balance sheet.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is recognized using
the straight-line method over a three- to five-year estimated useful life. Leasehold improvements are amortized over the
shorter of the lease term or the estimated useful life of the related asset. Expenditures for repairs and maintenance of assets
are charged to expense as incurred. Upon retirement or sale, the cost and related accumulated depreciation of assets
disposed of are removed from the accounts and any resulting gain or loss is included in loss from operations.
Impairment of Long-Lived Assets
Long-lived assets consist of property and equipment. Long-lived assets to be held and used are tested for
recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may
not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include
significant underperformance of the business in relation to expectations, significant negative industry or economic trends,
and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a
long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the
use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized when
estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The
impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined
based on discounted cash flows. The Company has had no impairment triggers of long-lived assets.
Research and Development Costs
Research and development costs are expensed as incurred. Included in research and development expenses are
salaries, stock-based compensation and benefits of employees and other operational costs related to the Company’s
research and development activities, including external costs of outside vendors engaged to conduct preclinical studies and
clinical trials, manufacturing costs of the Company’s products prior to regulatory approval, costs related to collaboration
agreements and facility-related expenses.
Research Contract Costs and Accruals
The Company has entered into various research and development contracts with research institutions and other
companies both inside and outside of the United States. Certain of these agreements have cancellation clauses, and related
payments are recorded as research and development expenses as incurred. The Company records accruals for estimated
ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the
studies, including the phase or completion of events, invoices received and contracted costs. Judgments and estimates are
made in determining the accrued balances at the end of any reporting period. Actual results could differ from the
Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.
Patent Costs
All patent-related costs incurred in connection with filing and prosecuting patent applications are recorded as general
and administrative expenses as incurred, as recoverability of such expenditures is uncertain.
Accounting for Stock-Based Compensation
The Company measures all stock options and other stock-based awards granted to employees and directors at the fair
value on the date of the grant using the Black-Scholes option-pricing model. The fair value of the awards is recognized as
expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the
respective award. The straight-line method of expense recognition is applied to all awards with service-only conditions.
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Following the Company’s adoption of Accounting Standards Update (“ASU”) 2018-07, Compensation—Stock
Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), on
January 1, 2019, for stock-based awards issued to non-employees, the Company no longer revalues non-employee awards
at each reporting date and instead calculates the fair value of the awards as of the grant date using the Black-Scholes
option-pricing model. Compensation expense for these awards is recognized over the related service period.
The Company classifies stock-based compensation expense in its consolidated statement of operations and
comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award
recipient’s service payments are classified.
The Company recognizes compensation expense for only the portion of awards that are expected to vest. In
developing a forfeiture rate estimate, the Company has considered its historical experience to estimate pre-vesting
forfeitures for service-based awards. The impact of a forfeiture rate adjustment will be recognized in full in the period of
adjustment, and if the actual forfeiture rate is materially different from the Company’s estimate, the Company may be
required to record adjustments to stock-based compensation expense in future periods.
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the
consolidated financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference
between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for
income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable
income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a
portion of deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax
expense.
The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by
applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be
evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax
position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of
benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the
largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income
taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well
as the related net interest and penalties.
Segment Data
The Company manages its operations as a single segment for the purposes of assessing performance and making
operating decisions. The Company’s singular focus is on advancing its bioresorbable hydrogel product candidates for the
programed-release delivery of therapeutic agents, specifically for ophthalmology. All tangible assets are held in the United
States. Revenue to date has been generated through product sales, all of which has been earned in the United States.
Comprehensive Loss
Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from
transactions and economic events other than those with stockholders. For the years ended December 31, 2020 and 2019,
there were no items that gave rise to other comprehensive loss and therefore, there was no difference between net loss and
comprehensive loss.
Net Loss Per Share
Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to
common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net
loss attributable to common stockholders is computed by adjusting net loss attributable to common stockholders to
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reallocate undistributed earnings based on the potential impact of dilutive securities, including the assumed conversion of
the Company’s 2026 Convertible Notes, outstanding stock options and common stock warrants, except where the result
would be anti-dilutive. Diluted net loss per share attributable to common stockholders is computed by dividing the diluted
net loss attributable to common stockholders by the weighted average number of common shares outstanding for the
period, including potential dilutive common shares assuming the dilutive effect of the conversion of the 2026 Convertible
Notes, the exercise of outstanding stock options and common stock warrants. In the diluted net loss per share calculation,
net loss would also be adjusted for the elimination of interest expense on the 2026 Convertible Notes (which includes
amortization of the discount created upon bifurcation of the conversion option from the debt) and, the mark-to-market gain
or loss each period to the bifurcated conversion option, if the impact was not anti-dilutive.
Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—
Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the existing
disclosure requirements for fair value measurements. The new disclosure requirements include disclosure related to
changes in unrealized gains or losses included in other comprehensive income (loss) for recurring Level 3 fair value
measurements held at the end of each reporting period and the explicit requirement to disclose the range and weighted
average of significant unobservable inputs used for Level 3 fair value measurements. The other provisions of ASU 2018-13
include eliminated and modified disclosure requirements.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the
Interaction between Topic 808 and Topic 606 (“ASU 2018-18”). ASU 2018-18 makes targeted improvements to GAAP for
collaborative arrangements, including (i) clarification that certain transactions between collaborative arrangement
participants should be accounted for as revenue under ASC 606 when the collaborative arrangement participant is a
customer in the context of a unit of account, (ii) adding unit-of-account guidance in ASC 808, Collaborative Arrangements,
to align with the guidance in ASC 606 and (iii) a requirement that in a transaction with a collaborative arrangement
participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized
under ASC 606 is precluded if the collaborative arrangement participant is not a customer. The Company adopted this
pronouncement as required effective January 1, 2020 and its adoption did not have a material impact on the Company’s
consolidated financial statements.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes Topic 740, Simplifying the Accounting for
Income Taxes (“ASU 2019-12”). ASU 2019-12 removes certain exceptions for investments, intra-period allocations and
interim calculations, and adds guidance to reduce complexity in accounting for income taxes. The guidance is effective for
fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is
currently evaluating the impact that the adoption of ASU 2019-12 will have on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments (‘‘ASU 2016-13’’), which requires the measurement and recognition of expected
credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model
with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses
related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction
in the amortized cost basis of the securities. These changes may result in earlier recognition of credit losses. In November
2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses,
which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently
issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted
Transition Relief (‘‘ASU 2019-05’’). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain
financial assets previously measured at amortized cost basis. For public entities that are Securities and Exchange
Commission filers, excluding entities eligible to be smaller reporting companies, ASU 2016-13 is effective for annual
periods beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, ASU
2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal
years. Early adoption is permitted. This standard will be effective for the Company on January 1, 2023. The Company is
currently evaluating the potential impact that this standard may have on its consolidated financial statements and related
disclosures.
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In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). This
standard amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s
own equity and improves and amends the related earnings per share guidance for both Subtopics. The amendments in the
ASU are effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be
smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim
periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15,
2020, including interim periods within those fiscal years. The FASB also specified that an entity should adopt the guidance
as of the beginning of its fiscal year and is not permitted to adopt the guidance in an interim period. The Company is
assessing the potential impact of ASU 2020-06 on its consolidated financial statements.
3. Fair Value of Financial Assets and Liabilities
The following tables present information about the Company’s financial assets and liabilities that are measured at fair
value on a recurring basis as of December 31, 2020 and 2019 and indicate the level of the fair value hierarchy utilized to
determine such fair value:
Assets:
Cash equivalents:
Money market funds
Liability:
Derivative liability (Note 4)
Total
Assets:
Cash equivalents:
Money market funds
Liability:
Derivative liability (Note 4)
Total
Fair Value Measurements as of
December 31, 2020 Using:
Level 2 Level 3
Total
Level 1
$ 213,372
$ — $
— $ 213,372
—
$ 213,372
— 98,313
$ — $ 98,313
98,313
$ 311,685
Fair Value Measurements as of
December 31, 2019 Using:
Level 1 Level 2 Level 3
Total
$ — $ 45,156
$
— $ 45,156
—
$ — $ 45,156
— 12,124
$ 12,124
12,124
$ 57,280
During the year ended December 31, 2020 and 2019, there were no transfers between Level 1 and 2.
4. Derivative Liability
The 2026 Convertible Notes (Note 5) contained an embedded conversion option that met the criteria to be bifurcated
and accounted for separately from the 2026 Convertible Notes (the "Derivative Liability"). The Derivative Liability was
recorded at fair value upon the issuance of the 2026 Convertible Notes and is subsequently remeasured to fair value at each
reporting period. The Derivative Liability was initially valued and remeasured using a "with-and-without" method. The
"with-and-without" methodology involves valuing the whole instrument on an as-is basis and then valuing the instrument
without the embedded conversion option. The difference between the entire instrument with the embedded conversion
option compared to the instrument without the embedded conversion option is the fair value of the derivative, recorded as
the Derivative Liability.
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The fair value of the 2026 Convertible Notes with and without the conversion option is estimated using a binomial
lattice approach. The main inputs to valuing the 2026 Convertible Notes with the conversion option are as follows:
Company's stock price
Expected annual volatility
Bond yield
As of
December 31,
December 31,
2020
2019
$
$
20.70
105.5 %
12.0 %
3.95
85.8 %
13.0 %
The bond yield was derived by making the fair value of the 2026 Convertible Notes equal to the face value on the
issuance date. Fair value measurements are highly sensitive to changes in these inputs and significant changes in these
inputs would result in a significantly higher or lower fair value.
A roll forward of the derivative liability is as follows:
Balance at December 31, 2018
Initial value
Change in fair value
Balance at December 31, 2019
Change in fair value
Balance at December 31, 2020
5. Convertible Notes
As of
—
16,434
(4,310)
12,124
86,189
98,313
$
$
$
On March 1, 2019, the Company issued $37,500 of 2026 Convertible Notes. Each 2026 Convertible Note accrues
interest at an annual rate of 6% of its outstanding principal amount, which is payable, along with the principal amount at
maturity, on March 1, 2026, unless earlier converted, repurchased or redeemed. The Company presents deferred interest in
accrued current liabilities because the notes are currently convertible and the interest is payable in cash. The effective
annual interest rate for the 2026 Convertible Notes was 14.8% through December 31, 2020.
The holders of the 2026 Convertible Notes may convert all or part of the outstanding principal amount of their 2026
Convertible Notes into shares of the Company’s common stock, par value $0.0001 per share, prior to maturity and
provided that no conversion results in a holder beneficially owning more than 19.99% of the issued and outstanding
common stock of the Company. The conversion rate is initially 153.8462 shares of the Company’s common stock per
$1,000 principal amount of the 2026 Convertible Notes, which is equivalent to an initial conversion price of $6.50 per
share. The conversion rate is subject to adjustment in customary circumstances such as stock splits or similar changes to
the Company’s capitalization.
At its election, the Company may choose to make such conversion payment in cash, in shares of common stock, or a
combination thereof. Upon any conversion of any 2026 Convertible Note, the Company is obligated to make a cash
payment to the holder of such 2026 Convertible Note for any interest accrued but unpaid on the principal amount
converted. Upon the occurrence of a Corporate Transaction (as defined below), each holder has the option to require the
Company to repurchase all or part of the outstanding principal amount of such note at a repurchase price equal to 100% of
the outstanding principal amount of the 2026 Convertible Note to be repurchased, plus accrued and unpaid interest to, but
excluding the repurchase date. In addition, each holder is entitled to receive an additional make-whole cash payment in
accordance with a table set forth in each 2026 Convertible Note.
Upon conversion by the holder, the Company has the right to select the settlement of the conversion in either shares
of common stock, cash, or in a combination thereof. In addition, the Company is obligated to make a cash
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payment to the holder of such 2026 Convertible Note for any interest accrued but unpaid on the principal amount
converted.
● If the Company elects to satisfy such conversion by shares of common stock, the Company shall deliver to the
converting holder in respect of each $1,000 principal amount of 2026 Convertible Notes being converted a
number of common shares equal to the conversion rate in effect on the conversion date;
● If the Company elects to satisfy such conversion by cash settlement, the Company shall pay to the converting
holder in respect of each $1,000 principal amount of 2026 Convertible Notes being converted cash in an amount
equal to the sum of the Daily Conversion Values (as defined below) for each of the twenty (20) consecutive
trading days during a specified period. The “Daily Conversion Values” is defined as each of the 20 consecutive
trading days during the specified period, 5.0% of the product of (a) the conversion rate on such trading day and
(b) the Daily VWAP on such trading day. The Daily VWAP is defined as each of the 20 consecutive trading
days during the applicable Observation Period, the per share volume-weighted average price as displayed under
the heading “Bloomberg VWAP” on the Bloomberg page for the Company.
● If the Company elects to satisfy such conversion by combination, the Company shall pay or deliver, as the case
may be, in respect of each $1,000 principal amount of 2026 Convertible Notes being converted, a settlement
amount equal to the sum of the Daily Settlement Amounts (as defined below) for each of the twenty (20)
consecutive trading days during the specified period. The “Daily Settlement Amount” is defined as, for each of
the 20 consecutive trading days during the specified period: (a) cash in an amount equal to the lesser of (i) the
Daily Measurement Value (as defined below) and (ii) the Daily Conversion Value on such Trading Day; and (b)
if the Daily Conversion Value on such trading day exceeds the Daily Measurement Value, a number of Shares
equal to (i) the difference between the Daily Conversion Value and the Daily Measurement Value, divided by
(ii) the Daily VWAP for such Trading Day. The “Daily Measurement Value” is defined as the Specified Dollar
Amount (as defined below), if any, divided by 20. The “Specified Dollar Amount” is defined as the maximum
cash amount per $1,000 principal amount of Notes to be received upon conversion as specified in the notice
specifying the Company’s chosen settlement method.
In the event of a Corporate Transaction, the noteholder shall have the right to either (a) convert all of the unpaid
principal at the conversion rate and receive a cash payment equal to (i) the outstanding accrued but unpaid interest under
the 2026 Convertible Note to, but excluding, the corporate transaction conversion date (to the extent such date occurs prior
to March 1, 2026, the maturity date of the 2026 Convertible Notes) plus (ii) and an additional amount of consideration
based on a sliding scale depending on the date of such as Corporate transaction or (b) require the Company to repurchase
all or part of the outstanding principal amount of such 2026 Convertible Note at a repurchase price equal to 100% of the
outstanding principal amount of the 2026 Convertible Note to be repurchased, plus accrued and unpaid interest to, but
excluding, the repurchase date.
A corporate transaction includes (i) a merger or consolidation executed through a tender offer or change of control
(other than one in which stockholders of the Company own a majority by voting power of the outstanding shares of the
surviving or acquiring corporation); (ii) a sale, lease, transfer, of all or substantially all of the assets of the Company; or (iii)
if the Company’s common stock ceases to be listed or quoted on any of the New York Stock Exchange, the Nasdaq Global
Select Market, the Nasdaq Global Market or the Nasdaq Capital Market (the “Corporate Transaction”).
On or after March 1, 2022, if the last reported sale price of the common stock has been at least 130% of the
conversion rate then in effect for 20 of the preceding 30 trading days (including the last trading day of such period), the
Company is entitled, at its option, to redeem all or part of the outstanding principal amount of the 2026 Convertible Notes,
on a pro rata basis, at an optional redemption price equal to 100% of the outstanding principal amount of the 2026
Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the optional redemption date.
The 2026 Convertible Notes are subject to acceleration upon the occurrence of specified events of default, including
a default or breach of certain contracts material to the Company and the delisting and deregistration of the Company’s
common stock.
As discussed in Note 4, the Company determined that the embedded conversion option is required to be separated
from the 2026 Convertible Notes and accounted for as a freestanding derivative instrument subject to derivative
accounting. The allocation of proceeds to the conversion option results in a discount on the 2026 Convertible Notes. The
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Company is amortizing the discount to interest expense over the term of the 2026 Convertible Notes using the effective
interest method.
A summary of the 2026 Convertible Notes at December 31, 2020 and 2019 is as follows:
2026 Convertible Notes
Less: unamortized discount
Total
Accrued interest
Total
December 31, December 31,
2020
37,500
(13,193)
24,307
—
24,307
$
$
$
$
$
$
2019
37,500
(15,101)
22,399
1,906
24,305
6. Property and Equipment, net
Property and equipment, net consisted of the following:
Equipment
Leasehold improvements
Furniture and fixtures
Software
Construction in progress
Less: Accumulated depreciation and amortization
December 31, December 31,
2020
10,186
9,074
1,281
220
120
20,881
(12,786)
8,095
$
$
$
$
2019
9,511
9,074
1,132
214
239
20,170
(10,019)
10,151
Depreciation and amortization expense was $2,773 and $2,530 for the years ended December 31, 2020 and 2019,
respectively.
7. Accrued Expenses
Accrued expenses consisted of the following:
Accrued payroll and related expenses
Accrued rebates and programs
Accrued professional fees
Accrued research and development expenses
Accrued interest payable on 2026 convertible notes
Accrued other
8. Collaboration Agreements
AffaMed License Agreement
December 31, December 31,
2020
5,853
1,438
868
1,013
4,194
941
14,307
$
$
2019
5,042
175
1,011
849
—
558
7,635
$
$
On October 29, 2020, the Company entered into license agreement (“License Agreement”) with AffaMed
Therapeutic Limited (“AffaMed”) for the development and commercialization of the Company’s DEXTENZA product
regarding ocular inflammation and pain following cataract surgery and allergic conjunctivitis (collectively, the
“DEXTENZA Field”) and for the Company’s OTX-TIC product candidate (collectively with DEXTENZA, the “AffaMed
Licensed Products”) regarding open-angle glaucoma and ocular hypertension (collectively, the “TIC Field” and, with the
DEXTENZA Field, each a “Field”), in each case in mainland China, Taiwan, Hong Kong, Macau, South
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Korea, and the countries of the Association of Southeast Asian Nations (collectively, the “Territories”). The Company
retains development and commercialization rights for the AffaMed Licensed Products in the rest of the world.
Under the License Agreement, the Company received a non-refundable upfront payment of $12,000 in December
2020. The Company is also eligible to receive up to an additional $91,000 in aggregate, inclusive of a low-seven-figure
clinical support payment, upon the achievement of certain regulatory, development and commercial milestones. The
Company is also entitled to receive tiered, escalating royalties on the net sales of the AffaMed Licensed Products ranging
from a low-teen to low-twenties percentage. Royalties under the License Agreement are payable on an AffaMed Licensed
Product-by-AffaMed Licensed Product and jurisdiction-by-jurisdiction basis and are subject to potential reductions in
specified circumstances, subject to a specified floor.
Under the License Agreement, the Company is generally responsible for expenses related to the development of the
AffaMed Licensed Products in the applicable Fields in the Territories, provided that AffaMed (i) reimburse the Company a
low-teen percentage of expenses incurred in connection with certain clinical trials conducted by the Company and designed
to support marketing approval of the AffaMed Licensed Product by the FDA or the European Medicines Agency (“Global
Studies”); (ii) is solely responsible for expenses incurred in connection with territory-specific clinical trials that it conducts
in furtherance of the development plan agreed between the parties in the applicable Fields in the Territories (“Local
Studies”); and (iii) reimburse the Company in full for expenses incurred in connection with obtaining and maintaining
regulatory approvals of the AffaMed Licensed Products in the applicable Fields in the Territories. In the event AffaMed
declines to participate in a Global Study or to conduct a Local Study in any jurisdiction in which the Company determines
to conduct such a study, the Company is relieved of its obligation to provide AffaMed clinical data from such study, other
than safety data, unless AffaMed subsequently reimburses the Company in the amounts described above plus a prespecified
premium.
The License Agreement expires upon the expiration of the last royalty term for the last AffaMed Licensed Product in
any applicable Field in the Territories. Either party may, subject to specified cure periods, terminate the License Agreement
in the event of the other party’s uncured breach. Either party may also terminate the License Agreement under specified
circumstances relating to the other party’s insolvency. AffaMed has the right to terminate the License Agreement at any
time after completion of a Phase 3 clinical trial for OTX-TIC for any or no reason upon providing the Company three
months’ notice. During an established period following its change of control or its entry into a global licensing agreement
that includes the Territories with a third party, the Company has the option to terminate the License Agreement, subject to a
specified notice period and the repayment of any costs and expenses incurred by AffaMed in connection with the License
Agreement, including upfront and milestone payments AffaMed has previously paid to the Company, at a prespecified
premium.
The Company concluded that AffaMed is a customer in this arrangement, and as such, the arrangement falls within
the scope of the revenue recognition guidance in ASC 606.
At the inception of the License Agreement, the Company identified the following performance obligations in the
agreement:
● the license, regulatory filings and manufacturing of DEXTENZA;
● the license, regulatory filings and manufacturing for the Company’s OTX-TIC product candidate regarding
open-angle glaucoma and ocular hypertension in the Territories;
● obligations to participate on various joint research, development and project committees; and
● the conduct of a Phase 2 clinical trial of OTX-TIC
The Company has concluded there is a combined performance obligation for a development and
commercialization license and manufacturing obligations for DEXTENZA Field and the Company’s OTX-TIC product
candidate regarding open-angle glaucoma and ocular hypertension in the Territories.
Further, AffaMed cannot exploit the value of the development and commercialization license for DEXTENZA
Field and the Company’s OTX-TIC product candidate regarding open-angle glaucoma and ocular hypertension in the
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Territories without receipt of supply as the development and commercialization license does not convey to AffaMed the
right to manufacture and therefore the Company has combined the development and commercialization license and the
manufacturing obligations into one performance obligation.
The Company has concluded that the right of AffaMed to opt into the Global Studies for DEXTENZA and OTX-
TIC are options that do not convey a material right to AffaMed. Therefore, these have not been recognized as performance
obligations upon the inception of the License Agreement.
With respect to the obligation of the Company to participate in joint research, development and project
committees the Company has concluded that these obligations are not material.
The transaction price was allocated to the performance obligations based on the relative estimated standalone
selling prices of each performance obligation.
The Company developed the estimated standalone selling price for the services and/or manufacturing and supply
included in each of the performance obligation, as applicable, primarily based on the nature of the services to be performed
and/or goods to be manufactured and estimates of the associated costs, adjusted for a reasonable profit margin that would
be expected to be realized under similar contracts.
The Company has determined that any sales-based royalties and milestones will be recognized as the Company
delivers the clinical and commercial manufactured product to AffaMed. Any changes in estimates may result in a
cumulative catch-up based on the number of units of manufactured product delivered.
As of December 31, 2020, the transaction price was determined to be $12,000. All potential regulatory,
development and commercial milestone payments in the amount of $91,000 did not meet the recognition criteria under the
most likely method, because their achievement was highly dependent on factors outside the control of the Company and
therefore, were excluded from the transaction price as of December 31, 2020. Furthermore, under the expected value
method the Company excluded the potential royalties from the transaction price.
We recognize revenue related to the amounts allocated to the combined performance obligations for DEXTENZA
Field and the Company’s OTX-TIC product candidate based on the point in time upon which control of supply is
transferred to AffaMed for each delivery of the associated supply. The Company currently expects to recognize the
revenue over a period of approximately seven to eight years commencing on the date the Company begins delivering
product to AffaMed. This estimate of this period considers the timing of development and commercial activities under the
License Agreement and may be reduced or increased based on the various activities as directed by the joint committees,
decisions made by AffaMed, regulatory feedback or other factors not currently known.
The Company has not recognized any revenue under the License Agreement as of December 31, 2020 as there has
not been any delivery of product under the License Agreement. The Company does not expect to recognize material
revenue from the License Agreement in 2021. The entire transaction price is recorded as deferred revenue as of December
31, 2020.
Regeneron Collaboration Agreement
On October 10, 2016, the Company entered into a Collaboration, Option and License Agreement (the “Collaboration
Agreement”) with Regeneron Pharmaceuticals, Inc. (“Regeneron”) for the development and potential commercialization of
products using the Company’s hydrogel in combination with Regeneron’s large molecule VEGF-targeting compounds for
the treatment of retinal diseases. The Collaboration Agreement does not cover the development of any product candidates
that deliver small molecule drugs, including TKIs for any target including VEGF, or any product candidate that delivers
large molecule drugs other than those that target VEGF proteins.
Under the terms of the Collaboration Agreement, the Company and Regeneron have agreed to conduct a joint
research program with the aim of developing a sustained-release formulation of aflibercept, currently marketed under the
tradename Eylea, that is suitable for advancement into clinical development. The Company has granted Regeneron an
option (the “Option”) to enter into an exclusive, worldwide license to develop and commercialize products using the
Company’s hydrogel in combination with Regeneron’s large molecule VEGF-targeting compounds (“Licensed
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Products”). Under the term of the Collaboration Agreement, Regeneron is responsible for funding an initial preclinical
tolerability study.
If Regeneron decided to exercise the Option, Regeneron will be obligated to conduct further preclinical development
and an initial clinical trial under a collaboration plan. The Company is obligated to reimburse Regeneron for certain
development costs incurred by Regeneron under the collaboration plan during the period through the completion of the
initial clinical trial, subject to a cap of $25,000, which cap may be increased by up to $5,000 under certain circumstances.
If Regeneron elects to proceed with further development following the completion of the collaboration plan, it will be
solely responsible for conducting and funding further development and commercialization of product candidates. If the
Option is exercised, Regeneron is required to use commercially reasonable efforts to research, develop and commercialize
at least one Licensed Product. Such efforts shall include initiating the dosing phase of a subsequent clinical trial within
specified time periods following the completion of the first-in-human clinical trial or the initiation of preclinical toxicology
studies, subject to certain extensions.
Under the terms of the Collaboration Agreement, Regeneron has agreed to pay the Company $10,000 upon the
exercise of the Option. The Company is also eligible to receive up to $145,000 per Licensed Product upon the achievement
of specified development and regulatory milestones, $100,000 per Licensed Product upon first commercial sale of such
Licensed Product and up to $50,000 based on the achievement of specified sales milestones for all Licensed Products. In
addition, the Company is entitled to tiered, escalating royalties, in a range from a high-single digit to a low-to-mid teen
percentage of net sales of Licensed Products.
In December 2017, the Company delivered to Regeneron a proposed final formulation for the initial preclinical
tolerability study. Regeneron initiated the preclinical study in early 2018. The Company and Regeneron subsequently
reached an understanding that the proposed formulation was not final and ceased development of it.
On May 8, 2020, the Company entered into an amendment (the “Regeneron Amendment”) to the Collaboration
Agreement. Pursuant to the Regeneron Amendment, the Company and Regeneron have adopted a new work plan to
transition joint efforts under the Collaboration Agreement to the research and development of an extended-delivery
formulation of aflibercept to be delivered to the suprachoroidal space. Regeneron has agreed to pay personnel and material
costs of the Company for specified preclinical development activities in connection with the revised work plan, as well as
certain other costs. In addition, the Regeneron Amendment provides for the modification of the terms of the Option
previously granted to Regeneron under the Collaboration Agreement. As amended, the Option is exclusive for twenty-four
months following May 8, 2020. Through December 31, 2020, the Option has not been exercised, and no payments have
been made.
As of December 31, 2020, the Company has recorded $1,256 related to work performed for preclinical development
activities in connection with the revised work plan which the Company has recorded as a reduction of research and
development expense as this research is not an output of the Company’s ordinary business activities. As of December 31,
2020, the Company has included the $1,256 in prepaid expenses and other current assets.
9. Notes Payable
The Company entered into a credit and security agreement in 2014 (as amended to date, the “Credit Agreement”)
establishing the Company’s credit facility (the “Credit Facility”). The Company has a total borrowing capacity of $25,000
under the Credit Facility, which was fully drawn down as of December 31, 2020.
In December 2018, the Company amended the terms of the Credit Agreement to increase total indebtedness under
the Credit Facility to $25,000 which was used primarily to pay-off outstanding balances as of the closing date. The
Company was required to make interest-only payments under the Credit Facility until December 2020. Commencing in
January 2021, the Company is required to make 36 equal monthly installments of principal in the amount of $694, plus
interest, through December 2023.
Amounts borrowed under the Credit Agreement are at LIBOR base rate, subject to 2.00% floor, plus 7.25%. The
interest rate on the date of the amendment was 9.76%. As of December 31, 2020, the interest rate was 9.25%. In addition,
a final payment (exit fee) equal to 3.5% of amounts drawn under the Credit Facility, or $875 based on
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borrowings of $25,000, is due upon the maturity date of December 21, 2023. The Company is accruing the exit fee
through December 21, 2023.
On August 2, 2019, the Company entered into a second amendment to the Credit Agreement in which the lenders
agreed to remove the financial covenant requiring the Company to maintain a minimum of $5,000 of cash on hand. Prior
to this amendment, the Company was required to maintain a minimum of $5,000 of cash on hand as a financial covenant to
the borrowing arrangement, which the Company had included in long-term restricted cash.
There are no other financial covenants associated with the Credit Agreement. However, there are negative
covenants restricting the Company’s activities, including limitations on dispositions, mergers or acquisitions; encumbering
its intellectual property; incurring indebtedness or liens; paying dividends; making certain investments; and engaging in
certain other business transactions. As of December 31, 2020, the Company is not in violation of any of the covenants.
The obligations under the Credit Agreement are subject to acceleration upon the occurrence of specified events of default,
including a material adverse change in the Company’s business, operations or financial or other condition. The debt is
collateralized by substantially all of the Company’s assets, including its intellectual property.
In accordance with the Credit Agreement, in connection with the Company’s desire to issue and sell the 2026
Convertible Notes, the Company amended the terms of its debt with existing lenders in February 2019. The amendment
added to the Credit Agreement, among other provisions, a negative covenant restricting the Company from paying the
holders of the 2026 Convertible Notes ahead in priority to the existing lenders, for so long as indebtedness remains
outstanding under the Credit Facility, and a cross-default provision to establish that an event of default under the purchase
agreement for the 2026 Convertible Notes also constitutes an event of default under the Credit Agreement.
Borrowings outstanding are as follows:
Borrowings outstanding
Accrued exit fee
Unamortized discount
Less: current portion
Long-term notes payable
December 31, December 31,
2020
25,000
355
(129)
25,226
(8,290)
16,936
$
$
2019
25,000
180
(173)
25,007
—
25,007
$
$
As of December 31, 2020, the annual repayment requirements for the Credit Facility, inclusive the final payment of
$875 due at expiration, were as follows:
Year Ending December 31,
2021
2022
2023
10. Warrants
Principal Final Payment
8,333
8,333
8,334
$ 25,000
$
—
—
875
875
Total
8,333
8,333
9,209
$ 25,875
In April 2014, the Company entered into a credit facility with Silicon Valley Bank and MidCap Financial SBIC,
LP, and it issued the lenders warrants to purchase 100,000 shares of its Series D-1 redeemable convertible preferred stock
with an exercise price of $3.00 per share. Upon the closing of the Company’s IPO in July 2014, the preferred stock
warrants became warrants to purchase an aggregate of 37,878 shares of its common stock with an exercise price of $7.92
per share, with Silicon Valley Bank and MidCap Financial SBIC, LP., each holding warrants of 18,939 shares of common
stock.
The Company had warrants for the purchase of 18,939 shares of common stock outstanding with MidCap Financial
SBIC, LP at December 31, 2020 and 2019 at a weighted average exercise price of $7.92 per share and an expiration date of
April 17, 2021.
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11. Preferred Stock
The Amended and Restated Certificate of Incorporation authorized 5,000,000 shares of preferred stock, $0.0001 par
value, all of which is undesignated and none of which are issued or outstanding at December 31, 2020 and 2019.
12. Common Stock
The Amended and Restated Certificate of Incorporation authorized 100,000,000 shares of the Company’s common
stock. Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s
stockholders.
On December 14, 2020, the Company entered into an underwriting agreement with Jefferies LLC (“Jefferies”) and
Piper Sandler & Co. (collectively with Jefferies, “the Underwriters”) in connection with an underwritten public offering of
3,725,000 shares of the Company’s common stock. Under the terms of this underwriting agreement, the Company also
granted the Underwriters an option to purchase up to an additional 558,750 shares of common stock at the public offering
price, less the underwriting discounts and commissions. The Underwriters subsequently exercised this option to purchase
such option shares in full. The public offering price of the shares in this offering was $21.50 per share, and the
Underwriters purchased all of the shares from the Company at a price of $20.21 per share. After deducting underwriting
discounts and commissions and offering expenses, the Company received net proceeds from the offering of $86,390.
On October 13, 2020, the Company entered into an underwriting agreement with the Underwriters, in connection
with an underwritten public offering of 7,180,000 shares of the Company’s common stock. Under the terms of this
underwriting agreement, the Company also granted the Underwriters an option to purchase up to an additional 1,077,000
shares of common stock at the public offering price, less the underwriting discounts and commissions. The Underwriters
subsequently exercised this option to purchase such option shares in full. The public offering price of the shares in this
offering was $9.75 per share, and the Underwriters purchased all of the shares from the Company at a price of $9.17 per
share. After deducting underwriting discounts and commissions and offering expenses, the Company received net proceeds
from the offering of $75,406.
In May 2020, the Company entered into an underwriting agreement with the Underwriters, in connection with an
underwritten public offering of 8,181,819 shares of the Company’s common stock. Under the terms of this underwriting
agreement, the Company also granted the Underwriters an option to purchase up to an additional 1,227,272 shares of
common stock at the public offering price, less the underwriting discounts and commissions. The Underwriters
subsequently exercised this option to purchase such option shares in full. The public offering price of the shares in this
offering was $5.50 per share, and the Underwriters purchased all of the shares from the Company at a price of $5.17 per
share. After deducting underwriting discounts and commissions and offering expenses, the Company received net proceeds
from the offering of $48,327.
On April 5, 2019, the Company entered into an Open Market Sales AgreementSM (the “2019 Sales Agreement”) with
Jefferies, under which the Company may offer and sell its common stock having aggregate proceeds of up to $50,000 from
time-to-time through Jefferies, acting as agent. In the twelve months ended December 31, 2019, the Company sold
7,337,459 shares of common stock under the 2019 Sales Agreement, resulting in net proceeds of approximately $32,626,
respectively, after commissions and expenses. In the twelve months ended December 31, 2020, the Company sold
2,984,381 shares of common stock under the 2019 Sales Agreement, resulting in net proceeds of approximately $14,359,
respectively, after commissions and expenses. From inception through March 1, 2021, the Company sold an aggregate of
10,321,840 shares of common stock under the 2019 Sales Agreement, resulting in net proceeds of approximately $46,985
after commissions and expenses. The Company has $1,326 available for issuance as of March 1, 2021.
In November 2016, the Company entered into a controlled equity offering sales agreement, (the “2016 Sales
Agreement”) with Cantor Fitzgerald & Co., (“Cantor”), under which the Company may offer and sell its common stock
having aggregate proceeds of up to $40,000 may be sold from time to time. During the year ended December 31, 2018, the
Company sold 4,121,173 shares of common stock under the 2016 Sales Agreement, resulting in net proceeds of
approximately $26,824 after underwriting discounts, commissions and expenses. Through December 31, 2018, the
Company had sold 5,011,741 shares of common stock under the 2016 Sales Agreement, resulting in net proceeds of
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approximately $33,427 after underwriting discounts, commissions and expenses. In the three months ended March 31,
2019, the Company sold 1,318,481 shares of common stock under the 2016 Sales Agreement, resulting in net proceeds of
approximately $4,954 after underwriting discounts and commissions and expenses. As of February 25, 2019, the Company
had no amounts remaining available for future sale under the 2016 Sales Agreement. On February 28, 2019, pursuant to the
2016 Sales Agreement, the Company delivered a termination notice to Cantor, terminating the 2016 Sales Agreement.
Through March 31, 2019, the Company sold 6,330,222 shares of common stock under the 2016 Sales Agreement, resulting
in net proceeds of approximately $38,381 after underwriting discounts and commissions and expenses.
As of December 31, 2020, the Company had reserved 11,191,284 shares of common stock for the exercise of
outstanding stock options and the number of shares remaining available for grant under the Company’s 2014 Stock
Incentive Plan (the “2014 Plan”) and the 2019 Inducement Stock Incentive Plan (the “2019 Inducement Plan”), the number
of shares available for issuance under the 2014 Employee Stock Purchase Plan (Note 13), and the outstanding warrants to
purchase common stock (Note 10).
13. Stock-Based Awards
2014 Stock Incentive Plan
The 2014 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards,
restricted stock units, stock appreciation rights and other stock-based awards. The number of shares initially reserved for
issuance under the 2014 Plan was 1,336,907 shares of common stock, which was increased to 2,126,907 on January 1,
2015. The number of shares reserved for issuance may be increased by the number of shares under the 2006 Stock Option
Plan (the “2006 Plan”) that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the
Company. The number of shares of common stock that may be issued under the 2014 Plan is subject to increase on the first
day of each fiscal year, beginning on January 1, 2015 and ending on December 31, 2024, equal to the least of 1,659,218
shares of the Company’s common stock, 4% of the number of shares of the Company’s common stock outstanding on the
first day of the applicable fiscal year, and an amount determined by the Company’s board of directors. On January 1, 2020,
the number of shares available for issuance under the 2014 Plan increased by 1,659,218. As of December 31, 2020,
883,416 shares remained available for issuance under the 2014 Plan.
As required by the 2006 Plan and 2014 Plan, the exercise price for stock options granted is not to be less than the fair
value of common shares as of the date of grant.
Inducement Stock Option Awards
On June 20, 2017, the Company issued to Antony Mattessich, who became a director of the Company on June 20,
2017 and the Company’s President and Chief Executive Officer on July 26, 2017, a non-statutory stock option to purchase
an aggregate of 590,000 shares of the Company’s common stock at an exercise price of $10.94 per share. Subject to Mr.
Mattessich’s continued service to the Company, the stock option will vest over a four-year period, with 25% of the shares
underlying the option award vesting on the one year anniversary of the grant date and the remaining 75% of the shares
underlying the award vesting monthly thereafter. The stock option was issued outside of the Company’s 2014 Plan as an
inducement material to Mr. Mattessich’s acceptance of an offer of employment with the Company in accordance with
Nasdaq Listing Rule 5635(c)(4).
On July 9, 2019, the Company issued to the Senior Vice President, Head of Business Development, a non-statutory
stock option to purchase an aggregate of 60,000 shares of its common stock at an exercise price of $5.13 per share. Subject
to his continued service to the Company, the stock option will vest over a four-year period, with 25% of the shares
underlying the option award vesting on the one-year anniversary of the grant date and the remaining 75% of the shares
underlying the award vesting monthly thereafter. The stock option was issued outside of the Company’s 2014 Plan as an
inducement material to the individual’s acceptance of an offer of employment with the Company in accordance with
Nasdaq Listing Rule 5635(c)(4).
On October 29, 2019, the 2019 Inducement Plan was approved by the Board of Directors of the Company. The 2019
Inducement Plan provides for the following types of awards, each of which is referred to as an “Award”: non-statutory
stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. Awards under
the 2019 Inducement Plan may only be granted to persons who (a) were not previously an employee or
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director of the Company or (b) are commencing employment with the Company following a bona fide period of non-
employment, in either case as an inducement material to the individual’s entering into employment with the Company and
in accordance with the requirements of Nasdaq Stock Market Rule 5635(c)(4). For the avoidance of doubt, neither
consultants nor advisors shall be eligible to participate in the 2019 Inducement Plan. Each person who is granted an Award
under the 2019 Inducement Plan is deemed a “Participant.”
On December 10, 2020, the Board of Directors of the Company amended the 2019 Inducement Plan to increase the
aggregate number of shares issuable by 554,000 shares of common stock to 1,054,000. As of December 31, 2020, 650,000
shares remained available for issuance under the 2019 Inducement Plan.
2014 Employee Stock Purchase Plan
The Company’s has a 2014 Employee Stock Purchase Plan (the “ESPP”) with a total of 207,402 shares of common
stock reserved for issuance under this plan which increased to 232,402 shares of common stock on January 1, 2015. The
number of shares of common stock that may be issued under the ESPP will automatically increase on the first day of each
fiscal year, commencing on January 1, 2015 and ending on December 31, 2024, in an amount equal to the least of 207,402
shares of the Company’s common stock, 0.5% of the number of shares of the Company’s common stock outstanding on the
first day of the applicable fiscal year, and an amount determined by the Company’s board of directors. On January 1, 2020,
the number of shares available for issuance under the ESPP increased by 207,402. As of December 31, 2020, 524,194
shares of common stock remained available for issuance.
Stock Option Valuation
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing
model. The expected life of the options was calculated using the simplified method. The simplified method defines the life
as the average of the contractual term of the options and the weighted-average vesting period for all option tranches. The
Company utilized the simplified method because the Company did not have sufficient historical exercise data over the life
of awards to provide a reasonable basis upon which to estimate expected term. The expected term of stock options granted
to nonemployees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference
to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the
expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends
and does not expect to pay any cash dividends in the foreseeable future.
As of December 31, 2020, there were no outstanding unvested service-based stock options held by nonemployees.
The assumptions that the Company used to determine the fair value of the stock options granted to employees and
directors are as follows, presented on a weighted average basis:
Risk-free interest rate
Expected term (in years)
Expected volatility
Expected dividend yield
F-28
Year Ended
December 31,
2020
2019
1.12 % 2.25 %
6
86 %
6
87 %
— % — %
Table of Contents
The following table summarizes the Company’s stock option activity:
Weighted
Average
Weighted
Remaining
Average
Exercise Contractual
Shares Issuable
Under Options Price
Term
Outstanding as of December 31, 2019
Granted
Exercised
Forfeited
Outstanding as of December 31, 2020
Options vested and expected to vest as of December 31, 2020
Options exercisable as of December 31, 2020
7,920,417
2,449,950
(567,776)
(687,856)
9,114,735
8,420,281
5,001,463
$ 6.67
5.93
4.55
5.84
$ 6.66
$ 6.78
$ 7.72
Aggregate
Intrinsic
Value
$
704
(In years)
7.6
7.4
7.2
6.3
131,032
120,315
67,984
The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock
options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the
fair value of the Company’s common stock. The aggregate intrinsic value of stock options exercised was $4,307 and $54
during the years ended December 31, 2020 and 2019, respectively.
The weighted average grant date fair value of stock options granted to employees and directors during the years
ended December 31, 2020 and 2019 was $5.93 and $2.99 per share, respectively.
Stock-based Compensation
The Company recorded stock-based compensation expense related to stock options in the following expense
categories of its statements of operations:
Research and development
Selling and marketing
General and administrative
Year Ended December 31,
2020
1,514
1,719
4,298
7,531
$
$
2019
$ 2,312
1,013
5,434
$ 8,759
As of December 31, 2020, the Company had an aggregate of $12,103 of unrecognized stock-based compensation
cost, which is expected to be recognized over a weighted average period of 2.6 years.
14. Net Loss Per Share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows for the years
ended December 31, 2020 and 2019:
Numerator:
Net loss
Denominator:
Weighted average common shares outstanding, basic and diluted
Net loss per share basic and diluted
Year Ended December 31,
2019
2020
$
(155,636) $
(86,372)
60,752,225 45,273,231
(1.91)
$
(2.56) $
The Company excluded the following common stock equivalents, outstanding as of December 31, 2020 and 2019,
from the computation of diluted net loss per share attributable to common stockholders for the years ended December 31,
2020 and 2019 because they had an anti-dilutive impact due to the net loss incurred for the periods. The
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Company also excluded the shares issuable upon conversion of the 2026 Convertible Notes from the computation of
diluted net loss per share for the year ended December 31, 2020 and 2019 because they had an anti-dilutive impact.
December 31,
Options to purchase common stock
Shares issuable upon conversion of 2026 Convertible Notes, if converted
Warrants for the purchase of common stock
15. Commitments and Contingencies
Intellectual Property Licenses
2020
2019
7,920,417
5,769,232
18,939
14,902,906 13,708,588
9,114,735
5,769,232
18,939
The Company has a license agreement with Incept, LLC (“Incept”) to use and develop certain patent rights (the
“Incept License”). Under the Incept License, as amended and restated, the Company was granted a worldwide, perpetual,
exclusive license to develop and commercialize products that are delivered to or around the human eye for diagnostic,
therapeutic or prophylactic purposes relating to ophthalmic diseases or conditions. The Company is obligated to pay low
single-digit royalties on net sales of commercial products developed using the licensed technology, commencing with the
date of the first commercial sale of such products and until the expiration of the last to expire of the patents covered by the
license. Any of the Company’s sublicensees also will be obligated to pay Incept a royalty equal to a low single-digit
percentage of net sales made by it and will be bound by the terms of the agreement to the same extent as the Company. The
Company is obligated to reimburse Incept for its share of the reasonable fees and costs incurred by Incept in connection
with the prosecution of the patent applications licensed to the Company under the Incept License. Through December 31,
2020, royalties paid under this agreement related to product sales were $575 and have been charged to cost of product
revenue.
On September 13, 2018, the Company entered into a second amended and restated license agreement (the “Second
Amended Agreement”) with Incept. The Second Amended Agreement amends and restates in full the Company’s prior
amended and restated Incept License (the “Prior Agreement” or “Original License”) to expand the scope of the Company’s
intellectual property license and modify future intellectual property ownership and other rights thereunder.
Indemnification Agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors,
lessors, business partners, and other parties with respect to certain matters including, but not limited to, losses arising out of
breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the
Company has entered into indemnification agreements with members of its board of directors and senior management team
that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of
their status or service as directors or officers. The maximum potential amount of future payments the Company could be
required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not
incurred any material costs as a result of such indemnifications. As of December 31, 2020, the Company was not aware of
any claims that could have a material effect on its financial position, results of operations or cash flows, and it has not
accrued any liabilities related to such obligations in its consolidated financial statements as of December 31, 2020.
Collaboration Agreement
On October 10, 2016, the Company entered into a Collaboration Agreement with Regeneron which the parties
amended in May 2020 (Note 8). If the Option to enter into an exclusive worldwide license is exercised, Regeneron will be
obligated to conduct further preclinical development and an initial clinical trial under a collaboration plan. The Company is
obligated to reimburse Regeneron for certain development costs incurred by Regeneron under the collaboration plan during
the period through the completion of the initial clinical trial, subject to a cap of $25,000, which cap may be increased by up
to $5,000 under certain circumstances; the timing of such payments are not known. If Regeneron elects to proceed with
further development following the completion of the collaboration plan, it will be solely responsible for conducting and
funding further development and commercialization of product candidates. If the Option is exercised, Regeneron is
required to use commercially reasonable efforts to research, develop and commercialize at least one Licensed Product.
Such efforts shall include initiating the dosing phase of a subsequent
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clinical trial within specified time periods following the completion of the first-in-human clinical trial or the initiation of
preclinical toxicology studies, subject to certain extensions.
16. Leases
The Company leases real estate, including laboratory, manufacturing and office space. The Company’s leases have
remaining lease terms ranging from less than 1 year to 8 years. Certain leases include one or more options to renew,
exercised at the Company’s sole discretion, with renewal terms that can extend the lease term from one year to six years.
All of the Company’s leases qualify as operating leases.
In October 2017, the Company entered into an amendment to a lease agreement for the Company’s laboratory and
manufacturing space located at 34 Crosby Drive and 36 Crosby Drive, each in Bedford, Massachusetts. The lease term
commenced on June 30, 2018 and will expire on July 31, 2023.
In June 2016, the Company entered into a lease agreement for approximately 70,712 square feet of general office,
research and development and manufacturing space located at 15 Crosby Drive in Bedford, Massachusetts. The lease term
commenced on February 1, 2017 and will expire on July 31, 2027. The Company has the option to extend the for two
additional periods of five years by delivering written notice of the exercise not earlier than fifteen months nor later than 12
months before expiration of the original term.
On April 4, 2019, the Company entered into a non-cancelable lease for 30,036 square feet of space located at 24
Crosby Drive in Bedford, Massachusetts to be used for office space. The five-year lease commenced on April 18, 2019 and
terminates on March 24, 2024 and does not include any lease renewal options.
Operating lease costs
Variable lease costs
Total lease costs
For the
Year Ended
For the
Year Ended
December 31,
December 31,
2020
2,418 $
677
3,095 $
$
$
2019
2,070
538
2,608
The following table summarizes the presentation in the Company’s consolidated balance sheet of its operating leases:
Assets:
Operating lease assets
Liability:
Current operating lease liabilities
Non-current operating lease
liabilities
Total Operating lease liabilities:
Balance sheet location
Operating lease assets
Operating lease liabilities
Operating lease liabilities, net of
current portion
December 31,
2020
December 31,
2019
5,844 $
6,655
1,358 $
1,126
7,548
8,906 $
8,905
10,031
$
$
$
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Table of Contents
The minimum lease payments for the next five years and thereafter are expected to be as follows:
Year Ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: interest
Present value of operating lease liabilities
December 31,
2020
2,483
2,549
2,353
1,569
1,447
2,366
12,767
3,861
8,906
$
$
The following table summarizes the weighted average remaining lease term and the weighted average incremental
borrowing rate used to determine the operating lease liability:
Weighted average remaining lease term in years
Weighted average discount rate
December 31,
2020
December 31,
2019
5.6
13.55 %
6.47
13.55 %
Supplemental disclosure of cash flow information related to the Company’s operating leases included in cash flows
provided by operating activities in its consolidated statements of cash flows is as follows:
For the
Year Ended
December 31,
2020
For the
Year Ended
December 31,
2019
Cash paid for amounts included in the measurement of lease liabilities
$
2,418 $
2,215
17. Income Taxes
During the years ended December 31, 2020 and 2019, the Company recorded no income tax benefits for the net
operating losses incurred or the research and development tax credits generated in each year, due to its uncertainty of
realizing a benefit from those items.
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as
follows:
Federal statutory income tax rate
Research and development tax credits
State taxes, net of federal benefit
Stock-based compensation
Derivative liability
Other
Change in the valuation allowance
Effective income tax rate
Year Ended December 31,
2020
21.0 %
1.0
1.0
—
(11.5)
—
(11.5)
2019
21.0 %
2.1
2.7
(1.3)
—
(0.5)
(24.0)
— %
— %
Changes in the valuation of the derivative liability do not provide a future tax benefit. To the extent the deferred
tax asset related to the derivative liability exceeds the deferred tax liability related to the 2026 Convertible Notes, the
excess is recorded as a permanent item.
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Net deferred tax assets consisted of the following:
Deferred tax assets:
Net operating loss carryforwards
Tax credit carryforwards
Capitalized start-up costs
Capitalized research and development expenses, net
Operating lease liabilities
Derivative liability
Accrued expenses and other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Operating lease right of use assets
2026 Convertible Notes
Total deferred tax liabilities
Net deferred tax assets
December 31,
2020
2019
$
90,797
13,514
514
10,657
2,066
3,061
6,828
127,437
(123,020)
4,417
$
70,317
11,966
695
14,521
2,505
3,028
6,987
110,019
(105,062)
4,957
(1,356)
(3,061)
(4,417)
$
— $
(1,662)
(3,295)
(4,957)
—
Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2020 and 2019
related primarily to the increase in net operating loss carryforwards, amortization of capitalized research and development
expenses, and increase in research and development tax credit carryforwards were as follows:
Valuation allowance as of beginning of year
Increases recorded to income tax provision
Valuation allowance as of end of year
Year Ended December 31,
2020
$ 105,062
17,958
$ 123,020
2019
$ 84,343
20,719
$ 105,062
As of December 31, 2020, the Company had net operating loss (“NOL”) carryforwards for federal and state income
tax purposes of $354,745 and $274,939, respectively. The federal and state NOLs generated for annual periods prior to
January 1, 2018 begin to expire in 2026. The Company’s federal NOLs generated for the years ended since December 31,
2018, which amounted to a total of $229,113, can be carried forward indefinitely. As of December 31, 2020, the Company
also had available research and development tax credit carryforwards for federal and state income tax purposes of $9,226
and $4,988, respectively, which begin to expire in 2026 and 2025, respectively. Utilization of the NOL carryforwards and
research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of
the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the
future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future
taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the
ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year
period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have
been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If
the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the
NOL carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under
Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership
change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any
limitation may result in expiration of a portion of the NOL carryforwards or research and development tax credit
carryforwards before utilization. Further, until a study is completed and any limitation is known, no amounts are being
presented as an uncertain tax position.
The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax
assets. Management considered the Company’s cumulative net losses and concluded that it is more likely than not that
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the Company would not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance was
established against the net deferred tax assets as of December 31, 2020 and 2019.
The Company has not recorded any amounts for unrecognized tax benefits as of December 31, 2020 or 2019.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal
course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are
currently no pending income tax examinations. The Company’s tax years are still open under statute from December 31,
2016 to the present. Earlier years may be examined to the extent that tax credit or net operating loss carryforwards are used
in future periods. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax
provision. As of December 31, 2020 and 2019, the Company had no accrued interest or penalties related to uncertain tax
positions and no amounts have been recognized in the Company’s statements of operations and comprehensive loss.
18. 401(k) Savings Plan
The Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code.
This plan covers substantially all employees who meet minimum age and service requirements and allows participants to
defer a portion of their annual compensation on a pre-tax basis. Company contributions to the plan may be made at the
discretion of the board of directors. Through December 31, 2020, no contributions have been made to the plan by the
Company.
19. Related Party Transactions
Since October 2017, the Company has engaged McCarter English LLP (“McCarter”) to provide legal services to the
Company, including with respect to intellectual property matters. Mr. Jonathan M. Sparks, Ph.D., a partner at McCarter &
English, has also served in the capacity as the Company’s in-house counsel from October 2017 through August 31, 2020.
The Company incurred fees for legal services rendered by McCarter of $766 and $1,119 for the years ended December 31,
2020 and 2019, respectively. As of December 31, 2020 and 2019, there was $47 and $107 recorded in accounts payable for
McCarter. As of December 31, 2020 and 2019, there was $0 and $242 recorded in accrued expenses for McCarter.
20. Restructuring and Other Costs
On November 6, 2019, the Board of Directors approved an operational restructuring to eliminate a portion of the
Company’s workforce to reduce expenses. As part of this operational restructuring, the Company reduced headcount by
approximately 22%. The Company completed the restructuring in the fourth quarter of 2019 and recorded total
restructuring costs of approximately $554 in total costs and operating expenses in the consolidated statements of operations
and comprehensive loss, all of which was paid.
21. Subsequent Events
The number of shares of common stock that may be issued under the 2014 Plan is subject to increase on the first day
of each fiscal year, beginning on January 1, 2015 and ending on December 31, 2024, equal to the least of 1,659,218 shares
of the Company’s common stock, 4% of the number of shares of the Company’s common stock outstanding on the first day
of the applicable fiscal year, and an amount determined by the Company’s board of directors. On January 1, 2021, the
number of shares available for issuance under the 2014 Plan increased by 1,659,218.
The number of shares of common stock that may be issued under the ESPP will automatically increase on the first
day of each fiscal year, commencing on January 1, 2015 and ending on December 31, 2024, in an amount equal to the least
of 207,402 shares of the Company’s common stock, 0.5% of the number of shares of the Company’s common stock
outstanding on the first day of the applicable fiscal year, and an amount determined by the Company’s board of directors.
On January 1, 2021, the number of shares available for issuance under the ESPP increased by 207,402.
On January 29, 2021, warrants covering 18,939 shares were exercised via net share settlement, and the Company
issued 11,737 shares of common stock as a result of the exercise.
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On February 1, 2021, the Company issued to the Senior Vice President, Clinical Development, a non-statutory stock
option to purchase an aggregate of 100,000 shares of its common stock at an exercise price of $18.70 per share subject to a
time-based vesting and a non-statutory stock option to purchase 50,000 shares of its common stock at an exercise price of
$18.70 per share subject to performance-based vesting. The stock option was issued under the Company’s 2019
Inducement Plan as an inducement material to such individual’s acceptance of an offer of employment with the Company
in accordance with Nasdaq Listing Rule 5635(c)(4). Subject to her continued service to the Company, the time-based stock
option will vest over a four-year period, with 25% of the shares underlying the option award vesting on the one-year
anniversary of the grant date and the remaining 75% of the shares underlying the award vesting monthly thereafter. The
performance-based stock option vests and becomes exercisable in whole or in part if the Company achieves specified
milestones, subject to continued service to the Company through the applicable vesting dates. The stock options are
subject to the terms and conditions of stock option agreements covering the grant and the Company’s 2019 Inducement
Plan, as amended to date.
F-35
OCULAR THERAPEUTIX, INC.
Amendment to 2019 Inducement Stock Incentive Plan
Exhibit 10.9
Ocular Therapeutix, Inc’s 2019 Inducement Stock Incentive Plan (the “Plan”), pursuant to Section 11(d)
thereof, is hereby amended as set forth below.
The first sentence of Section 4(a) of the Plan be, and hereby is, deleted in its entirety and replaced with the
following in lieu thereof:
“Subject to adjustment under Section 9, Awards may be made under the Plan for up to 1,054,000 shares of
common stock, $0.0001 par value per share, of the Company (the “Common Stock”).”
Adopted by the Board of Directors: December 10, 2020
Exhibit 10.19
Execution Copy
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the “Agreement”) is made on August 28, 2020, by and between
Ocular Therapeutix, Inc., a Delaware corporation (the “Company”), and Philip C. Strassburger (“Executive”) and
the employment relationship between the Company and the Executive shall be governed by this Agreement
commencing as of the Effective Date (as defined below) and continuing in effect until terminated by either party
in accordance with this Agreement. In consideration of the mutual covenants contained in this Agreement, the
Company and Executive agree as follows:
1.
Employment. The Company agrees to employ Executive and Executive agrees to be employed by
the Company on the terms and conditions set forth in this Agreement.
(a)
Capacity. Executive shall serve the Company as General Counsel, reporting to the
Company’s Chief Executive Officer (the “CEO”). During the Term (as defined below) of Executive’s
employment with the Company, Executive shall, subject to the direction of the CEO, have the responsibilities,
duties and authority commensurate with the position of General Counsel and shall perform such other duties as
may from time to time be assigned to him by the CEO that are consistent with his position as General Counsel.
The Company may change Executive’s position, duties, and work location as it deems necessary, provided such
changes are commensurate with a General Counsel position at similar companies and do not otherwise amount
(either singly or in the aggregate) to a “Good Reason” event as defined in Section 3(c).
(b)
Devotion of Duties; Representations. During the Term of Executive’s employment with the
Company, Executive shall devote 100% of his best efforts and full business time and energies to the business and
affairs of the Company and shall endeavor to perform the duties and services contemplated hereunder to the
reasonable satisfaction of the Company. During the Term of Executive’s employment with the Company,
Executive shall not, without the prior written approval of the Company (by action of the Company’s Board of
Directors (the “Board”)), undertake any other employment from any person or entity or serve as a director of any
other company; provided, however, that (i) Executive shall be permitted to provide cooperation and assistance
reasonably requested by his prior employer and continue his advisory board membership with Accencio, (ii) the
Company will entertain requests as to such other employment or directorships in good faith and (iii) Executive
will be eligible to participate in any policy relating to outside activities that is applicable to the senior executives
of the Company and approved by the Board after the date hereof, and provided further that in no event may any
business activity be undertaken if it would (x) be in violation of any provision of this Agreement or other
agreement between Executive and the Company, (y) interfere with the performance of Executive’s duties for the
Company, or (z) present a conflict of interest with the Company’s business interests.
2.
Term of Employment.
(a)
Executive’s employment hereunder shall begin on the first business day following his last
day of employment with his prior employer (the “Effective Date”), which is expected to be on or before
September 15, 2020 and shall be no later than September 30, 2020.
-2-
For the avoidance of doubt, if this Agreement does not become effective by September 30, 2020, it shall be null
and void. Executive’s employment hereunder shall be terminated upon the first to occur of the following:
(i)
(ii)
Immediately upon Executive’s death;
By the Company, by written notice to Executive effective as of the date of such
notice (or on such other date as specified in such notice):
(A)
Following the Disability of Executive. “Disability” means that Executive (i)
is unable to engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months or (ii) is, by reason of any medically
determinable physical or mental impairment which can be expected to last for a continuous period
of not less than twelve (12) months, receiving income replacement benefits for a period of not less
than three (3) months under an accident and health plan covering employees of the Company.
Such incapacity shall be determined by a physician chosen by the Company and reasonably
satisfactory to Executive (or Executive’s legal representative) upon examination requested by the
Company (to which Executive hereby agrees to submit). Notwithstanding the foregoing, such
Disability must result in Executive becoming “Disabled” within the meaning of Section 409A(a)(2)
(C) of the Internal Revenue Code of 1986, as amended (the “Code”) and the guidance issued
thereunder. (In this Agreement we refer to Section 409A of the Code and any guidance issued
thereunder as “Section 409A.”)
(B)
(C)
For Cause (as defined below); or
Subject to Section 4 hereof, without Cause;
(iii)
By Executive:
(A)
At any time by written notice to the Company, effective thirty (30) days after
the date of such notice; or
(B)
By written notice to the Company for Good Reason (as defined below),
effective on the date specified in such notice.
The term of Executive’s employment by the Company under this Agreement is referred to herein as the
“Term.”
(b)
Definition of “Cause”. For purposes of this Agreement, “Cause” shall, pursuant to the
reasonable good faith determination by the Company as documented in writing, mean: (i) the willful and
continued failure by Executive to substantially perform Executive’s material duties or responsibilities under this
Agreement (other than such a failure as a result of Disability); (ii) any action or omission by Executive involving
willful misconduct or gross negligence with regard to the Company, which has a detrimental effect on the
Company; (iii)
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Executive’s conviction of a felony, either in connection with the performance of Executive’s obligations to the
Company or which otherwise shall adversely affect Executive’s ability to perform such obligations or shall
materially adversely affect the business activities, reputation, goodwill or image of the Company; (iv) the material
breach of a fiduciary duty to the Company; or (v) the material breach by Executive of a material provision of this
Agreement, provided that any breach of Executive’s obligations with respect to Sections 5 or 6 of this Agreement,
subject to the cure provision in the next sentence, shall be deemed “material.” In respect of the events described in
clauses (i) and (v) above, the Company shall give Executive written notice of the failure of performance or breach,
reasonable as to time, place and manner in the circumstances, and a 30-day opportunity to cure, provided that such
failure of performance or breach is reasonably amenable to cure as determined by the Company in its reasonable
discretion. If cured, such events or grounds shall no longer be deemed a basis for a termination of Executive for
“Cause,” at any time during Executive’s employment.
(c)
Definition of “Good Reason”. For purposes of this Agreement, “Good Reason” shall mean
any of the following, unless (i) the basis for such Good Reason is cured within a reasonable period of time (in the
light of the cure appropriate to the basis of such Good Reason, but in no event less than thirty (30) nor more than
ninety (90) days) after the Company receives written notice (which must be received from Executive within ninety
(90) days of the initial existence of the condition giving rise to such Good Reason) specifying the basis for such
Good Reason or (ii) Executive has consented to the condition that would otherwise be a basis for Good Reason:
(i)
A change in the principal location at which Executive provides services to the
Company to a location more than fifty (50) miles from such principal location other than in a direction that
reduces Executive’s daily commuting distance (which change, the Company has reasonably determined as
of the date hereof, would constitute a material change in the geographic location at which Executive
provides services to the Company), provided that such a relocation shall not be deemed to occur under
circumstances where Executive’s responsibilities require him to work at a location other than the corporate
headquarters for a reasonable period of time;
(ii)
A material adverse change by the Company in Executive’s duties, authority or
responsibilities which causes Executive’s position with the Company to become of materially less
responsibility or authority than Executive’s position immediately following the Effective Date;
(iii)
A material reduction in Executive’s base salary;
(iv)
A material breach by the Company of this Agreement, which breach has not been
cured within thirty (30) days after written notice thereof by Executive; or
(v)
Failure to obtain the assumption (assignment) of this Agreement by any successor to
the Company.
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(d)
Definition of “Corporate Change”. For purposes of this Agreement, “Corporate Change”
shall mean any circumstance in which (i) the Company is not the surviving entity in any merger, consolidation or
other reorganization (or survives only as a subsidiary or affiliate of an entity other than a previously wholly-
owned subsidiary of the Company); (ii) the Company sells, leases or exchanges all or substantially all of its assets
to any other person or entity (other than a wholly-owned subsidiary of the Company); (iii) any person or entity,
including a “group” as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934 (excluding, for
this purpose, the Company or any subsidiary, or any employee benefit plan of the Company or any subsidiary, or
any “group” in which all or substantially all of its members or its members’ affiliates are individuals or entities
who are or were beneficial owners of the Company’s outstanding shares prior to the initial public offering of the
Company’s common stock), acquires or gains ownership or control (including, without limitations, powers to
vote) of more than 50% of the outstanding shares of the Company’s voting stock (based upon voting power); or
(v) as a result of or in connection with a contested election of directors, the persons who were directors of the
Company before such election shall cease to constitute a majority of the Board of Directors of the Company.
Notwithstanding the foregoing, a “Corporate Change” shall not occur as a result of a merger, consolidation,
reorganization or restructuring after which either (1) a majority of the Board of Directors of the controlling entity
consists of persons who were directors of the Company prior to the merger, consolidation, reorganization or
restructuring or (2) all or substantially all of the individuals or entities who were the beneficial owners of the
Company’s outstanding shares immediately prior to such merger, consolidation, reorganization or restructuring
beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the
combined voting power of the then-outstanding securities entitled to vote generally in the election of directors,
respectively, of the resulting or acquiring corporation in substantially the same proportions as their ownership of
the Company’s outstanding shares immediately prior to the merger, consolidation, reorganization or restructuring.
Notwithstanding the foregoing, for any payments or benefits hereunder (including pursuant to Section 4(b)(iii)
hereof) or pursuant to any other agreement between the Company and Executive, in either case that are subject to
Section 409A, the Corporate Change must constitute a “change in control event” within the meaning of Treasury
Regulation Section 1.409A-3(i)(5)(i).
3.
Compensation.
(a)
Base Salary. Executive’s minimum base salary during the Term shall be at the rate of
$425,000 per year. Executive’s base salary shall be payable in substantially equal installments in accordance with
the Company’s payroll practices as in effect from time to time, less any amounts required to be withheld under
applicable law. The base salary will be subject to adjustment from time to time in the sole discretion of the
Company; provided that, the Company covenants that (A) during the first twelve months of Executive’s
employment, it shall not reduce Executive’s base salary and (B) following such twelve month period, it shall not
reduce the base salary below the base salary then in effect immediately prior to the reduction unless (i) Executive
consents to such reduction, or (ii) the reduction is in connection with a general reduction of not more than 20% in
compensation of senior executives of the Company generally that occurs prior to the effective date of any
Corporate Change.
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(b)
Bonus. In addition to the base salary, the Company may pay Executive an annual bonus
(the “Bonus”) as determined by the Board, solely in its discretion (it being understood that Executive’s target
annual bonus shall be 40% of Executive’s annual base salary in effect for such year but the actual bonus may be
higher or lower in any year in the Board’s discretion). The Board’s decision to issue a Bonus to Executive in any
particular year shall have no effect on the absolute discretion of the Board to grant or not to grant a Bonus in
subsequent years. Executive must be an active employee of the Company on December 31 of any calendar year in
order to be eligible for and to earn any Bonus for that year. Any Bonus for a particular year shall be paid or
provided to Executive in a lump sum no later than March 15th of the calendar year following the calendar year in
which the Bonus was earned. For the avoidance of doubt, Executive will first be eligible for the Bonus for the
2020 calendar year. Any Bonus would be prorated for the 2020 calendar year.
(c)
Stock Option Grant. Subject to approval by the Compensation Committee of the Board or a
majority of the Company’s Independent Directors (as defined in Nasdaq Listing Rule 5605(a)(2)), and as a
material inducement to Executive entering into employment with the Company, the Company will grant to
Executive an option to purchase 350,000 shares of the Company’s common stock (the “Option”). The Option is
subject to adjustment for stock splits, combinations or other recapitalizations. The exercise price per share of the
Option shall be equal to the last reported sale price per share of the common stock on the Nasdaq stock exchange
on the effective date of grant of the Option. The Option shall be issued outside the Company’s 2014 Equity
Incentive Plan, as amended, as an “inducement grant” within the meaning of Nasdaq Listing Rule 5635(c)(4), will
be a non-qualified stock option for United States tax purposes and will be subject to all of the terms and
conditions set forth in a written agreement covering the Option, including, if applicable, the Company's 2019
Inducement Stock Incentive Plan.
(d)
Vacation. Executive shall be entitled to take 20 (twenty) days of paid vacation during each
year of the Term to be taken at such time or times as shall be mutually convenient and consistent with his duties
and obligations to the Company. The number of vacation days for which Executive is eligible shall accrue at the
rate of 1.67 days per month. Vacation is at all times subject to the Company’s Time-Off Policy, which the
Company may change periodically in its sole discretion.
(e)
Fringe Benefits. Executive shall be entitled to participate in any employee benefit plans
that the Company makes available to its executives (including, without limitation, group life, disability, medical,
dental and other insurance, retirement, pension, profit-sharing and similar plans) (collectively, the “Fringe
Benefits”), provided that the Fringe Benefits shall not include any stock option or similar plans relating to the
grant of equity securities of the Company. These benefits may be modified or changed from time to time at the
sole discretion of the Company. Where a particular benefit is subject to a formal plan (for example, medical or
life insurance), eligibility to participate in and receive any particular benefit is governed solely by the applicable
plan document, and eligibility to participate in such plan(s) may be dependent upon, among other things, a
physical examination.
(f)
Reimbursement of Expenses. Executive shall be entitled to reimbursement for all ordinary
and reasonable out-of-pocket business expenses that are
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reasonably incurred by him in furtherance of the Company’s business in accordance with reasonable policies
adopted from time to time by the Company for senior executives, subject to Section 4(d)(v).
(g)
Sign on Bonus. The Company will pay Executive a one-time sign on bonus of $100,000
subject to tax deductions and withholdings, which will be paid within thirty (30) days of the Effective Date. If
Executive voluntarily terminates his employment without Good Reason or his employment is terminated by the
Company for Cause within one year of the Effective Date, Executive will be responsible for reimbursing the
Company for the total amount of this bonus within thirty (30) days of the termination of Executive’s employment.
(h)
Relocation Expenses. In order to assist with Executive’s relocation to the Greater Boston
area, the Company will reimburse Executive for up to an amount to be reasonably determined by the Company in
consultation with the Executive (the “Relocation Amount”) for reasonable moving expenses incurred by him in
connection with his relocation within one year of the Effective Date. The Relocation Amount will be paid to
Executive in a lump sum within sixty (60) days following his relocation to the Greater Boston area, provided that
he delivers to the Company reasonable substantiation and documentation of such expenses. For the avoidance of
doubt, no part of the Relocation Amount will be paid to Executive prior to his relocation to the Greater Boston
area, and no expenses will be reimbursed if incurred after he ceases to be employed by the Company for any
reason. Further, if Executive voluntarily terminates his employment without Good Reason or his employment is
terminated by the Company for Cause within one year of the Effective Date, Executive will be responsible for
reimbursing the Company for the total Reimbursement Amount within thirty (30) days of the termination of his
employment.
4.
Severance Compensation.
(a)
In the event of any termination of Executive’s employment for any reason, the Company
shall pay Executive (or Executive’s estate) such portions of Executive’s base salary as have accrued prior to such
termination and have not yet been paid, together with (i) amounts for accrued unused vacation days (as provided
above), (ii) any amounts for expense reimbursement which have been properly incurred or the Company has
become obligated to pay prior to termination and have not been paid as of the date of such termination and (iii) the
amount of any Bonus previously granted to Executive by the Board but not yet paid, which amount shall not
include any pro rata portion of any Bonus for the year of such termination which would have been earned if such
termination had not occurred (the “Accrued Obligations”). Such Accrued Obligations shall be paid as soon as
possible after termination, and in any event in accordance with applicable law.
(b)
In the event that Executive’s employment hereunder is terminated (i) by Executive for a
Good Reason or (ii) by the Company without Cause, the Company shall pay to Executive the Accrued
Obligations. In addition, the Company shall pay to Executive the severance benefits set forth below for twelve
(12) months, or for eighteen (18) months if such termination occurs during the twelve (12) month period
following a Corporate Change (the “Protected Period”), following Executive’s termination of employment (as
applicable, the “Severance Period”). The receipt of any severance benefits provided in this Section shall be
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dependent upon Executive’s execution and, to the extent applicable, non-revocation of a standard separation and
general release of claims agreement, substantially in the form attached hereto as Exhibit A (the “Release”), which
Release contains, among other things, a release of all releasable claims, non-disparagement and cooperation
obligations, and a twelve-month post-employment non-competition provision, which Release must be signed and
any applicable revocation period with respect thereto must have expired by the sixtieth (60th) day following
Executive’s termination of employment. The severance benefits shall be paid or commence, as applicable, on the
first payroll period following the date the Release becomes effective (the “Payment Date”). Notwithstanding the
foregoing, if the 60th day following Executive’s termination occurs in the calendar year following the date on
which Executive’s employment terminates, then the Payment Date shall be no earlier than January 1 of such
subsequent calendar year.
(i)
The Company shall continue to pay Executive his base salary for the Severance
Period in accordance with the Company’s payroll practice, beginning on the Payment Date; provided, that
the first installment will include all amounts that otherwise would have been paid to Executive from the
date his employment terminates through the Payment Date. Notwithstanding the foregoing, if Executive’s
termination of employment occurs during the Protected Period, the Company shall pay Executive his base
salary for the Severance Period in a lump sum on the Payment Date.
(ii)
Only if Executive’s employment is terminated (A) by Executive for a Good Reason
or (B) by the Company without Cause, in each case during the Protected Period, the Company shall pay
Executive an amount equal to one and one-half times his target annual bonus, described in Section 3(b)
hereof, for the year in which the termination of employment occurs, which total amount shall be payable in
a lump sum on the Payment Date.
(iii)
Only if Executive’s employment is terminated (A) by Executive for a Good Reason
or (B) by the Company without Cause, in each case during the Protected Period, one hundred percent
(100%) of Executive’s outstanding unvested equity awards granted under the Company’s equity and long-
term incentive plan(s) prior to his termination (including, but not limited to, the Option) shall vest
immediately.
(iv)
The Company shall continue to provide Executive and his then- enrolled eligible
dependents with group health insurance and shall continue to pay the amount of the premium as in effect
on the date of such termination for the Severance Period commencing on the effective date of such
termination, subject to applicable law and the terms of the respective policies and provided Executive
elects and is eligible to continue receiving group health insurance pursuant to COBRA; provided that the
Company’s obligation to provide the benefits contemplated herein shall terminate upon Executive’s
becoming eligible for coverage under the medical benefits program of a subsequent employer. The
foregoing shall not be construed to extend any period of continuation coverage (e.g., COBRA) required by
Federal law.
(c)
In the event that Executive’s employment hereunder is terminated (i) by Executive for other
than a Good Reason, or (ii) by the Company for Cause, or (iii) as a result of Executive’s death or Disability, then
the Company will pay to Executive the Accrued
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Obligations. The Company shall have no obligation to pay Executive (or Executive’s estate) any other
compensation following such termination except as provided in Section 4(a).
(d)
Compliance with Section 409A. Subject to the provisions in this Section 4(d), any
severance payments or benefits under this Agreement shall begin only upon the date of Executive’s “separation
from service” (determined as set forth below) which occurs on or after the date of termination of Executive’s
employment. The following rules shall apply with respect to the distribution of the severance payments and
benefits, if any, to be provided to Executive under this Agreement:
(i)
It is intended that each installment of the severance payments and benefits provided
under this Agreement shall be treated as a separate “payment” for purposes of Section 409A. Neither the
Company nor Executive shall have the right to accelerate or defer the delivery of any such payments or
benefits except to the extent specifically permitted or required by Section 409A.
(ii)
If, as of the date of Executive’s “separation from service” from the Company,
Executive is not a “specified employee” (within the meaning of Section 409A), then each installment of
the severance payments and benefits shall be made on the dates and terms set forth in this Agreement.
(iii)
If, as of the date of Executive’s “separation from service” from the Company,
Executive is a “specified employee” (within the meaning of Section 409A), then:
(A)
Each installment of the severance payments and benefits due under this
Agreement that, in accordance with the dates and terms set forth herein, will in all circumstances,
regardless of when the separation from service occurs, be paid within the short-term deferral period
(as defined under Section 409A) shall be treated as a short-term deferral within the meaning of
Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible under Section
409A and such payments and benefits shall be paid or provided on the dates and terms set forth in
this Agreement; and
(B)
Each installment of the severance payments and benefits due this Agreement
that is not described in Section 4(d)(iii)(A) above and that would, absent this subsection (B), be
paid within the six-month period following Executive’s “separation from service” from the
Company shall not be paid until the date that is six months and one day after such separation from
service (or, if earlier, Executive’s death), with any such installments that are required to be delayed
being accumulated during the six-month period and paid in a lump sum on the date that is six
months and one day following Executive’s separation from service and any subsequent
installments, if any, being paid in accordance with the dates and terms set forth herein; provided,
however, that the preceding provisions of this sentence shall not apply to any installment of
severance payments and benefits if and to the maximum extent that such installment is deemed to
be paid under a separation pay plan that does not provide for a deferral of compensation
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by reason of the application of Treasury Regulation 1.409A-1(b)(9)(iii) (relating to separation pay
upon an involuntary separation from service). Any installments that qualify for the exception
under Treasury Regulation Section 1.409A-1(b)(9)(iii) must be paid no later than the last day of
Executive’s second taxable year following the taxable year in which the separation from service
occurs.
(iv)
The determination of whether and when Executive’s separation from service from
the Company has occurred shall be made in a manner consistent with, and based on the presumptions set
forth in, Treasury Regulation Section 1.409A-1(h). Solely for purposes of this Section 4(d)(iv),
“Company” shall include all persons with whom the Company would be considered a single employer
under Section 414(b) and 414(c) of the Code.
(v)
All reimbursements and in-kind benefits provided under this Agreement shall be
made or provided in accordance with the requirements of Section 409A to the extent that such
reimbursements or in-kind benefits are subject to Section 409A, including, where applicable, the
requirements that (i) any reimbursement is for expenses incurred during Executive’s lifetime (or during a
shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement
during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year,
(iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year
following the year in which the expense is incurred and (iv) the right to reimbursement is not subject to set
off or liquidation or exchange for any other benefit.
(vi)
Notwithstanding anything herein to the contrary, the Company shall have no
liability to Executive or to any other person if the payments and benefits provided hereunder that are
intended to be exempt from or compliant with Section 409A are not so exempt or compliant.
(e)
Modified Section 280G Cutback.
(i)
Notwithstanding any other provision of this Agreement, except as set forth in
Section 4(e)(ii), in the event that the Company undergoes a “Change in Ownership or Control” (as defined
below), the Company shall not be obligated to provide to Executive a portion of any “Contingent
Compensation Payments” (as defined below) that Executive would otherwise be entitled to receive to the
extent necessary to eliminate any “excess parachute payments” (as defined in Section 280G(b)(1) of the
Code) for Executive. For purposes of this Section 4(e), the Contingent Compensation Payments so
eliminated shall be referred to as the “Eliminated Payments” and the aggregate amount (determined in
accordance with Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision) of the
Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated Amount.”
(ii)
Notwithstanding the provisions of Section 4(e)(i), no such reduction in Contingent
Compensation Payments shall be made if (1) the Eliminated Amount (computed without regard to this
sentence) exceeds (2) 100% of the aggregate
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present value (determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-31 and Q/A-32
or any successor provisions) of the amount of any additional taxes that would be incurred by Executive if
the Eliminated Payments (determined without regard to this sentence) were paid to him (including federal
and state income taxes on the Eliminated Payments, the excise tax imposed by Section 4999 of the Code
payable with respect to all of the Contingent Compensation Payments in excess of Executive’s “base
amount” (as defined in Section 280G(b)(3) of the Code), and any withholding taxes). The override of such
reduction in Contingent Compensation Payments pursuant to this Section 4(e)(ii) shall be referred to as a
“Section 4(e)(ii) Override.” For purpose of this paragraph, if any federal or state income taxes would be
attributable to the receipt of any Eliminated Payment, the amount of such taxes shall be computed by
multiplying the amount of the Eliminated Payment by the maximum combined federal and state income
tax rate provided by law.
(iii)
For purposes of this Section 4(e) the following terms shall have the following
respective meanings:
(1)
“Change in Ownership or Control” shall mean a change in the ownership or
effective control of the Company or in the ownership of a substantial portion of the assets of the
Company determined in accordance with Section 280G(b)(2) of the Code.
(2)
“Contingent Compensation Payment” shall mean any payment (or benefit) in the
nature of compensation that is made or made available (under this Agreement or otherwise) to a
“disqualified individual” (as defined in Section 280G(c) of the Code) and that is contingent (within
the meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or Control of the
Company.
(iv)
Any payments or other benefits otherwise due to Executive following a Change in
Ownership or Control that could reasonably be characterized (as determined by the Company) as
Contingent Compensation Payments (the “Potential Payments”) shall not be made until the dates provided
for in this Section 4(e)(iv). Within 30 days after each date on which Executive first becomes entitled to
receive (whether or not then due) a Contingent Compensation Payment relating to such Change in
Ownership or Control, the Company shall determine and notify Executive (with reasonable detail
regarding the basis for its determinations) (1) which Potential Payments constitute Contingent
Compensation Payments, (2) the Eliminated Amount and (3) whether the Section 4(e)(ii) Override is
applicable. Within 30 days after delivery of such notice to Executive, Executive shall deliver a response to
the Company (the “Executive Response”) stating either (A) that he agrees with the Company’s
determination pursuant to the preceding sentence or (B) that he disagrees with such determination, in
which case he shall set forth (x) which Potential Payments should be characterized as Contingent
Compensation Payments, (y) the Eliminated Amount, and (z) whether the Section 4(e)(ii) Override is
applicable. In the event that Executive fails to deliver an Executive Response on or before the required
date, the Company’s initial determination shall be final. If Executive states in the Executive Response that
he agrees with the Company’s
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determination, the Company shall make the Potential Payments to Executive within three business days
following delivery to the Company of the Executive Response (except for any Potential Payments which
are not due to be made until after such date, which Potential Payments shall be made on the date on which
they are due). If Executive states in the Executive Response that he disagrees with the Company’s
determination, then, for a period of 60 days following delivery of the Executive Response, Executive and
the Company shall use good faith efforts to resolve such dispute. If such dispute is not resolved within
such 60-day period, such dispute shall be settled exclusively by arbitration in the greater Boston,
Massachusetts area, in accordance with the rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The Company shall,
within three business days following delivery to the Company of the Executive Response, make to
Executive those Potential Payments as to which there is no dispute between the Company and Executive
regarding whether they should be made (except for any such Potential Payments which are not due to be
made until after such date, which Potential Payments shall be made on the date on which they are due).
The balance of the Potential Payments shall be made within three business days following the resolution of
such dispute.
(v)
The Contingent Compensation Payments to be treated as Eliminated Payments shall
be determined by the Company by determining the “Contingent Compensation Payment Ratio” (as defined
below) for each Contingent Compensation Payment and then reducing the Contingent Compensation
Payments in order beginning with the Contingent Compensation Payment with the highest Contingent
Compensation Payment Ratio. For Contingent Compensation Payments with the same Contingent
Compensation Payment Ratio, such Contingent Compensation Payment shall be reduced based on the time
of payment of such Contingent Compensation Payments with amounts having later payment dates being
reduced first. For Contingent Compensation Payments with the same Contingent Compensation Payment
Ratio and the same time of payment, such Contingent Compensation Payments shall be reduced on a pro
rata basis (but not below zero) prior to reducing Contingent Compensation Payments with a lower
Contingent Compensation Payment Ratio. The term “Contingent Compensation Payment Ratio” shall
mean a fraction the numerator of which is the value of the applicable Contingent Compensation Payment
that must be taken into account by Executive for purposes of Section 4999(a) of the Code, and the
denominator of which is the actual amount to be received by Executive in respect of the applicable
Contingent Compensation Payment. For example, in the case of an equity grant that is treated as
contingent on the Change in Ownership or Control because the time at which the payment is made or the
payment vests is accelerated, the denominator shall be determined by reference to the fair market value of
the equity at the acceleration date, and not in accordance with the methodology for determining the value
of accelerated payments set forth in Treasury Regulation Section 1.280G-1Q/A-24(b) or (c)).
(vi)
The provisions of this Section 4(e) are intended to apply to any and all payments or
benefits available to Executive under this Agreement or any other agreement or plan of the Company
under which Executive receives Contingent Compensation Payments.
5.
Employee Covenants.
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(a)
Confidential Information. Executive recognizes and acknowledges the competitive and
proprietary aspects of the business of the Company, and that as a result of Executive’s employment, Executive
recognizes and acknowledges that he has had and will continue to have access to, and has been and will continue
to be involved in the development of, Confidential Information (as defined below) of the Company. As used
herein, “Confidential Information” shall mean and include trade secrets, knowledge and other confidential
information of the Company, which Executive has acquired, no matter from whom or on what matter such
knowledge or information may have been acquired, heretofore or hereafter, concerning the content and details of
the business of the Company, and which is not known to the general public, including but not limited to:
confidential and proprietary information supplied to Executive with the legend “Confidential and Proprietary,” or
equivalent, the Company’s marketing and customer support strategies, suppliers and customers, marketing and
selling, business plans, licenses, the Company’s financial information, including sales, costs, profits, prices,
pricing methods, budgets and unpublished financial statements, the Company’s internal organization, employee
information obtained pursuant to Executive’s duties and responsibilities, information regarding the skills and
compensation of other employees of the Company obtained pursuant to Executive’s duties and responsibilities and
customer lists, the Company’s technology, including products, discoveries, inventions, research, experimental and
development efforts, clinical studies, processes, hardware/software design and maintenance tools, samples, media
and/or molecular structures (and procedures and formulations for producing any such samples, media and/or
molecular structures), formulas, methods, know-how and show-how, designs, prototypes, plans for research and
new products, and all derivatives, improvements and enhancements of any of the above and information of third
parties as to which the Company has an obligation of confidentiality.
(i)
For as long as Executive is employed and at all times thereafter, Executive shall not,
directly or indirectly, communicate, disclose or divulge to any person or entity, or use for Executive’s own
benefit or the benefit of any person (other than the Company), any Confidential Information, except as
permitted in subparagraph (iii) below. Upon termination of Executive’s employment, or at any other time
at the request of the Company, Executive agrees to deliver promptly to the Company all Confidential
Information, including, but not limited to, customer and supplier lists, files and records, in Executive’s
possession or under Executive’s control. Executive further agrees that he will not make or retain any
copies of any of the foregoing and will so represent to the Company upon termination of Executive’s
employment. However, nothing in this Agreement or elsewhere shall prohibit Executive from retaining,
and using appropriately, copies of documents relating to Executive’s personal rights and obligations, or
from making disclosures, in confidence, to his attorney and financial advisor for the purpose of obtaining
professional advice.
(ii)
Executive shall disclose immediately to the Company any trade secrets or other
Confidential Information conceived or developed by Executive at any time during Executive’s
employment. Executive hereby assigns and agrees to assign to the Company Executive’s entire right, title
and interest in and to all Confidential Information. Such assignment shall include, without limitation, the
rights to obtain
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patent or copyright protection thereon in the United States and foreign countries. Executive agrees to
provide all reasonable assistance to enable the Company to prepare and prosecute any application before
any governmental agency for patent or copyright protection or any similar application with respect to any
Confidential Information. Executive further agrees to execute all documents and assignments and to make
all oaths necessary to vest ownership of such intellectual property rights in the Company, as the Company
may reasonably request. These obligations shall apply whether or not the subject thereof was conceived or
developed at the suggestion of the Company, and whether or not developed during regular hours of work
or while on the premises of the Company.
(iii)
Except as set forth below, Executive shall at all times, both during and after
termination of this Agreement by either Executive or the Company, maintain in confidence and shall not,
without prior written consent of the Company, use, except in the course of performance of Executive’s
duties for the Company or as required by legal process (provided that Executive will promptly notify the
Company of such legal process except with respect to any confidential government investigation), disclose
or give to others any Confidential Information. In the event Executive is questioned by anyone not
employed by the Company or by an employee of or a consultant to the Company not authorized to receive
such information, in regard to any such information or any other secret or confidential work of the
Company, or concerning any fact or circumstance relating thereto, Executive will promptly notify the
Company. Notwithstanding the foregoing, however, nothing in this Agreement or elsewhere prohibits
Executive from communicating with government agencies about possible violations of federal, state, or
local laws or otherwise providing information to government agencies, filing a complaint with government
agencies, or participating in government agency investigations or proceedings. Executive is not required
to notify the Company of any such communications; provided, however, that nothing herein authorizes the
disclosure of information Executive obtained through a communication that was subject to the attorney-
client privilege. Further, notwithstanding Executive’s confidentiality and nondisclosure obligations,
Executive is hereby advised as follows pursuant to the Defend Trade Secrets Act: “An individual shall not
be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade
secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or
indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected
violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if
such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for
reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and
use the trade secret information in the court proceeding, if the individual (A) files any document
containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court
order.”
(b)
Non-Competition and Non-Solicitation. Executive recognizes that the Company is engaged
in a competitive business and that the Company has a legitimate interest in protecting its trade secrets, confidential
business information, and customer, business development partner, licensee, supplier, and credit and/or financial
relationships. Accordingly, in exchange for valuable consideration, including without limitation Executive’s
access to
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confidential business information, employment by the Company, and, with respect to the non-competition
restrictions, the Option granted as described in Section 3(c) which Executive hereby explicitly acknowledges and
agrees has been mutually agreed upon by Executive and the Company, is fair and reasonable, and is sufficient
consideration in exchange for the non-competition restriction, Executive agrees as follows:
(i)
Non-Competition. During the Restricted Period (as defined below), Executive will
not, in the Applicable Territory (as defined below), directly or indirectly, whether for himself or for any
other person or entity, and whether as a proprietor, principal, shareholder, partner, agent, employee,
consultant, independent contractor, or in any other capacity whatsoever, undertake or have any interest in
(other than the passive ownership of publicly registered securities representing an ownership interest of
less than 1%), or engage or assist others in engaging in, any business or enterprise that is competitive with
the Company’s business, including but not limited to any business or enterprise that researches, develops,
manufactures, markets, licenses, sells or provides any product or service that competes with any product or
service researched, developed, manufactured, marketed, licensed, sold or provided, or planned to be
researched, developed, manufactured, marketed, licensed, sold or provided by the Company or any of its
affiliates or subsidiaries (a “Competitive Business”), if Executive would be performing job duties or
services for the Competitive Business that are of a similar type that Executive performed for the Company
at any time during the last two (2) years of Executive’s employment. As a senior leader for the Company,
Executive acknowledges and agrees that, in the performance of Executive’s duties for the Company
(including, without limitation, assisting the Company with its overall business strategy), Executive will be
privy to and rely upon Confidential Information regarding all aspects of the Company’s business and
operations. Accordingly, Executive acknowledges and agrees that undertaking a role in a Competitive
Business would constitute performing job duties or services of a similar type that Executive performed for
the Company. Notwithstanding the foregoing, both Executive and the Company recognize and
acknowledge that nothing in this Section 5(b)(i), any other section of this Agreement or elsewhere is
intended to or shall be interpreted to (x) restrict Executive’s ability, after he ceases to be an employee of
the Company, to practice law, in violation of the Massachusetts Rules of Professional Conduct 5.6 or other
applicable rules of professional conduct; or (y) expand the scope of Executive’s duty to maintain
privileged or confidential information obtained in connection with his role as counsel for the Company
beyond what is permitted under Massachusetts Rules of Professional Conduct 1.6 and 1.9, or other
applicable rules of professional conduct.
(1) Certain Definitions. Solely for purposes of this Section 5(b)(i):
(A)
the “Restricted Period” shall include the duration of Executive’s employment with
the Company and the twelve (12) month period thereafter; provided, however, that the Restricted Period shall
automatically be extended to two (2) years following the cessation of Executive’s employment if Executive
breaches a fiduciary duty to the Company or unlawfully takes, physically or electronically, any property belonging
to the Company. Notwithstanding the foregoing, the Restricted Period shall end immediately upon Executive’s
last day of employment with the Company if : (x) the Company terminates Executive’s
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employment other than for Cause (as defined in Section 2(b)), or (y) the Company notifies Executive in writing
that it is waiving the post-employment restrictions set forth in this Section 5(b)(i) (such notice to be provided no
later than Executive’s last day of employment or by the seventh (7th) business day following Executive’s notice of
resignation, if later).
(B)
“Applicable Territory” shall mean the geographic areas in which Executive provided
services or had a material presence or influence at any time during Executive’s last two (2) years of employment.
As a senior leader for the Company, Executive acknowledges that Executive’s duties and responsibilities require
Executive to have a material presence and/or influence anywhere that the Company does business.
(ii)
Non-Solicitation. While Executive is employed by the Company and for a period of
twelve (12) months after the termination or cessation of such employment for any reason, except in the
performance of his duties for the Company, Executive will not directly or indirectly:
(1) initiate contact with (including without limitation phone calls, press releases and the sending or
delivering of announcements), or in any manner solicit, directly or indirectly, any customers,
business development partners, licensors, licensees, or creditors (including institutional lenders,
bonding companies and trade creditors) of the Company in an attempt to induce or motivate them
either to discontinue or modify their then prevailing or future relationship with the Company or to
transfer any of their business with the Company to any person or entity other than the Company; or
(2) initiate contact with, or in any manner solicit, directly or indirectly, any supplier of goods, services
or materials to the Company in an attempt to induce or motivate them either to discontinue or
modify their then prevailing or future relationship with the Company or to supply the same or
similar inventory, goods, services or materials (except generally available inventory, goods,
services or materials) to any person or entity other than the Company; or
(3) directly or indirectly recruit, solicit or otherwise induce or influence any employee or independent
contractor of the Company to discontinue or modify his or her employment or engagement with the
Company, or employ or contract with any such employee or contractor for the provision of
services.
If Executive violates the provisions of any of the preceding paragraphs of this Section 5(b)(ii),
Executive shall continue to be bound by the restrictions set forth in such paragraph until a period of
twelve (12) months has expired without any violation of such provisions. Further, the twelve (12)
month post-employment restrictions set forth in this Section 5(b)(ii) shall be extended to two (2)
years if Executive breaches a fiduciary duty to the Company or unlawfully takes, physically or
electronically, any property belonging to the Company.
(c)
Definition of “Customer”. The term “customer” or “customers” shall include any person or
entity (a) that is a current customer of the Company, (b) that was a
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customer of the Company at any time during the preceding twenty-four (24) months or (c) to Executive’s
knowledge, to which the Company made a written presentation for the solicitation of business at any time during
the preceding twenty-four (24) months.
(d)
Reasonableness of Restrictions. Executive further recognizes and acknowledges that (i) the
types of employment which are prohibited by this Section 5 are narrow and reasonable in relation to the skills
which represent Executive’s principal salable asset both to the Company and to Executive’s other prospective
employers, and (ii) the broad geographical scope of the provisions of this Section 5 is reasonable, legitimate and
fair to Executive in light of the global nature of the Company’s business, and in light of the limited restrictions on
the type of employment prohibited herein compared to the types of employment for which Executive is qualified
to earn Executive’s livelihood.
(e)
Remedies. Executive acknowledges that a breach of this Section 5 will cause great and
irreparable injury and damage, which cannot be reasonably or adequately compensated by money damages.
Accordingly, Executive acknowledges that the remedies of injunction and specific performance shall be available
in the event of such a breach, in addition to money damages, costs and attorneys’ fees, and other legal or equitable
remedies, and that the Company shall be entitled as a matter of course to an injunction pending trial, without the
posting of bond or other security. Any period of restriction set forth in this Section 5 shall be extended for a
period of time equal to the duration of any breach or violation hereof.
(f)
Notification. Any person employing Executive or evidencing any intention to employ
Executive may be notified as to the existence and provisions of this Agreement.
(g)
Modification of Covenants; Enforceability. In the event that any provision of this Section 5
is held to be in any respect an unreasonable restriction, then the court so holding may modify the terms thereof,
including the period of time during which it operates or the geographic area to which it applies, or effect any other
change to the extent necessary to render this section enforceable, it being acknowledged by the parties that the
representations and covenants set forth herein are of the essence of this Agreement.
(h)
Subsidiaries. For purposes of Sections 5 and 6 of this Agreement, “Company” shall include
all direct and indirect subsidiaries of the Company. An entity shall be deemed to be a subsidiary of the Company
if the Company directly or indirectly owns or controls 50% or more of the equity interest in such entity.
(i)
Acknowledgements. Executive acknowledges that he has the right to consult with counsel
prior to signing this Agreement. Executive further acknowledges that he was provided this Agreement by the
earlier of the date of (x) a formal offer of employment, and (y) ten (10) business days prior to Executive’s
commencement of employment with the Company.
6.
Ownership of Ideas, Copyrights and Patents.
(a)
Property of the Company. Executive agrees that all ideas, inventions, original works of
authorship, developments, concepts, know-how, improvements or trade secrets,
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whether patentable, copyrightable or not, which Executive may conceive, reduce to practice or develop, alone or
in conjunction with another, or others, whether during or out of regular business hours, and whether at the request
or upon the suggestion of the Company, or otherwise, in the course of performing services for the Company in any
capacity, whether heretofore or hereafter, (collectively, “the Inventions”) are and shall be the sole and exclusive
property of the Company, and that Executive shall not publish any of the Inventions without the prior written
consent of the Company. Executive hereby assigns to the Company all of Executive’s right, title and interest in
and to all of the foregoing. Executive further represents and agrees that to the best of Executive’s knowledge and
belief none of the Inventions will violate or infringe upon any right, patent, copyright, trademark or right of
privacy, or constitute libel or slander against or violate any other rights of any person, firm or corporation and that
Executive will use his best efforts to prevent any such violation.
(b)
Cooperation. At any time during or after the Term, Executive agrees that he will fully
cooperate with the Company, its attorneys and agents in the preparation and filing of all papers and other
documents as may be required to perfect the Company’s rights in and to any of such Inventions, including, but not
limited to, executing any lawful document (including, but not limited to, applications, assignments, oaths,
declarations and affidavits) and joining in any proceeding to obtain letters patent, copyrights, trademarks or other
legal rights of the United States and of any and all other countries on such Inventions, provided that any patent or
other legal right so issued to Executive, personally, shall be assigned by Executive to the Company without charge
by Executive. Executive further designates the Company as his agent for, and grants to the Company a power of
attorney with full power of substitution, which power of attorney shall be deemed coupled with an interest, for the
purpose of effecting the foregoing assignments from Executive to the Company. Company will bear the
reasonable expenses which are incurred by Executive in assisting and cooperating hereunder. Executive waives
all claims to moral rights in any Inventions.
7.
Disclosure to Future Employers. The Company may provide in its discretion, a copy of the
covenants contained in Sections 5 and 6 of this Agreement to any business or enterprise which Executive may
directly, or indirectly, own, manage, operate, finance, join, control or in which Executive participates in the
ownership, management, operation, financing, or control, or with which Executive may be connected as an
officer, director, employee, partner, principal, agent, representative, consultant or otherwise.
8.
Records. Upon termination of Executive’s relationship with the Company, Executive shall deliver
to the Company any property of the Company which may be in Executive’s possession including products,
materials, memoranda, notes, records, reports, or other documents or photocopies of the same.
9.
Insurance. The Company, in its sole discretion, may apply for and procure in its own name
(whether or not for its own benefit) policies of insurance insuring Executive’s life. Executive agrees to submit to
reasonable medical or other examinations and to execute and deliver any applications or other instruments in
writing that are reasonably necessary to effectuate such insurance. No adverse employment actions may be based
upon the results of any such exam or the failure by the Company to obtain such insurance.
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10.
No Conflicting Agreements. Executive hereby represents and warrants that Executive has no
commitments or obligations inconsistent with this Agreement.
11.
Conditions to Employment. Notwithstanding anything to the contrary contained herein, this
Agreement and Executive’s employment hereunder is subject to and conditioned on satisfactory background and
reference checks, and Executive’s provision of proof of his right to work in the United States. The Company shall
notify Executive by August 31, 2020 if any such background or reference checks have not been completed to its
satisfaction.
12.
General.
(a)
Notices. All notices, requests, consents and other communications hereunder shall be in
writing, shall be addressed to the receiving party’s address as follows:
If to the Company:
Ocular Therapeutix, Inc.
24 Crosby Drive
Bedford, MA 01730 USA
Attention: Antony Mattessich
Telephone: (781) 357-4000
With an email copy to: AMattessich@ocutx.com
If to Executive:
Philip Strassburger
[last known address on file with the
Company]
With an email copy to:
philip.strassburger@gmail.com
or to such other address as a party may designate by notice hereunder, and shall be either (i) delivered by hand, (ii)
sent by overnight courier, or (iii) sent by registered or certified mail, return receipt requested, postage prepaid. All
notices, requests, consents and other communications hereunder shall be deemed to have been given either (i) if
by hand, at the time of the delivery thereof to the receiving party at the address of such party set forth above, (ii) if
sent by overnight courier, on the next business day following the day such notice is delivered to the courier
service, or (iii) if sent by registered or certified mail, on the fifth (5th) business day following the day such
mailing is made.
(b)
Entire Agreement. This Agreement embodies the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement of any kind not expressly set forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this Agreement.
(c)
Modifications and Amendments. The terms and provisions of this Agreement may be
modified or amended only by written agreement executed by the parties hereto that expressly references the
provision of this Agreement being modified or amended.
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(d) Waivers and Consents. The terms and provisions of this Agreement may be waived, or
consent for the departure therefrom granted, only by written document referencing the terms and provisions being
waived and executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent
shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this
Agreement, whether or not similar. Each such waiver or consent shall be effective only in the specific instance
and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.
(e)
Assignment. The Company shall assign its rights and obligations hereunder to any person
or entity that succeeds to all or substantially all of the Company’s business or that aspect of the Company’s
business in which Executive is principally involved. Executive may not assign Executive’s rights and obligations
under this Agreement without the prior written consent of the Company.
(f)
Benefit. All statements, representations, warranties, covenants and agreements in this
Agreement shall be binding on the parties hereto and shall inure to the benefit of the respective successors and
permitted assigns of each party hereto. Nothing in this Agreement shall be construed to create any rights or
obligations except among the parties hereto, and no person or entity shall be regarded as a third-party beneficiary
of this Agreement.
(g)
Governing Law. This Agreement and the rights and obligations of the parties hereunder
shall be construed in accordance with and governed by the law of the Commonwealth of Massachusetts, without
giving effect to the conflict of law principles thereof.
(h)
Jurisdiction and Service of Process. Any legal action or proceeding with respect to this
Agreement shall be brought in the courts of the Commonwealth of Massachusetts or of the United States of
America for the District of Massachusetts and in Suffolk County in the event of any legal action or proceeding
related to the non-competition provision contained in Section 5. By execution and delivery of this Agreement,
each of the parties hereto accepts for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Each of the parties hereto irrevocably consents to the service of process of any
of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by certified mail,
postage prepaid, to the party at its address set forth in Section 12(a) hereof. THE PARTIES IRREVOCABLY
WAIVE ANY RIGHT TO TRIAL BY JURY AS TO ALL CLAIMS HEREUNDER.
(i)
Severability. The parties intend this Agreement to be enforced as written. However, (i) if
any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a duly
authorized court having jurisdiction, then the remainder of this Agreement, or the application of such portion or
provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be
affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest
extent permitted by law; and (ii) if any provision, or part thereof, is held to be unenforceable because of the
duration of such provision or the geographic area covered thereby, the Company and Executive agrees that the
court making such determination shall have the power to reduce the duration and/or geographic area of such
provision, and/or to delete specific words and phrases (“blue-
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penciling”), and in its reduced or blue-penciled form such provision shall then be enforceable and shall be
enforced.
(j)
Headings and Captions; Interpretation. The headings and captions of the various
subdivisions of this Agreement are for convenience of reference only and shall in no way modify, or affect the
meaning or construction of, any of the terms or provisions hereof. The provisions of the following Sections of
this Agreement are in addition to, and do not limit, each other: Sections 6 and 5(a); Sections 7 and 5(g); Sections
12(k) and 5(f); and Sections 12(l) and 12(d).
(k)
Injunctive Relief. Executive hereby expressly acknowledges that any breach or threatened
breach of any of the terms and/or conditions set forth in Section 5 or 6 of this Agreement will result in substantial,
continuing and irreparable injury to the Company. Therefore, Executive hereby agrees that, in addition to any
other remedy that may be available to the Company, the Company shall be entitled to injunctive or other equitable
relief by a court of appropriate jurisdiction.
(l)
No Waiver of Rights, Powers and Remedies. No failure or delay by a party hereto in
exercising any right, power or remedy under this Agreement, and no course of dealing between the parties hereto,
shall operate as a waiver of any such right, power or remedy of the party. No single or partial exercise of any
right, power or remedy under this Agreement by a party hereto, nor any abandonment or discontinuance of steps
to enforce any such right, power or remedy, shall preclude such party from any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The election of any remedy by a party hereto shall
not constitute a waiver of the right of such party to pursue other available remedies. No notice to or demand on a
party not expressly required under this Agreement shall entitle the party receiving such notice or demand to any
other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the party
giving such notice or demand to any other or further action in any circumstances without such notice or demand.
(m)
Counterparts. This Agreement may be executed in one or more counterparts, and by
different parties hereto on separate counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of executed counterparts in electronic form
(including by portable document format) shall be sufficient for all purposes.
(n)
Survival. The provisions of Sections 4, 5, 6, 7, 8, and 12 shall survive the termination of
this Agreement and Executive’s employment hereunder in accordance with their terms.
[Remainder of Page Intentionally Left Blank]
IN WITNESS THEREOF, the parties hereto have executed this Agreement as of the day and year first
above written.
Ocular Therapeutix, Inc.
/s/ Antony Mattessich
Name: Antony Mattessich
Title: President and Chief Executive Officer
Agreed and Accepted
/s/ Philip C. Strassburger
Name: Philip C. Strassburger
EXHIBIT A1
Sample Separation and Release Agreement
[Insert Date]
[Insert Name]
Dear [Insert Name]:
In connection with the termination of your employment with Ocular Therapeutix, Inc. (the “Company”) on
[Separation Date], you are eligible to receive the Severance Compensation as described in Section 4 (b) of the
Employment Agreement executed between you and the Company dated August 28, 2020 (the “Employment
Agreement”) if you sign and return this letter agreement to me by [Return Date - 7/21/45 days from date of
receipt of this letter agreement] [and it becomes binding between you and the Company]. By signing and
returning this letter agreement [and not revoking your acceptance], you will be agreeing to the terms and
conditions set forth in the numbered paragraphs below, including the release of claims set forth in paragraph 2.
Therefore, you are advised to consult with an attorney before signing this letter agreement and you have been
given at least [seven/twenty-one (21)/forty-five (45)] 2days to do so. [If you sign this letter agreement, you
may change your mind and revoke your agreement during the seven (7) day period after you have signed it
by notifying me in writing. If you do not so revoke, this letter agreement will become a binding agreement
between you and the Company upon the expiration of the seven (7) day period.]
Although your receipt of the Severance Compensation is expressly conditioned on your entering into this
letter agreement, the following will apply regardless of whether or not you do so:
· As of the Separation Date, all salary payments from the Company will cease and any benefits you
had as of the Separation Date under Company-provided benefit plans, programs, or practices will
terminate, except as required by federal or state law.
· You will receive payment for your final wages and any unused vacation time accrued through the
Separation Date and you will receive any other “Accrued Obligations” described in Section 4(a) of
the Employment Agreement.
· You may, if eligible and at your own cost, elect to continue receiving group medical insurance
pursuant to applicable “COBRA” law. Please consult the COBRA materials to be provided under
separate cover for details regarding these benefits.
1 Note: The Company may revise this release agreement in its reasonable discretion to reflect changes in law,
additional statutes or claims, benefits, or employee’s circumstances, so that the Company receives the benefit
of the most complete release of claims that is legally permissible (without releasing employee’s right to
receive the Severance Compensation and without imposing additional post-employment restrictions), and the
Company may also change the timing, if required by applicable law to obtain such release. This footnote and
the other footnotes herein are part of the form of release and are to be removed only when the Company
finalizes the letter agreement for execution.
2 Consideration period depends upon circumstances of separation.
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· You are obligated to keep confidential and not to use or disclose any and all non-public information
concerning the Company that you acquired during the course of your employment with the
Company, including any non-public information concerning the Company’s business affairs,
business prospects, and financial condition, except as otherwise permitted by paragraph 9 below.
Further, you remain subject to any and all continuing confidentiality, non-competition and/or non-
solicitation obligations that you may have pursuant to any previous agreement with the Company,
including, as may be applicable and without limitation, the Employment Agreement.
· You must return to the Company no later than the Separation Date all Company property.
The following numbered paragraphs set forth the terms and conditions that will also apply if you timely
sign and return this letter agreement [and do not revoke it in writing within the seven (7) day period].
1.
Severance Compensation - If you timely sign and return this letter agreement [and do not revoke
your acceptance], and provided you comply with all of your obligations set forth herein, the Company will
provide you with the severance compensation and benefits set forth in Section 4(b) of the Employment Agreement
(the “Severance Compensation”), subject to and in accordance with the terms and conditions thereof.
2.
Release - In consideration of the Severance Compensation, which you acknowledge you would not
otherwise be entitled to receive, you hereby fully, forever, irrevocably and unconditionally release, remise and
discharge the Company, its affiliates, subsidiaries, parent companies, predecessors, and successors, and all of their
respective past and present officers, directors, stockholders, partners, members, managers, employees, agents,
representatives, plan administrators, attorneys, insurers and fiduciaries (each in their individual and corporate
capacities) (collectively, the “Released Parties”) from any and all claims, charges, complaints, demands, actions,
causes of action, suits, rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts,
agreements, promises, doings, omissions, damages, executions, obligations, liabilities, and expenses (including
attorneys’ fees and costs), of every kind and nature that you ever had or now have against any or all of the
Released Parties, including, but not limited to, any and all claims arising out of or relating to your employment
with and/or separation from the Company, including, but not limited to, all claims under Title VII of the Civil
Rights Act of 1964, 42 U.S.C. § 2000e et seq., the Americans With Disabilities Act of 1990, 42 U.S.C. § 12101 et
seq., [the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq.,] the Genetic Information
Nondiscrimination Act of 2008, 42 U.S.C. § 2000ff et seq., the Family and Medical Leave Act, 29 U.S.C. § 2601
et seq., the Worker Adjustment and Retraining Notification Act (“WARN”), 29 U.S.C. § 2101 et seq., the
Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq., Executive Order 11246, Executive Order 11141, the Fair
Credit Reporting Act, 15 U.S.C. § 1681 et seq., and the Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. § 1001 et seq., all as amended; all claims arising out of the Massachusetts Fair Employment
Practices Act, Mass. Gen. Laws ch. 151B, § 1 et seq., the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, §
148 et seq. (Massachusetts law regarding payment of wages and overtime), the Massachusetts Civil Rights Act,
Mass. Gen. Laws ch. 12, §§ 11H and 11I, the Massachusetts Equal Rights Act, Mass. Gen. Laws. ch. 93, § 102
and Mass.
-3-
Gen. Laws ch. 214, § 1C, the Massachusetts Labor and Industries Act, Mass. Gen. Laws ch. 149, § 1 et seq.,
Mass. Gen. Laws ch. 214, § 1B (Massachusetts right of privacy law), the Massachusetts Maternity Leave Act,
Mass. Gen. Laws ch. 149, § 105D, and the Massachusetts Small Necessities Leave Act, Mass. Gen. Laws ch. 149,
§ 52D, all as amended; [Insert any other applicable Federal and state citations at the time of termination;] all
common law claims including, but not limited to, actions in defamation, intentional infliction of emotional
distress, misrepresentation, fraud, wrongful discharge, and breach of contract (including, without limitation, all
claims arising out of or relating to the Employment Agreement); all claims to any ownership interest in the
Company, contractual or otherwise; all state and federal whistleblower claims to the maximum extent permitted
by law; and any claim or damage arising out of your employment with and/or separation from the Company
(including a claim for retaliation) under any common law theory or any federal, state or local statute or ordinance
not expressly referenced above; provided, however, that nothing in this letter agreement: (i) prevents you from
filing a charge with, cooperating with, or participating in any investigation or proceeding before, the Equal
Employment Opportunity Commission or a state fair employment practices agency (except that you acknowledge
that you may not recover any monetary benefits in connection with any such charge, investigation, or proceeding,
and you further waive any rights or claims to any payment, benefit, attorneys’ fees or other remedial relief in
connection with any such charge, investigation or proceeding), (ii) deprives you of any accrued benefits to which
you have acquired a vested right under any employee benefit plan or policy, stock plan or deferred compensation
arrangement, any health care continuation to the extent required by applicable law or any agreement, or any right
to severance benefits or any other benefits due to you upon termination of employment or thereafter that are
described in Section 4 of the Employment Agreement; or (iii) deprives you of any rights you may have to be
indemnified by the Company as provided in the Employment Agreement, any other agreement between the
Company and you, or pursuant to the Company’s Certificate of Incorporation or by-laws. This Release shall not
extend to any claims you may have against any persons that are Released Parties to the extent such claims are (i)
related solely to your ownership of the Company’s stock and (ii) unrelated to your employment with the
Company.
3.
Continuing Obligations - You acknowledge and reaffirm your confidentiality, non-competition
and non-disclosure obligations discussed above, as well as any and all confidentiality and/or non-solicitation
obligations set forth in any previous agreement you may have with the Company (including without limitation the
Employment Agreement), which survive your separation from employment with the Company. In addition, as an
express condition of your receipt of the Severance Compensation, you agree that, for a period of twelve (12)
months following the Separation Date, you will not, without the prior consent of the Company, directly or
indirectly, as a partner, stockholder, director, consultant, joint venture, investor, employee or in any other capacity,
work for, provide services, engage in or own, manage, operate or control, or participate in the ownership,
management, operation or control of any business or entity that engages in a substantially similar business or line
of businesses as those conducted by the Company or any of its direct or indirect subsidiaries for which you
worked or served at the time of your separation, in any market where such businesses or entity actually and
directly competes against the Company; provided, however, that nothing herein shall prohibit you from owning
not more than 1% of any class of securities of a publicly traded entity in any business or entity; and further
provided however, that both you and the Company recognize and acknowledge that nothing in this paragraph 3 or
elsewhere is intended to or shall
-4-
be interpreted to (x) restrict your ability, after you cease to be an employee of the Company, to practice law, in
violation of the Massachusetts Rules of Professional Conduct 5.6 or other applicable rules of professional
conduct; or (y) expand the scope of your duty to maintain privileged or confidential information obtained in
connection with your role as counsel for the Company beyond what is permitted under Massachusetts Rules of
Professional Conduct 1.6 and 1.9, or other applicable rules of professional conduct. If any restriction set forth in
the foregoing sentence is found by any court of competent jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it
may be enforceable. If you violate the non-competition provisions set forth in this paragraph, you shall continue
to be bound by the restrictions set forth in such paragraph until a period of one year has expired without any
violation of such provisions.
4.
Non-Disparagement - You understand and agree that, to the extent permitted by law and except as
otherwise permitted by paragraph 9 below, you will not, in public or private, make any false, disparaging,
derogatory or defamatory statements, online (including, without limitation, on any social media, networking, or
employer review site) or otherwise, to any person or entity, including, but not limited to, any media outlet,
industry group, financial institution or current or former employee, board member, consultant, client or customer
of the Company, regarding the Company or any of the other Released Parties, or regarding the Company’s
business affairs, business prospects, or financial condition. The Company agrees to instruct its officers and
members of the leadership team to not, in public or private, make any false, disparaging, derogatory or defamatory
statements, online (including, without limitation, on any social media, networking, or employer review site) or
otherwise, to any person or entity, including, but not limited to, any media outlet, industry group, financial
institution or current or former employee, board member, consultant, client or customer of the Company, or
potential employer, about you.
5.
Cooperation - You agree that, to the extent permitted by law and upon reasonable request, you
shall cooperate fully with the Company in the investigation, defense or prosecution of any claims or actions which
already have been brought, are currently pending, or which may be brought in the future against the Company by
a third party or by or on behalf of the Company against any third party, whether before a state or federal court, any
state or federal government agency, or a mediator or arbitrator. Your full cooperation in connection with such
claims or actions shall include, but not be limited to, being available to meet with the Company’s counsel, at
reasonable times and locations designated by the Company, to investigate or prepare the Company’s claims or
defenses, to prepare for trial or discovery or an administrative hearing, mediation, arbitration or other proceeding
and to act as a witness when requested by the Company. The Company will reimburse you for the reasonable and
documented out-of-pocket expenses you may incur in connection with your cooperation under this paragraph 5.
You further agree that, to the extent permitted by law or unless you are directed otherwise by a court or
government agency, you will notify the Company promptly in the event that you are served with a subpoena
(other than a subpoena issued by a government agency), or in the event that you are asked to provide a third party
(other than a government agency) with information concerning any actual or potential complaint or claim against
the Company.
-5-
6.
Return of Company Property - You confirm that you have returned to the Company all keys,
files, records (and copies thereof), equipment (including, but not limited to, computer hardware, software and
printers, flash drives and storage devices, wireless handheld devices, cellular phones, tablets, etc.), Company
identification, and any other Company-owned property in your possession or control and have left intact all
electronic Company documents, including but not limited to those that you developed or helped to develop during
your employment, and you have not retained any copies. You further confirm that you have cancelled all accounts
for your benefit, if any, in the Company’s name, including but not limited to, credit cards, telephone charge cards,
cellular phone accounts, and computer accounts.
7.
Business Expenses and Final Compensation - You acknowledge that you have been reimbursed
by the Company for all business expenses incurred in conjunction with the performance of your employment and
that no other reimbursements are owed to you. You further acknowledge that you have received payment in full
for all services rendered in conjunction with your employment by the Company, including payment for all wages,
bonuses, and accrued, unused vacation time, and that no other compensation is owed to you except as provided
herein.
8.
Confidentiality - You understand and agree that, to the extent permitted by law and except as
otherwise permitted by paragraph 9 below, the terms and contents of this letter agreement, and the contents of the
negotiations and discussions resulting in this letter agreement, shall be maintained as confidential by you and your
agents and representatives and shall not be disclosed except as otherwise agreed to in writing by the Company.
9.
Scope of Disclosure Restrictions - Nothing in this letter agreement or elsewhere prohibits you
from: (i) communicating with government agencies about possible violations of federal, state, or local laws or
otherwise providing information to government agencies: (ii) filing a complaint with government agencies, or
participating in government agency investigations or proceedings; (iii) disclosing information required by
applicable law, or in confidence to your attorney or professional advisor for the purpose of obtaining professional
advice; or (iv) enforcing your rights against the Company. You are not required to notify the Company of any
such communications; provided, however, that nothing herein authorizes the disclosure of information you
obtained through a communication that was subject to the attorney-client privilege. Further, notwithstanding your
confidentiality and nondisclosure obligations, you are hereby advised as follows pursuant to the Defend Trade
Secrets Act: “An individual shall not be held criminally or civilly liable under any Federal or State trade secret
law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government
official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a
suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding,
if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a
suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret
information in the court proceeding, if the individual (A) files any document containing the trade secret under
seal; and (B) does not disclose the trade secret, except pursuant to court order.”
10.
Amendment and Waiver - This letter agreement shall be binding upon the parties and may not be
modified in any manner, except by an instrument in writing of concurrent
-6-
or subsequent date signed by duly authorized representatives of the parties hereto. This letter agreement is
binding upon and shall inure to the benefit of the parties and their respective agents, assigns, heirs, executors,
successors and administrators. No delay or omission by the Company in exercising any right under this letter
agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any
one occasion shall be effective only in that instance and shall not be construed as a bar to or waiver of any right on
any other occasion.
11.
Validity - Should any provision of this letter agreement be declared or be determined by any court
of competent jurisdiction to be illegal or invalid, the validity of the remaining parts, terms or provisions shall not
be affected thereby and said illegal or invalid part, term or provision shall be deemed not to be a part of this letter
agreement.
12.
Nature of Agreement - You understand and agree that this letter agreement is a severance
agreement and does not constitute an admission of liability or wrongdoing on the part of the Company.
13.
Acknowledgments - You acknowledge that you have been given at least [seven (7) / twenty-one
(21) / forty-five (45)] days to consider this letter agreement, and that the Company advised you to consult with an
attorney of your own choosing prior to signing this letter agreement. [You understand that you may revoke this
letter agreement for a period of seven (7) days after you sign this letter agreement by notifying me in
writing, and the letter agreement shall not be effective or enforceable until the expiration of this seven (7)
day revocation period. You understand and agree that by entering into this letter agreement, you are
waiving any and all rights or claims you might have under the Age Discrimination in Employment Act, as
amended by the Older Workers Benefit Protection Act, and that you have received consideration beyond
that to which you were previously entitled.]
14.
[Eligibility for Severance Program - Attached to this letter agreement as Attachment A is a
description of (i) any class, unit or group of individuals covered by the program of severance benefits which
the Company has offered to you, and any applicable time limits regarding such severance benefit program;
and (ii) the job title and ages of all individuals eligible or selected for such severance benefit program, and
the ages of all individuals in the same job classification or organizational unit who are not eligible or who
were not selected for such severance benefit program.]
15.
Voluntary Assent - You affirm that no other promises or agreements of any kind have been made
to or with you by any person or entity whatsoever to cause you to sign this letter agreement, and that you fully
understand the meaning and intent of this letter agreement. You state and represent that you have had an
opportunity to fully discuss and review the terms of this letter agreement with an attorney. You further state and
represent that you have carefully read this letter agreement, understand the contents herein, freely and voluntarily
assent to all of the terms and conditions hereof, and sign your name of your own free act. Further, you
acknowledge that the restrictions referenced and contained in paragraphs 3 and 4 of this letter agreement are
necessary for the protection of the business and goodwill of the Company and are considered by you to be
reasonable for such purpose. You agree that any breach or threatened breach of such provisions is likely to cause
the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event of any
such breach or threatened breach,
-7-
you agree that the Company, in addition to such other remedies which may be available, shall have the right to
obtain an injunction from a court restraining such a breach or threatened breach without posting a bond and the
right to specific performance of such provisions and you and hereby waive the adequacy of a remedy at law as a
defense to such relief.
16.
Applicable Law - This letter agreement shall be interpreted and construed by the laws of the
Commonwealth of Massachusetts, without regard to conflict of laws provisions. You hereby irrevocably submit
to and acknowledge and recognize the jurisdiction of the courts of the Commonwealth of Massachusetts, or if
appropriate, a federal court located in the Commonwealth of Massachusetts (which courts, for purposes of this
letter agreement, are the only courts of competent jurisdiction), over any suit, action or other proceeding arising
out of, under or in connection with this letter agreement or the subject matter hereof. You hereby irrevocably
waive any right to a trial by jury in any action, suit or other legal proceeding arising under or relating to any
provision of this letter agreement.
17.
Entire Agreement - This letter agreement contains and constitutes the entire understanding and
agreement between the parties hereto with respect to your severance benefits and the settlement of claims against
the Company and cancels all previous oral and written negotiations, agreements, and commitments in connection
therewith. Notwithstanding the foregoing, if there is a conflict between the non-competition obligations set forth
in paragraph 3 herein and the noncompetition obligations set forth in Section 5(b)(i) of the Employment
Agreement, such conflict will be resolved in the manner most protective of the Company.
18.
Tax Acknowledgement - In connection with the Severance Compensation, the Company shall
withhold and remit to the tax authorities the amounts required under applicable law, and you shall be responsible
for all applicable taxes with respect to such Severance Compensation under applicable law. You acknowledge that
you are not relying upon the advice or representation of the Company with respect to the tax treatment of the
Severance Compensation.
[Remainder of Page Intentionally Left Blank]
If you have any questions about the matters covered in this letter agreement, please call me.
Very truly yours,
By:
[Name]
[Title]
I hereby agree to the terms and conditions set forth above. [I have been given at least [twenty-one (21) /
forty-five (45)] days to consider this letter agreement and I have chosen to execute this on the date below. I
intend that this letter agreement will become a binding agreement between me and the Company if I do not
revoke my acceptance in seven (7) days.]
[Insert Name]
Date
To be returned in a timely manner as set forth on the first page of this letter agreement, but not to be signed before
the close of business on your last day of employment.3
3 Note: All footnotes will be removed from the final execution version of this agreement.
SUPPLEMENT
Exhibit 10.36
This Supplement (this “Supplement”) to License Agreement by and between Ocular Therapeutix, Inc. and
Affamed Therapeutics Limited is made and entered into as of January 18, 2021.
WHEREAS, Ocular Therapeutix, Inc. (“Ocular”) and Affamed Therapeutics Limited (“Affamed”) entered
into a License Agreement dated as of October 28, 2020 (the “License Agreement”); and
WHEREAS, Ocular and Affamed desire to supplement the License Agreement by adding a reference to
two patents to Exhibit A to the License Agreement;
NOW THEREFORE, the Parties agree as follows:
1.
All terms used in this Supplement and not defined shall have the meanings ascribed to them in the
License Agreement.
2.
Exhibit A is supplemented by adding the following:
·
·
KR20190057353A
CN102395401B
3.
Except as supplemented hereby, each of the terms and provisions of the License Agreement shall
remain in full force and effect.
4.
This Supplement may be executed in counterparts, all of which taken together shall be regarded as
one and the same instrument.
IN WITNESS WHEROF, the Parties have executed this Supplement through their duly authorized
representatives to be effective as of the Effective Date.
OCULAR THERAPEUTIX, INC.
/s/ Antony Mattessich
By:
Name:Antony Mattessich
Title: President and Chief Executive Officer
AFFAMED THERAPEUTICS LIMITED
/s/ Dayao Zhao
By:
Name:Dayao Zhao
Title: CEO
Ocular Therapeutix Europe B.V.
The Netherlands
Jurisdiction of Incorporation or Organization
Subsidiaries of Ocular Therapeutix, Inc.
Exhibit 21.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-229085
333-230659 and 333-251327) and Form S-8 (Nos. 333-198240, 333-202886, 333-210059, 333-216622, 333-223513,
333-230126 and 333-237115) of Ocular Therapeutix, Inc. of our report dated March 11, 2021 relating to the financial
statements, which appears in this Form 10-K.
Exhibit 23.1
/s/PricewaterhouseCoopers LLP
Boston, Massachusetts
March 11, 2021
Exhibit 31.1
CERTIFICATIONS
I, Antony Mattessich, certify that:
1. I have reviewed this Annual Report on Form 10-K of Ocular Therapeutix, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: March 11, 2021
By: /s/ Antony Mattessich
Antony Mattessich
President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATIONS
I, Donald Notman, certify that:
1. I have reviewed this Annual Report on Form 10-K of Ocular Therapeutix, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: March 11, 2021
By:
/s/ Donald Notman
Donald Notman
Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of Ocular Therapeutix, Inc. (the “Company”) for the period
ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned, Antony Mattessich, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18
U.S.C. Section 1350, that to his knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: March 11, 2021
By:/s/ Antony Mattessich
Antony Mattessich
President and Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report on Form 10-K of Ocular Therapeutix, Inc. (the “Company”) for the period
ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned, Donald Notman, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C.
Section 1350, that to his knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: March 11, 2021
By:/s/ Donald Notman
Donald Notman
Chief Financial Officer
(Principal Financial and Accounting Officer)