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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, 2024
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
20-5560161
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
15 Crosby Drive
Bedford, MA
01730
(Address of principal executive offices)
(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
Trading Symbol
Name of each exchange on which registered
Common Stock, $0.0001 par value per share
OCUL
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
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth 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. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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, 2024, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $1,063.6 million.
The number of shares outstanding of the registrant’s class of common stock, as of February 27, 2025: 159,022,245
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report incorporates by reference information from the definitive Proxy Statement for the registrant’s 2025 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, 2024.
Table of Contents
TABLE OF CONTENTS
PART I
Item 1.
Business
5
Item 1A. Risk Factors
58
Item 1B. Unresolved Staff Comments
104
Item 1C. Cybersecurity
104
Item 2.
Properties
105
Item 3.
Legal Proceedings
105
Item 4.
Mine Safety Disclosures
105
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
106
Item 6.
[Reserved]
106
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
107
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
123
Item 8.
Financial Statements and Supplementary Data
124
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
124
Item 9A. Controls and Procedures
124
Item 9B. Other Information
125
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
125
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
126
Item 11.
Executive Compensation
126
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
126
Item 13.
Certain Relationships and Related Transactions, and Director Independence
127
Item 14.
Principal Accounting Fees and Services
127
PART IV
Item 15.
Exhibits and Financial Statement Schedules
128
Item 16.
Form 10-K Summary
128
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1
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”, “designed”, “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 clinical trials, including our two registrational Phase 3 clinical trials of AXPAXLI for the treatment
of wet age-related macular degeneration, or wet AMD, which we refer to as the SOL-1 and SOL-R trials, and
our Phase 2 clinical trial of PAXTRAVA for the reduction of intraocular pressure, or IOP, in patients with
primary open-angle glaucoma, or OAG, or ocular hypertension, or OHT;
●
any additional clinical trials we might determine in the future to conduct for AXPAXLI or any other product
candidate we determine to develop, including any clinical trials that we might conduct for AXPAXLI for the
treatment of patients with non-proliferative diabetic retinopathy, or NPDR, and diabetic macular edema, or
DME;
●
determining our next steps for our product candidate PAXTRAVA for the treatment of patients with OAG or
OHT;
●
our plans to potentially develop, seek regulatory approval for and commercialize AXPAXLI, PAXTRAVA and
any other product candidates that we might develop based on our proprietary bioresorbable hydrogel-based
formulation technology ELUTYX;
●
our commercialization efforts for our product DEXTENZA;
●
our ability to manufacture DEXTENZA and any of our product candidates, including AXPAXLI, in compliance
with current Good Manufacturing Practices and in sufficient quantities for our clinical trials and commercial
use;
●
the timing of and our ability to submit applications and obtain and maintain regulatory approvals for
DEXTENZA and any of our product candidates, including AXPAXLI;
●
our estimates regarding future revenue; expenses; 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 AXPAXLI and any of our other product candidates and DEXTENZA;
●
the rate and degree of market acceptance and clinical utility of our products;
●
our ability to secure and maintain reimbursement for our products as well as the associated procedures to insert,
implant or inject our products;
●
our estimates regarding the market opportunity for DEXTENZA and any of our product candidates, including
AXPAXLI;
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2
●
our license agreement and collaboration with AffaMed Therapeutics Limited under which we are collaborating
on the development and commercialization of DEXTENZA and our product candidate PAXTRAVA in mainland
China, Taiwan, Hong Kong, Macau, South Korea, and the countries of the Association of Southeast Asian
Nations;
●
our capabilities and strategy, and the costs and timing of manufacturing, sales, marketing, distribution and other
commercialization efforts with respect to DEXTENZA and any additional products for which we may obtain
marketing approval in the future, including AXPAXLI;
●
our intellectual property position;
●
the impact of government laws and regulations; 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 section
captioned “Risk Factors”, 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. The forward-looking statements included in this Annual Report on Form 10-K are made as of the date of
this Annual Report on Form 10-K. We do not assume, and we expressly disclaim, any obligation or undertaking to update
any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by
applicable law.
This Annual Report on Form 10-K includes statistical and other industry and market data that we obtained from
industry publications and research, surveys and studies conducted by third parties. All of the market data used in this
Annual Report on Form 10-K involves a number of assumptions and limitations, and you are cautioned not to give undue
weight to such data. While we believe that the information from these industry publications, surveys and studies is reliable,
we have not independently verified such data. The industry in which we operate is subject to a high degree of uncertainty
and risk due to a variety of important factors, including those described in the section titled “Risk Factors”.
This Annual Report on Form 10-K contains references to our trademarks and service marks and to those belonging to
other entities. Solely for convenience, trademarks and trade names referred to in this Annual Report on Form 10-K and the
documents incorporated by reference herein may appear without the ® or ™ symbols, but such references are not intended
to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the
applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies' trade
names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other
companies. AXPAXLI is a trade name which we use to refer to our OTX-TKI product candidate, and PAXTRAVA is a
trade name which we use to refer to our OTX-TIC product candidate. The U.S. Food and Drug Administration, or FDA,
has not approved either AXPAXLI or PAXTRAVA as product names.
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3
SUMMARY OF RISKS RELATED TO OUR BUSINESS
Our business, financial condition, results of operations, future growth prospects and common stock price 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 on Form 10-K. These risks include, but
are not limited to, the following:
●
We have a history of incurring significant losses. Our net losses were $193.5 million and $80.7 million for the
years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated
deficit of $891.1 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 could be forced to delay, reduce or eliminate our research and development programs or our
commercialization efforts. 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.
●
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.
●
If we are unable to raise additional funds through equity or debt financings or other arrangements when needed,
we may be required to delay, limit, reduce or terminate our product development or future commercialization
efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to
develop and market ourselves.
●
We have substantial indebtedness including under our secured term loan facility pursuant to our credit and
security agreement with Barings Finance LLC as administrative agent, and the lenders party thereto. Our
substantial indebtedness may limit cash flow available to invest in the ongoing needs of our business or
otherwise affect our operations.
●
We depend heavily on the success of our product candidate AXPAXLI and our commercial product
DEXTENZA. Our ability to generate product revenues sufficient to achieve profitability is dependent on
obtaining marketing approval for and successfully commercializing AXPAXLI, and our successful
commercialization of DEXTENZA for the treatment of ocular inflammation and pain following ophthalmic
surgery and ocular itching associated with allergic conjunctivitis.
●
Clinical trials of our product candidates, including AXPAXLI, may not be successful. If we experience delays or
difficulties in enrollment, serious adverse events or side effects are identified, or any other unforeseen events
occur in connection with clinical trials of any of our product candidates, or if clinical trials of any of our product
candidates 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 candidates.
●
We may experience unforeseen events that could delay or prevent our ability to receive marketing approval or
commercialize our product candidates. Clinical trials of our product candidates could produce negative or
inconclusive results, or we could disagree with regulators regarding clinical trial results. We may decide, or
regulators may require us, to conduct additional clinical trials or abandon product development programs.
Enrollment in clinical trials may be slower than we anticipate. The cost of clinical trials of our product
candidates may be greater than we anticipate.
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●
We are conducting our SOL-1 trial under a Special Protocol Assessment, or SPA, agreement agreed to by the
FDA. An SPA agreement indicates concurrence by the FDA with the adequacy and acceptability of specific
critical elements of the overall protocol design for a clinical trial intended to support a future marketing
application, but it does not indicate FDA concurrence on every protocol detail. Moreover, the FDA retains
significant discretion in interpreting the terms of an SPA agreement and the data and results from any trial that is
the subject of an SPA agreement. An SPA agreement does not ensure the receipt of marketing approval by the
FDA or other regulatory authorities or that the approval process will be faster than conventional procedures.
●
We have a single-site manufacturing facility for DEXTENZA, and we have a separate single-site manufacturing
facility for product candidates that we use in our clinical trials and other research and development activities,
including AXPAXLI. We also depend from time to time on single-source suppliers for certain materials used in
the manufacturing of our products and product candidates. If we have a material disruption in our
manufacturing operations at this facility, or if we are unable to obtain sufficient components of our products and
product candidates from our suppliers on acceptable terms or at all, we may not have sufficient quantities of our
product candidates to meet our clinical trial requirements or of our product inventory to meet our commercial
requirements. Such an event could delay our clinical trials or, particularly because we maintain limited
commercial inventory, could reduce our product sales.
●
DEXTENZA, and any of our product candidates for which we obtain marketing approval, including AXPAXLI,
may become subject to less favorable or unfavorable pricing regulations, third-party coverage or reimbursement
practices or healthcare reform initiatives, which could harm our business. For instance, if DEXTENZA ceases to
be eligible for reimbursement separate from ophthalmic surgery in the ambulatory surgical center setting, our
net product revenues would decline significantly, and our ability to generate revenues from future sales of
DEXTENZA would be adversely affected.
●
If we are unable to establish and maintain adequate sales, marketing and distribution 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 or any of our product candidates for which we obtain marketing approval, including AXPAXLI, 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 future success depends on our ability to retain key executives and to attract, retain and motivate qualified
personnel. 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.
●
Our products face and, if approved, our product candidates, including AXPAXLI, will face competition from
generic, biosimilar 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 leading product candidates are available on a
generic basis, competitors may be able to prepare and submit applications for abbreviated new drug
applications, or ANDAs, or foreign equivalents for generic versions of our products without the need to conduct
clinical development and may be able to offer and sell products, whether approved through the ANDA process
or otherwise, 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, including
AXPAXLI, the approved product will be subject to ongoing review and extensive regulation.
●
Our stock price is volatile and fluctuates substantially. 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. We have previously, and we
may in the future, be the target of legal proceedings related to declines in our stock price.
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5
PART I
Item 1.
Business
We are a biopharmaceutical company committed to redefining the retina experience. AXPAXLI (axitinib intravitreal
hydrogel, also known as OTX-TKI), our product candidate for retinal disease, is based on our proprietary ELUTYX
bioresorbable hydrogel-based formulation technology. AXPAXLI is currently in two repeat-dosing Phase 3 clinical trials
for the treatment of wet age-related macular degeneration, or wet AMD, which we refer to as the SOL-1 and the SOL-R
trials. We have also completed a Phase 1 clinical trial of AXPAXLI for the treatment of non-proliferative diabetic
retinopathy, or NPDR, which we refer to as the HELIOS trial. We intend to meet with the U.S. Food and Drug
Administration, or FDA, in the first half of 2025 to discuss the design of a potential registrational clinical program for
AXPAXLI for the treatment of NPDR and diabetic macular edema, or DME, and then evaluate our next steps.
We also leverage the ELUTYX technology in our commercial product DEXTENZA, an FDA-approved
corticosteroid for the treatment of ocular inflammation and pain following ophthalmic surgery and for the treatment of
ocular itching associated with allergic conjunctivitis, and our product candidate PAXTRAVA (travoprost intracameral
hydrogel, also known as OTX-TIC), which is currently in a Phase 2 clinical trial for the treatment of open-angle glaucoma,
or OAG, or ocular hypertension, or OHT.
DEXTENZA and our product candidates in clinical development generally incorporate therapeutic agents that have
previously received regulatory approval from the FDA, including small molecules, into ELUTYX, with the goal of
providing local programmed release to tailor the duration and amount of the therapeutic agent to be delivered to the eye.
The hydrogel technology that underpins ELUTYX has been used in the human body since 1992 and has
demonstrated its safety and effectiveness in over five million patients across eight FDA-approved treatments since that
time. Our own approved product DEXTENZA, the first and only drug-eluting intracanalicular insert approved by the FDA,
has been used in nearly 550,000 eyes since launch with reported adverse events in approximately 2 of every 10,000
patients. As a result, we believe that the ELUTYX technology is well tolerated.
We believe the ELUTYX technology can provide delivery solutions for durable therapies for wet AMD, NPDR,
DME, proliferative diabetic retinopathy, or PDR, retinal vein occlusion, or RVO, and other diseases and conditions of the
eye, such as glaucoma. Our ELUTYX-based products and product candidates are hydrogels with ester bonds that are
hydrolyzed over time by aqueous or vitreous humor fluid within the eye. Unlike traditional implants, the ELUTYX-based
hydrogel is not rigid, does not have a shell, and does not persist following dissolution of the active drug. The factors that
regulate the bioresorption of our ELUTYX polymer are temperature and pH of the aqueous environment. As body
temperature and pH of the human aqueous environment are within a typical range for humans, and since water levels in the
aqueous or vitreous humor are more than sufficient to saturate our polymer matrix, we believe we can program our
products and product candidates so that the polymer will be intact long-enough to deliver the active pharmaceutical
ingredient and then be fully bioresorbed. We believe that the ELUTYX safety profile is further supported because
ELUTYX does not create an acidic microenvironment, it is easily eliminated from the eye, does not leave behind harmful
byproducts, and it has soft gel properties.
AXPAXLI is seeking to address segments of the exudative retinal diseases market, which in the aggregate is
estimated to include up to 8.5 million patients in the United States by 2029 and accounted for approximately $9.5 billion in
U.S. annual estimated revenues in 2024, according to the Market Scope 2024 Retinal Pharmaceuticals Market Report: Wet
AMD and Other Exudative Diseases, published in September 2024, or the “Market Scope 2024 Retina Report.
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6
The following table summarizes the status of our key product candidates and development programs. We hold
worldwide exclusive commercial rights to the core technology underlying all of our product candidates in development and
have not granted commercial rights to any marketing partners other than a license agreement and collaboration with
AffaMed Therapeutics Limited, or AffaMed, for the development and commercialization of DEXTENZA and PAXTRAVA
in certain geographies in Asia agreed to between the parties.
PIPELINE AT A GLANCE
Our Strategy
Our strategy is to advance our pipeline of clinical assets, focusing specifically on our programs for wet AMD as well
as NPDR and DME, while we continue to build upon our experience in commercializing ophthalmology products. The key
tactics of our strategy are:
●
Advance our AXPAXLI clinical development programs.
●
Wet AMD: Continue the SOL-1 trial, as amended to incorporate re-dosing, and report topline data
on the primary efficacy endpoint in the first quarter of 2026. Complete enrollment and
randomization of the SOL-R trial expeditiously.
●
NPDR and DME: Seek FDA feedback in the first half of 2025 to discuss the design of a potential
registrational clinical program and then evaluate our next steps.
●
Scale up our commercialization and manufacturing capabilities.
●
Initiate activities to build on our existing sales, marketing and distribution capabilities, which we
currently use to market DEXTENZA, to prepare for potential commercialization of AXPAXLI for
the treatment of wet AMD as well as NPDR and DME.
●
Build out and validate our manufacturing operations in our existing facilities.
We will evaluate our next steps for PAXTRAVA for the treatment of OAG or OHT once we have completed the
Phase 2 clinical trial for this program.
Limitations 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, DR, DME, and RVO, are among the most common conditions treated with intravitreal
drugs. The most common intravitreal injections are anti-VEGF (vascular endothelial growth factor, or VEGFs) drugs. Anti-
VEGF drugs and steroids, which also can be injected intravitreally, help to reduce fluid leakage associated with these
disorders.
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While anti-VEGF treatment regimens can be very effective therapies, there are a number of significant drawbacks,
driven primarily by the frequency of injections. Patients typically require injections every six to eight weeks, but can
require them as frequently as every 4 weeks. We refer to the number of injections a patient has over a given time period as
the treatment burden of the particular treatment. The actual injection at the time of administration is often 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. These patients may also be younger, part of
the active workforce and therefore unwilling or unable to take personal time off to receive frequent injections. Furthermore,
frequent injections of medications to the back of the eye can lead to peaks and troughs of medication levels, with
fluctuations of intraretinal fluid based on these levels. Such fluid fluctuations have been associated with decreased vision
and possibly fibrosis. 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 treatment burden, measured by the number of injections.
Clinical Portfolio
Retinal Diseases
Wet Aged-Related Macular Degeneration (Wet AMD)
Wet AMD is a serious disease of the central portion of the retina, known as the macula, an oval-shaped pigmented
area 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 and hyper-permeability of established and new blood vessels.
Wet AMD is the most common cause of visual impairment among patients over the age of 50 years in developed
countries. According to the Market Scope 2024 Retina Report, there were approximately 1.7 million people in the United
States who suffered from wet AMD in 2024. This population is expected to grow at a 3.2% compound annual growth rate,
or CAGR, through 2029.
The anti-VEGF market for the treatment of wet AMD consists predominantly of four drugs that are approved for
marketing and primarily prescribed for the treatment of wet AMD: Eylea and Eylea HD, marketed in the United States by
Regeneron; Lucentis, marketed in the United States by Genentech; and Vabysmo, marketed in the United States by
Genentech. Bevacizumab, also known as Avastin, an anti-VEGF therapy approved for the treatment of certain cancers, is
also used off-label in ophthalmology.
Non-Proliferative Diabetic Retinopathy (NPDR) and Diabetic Macular Edema (DME)
Diabetic retinopathy, or DR, is a progressive condition in which chronically elevated levels of blood glucose lead to
damage of the tiny blood vessels in the retina. DR is among the most common microvascular complications of diabetes,
making diabetes the leading cause of new cases of blindness in adults. DR can take time to develop. NPDR, which is an
early stage of DR and sometimes called background retinopathy, is often asymptomatic and may go unnoticed until it is
very advanced with vision loss imminent. PDR is the most serious stage of the disease that develops when areas of the
retina are starved for nourishment and oxygen, triggering the proliferation of new blood vessels via secretions of growth
factors including VEGFs. These new blood vessels can bleed or lead to tractional retinal detachments, or both, and
permanent vision loss. Another visual threatening complication of DR is DME where the damaged blood vessels leak
blood and fluid into the retina. The current standard of care for DR at the non-proliferative stage is watchful waiting, with
the use of anti-VEGFs or steroids when the disease has progressed to center-involved DME, or CI-DME, or the
proliferative stage. In addition, laser treatment can be used to manage DR.
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It is estimated that there were 6.3 million cases of NPDR and 1.7 million cases of DME in the United States in 2024
according to the Market Scope 2024 Retina Report, growing at a CAGR of 1.7% and 1.9%, respectively, through 2029.
The anti-VEGF market for the treatment of DR consists predominantly of three drugs that are approved for
marketing, although only sparingly used for the treatment of DR: Lucentis, Eylea, and Eylea HD.
Retinal Programs
AXPAXLI (axitinib intravitreal hydrogel)
Our product candidate AXPAXLI is an investigational, bioresorbable hydrogel implant, based on our ELUTYX
technology, incorporating axitinib, a small molecule, multi-target, tyrosine kinase inhibitor, or TKI, with anti-angiogenic
properties. AXPAXLI is delivered by intravitreal injection and is designed for a duration of six months or longer. Our wet
AMD registrational program for AXPAXLI is comprised of two ongoing complementary clinical trials, SOL-1 and SOL-R,
which are strategically designed with the intent of de-risking subject populations, aligning with regulatory standards, and
providing a broad evaluation of AXPAXLI’s durability, repeatability, and flexibility. We have also conducted a Phase 1
clinical trial in Australia and a Phase 1 clinical trial in the United States to evaluate AXPAXLI for the treatment of wet
AMD. We have completed the HELIOS trial to evaluate AXPAXLI for the treatment of NPDR. We intend to meet with the
FDA in the first half of 2025 to discuss the design of a potential registrational clinical program for AXPAXLI for the
treatment of NPDR and DME and then evaluate our next steps.
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, very short half-lives in solution, and off-target effects. We believe ELUTYX gives us potential advantages
to address all three of these challenges. Our initial hydrogel implants have delivered anti-VEGF compounds in vitro over a
targeted nine-to-twelve-month period, which we believe could make it possible to reduce patients’ treatment burden by
reducing the frequency of the current monthly or bi-monthly intravitreal injection regimen for wet AMD.
We conducted the two Phase 1 trials of AXPAXLI for the treatment of wet AMD with different formulations of
axitinib. We are conducting the SOL-1 and SOL-R trials with a single 450 µg axitinib dose of AXPAXLI, which is a
different formulation than we used in either of the two Phase 1 trials of AXPAXLI for the treatment of wet AMD. This
optimized configuration is expected to provide for an increased daily release of the drug and is designed to improve
synchronization of axitinib drug release with hydrogel bioresorption.
The two Phase 1 trials of AXPAXLI for the treatment of wet AMD, the HELIOS trial, and the initial portions of the
SOL-1 and SOL-R trials were conducted with a two-piece injector. We have developed a next-generation one-piece injector
which we believe improves the administration of AXPAXLI to the eye. We expect to use this one-piece injector for the
administration of AXPAXLI in a majority of the subjects in the AXPAXLI arm of the SOL-R trial and for the repeat-dosing
of AXPAXLI in all subjects in the AXPAXLI arm of the SOL-1 trial.
Wet Age-Related Macular Degeneration (Wet AMD)
The SOL-1 Trial
We are currently conducting the SOL-1 trial, a repeat-dosing registrational Phase 3 clinical trial for the treatment of
wet AMD. The SOL-1 trial is designed as a prospective, multi-center, randomized, parallel-group trial that involves more
than 100 trial sites located in the United States and Argentina. The SOL-1 trial is designed as a superiority trial comparing
a single optimized dose of AXPAXLI with a drug load of 450 µg of axitinib to a single injection of aflibercept 2 mg and
assessing the safety and efficacy of AXPAXLI in subjects with wet AMD. The primary endpoint is the proportion of
subjects who maintain visual acuity, defined as a Best Corrected Visual Acuity, or BCVA, loss of fewer than 15 letters on
the Early Treatment of Diabetic Retinopathy Study, or ETDRS, letters chart from baseline at Week 36. This superiority trial
has an 8-week loading segment with two monthly aflibercept 2 mg intravitreal injections prior to randomization, thereafter
a 52-week masked treatment segment, and a 52-week safety follow-up with re-dosing
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at Weeks 52 and 76. The design of the SOL-1 trial enhances the potential for a 6 - 12 month dosing label for AXPAXLI for
the treatment of wet AMD and also provides insights into the long-term durability of AXPAXLI.
The SOL-1 trial is intended to randomize approximately 300 evaluable treatment-naïve subjects with a diagnosis of
wet AMD in the study eye with good visual acuity and a diagnosis of macular choroidal neovascularization at screening.
The SOL-1 trial completed randomization of 344 subjects in December 2024. Under the study protocol, after initial
screening, every enrolled subject received two aflibercept 2 mg loading doses between the screening visit and Day 1: one at
Week -8 and another at Week -4. Subjects reaching approximately 20/20 vision or experiencing an improvement of at least
10 ETDRS letters after these injections, in addition to satisfying other criteria, were randomized in the trial at Day 1 to
receive either one dose of AXPAXLI 450 µg in the investigational arm or one injection of aflibercept 2 mg in the control
arm. After all predefined visit assessments at Week 52 and at Week 76, all subjects that were randomized in the trial at Day
1, including subjects who previously received supplemental anti-VEGF treatment, are re-dosed with their respective initial
treatment of a single dose of AXPAXLI 450 µg in the investigational arm or a single injection of aflibercept 2 mg in the
control arm and followed for safety until Week 104. Throughout the trial, subjects are assessed monthly. Subjects who
failed randomization became eligible to be screened for the SOL-R trial. Subjects who were successfully randomized in the
SOL-1 trial on Day 1 are being followed every month and will receive a supplemental dose of aflibercept 2 mg as needed
based on pre-specified criteria. Our pre-specified rescue criteria are a loss of 15 or more letters on the ETDRS chart
compared to baseline due to wet AMD, or a new hemorrhage that is deemed to be likely to cause irreversible vision loss
due to progression of wet AMD. The first time a subject is observed to have lost 15 or more ETDRS letters in BCVA in the
study eye due to wet AMD at any time in the trial would be considered as having met the endpoint as a treatment failure.
We are conducting the SOL-1 trial in accordance with a Special Protocol Assessment, or SPA, agreement with the
FDA. We initially sought an SPA agreement from the FDA to determine whether the proposed clinical protocol and the
statistical analysis plan for the SOL-1 trial adequately addressed scientific and regulatory requirements for a clinical trial
that could support a marketing application. We received an agreement letter regarding the overall trial design from the FDA
under the SPA agreement on October 30, 2023. In December 2023, we submitted a first SPA agreement modification to the
FDA to broaden the inclusion criteria for subjects in the SOL-1 trial and to reflect our intention to evaluate a single
optimized dose of AXPAXLI with a drug load of 450 µg of a more soluble form of axitinib in the trial. We received an
agreement letter regarding the first SPA agreement modification from the FDA on January 22, 2024. This first SPA
agreement modification enabled us to include in the trial treatment-naïve wet AMD subjects with visual acuity of
approximately 20/80 or better at the initial screening visit. These subjects then needed to reach the BCVA of approximately
20/20 or experience an improvement of at least 10 ETDRS letters gain from the initial screening visit at Day 1 to be
randomized. In addition, the subjects were stratified between the two treatment groups at randomization based on BCVA
category (≤ 71 and >71 ETDRS letters) as of the initial screening visit. In January 2025, we submitted a second SPA
agreement modification to the FDA to add a repeat dose of AXPAXLI 450 µg at Week 52 and at Week 76, in each case,
after all pre-defined efficacy endpoint assessments, to generate the required safety data for subjects re-dosed with
AXPAXLI through Week 104, to support long-term dosing. We received an agreement letter regarding the second SPA
agreement modification from the FDA on February 24, 2025.
As of March 3, 2025, subject retention in the SOL-1 trial has been exceptional, and the vast majority of rescue
treatments, reviewed on a masked basis, have been in accordance with pre-specified criteria under the trial protocol.
Because the inclusion of re-dosing requires all data to be masked until week 52, we now expect topline results for SOL-1 to
be available in the first quarter of 2026.
The SOL-R Trial
In June 2024, we initiated the SOL-R trial, a repeat-dosing registrational Phase 3 clinical trial for the treatment of
wet AMD. The SOL-R trial is designed as a multi-center, double-masked, randomized (2:2:1), three-arm trial that will
involve sites located in the U.S. and the rest of the world. The trial is intended to randomize approximately 555 subjects
that are either treatment naïve or have been diagnosed with wet AMD in the study eye within the prior four months and
received up to three monthly anti-VEGF injections with last injection approximately 4 weeks prior to screening for SOL-R.
Prior to the second SPA amendment and inclusion of re-dosing in SOL-1 as described above, we previously intended to
randomize 825 subjects in the SOL-R trial. This non-inferiority trial reflects a patient enrichment strategy over the six
months prior to randomization that includes five loading doses of anti-VEGF therapy, including aflibercept 2 mg, and
monitoring to exclude those subjects with significant retinal fluid fluctuations. In the first arm, subjects will receive a 450
µg dose of AXPAXLI at Day 1 and be re-dosed at Weeks 24, 48, and every 24 weeks thereafter. In the second arm,
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subjects will receive aflibercept 2 mg on-label every 8 weeks. In the third arm, subjects will receive an 8 mg dose of
aflibercept (Eylea HD) at Day 1 and will be re-dosed at Weeks 24, 48, and every 24 weeks thereafter, aligned with the
AXPAXLI dosing regimen in the first arm and serving as adequate masking pursuant to current FDA guidance. Subjects
will be followed for safety until Week 104. Throughout the trial, subjects are assessed monthly. The clinical trial protocol
requires that, during the trial, subjects in any arm meeting pre-specified rescue criteria will receive a supplemental dose of
aflibercept 2 mg. The pre-specified rescue criteria include a loss of 10 or more ETDRS letters in BCVA from baseline or a
combination of worsening anatomical measures and BCVA loss. The primary endpoint is non-inferiority in mean change in
BCVA from baseline between the AXPAXLI and on-label aflibercept 2 mg arms at Week 56. As per the protocol agreed to
by the FDA, the non-inferiority margin for the lower bound is -4.5 letters of mean BCVA when compared to aflibercept 2
mg dosed every eight weeks. The first subject was enrolled in the SOL-R trial in July 2024. Initially, subjects screened and
enrolled in the SOL-R trial included only subjects that constituted loading or randomization failures from the SOL-1 trial.
In a written Type C response received in August 2024, and a subsequent written response received in December
2024, the FDA agreed that the SOL-R repeat dosing wet AMD trial, with a primary endpoint at Week 56, should be
appropriate as an adequate and well-controlled trial in support of a potential NDA and product label for AXPAXLI for the
treatment of wet AMD. The FDA also noted that the use of one superiority trial and one non-inferiority trial is generally
acceptable as the basis of an eventual NDA in wet AMD.
On November 14, 2024, we announced that, as the SOL-1 trial neared completion of randomization, trial sites could
directly screen and enroll eligible subjects into the SOL-R trial.
On January 14, 2025, we announced that, as of January 10, 2025, we had enrolled 311 subjects across various stages
of loading and randomization. All subjects that have been randomized to date have received their first 450 µg dose of
AXPAXLI at Day 1 with the 2-piece injector.
Phase 1 Clinical Trial (Australia)
We have conducted an open-label, multi-center, proof-of-concept, dose-escalation Phase 1 clinical trial of AXPAXLI
for the treatment of patients with wet AMD. This Phase 1 clinical trial was designed to evaluate the safety, durability and
tolerability of AXPAXLI. All subjects have completed this Phase 1 clinical trial.
Our Phase 1 clinical trial of AXPAXLI in Australia was submitted to the Therapeutic Goods Administration,
Australia’s regulatory authority for therapeutic goods, in July 2018 and was being conducted at multiple sites in Australia.
The Phase 1 clinical trial was comprised of four cohorts consisting of subjects with wet AMD and pre-existing intraretinal
and/or subretinal fluid: a lower dose cohort of 200 µg with six subjects; a higher dose cohort of 400 µg with seven subjects;
a third cohort with two parallel arms, one arm of four subjects receiving a concomitant anti-VEGF injection with 400 µg of
AXPAXLI and the other arm of six subjects receiving a 600 µg of AXPAXLI with no anti-VEGF injection; and a fourth
cohort with two parallel arms, one arm of one subject receiving a 600 µg single dose of AXPAXLI and the other arm of
five subjects receiving a 600 µg single dose of AXPAXLI with anti-VEGF injection. In this trial, we evaluated whether
AXPAXLI can reduce existing fluid levels.
In the Phase 1 clinical trial of AXPAXLI conducted in Australia, we evaluated biological activity by measuring
CSFT, using spectral domain optical coherence tomography, or OCT, and following visual acuity over time as measured by
BCVA.
In the clinical trial, intravitreal injections of AXPAXLI at 200 μg, 400 μg, and 600 μg, with and without concurrent
administration of anti-VEGF, were generally well tolerated. There were no drug-related serious treatment-emergent adverse
events reported in any of the AXPAXLI dose cohorts over the 9-month study period. Plasma levels of the active drug,
axitinib, were below the limit of quantification at all doses, indicating that systemic exposure to intravitreal delivery of
axitinib by AXPAXLI up to 600 μg was negligible. This data also showed a preliminary signal of biological activity as
observed by a clinically meaningful decrease in the volume of intraretinal and/or subretinal fluid as measured by high
resolution OCT that provides cross-sectional images of the anatomical structure of the retina. Some subjects showed a
decrease in intraretinal or subretinal fluid by two months in cohorts 2 (400 µg) and 3a (600 µg). In cohort 3b (400 µg dose
plus anti-VEGF induction injection of aflibercept), two subjects showed a decrease in intraretinal or subretinal fluid as
early as a week after treatment. We observed extended duration of activity of six months or more for over 60% of subjects
across all cohorts and for over 80% of subjects in cohort 3a, in which we administered a 600 μg
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dose. In addition, the AXPAXLI doses in cohort 1 (200 µg single dose) were observed to have biodegraded in all subjects
within nine to 10.5 months of injection. It has also been observed in the trial that the hydrogels were able to be adequately
monitored and that there was limited to no movement of the hydrogel and no migration into the anterior chamber has
occurred.
Phase 1 Clinical Trial (United States)
We have conducted a prospective, multi-center, randomized, controlled Phase 1 clinical trial in the United States
under an exploratory investigational new drug, or eIND, application to evaluate a single 600 µg dose of AXPAXLI with an
anti-VEGF injection in comparison with a 2 mg dose of aflibercept. The population we studied in this U.S.-based clinical
trial was different than the population we studied in our Phase 1 clinical trial of AXPAXLI in Australia. In this trial, we
evaluated how long we are able to maintain subjects who have been previously treated with anti-VEGF therapy without the
need for retreatment. All enrolled subjects have completed this Phase 1 clinical trial.
The trial enrolled a total of 21 subjects at six clinical sites, comprising two arms consisting of subjects previously
treated with, and who were responsive to, standard of care anti-VEGF therapy: a 16-subject arm receiving AXPAXLI in
combination with a single anti-VEGF injection at month one and a five-subject arm receiving on-label aflibercept at eight-
week intervals. The trial was designed to assess the safety, durability and tolerability of AXPAXLI as well as to assess
preliminary biological activity in subjects by measuring anatomical and functional changes.
In February 2023, we announced interim 10-month data from the Phase 1 clinical trial of AXPAXLI in the United
States at the Angiogenesis, Exudation, and Degeneration 2023 Annual Meeting. As of the December 12, 2022 cut-off date,
the interim data showed that the single 600 µg AXPAXLI dose was generally well tolerated with no drug-related ocular or
systemic serious adverse events, or SAEs, observed through 10 months. One SAE of endophthalmitis was observed in the
AXPAXLI arm which occurred following the aflibercept injection required by the clinical trial protocol at month one and
was assessed by the investigator as related to the injection procedure. There were no instances of elevated intraocular
pressure, or IOP, retinal detachment, retinal vasculitis, or hydrogel implant migration into the anterior chamber observed in
the AXPAXLI arm, and no subjects had dropped out of either arm as of the data cutoff.
The interim results showed subjects treated with a single AXPAXLI dose demonstrated stable and sustained BCVA
(mean change from baseline of -0.3 letters) and CSFT (mean change from baseline of -1.3 µm) in the AXPAXLI arm at 10
months, which was comparable with the aflibercept arm (mean change from BCVA baseline of -0.8 letters; mean change
from CSFT baseline of -4.5 µm). Up to Month 10, 73% of subjects remained rescue-free. Overall, a 92% reduction in
treatment burden (average percent decrease in injections over the period compared to a standard monthly injection
regimen) was observed in AXPAXLI treated subjects for up to 10 months. Four subjects were rescued in the AXPAXLI
arm up to Month 10. One subject, the subject who experienced endophthalmitis, was rescued twice. None of these rescues
met the pre-established rescue criteria set forth in the clinical trial protocol and were instead initiated at investigator
discretion. One additional subject, who met the established rescue criteria at such subject’s Month 10 visit, was rescued at
the end of Month 10.
There was one subject randomized to the AXPAXLI arm who was inadvertently given aflibercept instead of sham
injections at the subject’s month three and month five visits. Since this subject was not treated according to protocol, the
subject was excluded from the analysis of biological activity, which comprised 15 out of the 16 subjects in the AXPAXLI
arm and all five subjects in the aflibercept arm, but the subject was included in the safety analysis which comprised all 16
subjects in the AXPAXLI arm and all five subjects in the aflibercept arm.
In April 2023, we presented data regarding the preclinical pharmacokinetics, or PK, of AXPAXLI and a review of the
10-month interim data from the ongoing Phase 1 clinical trial of AXPAXLI in the United States, including AXPAXLI
resorption data to date. We augmented the results from our ongoing clinical trial with PK data in two animal models
showing the uptake of axitinib from our hydrogel in the choroid and retinal pigment epithelium, or RPE, cells, where
axitinib acts intra-cellularly to exert its VEGF receptor inhibiting effect. That data showed that clinically representative
formulations of AXPAXLI delivered sustained axitinib concentrations through 12 months that were well above the IC50
for VEGFR-2 (vascular endothelial growth factor receptor) in cynomolgus monkey retina tissue and choroid/RPE tissues.
This preclinical PK data aligns with the pharmacodynamics data we observed in our U.S. clinical trial, namely the high
proportion of rescue-free subjects up to Month 10 and suggests that AXPAXLI may provide continuous VEGF receptor
inhibition.
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In June 2023, we presented 12-month data from the ongoing Phase 1 clinical trial of AXPAXLI in the United States
at the Clinical Trials at the Summit 2023 conference sponsored by the American Society of Retina Specialists. As of the
April 14, 2023 cut-off date, there were no drug-related ocular or systemic SAEs observed in the AXPAXLI arm except for
the one SAE of endophthalmitis following the aflibercept injection at month 1 that we had previously announced. There
were no retinal detachment, retinal vasculitis, or hydrogel implant migration into the anterior chamber adverse events
observed in the AXPAXLI arm, and no subjects had dropped out of either arm as of the data cut-off. The results showed
subjects treated with a single AXPAXLI dose continued to demonstrate sustained BCVA (mean change from baseline of
-1.0 letters) and CSFT (mean change from baseline of +20.2 μm) in the AXPAXLI arm at 12 months, which was
comparable with the aflibercept arm (mean change from BCVA baseline of +2.0 letters; mean change from CSFT baseline
of -2.2 μm). Sixty percent of AXPAXLI subjects were rescue-free up to Month 12. At the Month 12 visit, an additional
four of the subjects were rescued. Overall, an 89% reduction in treatment burden was observed in AXPAXLI treated
subjects at 12 months. These results align with our expectation that we would see a reactivation of disease in some
subjects, which we believe indicates that AXPAXLI continues to function as designed with axitinib concentrations
beginning to fall below therapeutic levels after the hydrogel bioresorbs.
In the clinical trial, intravitreal administration of single AXPAXLI 600 µg dose was generally well tolerated during
the 52 weeks of the study. There were no drug-related ocular or systemic significant adverse events with either AXPAXLI
or aflibercept treatment during 52 weeks of assessment. BCVA was stable after single AXPAXLI 600 µg dose
administration and appeared similar to that of the aflibercept 2 mg administered every 8 weeks during 52 weeks of
assessment. CSFT parameters were stable with AXPAXLI administration and appeared similar to that of the aflibercept 2
mg arm during 52 weeks of assessment. There were fewer injections over 52 weeks in subjects with AXPAXLI compared
with the annualized number of anti-VEGF injections in 52 weeks prior to baseline. Furthermore, there were fewer
injections over 52 weeks received in subjects from AXPAXLI treatment compared to those received in aflibercept 2 mg
treatment arm.
Next Steps
If we were to obtain favorable results from the SOL-1 and the SOL-R trials evaluating AXPAXLI for the treatment
of wet AMD, 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.
Non-Proliferative Diabetic Retinopathy (NPDR)
Phase 1 Clinical Trial
We have completed the HELIOS trial, a U.S.-based, multicenter, double-masked, randomized, parallel group Phase 1
clinical trial evaluating the safety, tolerability and efficacy of a single injection of an AXPAXLI 600 µg dose in subjects
with moderately severe to severe NPDR without CI-DME. We conducted the HELIOS trial initially under an exploratory
IND, which was subsequently converted to a traditional IND. We enrolled 22 subjects with diabetic retinopathy secondary
to type 1 or type 2 diabetes who had not had an anti-VEGF injection in the prior 12 months or DME in the prior six
months, randomized 2:1 to either a single dose of AXPAXLI containing 600 µg of axitinib or sham control. One subject
died during the HELIOS trial due to reasons unrelated to the trial and study treatment.
In June 2024, we announced topline data from the HELIOS trial at 48 weeks. AXPAXLI was generally well-tolerated
and did not result in any reported incidence of intraocular inflammation, iritis, vitritis, or vasculitis. No subjects in either
arm received rescue medication. At week 48, six of 13 (46.2%) subjects in the AXPAXLI group experienced either a 1- or
2-step improvement in the Diabetic Retinopathy Severity Scale, or DRSS, with three of the 13 (23.1%) experiencing a 2-
step improvement. No subjects in the control group showed a 1-step or greater improvement at the same timepoint. No
subjects in the AXPAXLI group experienced any worsening in DRSS. Two of eight (25.0%) subjects in the control group
experienced worsening in the DRSS at 48 weeks. No subjects in the AXPAXLI group developed PDR or CI-DME at week
48. Three of eight (37.5%) subjects in the control group developed PDR or CI-DME at the same timepoint. On average,
subjects in the AXPAXLI arm showed improvement in mean CSFT versus baseline compared to the control group, which
showed worsening at the 48-week timepoint.
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Next Steps
We intend to meet with the FDA in the first half of 2025 to discuss the design of a potential registrational clinical
program for AXPAXLI for the treatment of NPDR and DME and then evaluate our next steps.
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. OHT is characterized by elevated levels of IOP without any optic
nerve damage. Patients with OHT are at high risk of developing glaucoma.
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.
According to the Market Scope 2024 Glaucoma Pharmaceuticals Market Report, or the Market Scope 2024
Glaucoma Report, it is estimated that there were 130.2 million people globally in 2024 with primary OAG or OHT. In the
United States, it is estimated there were 6.8 million and 3.7 million who had primary OAG or OHT, respectively. 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. 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 product candidates 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
According to the Market Scope 2024 Glaucoma Report, the global market for glaucoma was estimated at $4.2 billion
in 2024 with the U.S. market representing $1.6 billion. The global market is estimated to grow at a 4.7% CAGR through
2029 while the U.S. market is expected to grow at a 3.7% CAGR through 2029.
The most commonly used treatments for glaucoma in the United States are topical eye drops including both branded
and generic products. Branded products have maintained premium pricing and significant market share. These products
include Lumigan (bimatoprost) marketed by Allergan, Travatan Z (travoprost) marketed by Novartis, Tapros marketed by
Santen, and recently approved Miebo (perfluorohexyloctane ophthalmic solution) marketed by Bausch + Lomb.
Commonly used generic drugs include latanoprost and timolol.
Glaucoma Program
PAXTRAVA (travoprost intracameral hydrogel)
Our product candidate PAXTRAVA is a bioresorbable hydrogel implant based on ELUTYX, incorporating
travoprost, an FDA-approved PGA designed to lower elevated IOP, 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 with a single treatment.
Phase 2 Clinical Trial
We are conducting a U.S.-based Phase 2 prospective, multi-center, randomized, controlled clinical trial evaluating
the safety, tolerability and efficacy of PAXTRAVA for the treatment of subjects with primary OAG or OHT under an IND.
The Phase 2 clinical trial was initially designed to include approximately 105 subjects at 15 to 20 sites between three arms
of approximately 35 subjects each to evaluate two formulations of PAXTRAVA for the treatment of OAG or
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OHT in subjects compared to DURYSTA. The non-study eye of each subject receives a topical PGA daily, if not
contraindicated. The primary efficacy endpoint is measured by mean change from baseline (8 a.m., 10 a.m. and 4 p.m.) at
2, 6 and 12 weeks in diurnal IOP. The active comparator control arm receives one injection of DURYSTA in one eye and a
topical PGA daily in the non-study eye, if not contraindicated.
We initiated the Phase 2 clinical trial in the fourth quarter of 2021 and dosed the first subject in the first quarter of
2022. One arm in the Phase 2 clinical trial is receiving the same formulation used in cohort 2 of the Phase 1 clinical trial of
PAXTRAVA that we conducted, containing a 26 µg dose of travoprost and utilizing a standard hydrogel. The second arm
was receiving 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 hydrogel. Due to elevations in IOP observed in six subjects approximately 12 weeks after
enrollment in the PAXTRAVA 5 µg arm of the trial, we terminated enrollment in the 5 µg arm of the trial in the fourth
quarter of 2022 and continued with the PAXTRAVA 26 µg and DURYSTA arms of the trial.
The Phase 2 clinical trial primary study consisted of 83 subjects: 33 subjects in the PAXTRAVA 26 µg treatment arm,
34 subjects in the DURYSTA arm and 16 subjects that were previously enrolled in the PAXTRAVA 5 µg treatment arm.
Enrollment of the Phase 2 clinical trial was completed in July 2023. In April 2024, we presented 6-month topline data from
this Phase 2 clinical trial at the 2024 American Society of Cataract and Refractive Surgery Annual Meeting. In the trial, the
PAXTRAVA 26 µg single hydrogel implant demonstrated consistent control of IOP, through six months, as statistically
significant IOP changes from baseline were observed for every individual and mean diurnal measurement at primary
endpoints Week 2 (M0.5), Week 6 (M1.5), and Week 12 (M3), as well as secondary endpoints Months 4.5 and 6
(p<0.0001), although no formal statistical testing was prespecified by the clinical trial protocol. Clinically meaningful
mean IOP reduction of approximately 24-30% from baseline over six months was observed. A majority (81.3%) of treated
eyes did not require additional IOP-lowering therapy through six months, indicating sustained and consistent treatment
effects.
PAXTRAVA 26 µg was generally well tolerated with no impact on the corneal endothelium having been observed at
six months following a single administration of the product candidate. The majority of adverse events, observed were mild
in severity and generally resolved with topical medical treatment. Most ocular adverse events occurring within three days
of the injection were deemed related to the injection procedure by the investigators. Adverse events observed more than
three days post-injection procedure were consistent with the travoprost label. There was one serious adverse event in the
trial, where a hydrogel implant required removal, which the investigator assessed to be likely due to a peri-implantation
bacterial infection. Consistent bioresorption of the hydrogel implant coupled with the durable effect observed in the Phase
2 trial suggests redosing could be possible without the risk of implants stacking.
We are conducting a pilot repeat-dose sub-study in the Phase 2 clinical trial to evaluate the safety of a repeat,
sustained release dose of PAXTRAVA 26 μg, in a small subset of subjects with OAG or OHT. These subjects will be
followed for at least six months after their enrollment in the sub-study to monitor and evaluate their endothelial cell health.
Phase 1 clinical development
We submitted an IND for PAXTRAVA in February 2018 and have completed a prospective, multi-center, open-label,
dose-escalation, proof-of-concept Phase 1 clinical trial of PAXTRAVA in the United States that we initiated in the second
quarter of 2018 for the treatment of subjects with moderate to severe glaucoma or OHT. The clinical trial is designed to
evaluate the safety, biological activity, durability and tolerability of PAXTRAVA in subjects with controlled OAG or OHT.
The clinical trial consisted of four subject cohorts: cohort 1 included five subjects who received a 15 µg dose, cohort 2
included four subjects who received a 26 µg dose, cohort 3 included five subjects who received a 15 µg dose with a fast-
degrading hydrogel, and cohort 4 included five subjects who received a 5 µg dose with a fast-degrading hydrogel.
In February 2022, at the Glaucoma 360 virtual meeting, we presented interim results from all four subject cohorts in
the Phase 1 clinical trial. In the Phase 1 clinical trial, at least one subject in each of the four cohorts receiving PAXTRAVA
were observed to experience a mean change in IOP from baseline as measured at 8:00 am, 10:00 a.m. and 4:00 p.m. as
early as two days following injection. We believe these results were comparable to the decrease in IOP achieved with
topical travoprost administered via daily eye drops. IOP lowering effects lasted more than six months in subjects in cohorts
1 and 2 and three to six months in subjects in cohorts 3 and 4.
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The PAXTRAVA hydrogel was observed to biodegrade over the course of between five and seven months in subjects
in cohorts 1 and 2. In subjects in cohorts 3 and 4, the fast-degrading hydrogels were observed to biodegrade over the course
of between three and five months. Within all four cohorts, hydrogel implants were not observed to move when viewed with
a slit lamp biomicroscope and were visible at all examinations in all subjects using gonioscopy. Corneal health as measured
by endothelial cell counts, pachymetry assessments, and slit lamp examinations did not indicate any clinically meaningful
changes from baseline in any of the four cohorts. IOP elevation was observed in three subjects in cohort 3 at the
approximate time of the hydrogel resorption.
Next Steps
Once we have completed the pilot repeat-dose sub-study, we will evaluate whether an end-of-Phase 2 meeting with
the FDA is appropriate for determining our next steps for PAXTRAVA for the treatment of OAG or OHT.
Dry Eye Programs
We are not currently actively pursuing additional development activities for our product candidates OTX-DED
(dexamethasone intracanalicular insert) for the short-term treatment of the signs and symptoms of dry eye disease, or OTX-
CSI (cyclosporine intracanalicular insert) for the chronic treatment of dry eye disease.
The Ocular Therapeutix Approach
Our Hydrogel-Based Formulation Technology ELUTYX
We apply our expertise with ELUTYX 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.
ELUTYX is based on the use of a proprietary form of polyethylene glycol, or 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 multiple 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 months.
We select the active pharmaceutical ingredients for our local programmed-release drug delivery product candidates
based on criteria we have developed through our extensive experience with hydrogel-based technologies. We consider the
following selection criteria:
●
prior approval by the FDA for the targeted ophthalmic indication,
●
scientific rationale, either clinical or pre-clinical, for active pharmaceutical ingredients such as axitinib, which
are 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 intravitreal hydrogel, intracameral hydrogel or
intracanalicular insert;
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●
availability from a qualified supplier; and
●
compatibility with our drug delivery system.
We believe our current and future intravitreal hydrogel, intracameral hydrogel and intracanalicular insert products
and product candidates may offer a range of favorable attributes as compared to immediate release back-of-the-eye
injections and eye drops, including:
●
Improved patient compliance. Our hydrogel implants and inserts are placed by a healthcare professional and are
designed to provide local programmed-release of drug to the ocular surface, intracameral space or intravitreal
space. Because patients are not responsible for self-administration of the drug and the hydrogel implants and
inserts dissipate over time and do not require removal for acute conditions or frequent removal for chronic
conditions, we believe our hydrogel implants and inserts address the problem of patient compliance.
●
Ease of administration. We have designed our hydrogel implants and inserts to provide the entire course of
medication with a single administration by a healthcare professional for acute conditions or for months for
chronic conditions. We believe this avoids the need for frequent administration, reducing the patient’s treatment
burden and the likelihood of potential complications that could result if doses are missed.
●
Local programmed-release of drug. We have designed our hydrogel implants and inserts to deliver drug in a
programmed fashion in order to avoid the peak and valley dosing and related side effects associated with current
standard of care injections for the back of the eye, as well as 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 back of the eye injection or eye drop
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 hydrogel implants and
inserts are designed to fully dissipate and can be removed if necessary by a healthcare professional.
●
Avoidance of preservative side effects. Our hydrogel implants and inserts do not involve the use of preservatives,
such as benzalkonium chloride, which have been linked to side effects including burning, stinging, hyperemia,
irritation, eye dryness and, less frequently, conjunctivitis or corneal damage.
Intravitreal Hydrogels
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 hydrogel product candidates,
such as AXPAXLI, consist of a PEG-based hydrogel, which contains embedded micronized particles of active drug. We
design the intravitreal hydrogel to be injected and retained in the vitreous humor to provide local programmed-release
intravitreal delivery of anti-VEGF compounds.
Intracameral Hydrogels
We are engaged in the clinical development of our hydrogel administered via intracameral injection to address
glaucoma. Intracameral hydrogels refer to biodegradable or bioresorbable hydrogels placed into the anterior chamber or
front of the eye for the treatment of ocular conditions. The hydrogels are designed to be held in place by currents and
gravity present in the anterior chamber of an eye. In the case of PAXTRAVA, the hydrogel is designed to infuse with
intracameral water, settle into the inferior angle of the eye and demonstrate little to no movement. The hydrogels are soft,
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.
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Intracanalicular Inserts
Our intracanalicular inserts, including DEXTENZA, are designed to be inserted into the patient’s punctum by a
healthcare professional and to release drug to the surface of the eye to address diseases including ocular inflammation and
pain following ophthalmic surgery and ocular itching associated with allergic conjunctivitis.
Our intracanalicular inserts utilize ELUTYX 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. 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.
Commercial Portfolio
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 drug-eluting intracanalicular insert that is based on ELUTYX. Following FDA approval,
we commercially launched DEXTENZA for the treatment of post-surgical inflammation and pain in July 2019.
DEXTENZA is the first and only FDA-approved intracanalicular insert delivering dexamethasone to treat post-surgical
ocular inflammation and pain for up to 30 days with a single administration.
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 from multiple qualified suppliers; is highly
potent and is typically prescribed for prevention of ocular inflammation and pain following ocular surgery; and has
physical properties that are well suited for incorporation within our hydrogel technology.
The dexamethasone drug particles embedded within our DEXTENZA intracanalicular insert gradually erode and
release the drug in a programmed fashion until the drug is depleted. As the dexamethasone drug particles erode and the
ELUTYX 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 eye drops of other drugs following surgery, such as antibiotics and non-steroidal anti-inflammatory
drugs, or 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.
Investigator-Initiated Trials
We have received proposals for, and are supporting, several investigator-initiated trials evaluating DEXTENZA in
different clinical situations. To date, third-party clinical investigators have initiated 45 trials to study the use of
DEXTENZA in cataract surgery, other ophthalmic surgeries, and other potential indications. Of those, 21 trials have
published study reports, and 14 trials have been terminated. The remaining 10 trials are in various stages of enrollment and
treatment.
Post-Approval Studies
In September 2020, we announced that we had dosed the first pediatric subjects in a U.S.-based, randomized,
multicenter Phase 3 clinical trial evaluating DEXTENZA for the treatment of post-surgical ocular inflammation and pain in
children following cataract surgery. This 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. We enrolled 65 subjects in this clinical trial.
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It is designed to evaluate the safety 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 five years of age. The FDA has agreed that this Phase 3 clinical trial evaluating DEXTENZA for the treatment of post-
surgical ocular inflammation and pain in children following cataract surgery may also satisfy the post-approval requirement
for a pediatric trial as it relates to the indication for ocular itching associated with allergic conjunctivitis.
In June 2024, we submitted the data for our clinical trial to evaluate DEXTENZA in pediatric subjects following
cataract surgery and the updated package insert to the FDA. We anticipate receiving the FDA’s decision on the pediatric
labeling for DEXTENZA during the second quarter of 2025.
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, in particular for retinal diseases, and our planned commercialization efforts for our initial intracanalicular insert
product candidates in the United States, we expect we will need to engage 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 PAXTRAVA in mainland China, Taiwan, Hong Kong, Macau, South Korea,
and the countries of the Association of Southeast Asian Nations, or the AffaMed License Agreement. In January 2022,
AffaMed dosed its first subject in a study conducted in China evaluating the safety and efficacy of DEXTENZA for the
treatment of ocular inflammation and pain post-cataract surgery. This prospective, single-arm, real-world trial is designed
to assess the safety and efficacy of DEXTENZA for the treatment of ocular inflammation and pain following cataract
surgery in approximately 120 subjects at the Bo’ao Super Hospital, or the Bo’ao Real World Study. The Bo’ao Real World
Study’s primary efficacy endpoint is the absence of anterior chamber cells in the study eye at Day 14, and the key
secondary endpoint is the absence of pain in the study eye at Day 8. In October 2023, AffaMed announced positive topline
results from the Bo’ao Real World Study. As announced by AffaMed, the trial met its primary endpoint, with DEXTENZA
demonstrating a significant reduction of ocular inflammation as measured by the absence of anterior chamber cells (i.e.
score of "0") in the study eye on Day 14 after cataract surgery. AffaMed also announced that the trial also met its secondary
endpoint, demonstrating a significant reduction of ocular pain on Day 8, and that DEXTENZA was well-tolerated and had
a favorable safety profile consistent with all prior trials.
In April 2023, AffaMed announced that China’s National Medical Products Administration, or NMPA, had approved
AffaMed’s Clinical Trial Application to initiate a Phase 3 registrational study in China to investigate the efficacy and safety
of DEXTENZA in subjects following ophthalmic surgery, or the Phase 3 Registrational Study. In September 2023,
AffaMed announced that the first subject had been treated in the Phase 3 Registrational Study.
In February 2024, AffaMed announced that the Singapore Health Sciences Authority has accepted AffaMed’s new
drug application for DEXTENZA for the treatment of ocular inflammation and pain following ophthalmic surgery, and
ocular itching associated with allergic conjunctivitis for evaluation. In April 2022, AffaMed announced that DEXTENZA
has been approved in Macau, China for the treatment of ocular inflammation and pain following ophthalmic surgery. We do
not expect that DEXTENZA sales in Macau will result in material revenues to us.
We retain the right to develop and commercialize DEXTENZA in all other global 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.
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Allergic Conjunctivitis
DEXTENZA (dexamethasone ophthalmic insert) for the Treatment of Ocular Itching Associated with Allergic Conjunctivitis
In October 2021, the FDA approved our supplemental New Drug Application, or sNDA, for DEXTENZA to include
the treatment of ocular itching associated with allergic conjunctivitis as an additional indication. With the approval,
DEXTENZA became the first, FDA-approved, physician-administered intracanalicular insert capable of delivering a
preservative-free drug for the treatment of ocular itching associated with allergic conjunctivitis with a single administration
for up to 30 days. DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis also represents our
first indication approved to be administered in a physician’s office during a routine, non-surgical appointment. We
commercially launched DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis in the first
quarter of 2022.
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
antihistamine 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 can 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.
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. We believe that
many of the specialists who treat patients for post-surgical inflammation and pain also treat patients suffering from allergic
conjunctivitis.
AffaMed License Agreement
Under the terms of the AffaMed License Agreement, we received an upfront payment of $12 million and became
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. In the fourth quarter of 2021,
we received a $1 million milestone payment upon the approval by the FDA of an sNDA for DEXTENZA to include the
treatment of ocular itching associated with allergic conjunctivitis as an additional indication; in the second quarter of 2022,
we received a $2 million clinical support payment in connection with dosing the first subject in a Phase 2 clinical trial
evaluating PAXTRAVA for the treatment of OAG or OHT; and in the second quarter of 2023, we received a $1 million
milestone payment upon the NMPA’s approval of AffaMed’s Phase 3 Registrational Study. 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 PAXTRAVA for the reduction of elevated IOP in patients
with primary OAG or OHT in specified Asian markets. We retain the right to develop and commercialize DEXTENZA and
PAXTRAVA in all other global markets.
Sales, Marketing and Distribution
We generally expect to retain commercial rights in the United States to any of our product candidates 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.
We sell DEXTENZA in the United States to specialty distributors, or SDs, for resale to certain ambulatory surgery
centers, or ASCs, certain hospital outpatient departments, or HOPDs, and certain physicians’ offices, and directly to
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certain ASCs and physicians’ offices. We are continuing to offer this distribution option more broadly to our end
customers.
In addition to distribution agreements with specialty distributors and a small number of ASCs and physicians’
offices, we enter into arrangements with government payors that provide for government-mandated rebates and
chargebacks with respect to the purchase of DEXTENZA. We have built a highly targeted, key account sales force of
KAMs, or key account managers, Regional Directors, and FRMs, or field reimbursement managers, that focus on the ASCs
and their affiliates responsible for the largest volumes of cataract surgery in the United States, with an initial emphasis on
the approximately two million cataract procedures performed annually under Medicare Part B.
Since 2022, we have periodically adjusted our discounting and rebate strategy to meet the demands of the market.
For example, in the third quarter of 2022, we implemented an off-invoice discount, or OID, program whereby providers
receive the discounted price immediately upon purchase, rather than having to wait until the end of the quarter for a rebate
payment. We focus our sales efforts on sales to ASCs and strategic accounts that own and control multiple ASCs. In the
first quarter of 2023, we launched a Commercial Assurance Program to provide assistance with patients’ out-of-pocket
costs, supporting the expansion of DEXTENZA for commercially insured patients not covered by government payors.
Manufacturing
We fabricate devices and drug products for use in our clinical trials, research and development and commercial
efforts for DEXTENZA using current Good Manufacturing Practices, or cGMP, at our approximately 20,000 square foot
facility located in Bedford, Massachusetts. We fabricate devices and drug products for use in our clinical trials and other
research and development activities for our product candidates, including AXPAXLI, using cGMP at our 71,000 square
foot facility that is also located in Bedford, Massachusetts. This facility may include additional manufacturing space in the
future as we increase our manufacturing capacity and capabilities for AXPAXLI.
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. While we believe that multiple vendors are available for each
component we purchase, we have historically sole-sourced each component. 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 current or
potential front and back-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 if we were to work with a contract manufacturer, although we will continue
to evaluate outsourcing unit operations for cost advantages or eventually as a second source. Our manufacturing capability
also enables us to produce products in a cost-effective manner while retaining control over the manufacturing process and
prioritizing 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 and packaging services for our products.
We believe that we can scale our manufacturing processes to support DEXTENZA sales as well as development of
our drug product candidates and the potential commercialization of such product candidates, including AXPAXLI.
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.
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We have issued 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. As of December 31, 2024, we owned or exclusively
licensed in certain fields of use over 300 issued U.S. patents, pending U.S. patent applications, issued foreign patents and
pending foreign patent applications.
Certain of our U.S. patents and applications, and their foreign counterparts, are owned by us and other U.S. patents
and applications, and their foreign counterparts have been in-licensed from Incept.
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, enforceability 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 for certain patents 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, where applicable, we expect to apply for patent term extensions on certain 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.
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, and certain consultants, scientific advisors and contractors. We also seek to preserve the integrity and
confidentiality of our data.
The following is a summary of patents and patent applications that cover our commercial products and potentially
cover our product candidates:
AXPAXLI (axitinib intravitreal hydrogel)
We own issued patents in the United States and patents in certain foreign jurisdictions that cover this product
candidate, with current expiration dates in 2041. We own a pending Patent Cooperation Treaty application with the
potential to cover this product candidate in the U.S. and foreign jurisdictions, that, if granted, is expected to expire in 2044.
Additional U.S. and foreign patent applications are pending.
PAXTRAVA (travoprost intracameral hydrogel) for the treatment of OAG or OHT
We have licenses to a U.S. patent, and certain foreign counterparts, with current expiration dates in 2037 with
corresponding pending U.S. and foreign counterparts. We own an issued patent in the United States and patents in certain
foreign jurisdictions that cover this product candidate, with current expiration dates in 2041. Additional owned U.S. and
foreign patent applications are pending.
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DEXTENZA (dexamethasone ophthalmic insert) 0.4 mg
We have licenses to U.S. patents, and certain foreign counterparts, with current expiration dates in 2030 that cover
this product. We also own two U.S. patents that cover this product with current expiration dates in 2036 and 2037, and a
pending U.S. patent application.
DEXTENZA (dexamethasone ophthalmic insert) 0.4 mg for the treatment of allergic conjunctivitis
We have licenses to U.S. patents, and certain foreign counterparts, with current expiration dates in 2030 that cover
this product. We also own two U.S. patents that cover this product with current expiration dates in 2036 and 2037. We also
own an issued U.S. patent expiring in 2041, and related pending U.S. and foreign applications.
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 DEXTENZA, ReSure Sealant and our hydrogel platform
technology product candidates. The agreement supersedes an April 2007 license agreement between us and Incept. Amar
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 Second
Amended Agreement: (i) consistent with the Prior Agreement, a royalty equal to a low single-digit percentage of net sales
by 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-
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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 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 the AffaMed 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 PAXTRAVA, or collectively with DEXTENZA, the AffaMed
Licensed Products, regarding OAG and OHT, 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 AffaMed 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 AffaMed License Agreement, we received upfront payments and we also became eligible to
receive additional payments upon the achievement of certain development and commercial milestones. There can be no
guarantee, however, that any of the remaining milestones will be achieved. We are also entitled to receive tiered,
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escalating royalties on the net sales of the AffaMed Licensed Products ranging from a low-teen to low-twenties percentage.
Royalties under the AffaMed 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 AffaMed 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 AffaMed License Agreement contemplates
that the parties negotiate and enter into a future agreement requiring us to use commercially reasonable efforts to
manufacture 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 AffaMed 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 AffaMed License Agreement in the event of the other party’s uncured breach. Either party may also
terminate the AffaMed 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 AffaMed License Agreement, subject to a specified notice
period and the repayment of any costs and expenses incurred by AffaMed in connection with the AffaMed License
Agreement, including upfront and milestone payments AffaMed has previously paid to us, at a prespecified premium.
AffaMed has the right to terminate the AffaMed License Agreement at any time following the completion of a Phase 3
clinical trial to evaluate PAXTRAVA.
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 and frequency 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
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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 to AXPAXLI
In wet AMD and DR, AXPAXLI 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 more than one or two months of
therapeutic effect. They include Lucentis (ranibizumab), Eylea (aflibercept 2 mg), Eylea HD (aflibercept 8 mg), Beovu
(brolicizumab), Vabysmo (faricimab), Susvimo (ranibizumab Port Delivery System), and off-label use of the cancer
therapy Avastin. Biosimilars to ranibizumab and aflibercept 2 mg have received FDA approval as well.
Multiple companies, in various stages of development, are pursuing products for wet AMD that would be
competitive with AXPAXLI. Programs in later-stage development include: Eyepoint Pharmaceuticals, which is pursuing a
sustained-release bioerodible device containing a TKI (vorolanib) using its Durasert-E technology; Opthea, which is
pursuing an anti-VEGF C/D Trap evaluated in combination with anti-VEGF; Clearside Biomedical, which is pursuing a
TKI (axitinib) administered into the suprachoroidal space; and Kodiak Sciences, which is pursuing products based on its
anti-VEGF biopolymer conjugate technology. In addition, there are several companies pursuing gene therapies to treat wet
AMD including, 4D Molecular Therapeutics, Adverum Biotechnologies and RegenxBio. Programs in early phases of
development include but are not limited to: Alcon, which is pursuing development of a TKI implant containing axitinib
using its Print manufacturing technology; Glaukos, which is pursuing a sustained-release bioerodible implant containing a
TKI (axitinib) through its Retina-XR delivery platform; and Roche, which is pursuing intravitreal products along with
those delivered with its Port Delivery System technology.
In DR, AXPAXLI will compete with approved agents, including Lucentis, Eylea and Eylea HD. These treatments,
although approved for DR, are sparingly used, largely due to the treatment burden. Multiple companies, in various stages
of development, are pursuing products that would be competitive with AXPAXLI. Programs in later-stage development
include: Roche, which is pursuing Susvimo for the treatment of DR; Kodiak Sciences, which is pursuing an anti-VEGF
molecule built on its antibody polymer conjugate technology; RegenxBio, which is pursuing a suprachoroidal formulation
of its gene therapy for the treatment of DR; and Opus Genetics, which is pursuing an oral treatment.
Competitors to PAXTRAVA
A number of therapies are currently available for the treatment of glaucoma in the United States. The most
commonly used treatments for glaucoma in the United States are topical eye drops, including both branded and generic
PGAs, along with combination therapies. Allergan, now owned by AbbVie, 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 OAG or OHT. In December 2023, Glaukos received marketing approval from the
FDA for iDose, a PGA indicated for the reduction of IOP in patients with OHT or OAG. In addition, several other
companies, in varying stages of development, have announced their intention to develop products for treatment of
glaucoma using sustained-release therapy. These programs include but are not limited to: Glaukos, which is developing a
second-generation formulation of the iDose, referred to as iDose TREX; AbbVie, which is pursuing an intracameral
implant comprised of a PGA; PolyActiva, which is pursuing an ocular implant with latanoprost based on its Prezia
technology; and Spyglass Pharma, which is pursuing an intraocular lens which elutes bimatoprost.
Competitors to 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. DEXYCU lost separate government reimbursement as of January 1, 2023 and is no longer actively
marketed. OMIDRIA, purchased by Rayner Surgical Group Limited, is a prescription medication used during cataract
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surgery. According to the OMIDRIA website, this product helps the black part in the center of the eye (pupil) stay open
(dilated) during cataract surgery and decreases eye pain after surgery.
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, 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. The regulatory requirements
applicable to product development, approval and marketing are subject to change, and regulations and administrative
guidance often are revised or reinterpreted by government agencies in ways that may have a significant impact on our
business.
Review and Approval of Drugs and Biologics in the United States
In the United States, the FDA approves and regulates drug products under the FDCA and related regulations. Drugs
are also subject to other federal, state and local statutes and regulations. Biological products, or biologics, 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. A company, institution, or organization which takes
responsibility for the initiation and management of a clinical development program for such products is referred to as a
sponsor. A sponsor 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;
●
design of a clinical protocol and 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 GCPs, to establish the
safety and efficacy of the proposed drug product or the safety, potency and purity for the proposed biological
product for each indication;
●
preparation and submission to the FDA of a new drug application, or NDA, demonstrating the safety and
efficacy for the drug candidate product or, with respect to biologics, a biological licensing application, or BLA,
demonstrating the safety, purity and potency of the proposed biological product 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 pursuant to the Prescription Drug User Fee Act;
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●
securing FDA approval of the NDA or BLA authorizing marketing of the new drug product or biological
product in the United States; 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. These
studies are generally referred to as IND-enabling studies. The conduct of preclinical studies is subject to federal regulations
and requirements, including GLP regulations and standards and the United States Department of Agriculture’s Animal
Welfare Act. 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.
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.
With passage of the FDA’s Modernization Act 2.0 in December 2022, Congress eliminated provisions in both the
FDCA and the PHSA that required animal testing in support of an NDA or BLA. While animal testing may still be
conducted, the FDA was authorized to rely on alternative non-clinical tests, including cell-based assays,
microphysiological systems, or bioprinted or computer models.
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, sponsors 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 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. 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.
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
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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 monitoring 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.
Reporting Clinical Trial Results
Under the PHSA, sponsors of clinical trials of certain FDA-regulated products, including prescription drugs and
biologics, are required to register and disclose certain clinical trial information on a public registry (clinicaltrials.gov)
maintained by the U.S. National Institutes of Health, or NIH. In particular, information related to the product, patient
population, phase of investigation, study sites and investigators and other aspects of the clinical trial is made public as part
of the registration of the clinical trial. Although sponsors are also obligated to disclose the results of their clinical trials
after completion, disclosure of the results can be delayed in some cases for up to two years after the date of completion of
the trial. The NIH’s Final Rule on registration and reporting requirements for clinical trials became effective in 2017.
The PHSA grants the Secretary of Health and Human Services the authority to issue a notice of noncompliance to a
responsible party for failure to submit clinical trial information as required. The responsible party, however, is allowed 30
days to correct the noncompliance and submit the required information. As of December 19, 2024, the FDA has issued six
notices of non-compliance, thereby signaling the government’s willingness to begin enforcing these requirements against
non-compliant clinical trial sponsors. While these notices of non-compliance did not result in civil monetary penalties, the
failure to submit clinical trial information to clinicaltrials.gov is a prohibited act under the FDCA with violations subject to
potential civil monetary penalties of up to $10,000 for each day the violation continues. Violations may also result in
injunctions and/or criminal prosecution or disqualification from federal grants.
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.
There is no obligation for a sponsor to make its investigational products available for expanded access; however, as
required by amendments to the FDCA included in the 21st Century Cures Act, or the Cures Act, passed in 2016, if a
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sponsor has a policy regarding how it responds to expanded access requests with respect to product candidates in
development to treat serious diseases or conditions, it must make that policy publicly available. Sponsors are required to
make such policies publicly available upon the earlier of initiation of a Phase 2 or Phase 3 study for a covered
investigational product; or 15 days after the investigational product receives designation from the FDA 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.
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.
●
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.
In some cases, the FDA may approve an NDA or BLA for a product candidate but require the sponsor to conduct
additional clinical trials to further assess the product candidate’s safety and effectiveness after approval. Such post-
approval trials, typically referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These
trials are used to gain additional experience from the treatment of a larger number of patients in the intended treatment
group. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials, such as to verify clinical
benefit in the case of products approved under accelerated approval regulations. Failure to exhibit due diligence with
regard to conducting mandatory Phase 4 clinical trials could result in withdrawal of FDA approval for products.
A clinical trial may combine the elements of more than one phase, and the FDA often requires more than one Phase 3
trial to support marketing approval of a product candidate. A company’s designation of a clinical trial as being of a
particular phase is not necessarily indicative that the study will be sufficient to satisfy the FDA requirements of that phase
because this determination cannot be made until the protocol and data have been submitted to and reviewed by the FDA.
Moreover, as noted above, a pivotal trial is a clinical trial that is believed to satisfy FDA requirements for the evaluation of
a product candidate’s safety and efficacy such that it can be used, alone or with other pivotal or non-pivotal trials, to
support regulatory approval. Generally, pivotal trials are Phase 3 trials, but they may be Phase 2 trials if the design provides
a well-controlled and reliable assessment of clinical benefit, particularly in an area of unmet medical need.
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In December 2022, with the passage of Food and Drug Omnibus Reform Act, or FDORA, Congress began requiring
sponsors to develop and submit a diversity action plan, or DAP, for each Phase 3 clinical trial or any other “pivotal study”
of a new drug or biological product. These plans are meant to encourage the enrollment of more diverse patient populations
in late-stage clinical trials of FDA-regulated products. Specifically, DAPs must include the sponsor’s goals for enrollment,
the underlying rationale for those goals, and an explanation of how the sponsor intends to meet them. In addition to these
requirements, the legislation directs the FDA to issue new guidance on DAPs. In June 2024, as mandated by FDORA, the
FDA issued draft guidance outlining the general requirements for DAPs. Unlike most guidance documents issued by the
FDA, the DAP guidance when finalized will have the force of law because FDORA specifically dictates that the form and
manner for submission of DAPs are specified in FDA guidance. On January 27, 2025, in response to an Executive Order
issued by President Trump on January 21, 2025, on Diversity, Equity and Inclusion programs, the FDA removed this draft
guidance from its website. This action raises questions about the applicability of statutory obligations to submit DAPs and
the agency’s current thinking on best practices for clinical development.
In June 2023, the FDA issued draft guidance with updated recommendations for GCPs aimed at modernizing the
design and conduct of clinical trials. The updates are intended to help pave the way for more efficient clinical trials to
facilitate the development of medical products. The draft guidance is adopted from the International Council for
Harmonisation’s recently updated E6(R3) draft guideline that was developed to enable the incorporation of rapidly
developing technological and methodological innovations into the clinical trial enterprise. In addition, the FDA issued draft
guidance outlining recommendations for the implementation of decentralized clinical trials.
Clinical Trials Outside the United States in Support of FDA Approval
In connection with our clinical development program, we have trial sites outside the United States from time to time.
When a foreign clinical trial is conducted under an IND, all 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 trials must be conducted in accordance with GCP, including undergoing review and receiving approval by an
independent ethics committee, or IEC, and seeking and receiving informed consent from subjects. GCP requirements
encompass both ethical and data integrity standards for clinical studies. 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.
The acceptance by the FDA of trial data from clinical trials conducted outside the United States in support of US
approval may be subject to certain conditions or may not be accepted at all. In cases where data from foreign clinical trials
are intended to serve as the sole basis for marketing approval in the United States, the FDA will generally not approve the
application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical
practice; (ii) the trials were performed by clinical investigators of recognized competence and pursuant to GCP regulations;
and (iii) the data may be considered valid without the need for an on-site inspection by the FDA, or if the FDA considers
such inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate
means.
In addition, even where the foreign trial data are not intended to serve as the sole basis for approval, the FDA will not
accept the data as support for an application for marketing approval unless the trial is well-designed and well-conducted in
accordance with GCP requirements and the FDA is able to validate the data from the trial through an onsite inspection if
deemed necessary. Many foreign regulatory authorities have similar approval requirements. In addition, such foreign trials
are subject to the applicable local laws of the foreign jurisdictions where the trials are conducted.
Interactions with FDA During the Clinical Development Program
Following the clearance of an IND and the commencement of clinical trials, the sponsor will continue to have
interactions with the FDA. Progress reports detailing the results of clinical trials must be submitted at least annually to the
FDA and more frequently if serious adverse events occur. These reports must include a development safety update report.
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 occurrence of a serious suspected
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adverse reaction over that listed in the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3 clinical trials may
not be completed successfully within any specified period, or at all. The FDA will typically inspect one or more clinical
sites to assure compliance with GCP and the integrity of the clinical data submitted.
In addition, sponsors are given opportunities to meet with the FDA at certain points in the clinical development
program. Specifically, sponsors may meet with the FDA prior to the submission of an IND (pre-IND meeting), at the end
of Phase 2 clinical trial (EOP2 meeting) and before an NDA or BLA is submitted (pre-NDA or pre-BLA meeting).
Meetings at other times may also be requested. There are five types of meetings that occur between sponsors and the FDA.
Type A meetings are those that are necessary for an otherwise stalled product development program to proceed or to
address an important safety issue. Type B meetings include pre-IND and pre-NDA/pre-BLA meetings, as well as end of
phase meetings such as EOP2 meetings. A Type C meeting is any meeting other than a Type A or Type B meeting
regarding the development and review of a product, including for example meetings to facilitate early consultations on the
use of a biomarker as a new surrogate endpoint that has never been previously used as the primary basis for product
approval in the proposed context of use. A Type D meeting is focused on a narrow set of issues, which should be limited to
no more than two focused topics and should not require input from more than three disciplines or Divisions. Finally,
INTERACT meetings are intended for novel products and development programs that present unique challenges in the
early development of an investigational product.
These meetings provide an opportunity for the sponsor to share information about the data gathered to date with the
FDA and for the FDA to provide advice on the next phase of development. For example, at an EOP2 meeting, a sponsor
may discuss its Phase 2 clinical results and present its plans for the pivotal Phase 3 clinical trial(s) that it believes will
support the approval of the new product. Such meetings may be conducted in person, via teleconference/videoconference
or written response only with minutes reflecting the questions that the sponsor posed to the FDA and the FDA’s responses.
The FDA has indicated that its responses, as conveyed in meeting minutes and advice letters, only constitute mere
recommendations and/or advice made to a sponsor and, as such, sponsors are not bound by such recommendations and/or
advice. From a practical perspective, a sponsor’s failure to follow the FDA’s recommendations for design of a clinical
program may put the program at significant risk of failure.
Special Protocol Assessment Agreements
A Special Protocol Assessment, or SPA, agreement is an agreement between a sponsor and the FDA on the design
and size of studies and clinical trials that can be used for approval of a drug or biological product. The FDA’s guidance on
such agreements states that an agreement may not be changed by the sponsor or the agency unless through a written
agreement of the two entities or if FDA determines there is a substantial scientific issue essential to determining the safety
or effectiveness of the drug or the safety, potency or purity of the biologic product. The protocols that are eligible for SPA
agreements are: animal carcinogenicity protocols, final product stability protocols and clinical protocols for Phase 3 trials
where the data will form the primary basis for an efficacy claim.
The FDA may meet with sponsors, provided certain conditions are met, for the purpose of reaching an SPA
agreement on the design and size of clinical trials intended to form the primary basis of an efficacy claim in a marketing
application. If a sponsor makes a reasonable written request to meet with the FDA for the purpose of reaching agreement
on the design and size of a clinical trial, then the FDA will meet with the sponsor. If an agreement is reached, the FDA will
reduce the agreement to writing and make it part of the administrative record. An agreement may not be changed by the
sponsor or FDA after the trial begins, except with the written agreement of the sponsor and FDA, or if the director of the
FDA reviewing division determines that “a substantial scientific issue essential to determining the safety or effectiveness of
the investigational product was identified after the testing began. If a sponsor and the FDA meet regarding the design and
size of a clinical trial and the parties cannot agree that the trial design is adequate to meet the goals of the sponsor, the FDA
will clearly state the reasons for the disagreement in a letter to the sponsor.
Manufacturing and Other Regulatory Requirements
Concurrently with clinical trials, sponsors usually complete additional animal safety studies, develop additional
information about the chemistry and physical characteristics of the product candidate and finalize a process for
manufacturing commercial quantities of the product candidate in accordance with cGMP requirements. The manufacturing
process must be capable of consistently producing quality batches of the product candidate and, among other criteria, the
sponsor must develop methods for testing the identity, strength, quality, and purity of the finished
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product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to
demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
Specifically, the FDA’s regulations require that pharmaceutical products be manufactured in specific approved
facilities and in accordance with cGMPs. The cGMP regulations include requirements relating to organization of personnel,
buildings and facilities, equipment, control of components and product containers and closures, production and process
controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports and returned or
salvaged products. Manufacturers and other entities involved in the manufacture and distribution of approved
pharmaceuticals are required to register their establishments with the FDA and some state agencies, and they are subject to
periodic unannounced inspections by the FDA for compliance with cGMPs and other requirements. Inspections must
follow a “risk-based schedule” that may result in certain establishments being inspected more frequently. Manufacturers
may also have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying,
limiting, or refusing inspection by the FDA may lead to a product being deemed to be adulterated. Changes to the
manufacturing process, specifications or container closure system for an approved product are strictly regulated and often
require prior FDA approval before being implemented. The FDA’s regulations also require, among other things, the
investigation and correction of any deviations from cGMP and the imposition of reporting and documentation requirements
upon the sponsor and any third-party manufacturers involved in producing the approved product.
The PREVENT Pandemics Act, which was enacted in December 2022, clarifies that foreign drug manufacturing
establishments are subject to registration and listing requirements even if a drug or biologic undergoes further manufacture,
preparation, propagation, compounding, or processing at a separate establishment outside the United States prior to being
imported or offered for import into the United States.
Pediatric Studies
Under the Pediatric Research Equity Act, or PREA, applications and certain types of supplements to applications
must contain data that are adequate to assess the safety and effectiveness of the 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. The sponsor must submit an initial Pediatric Study Plan, or PSP, within 60 days of an EOP2
meeting or as may be agreed between the sponsor and the FDA. Those plans must contain an outline of the proposed
pediatric study or studies the sponsor plans to conduct, including study objectives and design, age groups, relevant
endpoints and statistical approach, or a justification for not including such detailed information, and any request for a
deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along
with supporting information. The sponsor and the FDA must reach agreement on a final plan. A sponsor can submit
amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data
collected from nonclinical studies, early phase clinical trials, and/or other clinical development programs.
The FDA may, on its own initiative or at the request of the sponsor, 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. A deferral may be granted for several reasons, including a finding that the product or therapeutic candidate is
ready for approval for use in adults before pediatric trials are complete or that additional safety or effectiveness data needs
to be collected before the pediatric trials begin. Pursuant to the Food and Drug Administration Safety and Innovation Act
of 2012, or FDASIA, the FDA must send a PREA Non-Compliance letter to sponsors who have failed to submit their
pediatric assessments required under PREA, have failed to seek or obtain a deferral or deferral extension or have failed to
request approval for a required pediatric formulation. It further requires the FDA to publicly post the PREA Non-
Compliance letter and sponsor’s response. Unless otherwise required by regulation, the pediatric data requirements do not
apply to products with orphan designation, although the FDA has recently taken steps to limit what it considers abuse of
this statutory exemption in PREA by announcing that it does not intend to grant any additional orphan drug designations
for rare pediatric subpopulations of what is otherwise a common disease. The FDA also maintains a list of diseases that are
exempt from PREA requirements due to low prevalence of disease in the pediatric population. In May 2023, the FDA
issued new draft guidance that further describes the pediatric study requirements under PREA.
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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 sponsor 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 sponsor for
approval of the application “were not conducted by or for the sponsor and for which the sponsor has not obtained a right of
reference or use from the person by or for whom the investigations were conducted.”
Section 505(b)(2) thus authorizes the FDA to approve an NDA based on safety and effectiveness data that were not
developed by the sponsor. 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)
sponsor can establish that reliance on the FDA’s previous approval is scientifically appropriate, the sponsor 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) sponsor.
If we obtain favorable results in our clinical trials, we plan to submit NDAs for our product candidates under
Section 505(b)(2).
Acceptance and Review of NDAs and BLAs
Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical
trials, along with information relating to the product’s chemistry, manufacturing, controls, safety updates, patent
information, abuse information and proposed labeling, are submitted to the FDA as part of an application requesting
approval to market the product candidate for one or more indications. Data may come from company-sponsored clinical
trials intended to test the safety and efficacy of a product’s use 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 efficacy of a drug product and the safety, potency and purity of the biological product to the
satisfaction of the FDA.
The fee required for the submission and review of an application under the Prescription Drug User Fee Act, or
PDUFA, is substantial (for example, for FY2025 this application fee is approximately $4.3 million), and the sponsor of an
approved application is also subject to an annual program fee, which for FY2025 is currently set at $403,889 per eligible
prescription product. These fees are typically adjusted annually, and exemptions and waivers may be available under
certain circumstances, such as where a waiver is necessary to protect the public health, where the fee would present a
significant barrier to innovation, or where the sponsor is a small business submitting its first human therapeutic application
for review.
The FDA conducts a preliminary review of all applications within 60 days of receipt and must inform the sponsor at
that time or before whether an application is sufficiently complete to permit substantive review. In pertinent part, FDA’s
regulations state that an application “shall not be considered as filed until all pertinent information and data have been
received” by the FDA. In the event that FDA determines that an application does not satisfy this standard, it will issue a
Refuse to File, or RTF, determination to the sponsor. Typically, an RTF will be based on administrative incompleteness,
such as clear omission of information or sections of required information; scientific incompleteness, such as omission of
critical data, information or analyses needed to evaluate safety and efficacy or provide adequate directions for use; or
inadequate content, presentation, or organization of information such that substantive and meaningful review is precluded.
The FDA may request additional information rather than accept an 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.
After the submission is accepted for filing, the FDA begins an in-depth substantive review of the application. The
FDA reviews the application to determine, among other things, whether the proposed product is safe and effective for its
intended use, whether it has an acceptable purity profile and whether the product is being manufactured in accordance
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with cGMP. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months from the filing
date in which to complete its initial review of a standard application that is a new molecular entity, and six months from the
filing date for an application with “priority review.” The review process may be extended by the FDA for three additional
months to consider new information or in the case of a clarification provided by the sponsor to address an outstanding
deficiency identified by the FDA following the original submission. Despite these review goals, it is not uncommon for
FDA review of an application to extend beyond the PDUFA target action date. The FDA’s ability to meet its review goals
may be affected by a variety of factors, including government budget and funding levels, the ability to hire and retain key
personnel and statutory, regulatory and policy changes. Average review times at the FDA have fluctuated in recent years.
In connection with its review of an application, the FDA will typically submit information requests to the sponsor
and set deadlines for responses thereto. The FDA will also conduct a pre-approval inspection of the manufacturing
facilities for the new product to determine whether the manufacturing processes and facilities comply with cGMPs. The
FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance
with cGMP requirements and are adequate to assure consistent production of the product within required specifications.
The FDA also may inspect the sponsor and one or more clinical trial sites to assure compliance with IND and GCP
requirements and the integrity of the clinical data submitted to the FDA. With passage of FDORA, Congress clarified
FDA’s authority to conduct inspections by expressly permitting inspection of facilities involved in the preparation, conduct,
or analysis of clinical and non-clinical studies submitted to FDA as well as other persons holding study records or involved
in the study process. To ensure cGMP and GCP compliance by its employees and third-party contractors, a sponsor may
incur significant expenditure of time, money and effort in the areas of training, record keeping, production and quality
control.
Moreover, the FDA will review a sponsor’s financial relationship with the principal investigators who conducted the
clinical trials in support of the NDA. That is because, under certain circumstances, principal investigators at a clinical trial
site may also serve as scientific advisors or consultants to a sponsor and receive compensation in connection with such
services. Depending on the level of that compensation and any other financial interest a principal investigator may have in
a sponsor, the sponsor may be required to report these relationships to the FDA. The FDA will then evaluate that financial
relationship and determine whether it creates a conflict of interest or otherwise affects the interpretation of the trial or the
integrity of the data generated at the principal investigator’s clinical trial site. If so, the FDA may exclude data from the
clinical trial site in connection with its determination of safety and efficacy of the investigational product.
Additionally, the FDA may refer an application, including applications for novel product candidates which present
difficult questions of safety or efficacy, to an advisory committee for review, evaluation and recommendation as to whether
the application should be approved and under what conditions. 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 under what conditions. The FDA is not bound by the recommendation of
an advisory committee, but it considers such recommendations when making final decisions on approval. Data from
clinical trials are not always conclusive, and the FDA or its advisory committee may interpret data differently than the
sponsor interprets the same data. The FDA may also re-analyze the clinical trial data, which could result in extensive
discussions between the FDA and the sponsor during the review process.
The FDA also may require submission of a Risk Evaluation and Mitigation Strategy, or REMS, if it determines that a
REMS is necessary to ensure that the benefits of the product outweigh its risks and to assure the safe use of the product.
The REMS could include medication guides, physician communication plans, assessment plans and/or elements to assure
safe use, such as restricted distribution methods, patient registries or other risk minimization tools. The FDA determines
the requirement for a REMS, as well as the specific REMS provisions, on a case-by-case basis. If the FDA concludes a
REMS is needed, the sponsor of the application must submit a proposed REMS and the FDA will not approve the
application without a REMS.
Decisions on NDAs and BLAs
The FDA reviews a sponsor to determine, among other things, whether the product is safe and whether it is effective
for its intended use(s), with the latter determination being made on the basis of substantial evidence. The term “substantial
evidence” is defined under the FDCA as “evidence consisting of adequate and well-controlled investigations, including
clinical investigations, by experts qualified by scientific training and experience to evaluate the
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effectiveness of the product involved, on the basis of which it could fairly and responsibly be concluded by such experts
that the product will have the effect it purports or is represented to have under the conditions of use prescribed,
recommended, or suggested in the labeling or proposed labeling thereof.”
The FDA has interpreted this evidentiary standard to require at least two adequate and well-controlled clinical
investigations to establish effectiveness of a new product. Under certain circumstances, however, FDA has indicated that a
single trial with certain characteristics and additional information may satisfy this standard. This approach was
subsequently endorsed by Congress in 1998 with legislation providing, in pertinent part, that “If FDA determines, based on
relevant science, that data from one adequate and well-controlled clinical investigation and confirmatory evidence
(obtained prior to or after such investigation) are sufficient to establish effectiveness, FDA may consider such data and
evidence to constitute substantial evidence.” This modification to the law recognized the potential for FDA to find that one
adequate and well controlled clinical investigation with confirmatory evidence, including supportive data outside of a
controlled trial, is sufficient to establish effectiveness. In December 2019, FDA issued draft guidance further explaining
the studies that are needed to establish substantial evidence of effectiveness. The FDA also issued draft guidance in
September 2023 that outlines considerations for relying on confirmatory evidence in lieu of a second clinical trial to
demonstrate efficacy. The FDA has not yet finalized such guidance.
After evaluating the application and all related information, including the advisory committee recommendations, if
any, and inspection reports of manufacturing facilities and clinical trial sites, the FDA will issue either a complete response
letter, or CRL, or an approval letter. To reach this determination, the FDA must determine that the drug is effective and
that its expected benefits outweigh its potential risks to patients. This “benefit-risk” assessment is informed by the
extensive body of evidence about the product’s safety and efficacy in the NDA or BLA. This assessment is also informed
by other factors, including: the severity of the underlying condition and how well patients’ medical needs are addressed by
currently available therapies; uncertainty about how the premarket clinical trial evidence will extrapolate to real-world use
of the product in the post-market setting; and whether risk management tools are necessary to manage specific risks. In
connection with this assessment, the FDA review team will assemble all individual reviews and other documents into an
“action package,” which becomes the record for FDA review. The review team then issues a recommendation, and a senior
FDA official makes a decision.
A CRL indicates that the review cycle of the application is complete, and the application will not be approved in its
present form. 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. The CRL may require additional clinical or other data,
additional pivotal Phase 3 clinical trial(s) and/or other significant and time- consuming requirements related to clinical
trials, preclinical studies or manufacturing. If a CRL is issued, the sponsor will have one year to respond to the deficiencies
identified by the FDA, at which time the FDA can deem the application withdrawn or, in its discretion, grant the sponsor an
additional six-month extension to respond. The FDA has committed to reviewing resubmissions in response to an issued
CRL in either two or six months depending on the type of information included. Even with the submission of this
additional information, however, the FDA ultimately may decide that the application does not satisfy the regulatory criteria
for approval. The FDA has taken the position that a CRL is not final agency action making the determination subject to
judicial review. For those seeking to challenge FDA’s CRL decision, the FDA has indicated that sponsors may request a
formal hearing on the CRL or file a request for reconsideration or a request for a formal dispute resolution.
An approval letter, on the other hand, authorizes commercial marketing of the product with specific prescribing
information for specific indications. That is, the approval will be limited to the conditions of use (e.g., patient population,
indication) described in the FDA-approved labeling. Further, depending on the specific risk(s) to be addressed, the FDA
may require that contraindications, warnings or precautions be included in the product labeling, require that post-approval
trials, including Phase 4 clinical trials, be conducted to further assess a product’s safety after approval, require testing and
surveillance programs to monitor the product after commercialization or impose other conditions, including distribution
and use restrictions or other risk management mechanisms under a 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-
marketing trials or surveillance programs. After approval, some 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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Under the Ensuring Innovation Act, which was signed into law in April 2021, the FDA must publish action packages
summarizing its decisions to approve new drugs and biologics within 30 days of approval of such products. To date, CRLs
are not publicly available documents.
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.
With passage of FDORA, Congress modified certain provisions governing accelerated approval of drug and biologic
products. Specifically, the new legislation authorized the FDA to: require a sponsor to have its confirmatory clinical trial
underway before accelerated approval is awarded, require a sponsor of a product granted accelerated approval to submit
progress reports on its post-approval studies to FDA every six months until the study is completed; and use expedited
procedures to withdraw accelerated approval of an NDA or BLA after the confirmatory trial fails to verify the product’s
clinical benefit. Further, FDORA requires the FDA to publish on its website “the rationale for why a post-approval study
is not appropriate or necessary” whenever it decides not to require such a study upon granting accelerated approval.
In March 2023, the FDA issued draft guidance that outlines its current thinking and approach to accelerated
approval. The guidance provides that although single-arm trials have been commonly used to support accelerated approval,
a randomized controlled trial is the preferred approach as it provides a more robust efficacy and safety assessment and
allows for direct comparisons to an available therapy. Subsequently, in December 2024 and January 2025, the FDA issued
additional draft guidances relating to accelerated approval. These guidances describe FDA’s latest thinking on what it
means to conduct a confirmatory trial with due diligence and how the agency plans to interpret whether such a study needs
to be underway at the time of approval. While these guidances are currently only in draft form and will ultimately not be
legally binding even when finalized, sponsors typically observe the FDA’s guidance closely to ensure that their
investigational products qualify for accelerated 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 HHS, 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. In September 2021, the FDA published final regulations which describe
the types of evidence that the agency will consider in determining the intended use of a drug or biologic.
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It may be permissible, under very specific, narrow conditions, for a manufacturer to engage in nonpromotional, non-
misleading communication regarding off-label information, such as distributing scientific or medical journal information.
Moreover, with passage of the Pre-Approval Information Exchange Act, or PIE Act, in December 2022, sponsors of
products that have not been approved may proactively communicate to payors certain information about products and
product candidates in development to help expedite patient access upon product approval. Previously, such
communications were permitted under FDA guidance but the new legislation explicitly provides protection to sponsors
who convey certain information about products and product candidates in development to payors, including unapproved
uses of approved products. In addition, in January 2025, the FDA published final guidance outlining the agency’s non-
binding policies governing the distribution of scientific information on unapproved uses of approved products to healthcare
providers. This final guidance calls for such communications to be truthful, non-misleading, factual, and unbiased and
include all information necessary for healthcare providers to interpret the strengths and weaknesses and validity and utility
of the information about the unapproved use.
In addition, the distribution of prescription pharmaceutical products is subject to a variety of federal and state laws,
the most recent of which is still in the process of being phased into the U.S. supply chain and regulatory framework. The
Prescription Drug Marketing Act, or PDMA, was the first federal law to set minimum standards for the registration and
regulation of drug distributors by the states and to regulate the distribution of drug samples. Today, both the PDMA and
state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure
accountability in distribution. In November 2013, the Federal Drug Supply Chain Security Act became effective in the
U.S., mandating an industry-wide, electronic, interoperable system to trace prescription drugs through the pharmaceutical
distribution supply chain with a ten-year phase-in process. Manufacturers were required by November 2023 to have such
systems and processes. So as not to disrupt supply chains, the FDA has granted certain exemptions from enhanced drug
distribution security requirements for eligible trading partners for particular periods of time.
Generic Drugs and Regulatory Exclusivity
In 1984, with passage of the Hatch-Waxman Act, Congress established an abbreviated regulatory scheme authorizing
the FDA to approve generic drugs that are shown to contain the same active ingredients as, and to be bioequivalent to,
drugs previously approved by the FDA pursuant to NDAs and it also enacted Section 505(b)(2). To obtain approval of a
generic drug, a sponsor must submit an abbreviated new drug application, or ANDA, to the agency. In support of such
applications, a generic manufacturer may rely on the preclinical and clinical testing conducted for a drug product
previously approved under an NDA, known as the reference listed drug, or RLD.
Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is identical to the
RLD with respect to the active ingredients, the route of administration, the dosage form, the strength of the drug and the
conditions of use 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 a 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.
Under the Hatch-Waxman Act, the FDA may not approve an ANDA or 505(b)(2) application until any applicable
period of non-patent exclusivity for the RLD has expired. The FDCA provides a period of five years of regulatory
exclusivity for a new drug containing a new chemical entity, or NCE. For the purposes of this provision, FDA has
consistently taken the position that an NCE is a drug that contains no active moiety that has previously been approved by
the FDA in any other NDA. This interpretation was confirmed with enactment of the Ensuring Innovation Act in April
2021. An active moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug
substance. In cases where such NCE exclusivity has been granted, a generic or follow-on drug application 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 sponsor may submit its application four years following the original product approval.
The FDCA also provides for a period of three years of regulatory 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
sponsor 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 new indications, dosage forms, route of administration or combination of
ingredients. Three-year exclusivity would be available for a drug product that contains a previously approved active
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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 or 505(b)(2) NDAs seeking approval
for generic versions of the drug as of the date of approval of the original drug product; rather, this three-year exclusivity
covers only the conditions of use associated with the new clinical investigations and, as a general matter, does not prohibit
the FDA from approving follow-on applications for drugs containing the original active ingredient.
Five-year and three-year exclusivity also will not delay the submission or approval of a traditional NDA filed under
Section 505(b)(1) of the FDCA; however, a sponsor submitting a traditional NDA would be required to conduct or obtain a
right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate
safety and effectiveness.
As part of the submission of an NDA or certain supplemental applications, NDA sponsors are required to list with
the FDA each patent with claims that cover the sponsor’s product or an approved method of using the product. Upon
approval of a new drug, each of the patents listed in the application for the drug is then published in the Orange Book. The
FDA’s regulations governing patient listings were largely codified into law with enactment of the Orange Book
Modernization Act in January 2021. When an ANDA sponsor files its application with the FDA, the sponsor is required to
certify to the FDA concerning any patents listed for the reference product in the Orange Book. Specifically, the ANDA
sponsor must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the
listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the
listed patent is invalid or will not be infringed by the new product. Moreover, to the extent that the Section 505(b)(2) NDA
sponsor is relying on studies conducted for an already approved product, the sponsor also is required to certify to the FDA
concerning any patents listed for the NDA-approved product in the Orange Book to the same extent that an ANDA sponsor
would.
If the generic drug or follow-on drug sponsor does not challenge the innovator’s listed patents, FDA will not approve
the ANDA or 505(b)(2) application until all the listed patents claiming the referenced product have expired. A certification
that the new generic 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 ANDA sponsor has provided a Paragraph IV certification to
the FDA, the sponsor must also send notice of the Paragraph IV certification to the NDA owner and patent holders once the
ANDA has been accepted for filing by the FDA. The NDA owner 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
or 505(b)(2) NDA until the earliest of 30 months after the receipt of the Paragraph IV notice, expiration of the patent and a
decision in the infringement case that is favorable to the ANDA or 505(b)(2) NDA sponsor.
Regulatory Exclusivity Governing Biologics
When a biological product is licensed for marketing by FDA with approval of a BLA, the product may be entitled to
certain types of market and data exclusivity barring FDA from approving competing products for certain periods of time.
In March 2010, the Patient Protection and Affordable Care Act was enacted in the United States and included the Biologics
Price Competition and Innovation Act of 2009, or the BPCIA. The BPCIA amended the PHSA to create an abbreviated
approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference
biological product. Since enactment of this statute, the FDA has approved a number of biosimilars and interchangeable
biosimilar products.
Under the BPCIA, a manufacturer may submit an application for a product that is “biosimilar to” a previously
approved biological product, which the statute refers to as a “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 the
proposed biosimilar product in terms of safety, purity and potency. The biosimilar sponsor may demonstrate that its product
is biosimilar to the reference product on the basis of data from analytical studies, animal studies and one or more clinical
studies to demonstrate safety, purity and potency in one or more appropriate conditions of use for which the reference
product is approved. In addition, the sponsor must show that the biosimilar and reference products have the same
mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production
facility must meet standards designed to assure product safety, purity and potency.
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For the FDA to approve a biosimilar product as interchangeable with a reference product, the agency must find not
only that the product is biosimilar to the reference product but also that it can be expected to produce the same clinical
results as the reference product such that the two products may be switched without increasing safety risks or risks of
diminished efficacy relative to exclusive use of the reference biologic. Upon licensure by the FDA, an interchangeable
biosimilar may be substituted for the reference product without the intervention of the health care provider who prescribed
the reference product. Following approval of the interchangeable biosimilar product, the FDA may not grant
interchangeability status for any second biosimilar until one year after the first commercial marketing of the first
interchangeable biosimilar product. In December 2022, Congress clarified through FDORA that FDA may approve
multiple first interchangeable biosimilar biological products so long as the products are all approved on the first day on
which such a product is approved as interchangeable with the reference product.
A reference biological product is granted 12 years of exclusivity from the time of first licensure of the product, and
the FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological
product until four years after the date of first licensure of the reference product. Even if a product is considered to be a
reference product eligible for exclusivity, however, 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. There have been recent
government proposals to reduce the 12-year reference product exclusivity period, but none has been enacted to date. At the
same time, since passage of the BPCIA, many states have passed laws or amendments to laws, which address pharmacy
practices involving biosimilar products.
Pediatric Exclusivity
Pediatric exclusivity is a type of non-patent marketing exclusivity in the United States and, if granted, provides for
the attachment of an additional six months of exclusivity. For drug products, the six-month exclusivity may be attached to
the term of any existing patent or regulatory exclusivity, including the orphan exclusivity and regulatory exclusivities
available under the Hatch-Waxman Act. For biologic products, the six-month period may be attached to any existing
regulatory exclusivities but not to any patent terms. The conditions for pediatric exclusivity include the FDA’s
determination that information relating to the use of a new product in the pediatric population may produce health benefits
in that population, the FDA making a written request for pediatric clinical trials, and the sponsor agreeing to perform, and
reporting on, the requested clinical trials within the statutory timeframe. 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 patents
that cover the product are extended by six months. Although this is not a patent term extension, 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) sponsor 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
In the United States, a patent claiming a new product, its method of use or its method of manufacture may be eligible
for a limited patent term extension under the Hatch Waxman Act, which permits a patent extension of up to five years for
patent term lost during product development and FDA regulatory review. Assuming grant of the patent for which the
extension is sought, the restoration period for a patent covering a product is typically one half the time between the
effective date of the IND involving human beings and the submission date of the NDA or BLA, plus the time between the
submission date of the application 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 in the United States. Only one patent
applicable to an approved product is eligible for the extension, and the application for the extension must be submitted
prior to the expiration of the patent for which extension is sought. A patent that covers multiple products for which
approval is sought can only be extended in connection with one of the approvals. The USPTO reviews and approves the
application for any patent term extension 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 the sponsor
and the FDA. 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 2025, the standard fee is $540,783 and the
small business fee is $135,196.
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
●
A combination product is a product composed of any combination of a drug and a device; a biological product
and a device; a drug and a biological product; or a drug, device, and a biological product. Under FDA’s
regulations, a combination product is defined to include: a product comprised of two or more regulated
components that are physically, chemically, or otherwise combined or mixed and produced as a single entity (a
“single-entity” combination product);
●
two or more separate products packaged together in a single package or as a unit and comprised of drug and
device products, device and biological products, or biological and drug products (“co-packaged” combination
product);
●
a drug, device, or biological product packaged separately that according to its investigational plan or proposed
labeling is intended for use only with an approved individually specified drug, device, or biological product (a
“cross-labeled” combination product); or
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●
any investigational drug, device, or biological product 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 (a “cross-labeled” investigational
combination product).
The FDA has established an Office of Combination Products to serve as a focal point for combination product issues
and for medical product classification and assignment issues for agency staff and industry. That office issues guidance and
regulations to clarify the regulation of combination products, and is responsible for assigning products to an FDA center
for premarket review and regulation where their classification or assignment is unclear or in dispute. Combination
products are assigned to an FDA center based on a determination of the “primary mode of action” or PMOA of the
combination product. The FDCA defines PMOA as “the single mode of action of a combination product that provides the
most important therapeutic action of the combination product.” For example, if the PMOA of a device-biological
combination product is attributable to the biological product, the FDA Division responsible for premarket review of that
biological product would have primary jurisdiction for the combination product. One investigational application is
generally sufficient for a combination product, but that application must include all information on the entire combination
product. In most cases, the type of investigational application is that typically required by the lead center. Thus, if the drug
constituent part of a drug/device combination product provides the PMOA, the investigation would be under an IND.
Federal and State Data Privacy Laws
There are multiple privacy and data security laws that may impact our business activities, in the United States and in
other countries where we conduct trials or where we may do business in the future. These laws are evolving and may
increase both our obligations and our regulatory risks in the future. In the health care industry generally, under the federal
Health Insurance Portability and Accountability Act of 1996, or HIPAA, the HHS has issued regulations to protect the
privacy and security of protected health information, or PHI, used or disclosed by covered entities including certain
healthcare providers, health plans and healthcare clearinghouses. HIPAA also regulates standardization of data content,
codes and formats used in healthcare transactions and standardization of identifiers for health plans and providers. HIPAA
also imposes certain obligations on the business associates of covered entities that obtain protected health information in
providing services to or on behalf of covered entities. HIPAA may apply to us in certain circumstances and may also apply
to our business partners in ways that may impact our relationships with them. Our clinical trials are regulated by the
Common Rule, which also includes specific privacy-related provisions. In addition to federal privacy regulations, there are
a number of state laws governing confidentiality and security of health information that may be applicable to our business.
In addition to possible federal civil and criminal penalties for HIPAA violations, state attorneys general are authorized to
file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorney’s fees and costs
associated with pursuing federal civil actions. In addition, state attorneys general (along with private plaintiffs) have
brought civil actions seeking injunctions and damages resulting from alleged violations of HIPAA’s privacy and security
rules. State attorneys general also have authority to enforce state privacy and security laws. New laws and regulations
governing privacy and security may be adopted in the future as well.
At the state level, California has enacted legislation that has been dubbed the first “GDPR-like” law in the United
States. Known as the California Consumer Privacy Act, or CCPA, it creates new individual privacy rights for consumers
(as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling
personal data of consumers or households. The CCPA went into effect on January 1, 2020 and requires covered companies
to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of
personal information, and allow for a new cause of action for data breaches. In November 2020, California voters passed a
ballot initiative for the California Privacy Rights Act, or the CPRA, which went into effect on January 1, 2023, and
significantly expanded the CCPA to incorporate additional GDPR-like provisions including requiring that the use,
retention, and sharing of personal information of California residents be reasonably necessary and proportionate to the
purposes of collection or processing, granting additional protections for sensitive personal information, and requiring
greater disclosures related to notice to residents regarding retention of information. The CPRA also created a new
enforcement agency – the California Privacy Protection Agency – whose sole responsibility is to enforce the CPRA, which
will further increase compliance risk. The provisions in the CPRA may apply to some of our business activities.
In addition to California, at least eighteen other states have passed comprehensive privacy laws similar to the CCPA
and CPRA. These laws are either in effect or will go into effect sometime before the end of 2026. Like the CCPA and
CPRA, these laws create obligations related to the processing of personal information, as well as special obligations
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for the processing of “sensitive” data, which includes health data in some cases. Some of the provisions of these laws may
apply to our business activities. There are also states that are strongly considering or have already passed comprehensive
privacy laws during the 2024 legislative sessions that will go into effect in 2025 and beyond. Other states will be
considering similar laws in the future, and Congress has also been debating passing a federal privacy law. There are also
states that are specifically regulating health information that may affect our business. For example, the State of Washington
passed the My Health My Data Act in 2023 which specifically regulated health information that is not otherwise regulated
by the HIPAA rules, and the law also has a private right of action, which further increases the relevant compliance risk.
Connecticut and Nevada have also passed similar laws regulating consumer health data, and more states are considering
such legislation in 2024. These laws may impact our business activities, including our identification of research subjects,
relationships with business partners and ultimately the marketing and distribution of our products.
Plaintiffs’ lawyers are also increasingly using privacy-related statutes at both the state and federal level to bring
lawsuits against companies for their data-related practices. In particular, there have been a significant number of cases filed
against companies for their use of pixels and other web trackers. These cases often allege violations of the California
Invasion of Privacy Act and other state laws regulating wiretapping, as well as the federal Video Privacy Protection Act.
Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors
available under such laws, it is possible that some of our current or future business activities, including certain clinical
research, sales and marketing practices and the provision of certain items and services to our customers, could be subject to
challenge under one or more of such privacy and data security laws. The heightening compliance environment and the need
to build and maintain robust and secure systems to comply with different privacy compliance and/or reporting requirements
in multiple jurisdictions could increase the possibility that a healthcare company may fail to comply fully with one or more
of these requirements. If our operations are found to be in violation of any of the privacy or data security laws or
regulations described above that are applicable to us, or any other laws that apply to us, we may be subject to penalties,
including potentially significant criminal, civil and administrative penalties, damages, fines, contractual damages,
reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if we become
subject to a consent decree or similar agreement to resolve allegations of non-compliance with these laws, and the
curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and
our results of operations. To the extent that any product candidates we may develop, once approved, are sold in a foreign
country, we may be subject to similar foreign laws.
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.
Non-clinical Studies
Non-clinical studies are performed to demonstrate the health or environmental safety of new chemical or biological
substances. Non-clinical (pharmaco-toxicological) studies must be conducted in compliance with the principles of good
laboratory practice (GLP) as set forth in EU Directive 2004/10/EC (unless otherwise justified for certain particular
medicinal products – e.g., radio-pharmaceutical precursors for radio-labeling purposes). In particular, non-clinical studies,
both in vitro and in vivo, must be planned, performed, monitored, recorded, reported and archived in accordance with the
GLP principles, which define a set of rules and criteria for a quality system for the organizational process and the
conditions for non-clinical studies. These GLP standards reflect the Organization for Economic Co-operation and
Development requirements.
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Clinical Trial Approval
On January 31, 2022, the new Clinical Trials Regulation (EU) No 536/2014 became effective in the European Union
and replaced the prior Clinical Trials Directive 2001/20/EC. The new regulation aims at simplifying and streamlining the
authorization, conduct and transparency of clinical trials in the European Union. Under the new coordinated procedure for
the approval of clinical trials, the sponsor of a clinical trial to be conducted in more than one Member State of the
European Union, or EU Member State, will only be required to submit a single application for approval. The submission
will be made through the Clinical Trials Information System, a new clinical trials portal overseen by the EMA and
available to clinical trial sponsors, competent authorities of the EU Member States and the public.
Beyond streamlining the process, the new Regulation includes a single set of documents to be prepared and
submitted for the application as well as simplified reporting procedures for clinical trial sponsors, and a harmonized
procedure for the assessment of applications for clinical trials, which is divided in two parts. Part I is assessed by the
competent authorities of all EU Member States in which an application for authorization of a clinical trial has been
submitted (Member States concerned). Part II is assessed separately by each Member State concerned. Strict deadlines
have been established for the assessment of clinical trial applications. The role of the relevant ethics committees in the
assessment procedure will continue to be governed by the national law of the concerned EU Member State. However,
overall related timelines will be defined by the Clinical Trials Regulation.
The Clinical Trials Regulation, or CTR, foresees a three-year transition period. The extent to which ongoing and new
clinical trials will be governed by the Clinical Trials Regulation varies. Clinical trials for which an application was
submitted (i) prior to January 31, 2022 under the Clinical Trials Directive, or (ii) between January 31, 2022 and January 31,
2023 and for which the sponsor has opted for the application of the Clinical Trials Directive remain governed by said
Directive until January 31, 2025. After this date, all clinical trials (including those which are ongoing) will become subject
to the provisions of the CTR.
Parties conducting certain clinical trials must, as in the United States, post clinical trial information in the European
Union at the EudraCT website: https://eudract.ema.europa.eu.
Marketing Authorization
To obtain marketing approval of a drug under European Union regulatory systems, a sponsor must submit a
marketing authorization application, or MA, 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 MA is 210 days, excluding clock stops, when additional information or written or oral explanation
is to be provided by the sponsor 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 sponsors 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 sponsor, known as the reference member state. Under this
procedure, a sponsor 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
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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.
Conditional Approval
In particular circumstances, European Union legislation (Article 14–a Regulation (EC) No 726/2004 (as amended by
Regulation (EU) 2019/5 and Regulation (EC) No 507/2006 on Conditional Marketing Authorizations for Medicinal
Products for Human Use) enables sponsors to obtain a conditional marketing authorization prior to obtaining the
comprehensive clinical data required for an application for a full marketing authorization. Such conditional approvals may
be granted for product candidates (including medicines designated as orphan medicinal products) if (1) the product
candidate is intended for the treatment, prevention or medical diagnosis of seriously debilitating or life-threatening
diseases; (2) the product candidate is intended to meet unmet medical needs of patients; (3) a marketing authorization may
be granted prior to submission of comprehensive clinical data provided that the benefit of the immediate availability on the
market of the medicinal product concerned outweighs the risk inherent in the fact that additional data are still required; (4)
the risk-benefit balance of the product candidate is positive, and (5) it is likely that the sponsor will be in a position to
provide the required comprehensive clinical trial data. A conditional marketing authorization may contain specific
obligations to be fulfilled by the marketing authorization holder, including obligations with respect to the completion of
ongoing or new studies and with respect to the collection of pharmacovigilance data. Conditional marketing authorizations
are valid for one year, and may be renewed annually, if the risk-benefit balance remains positive, and after an assessment of
the need for additional or modified conditions or specific obligations. The timelines for the centralized procedure described
above also apply with respect to the review by the CHMP of applications for a conditional marketing authorization, but
applicants can also request EMA to conduct an accelerated assessment, for instance in cases of unmet medical needs.
Exceptional Circumstances
A MA may also be granted “under exceptional circumstances” under Article 14(8) of Regulation (EC) No 726/2004
when the applicant can show that it is unable to provide comprehensive data on the efficacy and safety under normal
conditions of use even after the product has been authorized and subject to specific procedures being introduced. This may
arise in particular when the intended indications are very rare and, in the present state of scientific knowledge, it is not
possible to provide comprehensive information, or when generating data may be contrary to generally accepted ethical
principles. This MA is close to the conditional MA as it is reserved to medicinal products to be approved for severe
diseases or unmet medical needs and the applicant does not hold the complete data set legally required for the grant of a
MA. However, unlike the conditional MA, the applicant does not have to provide the missing data and will never have to.
Although the MA “under exceptional circumstances” is granted definitively, the risk-benefit balance of the medicinal
product is reviewed annually and the MA is withdrawn in case the risk-benefit ratio is no longer favorable. Under these
procedures, before granting the MA, the EMA or the competent authorities of the European Union Member States make an
assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and
efficacy.
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 European Union 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 European Union 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
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European Union market (in case of centralized procedure) or on the market of the authorizing European Union 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 European Union 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 European Union’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 European Union 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
European Union cGMP standards when manufacturing medicinal products and active pharmaceutical
ingredients, including the manufacture of active pharmaceutical ingredients outside of the European Union with
the intention to import the active pharmaceutical ingredients into the European Union.
●
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
European Union notably under Directive 2001/83EC, as amended, and European Union Member State laws.
Direct-to-consumer advertising of prescription medicines is prohibited across the European Union.
Regulatory Data Protection in the European Union
In the European Union, 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 sponsors 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 European Union 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 MA with a complete independent data package of pharmaceutical tests, preclinical tests and clinical trials.
In this context, it should be noted that the European Union pharmaceutical legislation is currently undergoing a
complete review process, in the context of the Pharmaceutical Strategy for Europe initiative, launched by the European
Commission in November 2020. The European Commission’s proposal for revision of several legislative instruments
related to medicinal products was published in April 2023 and includes, among other things, provisions that would
potentially reduce the duration of regulatory data protection. The European Parliament requested several amendments in
April 2024. At this time, the proposed revisions remain to be agreed and adopted by the European Parliament and
European Council and the proposals may therefore be substantially revised before adoption, which is not anticipated before
early 2026. The revisions may, however, have a significant impact on the pharmaceutical industry in the long term, if and
when adopted.
Pediatric Exclusivity
If a sponsor obtains a marketing authorization in all European Union Member States, or a marketing authorization
granted in the centralized procedure by the European Commission, and the study results for the pediatric population are
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included in the product information, even when negative, the medicine is then eligible for an additional six-month period of
qualifying patent protection through extension of the term of the Supplementary Protection Certificate, or SPC, or
alternatively a one year extension of the regulatory market exclusivity from ten to eleven years, as selected by the
marketing authorization holder.
Patent Term Extensions
The European Union also provides for patent term extension through SPCs. The rules and requirements for obtaining
a SPC are similar to those in the United States. An SPC may extend the term of a patent for up to five years after its
originally scheduled expiration date and can provide up to a maximum of fifteen years of marketing exclusivity for a drug.
In certain circumstances, these periods may be extended for six additional months if pediatric exclusivity is obtained.
Although SPCs are available throughout the European Union, sponsors must apply on a country-by-country basis. Similar
patent term extension rights exist in certain other foreign jurisdictions outside the European Union.
Reimbursement and Pricing of Prescription Pharmaceuticals
In the European Union, similar political, economic and regulatory developments to those in the United States may
affect our ability to profitably commercialize our product candidates, if approved. In markets outside of the United States
and the European Union, reimbursement and healthcare payment systems vary significantly by country and many countries
have instituted price ceilings on specific products and therapies. In many countries, including those of the European
Union, the pricing of prescription pharmaceuticals is subject to governmental control and access. 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, pharmaceutical firms may be required to conduct a clinical
trial that compares the cost-effectiveness of the product to other available therapies.
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 European Union, medical devices must comply with the Essential Requirements in Annex I to the currently applicable
European Union 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.
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.
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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 European Union
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 was amended by Medical
Devices Regulation (Regulation (EU) 2017/745) adopted in 2017, which we refer to as the MDR and which repeals and
replaces the European Union Medical Devices Directive. Unlike directives, which must be implemented into the national
laws of the European Economic Area, or EEA, member states, the MDR is directly applicable (i.e., without the need for
adoption of EEA member State laws implementing them) in all EEA member states and is 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.
The MDR became applicable on May 26, 2021 and will, among other things:
●
strengthen the rules on placing devices on the market and reinforce surveillance once they are available;
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●
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 European Union; 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
As of January 1, 2025, the Medicines and Healthcare Products Regulatory Agency, or the MHRA, is responsible for
approving all medicinal products destined for the U.K. market (Great Britain and Northern Ireland), and the EMA will no
longer have any role in approving medicinal products destined for Northern Ireland. The MHRA relies on the Human
Medicines Regulations 2012 (SI 2012/1916) (as amended), or the HMR, as the basis for regulating medicines. The HMR
has incorporated into domestic law the body of EU law instruments governing medicinal products that pre-existed prior to
the United Kingdom’s withdrawal from the European Union.
As of January 1, 2024, a new international recognition procedure, or the IRP, applies which intends to facilitate
approval of pharmaceutical products in the United Kingdom. The IRP is open to applicants that have already received an
authorization for the same product from one of the MHRA’s specified Reference Regulators, or RRs. The RRs notably
include EMA and regulators in the EEA member states for approvals in the European Union centralized procedure and
mutual recognition procedure as well as the FDA (for product approvals granted in the United States).The RR assessment
must have undergone a full and standalone review. RR assessments based on reliance or recognition cannot be used to
support an IRP application. A CHMP positive opinion or an MRDC positive end of procedure outcome is an RR
authorization for the purposes of IRP.
General Data Protection Regulation
Many countries outside of the United States maintain rigorous laws governing the privacy and security of personal
information. The collection, use, disclosure, transfer, or other processing of personal data, including personal health data,
regarding individuals who are located in the EEA, and the processing of personal data that takes place in the EEA, is
subject to the GDPR, which became effective on May 25, 2018. The GDPR is wide-ranging in scope and imposes
numerous requirements on companies that process personal data, and it imposes heightened requirements on companies
that process health and other sensitive data, such as requiring in many situations that a company obtain the consent of the
individuals to whom the sensitive personal data relate before processing such data. Examples of obligations imposed by the
GDPR on companies processing personal data that fall within the scope of the GDPR include providing information to
individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of
personal data, appointing a data protection officer, 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 EEA, 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 is 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. In July 2020, the Court of Justice of the European Union, or the CJEU,
invalidated the European Union-U.S. Privacy Shield framework, one of the mechanisms used to legitimize the transfer of
personal data from the EEA to the United States. The CJEU decision also drew into question the long-term viability of an
alternative means of data transfer, the standard contractual clauses, for transfers of personal data from the EEA to the
United States. Following the withdrawal of the United Kingdom from the European Union, the UK Data Protection Act
2018 applies to the processing of personal data that takes place in the United Kingdom and includes parallel obligations to
those set forth by GDPR.
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Additionally, in October 2022, President Biden signed an executive order to implement the EU-U.S. Data Privacy
Framework, which would serve as a replacement to the EU-U.S. Privacy Shield. The European Union initiated the process
to adopt an adequacy decision for the EU-U.S. Data Privacy Framework in December 2022 and the European Commission
adopted the adequacy decision on July 10, 2023. The adequacy decision will permit U.S. companies who self-certify to the
EU-U.S. Data Privacy Framework to rely on it as a valid data transfer mechanism for data transfers from the EU to the U.S.
However, some privacy advocacy groups have already suggested that they will be challenging the EU-U.S. Data Privacy
Framework. If these challenges are successful, they may not only impact the EU-U.S. Data Privacy Framework, but also
further limit the viability of the standard contractual clauses and other data transfer mechanisms.
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, or OPPS, 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.
J-Codes are part of the Healthcare Common Procedure Coding System (HCPCS) Level II set of procedure codes.
These codes are used by CMS and other managed care organizations to identify drugs that ordinarily cannot be self-
administered by a patient. Lacrimal ophthalmic inserts containing dexamethasone, such as DEXTENZA, have a specific
and permanent J-Code, in case of DEXTENZA J1096, that allows for a simpler and more convenient reimbursement
process versus miscellaneous J-codes. Initially, DEXTENZA was payable in ASCs and HOPDs separately from
ophthalmic surgery via the transitional pass-through status under the J1096 J-Code. However, the pass-through status for
J1096 ended on December 31, 2022. In November 2022, as part of the annual CMS rule-making cycle, the CY 2023 OPPS
rule was finalized and provided that DEXTENZA would qualify under the criteria established for non-opioid pain
management drugs as a surgical supply provision. This provision allowed for continued separate payment of DEXTENZA
in the ASC setting for 2023 but did not require separate payment for DEXTENZA in the HOPD setting. In November
2023, the CY 2024 OPPS was finalized and confirmed that DEXTENZA would continue to be separately reimbursed in the
ASC setting in 2024. The CY 2025 OPPS rule, which was released in November 2024, allows for
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continued separate payment of DEXTENZA in the ASC setting, and it re-establishes the separate payment of DEXTENZA
in the HOPD setting.
CPT codes are part of the HCPCS Level I set of procedure codes which consists of codes that are used to report
medical services and procedures furnished by physicians. These codes are also used by CMS and other managed care
organizations. Drug-eluting intracanalicular inserts, such as DEXTENZA, have a procedure-specific and permanent
Category 1 CPT code, 68841, used to facilitate reimbursement for the administration of inserts into the canaliculus. In
2024, the Medicare Physician Fee Schedule, or MPFS, for the insertion of DEXTENZA into the canaliculus was $31.43 in
the ASCs and $37.33 in the physician’s office for unilateral insertion. In November 2024, the CY 2025 MPFS rule was
finalized resulting in a marginal decrease in physician payments compared to 2024 to $31.38 in the ASCs and HOPDs and
$36.88 in the physician’s office for unilateral insertion, due to a decrease in the conversion factor which CMS uses to
translate the relative value units, or RVUs, of medical services into fee schedule payment amounts. Although the office
based RVU for code 68841 was unchanged, the RVU code in the ASC and HOPD setting increased from 0.96 to 0.97. The
CY 2025 MPFS final rule also includes finalized policies for the quality payment program, including the Merit-based
Incentive Payment System, or MIPS. For eligible clinicians, CMS calculates the MIPS final score based on four
performance categories, which is then used by CMS to determine the payment adjustment applied to the clinicians’
Medicare Part B claims, with clinicians that incur costs above or below national average spending being penalized or
incentivized, respectively. Based on the CY 2025 MPFS final rule, the respective surgeon’s cost for DEXTENZA is
included in the MIPS cost performance category for surgeons using DEXTENZA to treat post-surgical ocular inflammation
and pain following cataract surgery effective January 1, 2025.
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
HHS information related to payments and other transfers of value to physicians, other healthcare providers 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.
Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, exclusion
from participation in federal and state health care programs, such as Medicare and Medicaid. Ensuring compliance is time
consuming and costly. Similar healthcare laws and regulations exist in the European Union and other jurisdictions,
including reporting requirements detailing interactions with and payments to healthcare providers and laws governing the
privacy and security of personal information.
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 U.S. 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 drug and biologic products, limiting coverage
and reimbursement for medical products 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, as amended by
the Health Care and Education Reconciliation Act of 2010, or collectively the PPACA, which, among other things, includes
changes to the coverage and payment for pharmaceutical products under government healthcare programs. Other
legislative changes have been proposed and adopted since the PPACA 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 2031.
Since enactment of the PPACA, 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 Tax Act, 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. On December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled
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that the individual mandate portion of the PPACA is an essential and inseverable feature of the PPACA, and therefore
because the mandate was repealed as part of the Tax Act, the remaining provisions of the PPACA are invalid as well.
The U.S. Supreme Court heard this case on November 10, 2020 and, on June 17, 2021, dismissed this action after
finding that the plaintiffs do not have standing to challenge the constitutionality of the ACA. Litigation and legislation over
the PPACA are likely to continue, with unpredictable and uncertain results.
Pharmaceutical Prices
The prices of prescription pharmaceuticals have also been the subject of considerable discussion in the United States.
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 pharmaceutical pricing, review the relationship between
pricing and manufacturer patient programs, and reduce the costs of pharmaceuticals under Medicare and Medicaid
In addition, in October 2020, HHS and the FDA published a final rule allowing states and other entities to develop a
Section 804 Importation Program, or SIP, to import certain prescription drugs from Canada into the United States. Seven
states (Colorado, Florida, Maine, New Hampshire, New Mexico, Texas and Vermont) have passed laws allowing for the
importation of products from Canada. North Dakota and Virginia have passed legislation establishing workgroups to
examine the impact of a state importation program. As of May 2024, five states (Colorado, Florida, Maine, New Hampshire
and New Mexico) had submitted Section 804 Importation Program proposals to the FDA. On January 5, 2023, the FDA
approved Florida’s plan for Canadian product importation. That state now has authority to import certain products from
Canada for a period of two years once certain conditions are met. Florida will first need to submit a pre-import request for
each product selected for importation, which must be approved by the FDA. The state will also need to relabel the products
and perform quality testing of the products to meet FDA standards.
Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions
from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers,
unless the price reduction is required by law. The final rule would eliminate the current safe harbor for Medicare drug
rebates and create new safe harbors for beneficiary point-of-sale discounts and pharmacy benefit manager, or PBM, service
fees. It originally was set to go into effect on January 1, 2022, but with passage of the Inflation Reduction Act, or IRA, has
been delayed by Congress to January 1, 2032.
More recently, on August 16, 2022, the IRA was signed into law by President Biden. The new legislation has
implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or
enrolled in Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug
coverage. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with
Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B
and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage
gap discount program with a new discounting program (beginning in 2025). The IRA permits the Secretary of the HHS to
implement many of these provisions through guidance, as opposed to regulation, for the initial years.
Specifically, with respect to price negotiations, Congress authorized Medicare to negotiate lower prices for certain
costly single-source drug and biologic products that do not have competing generics or biosimilars and are reimbursed
under Medicare Part B and Part D. CMS may negotiate prices for ten high-cost drugs paid for by Medicare Part D starting
in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and
beyond. This provision applies to drug products that have been approved for at least 9 years and biologics that have been
licensed for 13 years, but it does not apply to drugs and biologics that have been approved for a single rare disease or
condition. Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for
failing to comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair
price” under the law or for taking price increases that exceed inflation. The legislation also requires manufacturers to pay
rebates for drugs in Medicare Part D whose price increases exceed inflation. The new law also caps Medicare out-of-
pocket drug costs at an estimated $4,000 a year in 2024 and, thereafter beginning in 2025, at $2,000 a year.
The first cycle of negotiations for the Medicare Drug Price Negotiation Program commenced in the summer of
2023. On August 15, 2024, the HHS published the results of the first Medicare drug price negotiations for ten selected
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drugs that treat a range of conditions, including diabetes, chronic kidney disease, and rheumatoid arthritis. The prices of
these ten drugs will become effective January 1, 2026. On January 17, 2025, CMS announced its selection of 15 additional
drugs covered by Part D for the second cycle of negotiations by February 1, 2025. While there had been some questions
about the Trump Administration’s position on this program, CMS issued a public statement on January 29, 2025, declaring
that lowering the cost of prescription drugs is a top priority of the new administration and CMS is committed to
considering opportunities to bring greater transparency in the negotiation program. The second cycle of negotiations with
participating drug companies will occur during 2025, and any negotiated prices for this second set of drugs will be
effective starting January 1, 2027.
In June 2023, Merck & Co. filed a lawsuit against HHS and CMS asserting that, among other things, the IRA’s Drug
Price Negotiation Program for Medicare constitutes an uncompensated taking in violation of the Fifth Amendment of the
Constitution. Subsequently, a number of other parties, including the U.S. Chamber of Commerce, Bristol Myers Squibb
Company, PhRMA, Astellas, Novo Nordisk, Janssen Pharmaceuticals, Novartis, AstraZeneca and Boehringer Ingelheim,
also filed lawsuits in various courts with similar constitutional claims against HHS and CMS. HHS has generally won the
substantive disputes in these cases, and various federal district court judges have expressed skepticism regarding the merits
of the legal arguments being pursued by the pharmaceutical industry. Certain of these cases are now on appeal and, on
October 30, 2024, the Court of Appeals for the Third Circuit heard oral argument in three of these cases. Litigation
involving these and other provisions of the IRA will continue with unpredictable and uncertain results.
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. A number of states, for example,
require drug manufacturers and other entities in the drug supply chain, including health carriers, pharmacy benefit
managers, wholesale distributors, to disclose information about pricing of pharmaceuticals. This is increasingly true with
respect to products approved pursuant to the accelerated approval pathway. State Medicaid programs and other payers are
developing strategies and implementing significant coverage barriers, or refusing to cover these products outright, arguing
that accelerated approval drugs have insufficient or limited evidence despite meeting the FDA’s standards for accelerated
approval.
In addition, regional healthcare organizations and individual hospitals are increasingly using bidding procedures to
determine what pharmaceutical products and which suppliers will be included in their prescription pharmaceutical and
other healthcare 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.
Human Capital
As of December 31, 2024, we had 274 full-time employees. The following table provides an overview of the
distribution of those employees:
Department
Headcount
Research & Development
118
Sales & Marketing
93
Manufacturing
12
General & Administrative
51
Total Employees
274
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
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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 we believe 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 value the health, safety and wellbeing of our employees and their
families, and we consider our relationship with our employees to be good.
Our Corporate Information
We were incorporated under the laws of the State of Delaware in 2006. Our principal executive offices are located at
15 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.
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 the section of this Annual Report on
Form 10-K captioned “Forward-Looking Statements” for a discussion of some of the forward-looking statements that are
qualified by these risk factors. 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 Our Financial Position and Need for Additional Capital
We have a history of incurring significant losses. We expect to incur losses over the next several years and may never
achieve or maintain profitability.
We have a history of incurring significant losses. Our net losses were $193.5 million and $80.7 million for the years
ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of
$891.1 million. We have financed our operations primarily through private placements of our preferred stock, public
offerings and private placements of our common stock, borrowings under credit facilities, the private placement of
convertible notes, and sales of our products. 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 DEXTENZA.
Although we expect to continue to generate revenue from sales of 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 our ongoing clinical trials, including our two registrational Phase 3 clinical trials of AXPAXLI for the
treatment of wet age-related macular degeneration, or wet AMD, which we refer to as the SOL-1 and SOL-R
trials;
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●
initiate any additional clinical trials we might determine in the future to conduct for our product candidates,
including any clinical trials that we might conduct for AXPAXLI for the treatment of patients with non-
proliferative diabetic retinopathy, or NPDR, and diabetic macular edema, or DME;
●
scale up our manufacturing processes and capabilities to support sales of commercial products, clinical trials of
our product candidates, including AXPAXLI, 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;
●
scale up our sales, marketing and distribution capabilities to prepare for commercialization of any product
candidates for which we intend to obtain marketing approval;
●
seek marketing approvals for any of our product candidates that successfully complete clinical development;
●
continue to monitor subjects according to the applicable clinical trial protocols, or prepare submission
documentation such as clinical study reports, for our clinical trials that have been completed;
●
continue to commercialize DEXTENZA in the United States;
●
maintain, expand and protect our intellectual property portfolio;
●
expand our operational, quality assurance, financial, administrative and management systems and personnel,
including personnel to support our clinical development, manufacturing and commercialization efforts;
●
defend ourselves against legal proceedings, if any;
●
make investments to improve our defenses against cybersecurity threats and establish and maintain
cybersecurity insurance;
●
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
development expenses will increase if:
●
we are required by the U.S. Food and Drug Administration, or FDA, or the other regulatory authorities 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;
●
there are any delays in enrollment of subjects in or completion of our clinical trials or the development of
AXPAXLI or our other product candidates; or
●
there are any delays in receiving marketing approval of AXPAXLI or any of our other product candidates.
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:
●
completing clinical development of our product candidates, including AXPAXLI;
●
obtaining marketing approval for these product candidates;
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●
continuing to commercialize DEXTENZA in the United States, including by further developing our
manufacturing, marketing, sales force, and distribution capabilities;
●
manufacturing, marketing, selling and distributing 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 Centers for Medicare and Medicaid Services, or CMS, private insurers, and other third-
party payors for our products; and
●
protecting our rights to our intellectual property portfolio.
Even if we succeed in our commercialization efforts, we may never generate revenue that is sufficient to achieve
profitability. We do not anticipate that revenue from sales of DEXTENZA for the treatment of ocular inflammation and
pain following ophthalmic surgery and ocular itching associated with allergic conjunctivitis will be sufficient for us to
become profitable for several years, if ever.
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 common stock 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 or on attractive terms, we
could be forced to delay, reduce or eliminate our research and development programs or commercialization efforts.
We expect to devote substantial financial resources to our ongoing and planned activities, particularly if and as we
advance our product candidate AXPAXLI for the treatment of wet AMD through clinical development and continue to
commercialize DEXTENZA. We expect to devote substantial financial resources as we conduct late-stage clinical trials for
our product candidates, including the SOL-1 trial and the SOL-R trial, seek marketing approval for any such product
candidate for which we obtain favorable pivotal clinical results, and commercialize any products for which we receive
marketing approval. In addition, we plan to devote significant financial resources to conduct research and development of
our other product candidates. Accordingly, we will need to obtain substantial additional funding to fully support our
continuing and planned operations. If we are unable to raise capital when needed or on attractive terms, we could be forced
to delay, reduce or eliminate our research and development programs or commercialization efforts.
As of December 31, 2024, we had cash and cash equivalents of $392.1 million, and outstanding debt with a principal
amount of $82.5 million under a credit and security agreement, or the Barings Credit Agreement, with Barings Finance
LLC, or Barings, as administrative agent, and the lenders party thereto, or the Barings Credit Facility. Based on our current
operating plan, which includes estimates of anticipated cash inflows from DEXTENZA product sales and cash outflows
from operating expenses and capital expenditures and reflects our observance of the minimum liquidity covenant of $20.0
million under the Barings Credit Agreement, we believe that our existing cash and cash equivalents as of
December 31, 2024 will enable us to fund our planned operating expenses, debt service obligations and capital expenditure
requirements into 2028. Our planned operating expenses do not include the expenses necessary to conduct a clinical trial of
AXPAXLI for NPDR and DME, or to build out our manufacturing capabilities beyond the buildout of our existing
manufacturing facilities. These estimates are subject to various assumptions, including assumptions as to the revenues and
expenses associated with the commercialization of DEXTENZA, the pace of our research and clinical development
programs, the timing of commencement of dosing and enrollment of our clinical trials, and other aspects of our business.
We have based our estimates 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:
●
the progress, costs and outcome of our ongoing clinical trials of AXPAXLI for the treatment of wet AMD;
●
the timing, scope, progress, costs and outcome of a potential registrational clinical program of AXPAXLI for the
treatment of NPDR and DME;
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●
the costs, timing and outcome of regulatory review of AXPAXLI or our other product candidates by the FDA,
the European Medicines Agency, or EMA, or other regulatory authorities;
●
the scope, progress, costs and outcome of preclinical development and any additional clinical trials we might
determine in the future to conduct for our other product candidates, including PAXTRAVA for the reduction of
intraocular pressure, or IOP, in patients with primary open-angle glaucoma, or OAG, or ocular hypertension, or
OHT;
●
the level of product sales from DEXTENZA and any additional products for which we obtain marketing
approval in the future and the level of third-party reimbursement of such products;
●
the costs of sales, marketing, distribution and other commercialization efforts with respect to DEXTENZA and
any of our product candidates for which we obtain marketing approval in the future, including cost increases
due to inflation;
●
the costs of scaling up our manufacturing processes and capabilities to support sales of commercial products,
clinical trials of our product candidates, including AXPAXLI, and commercialization of any of our product
candidates for which we obtain marketing approval, including AXPAXLI, and of expanding our facilities to
accommodate this scale up and any corresponding growth in personnel;
●
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, 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 any 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 generate
significant revenues from the sale of such products. 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.
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 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 securityholders’ ownership interests will be diluted, and the terms of these securities may include
liquidation or other preferences that adversely affect our existing securityholders’ rights as holders or beneficial owners 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
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incurring additional debt, making capital expenditures or declaring dividends. Our pledge of our assets as collateral to
secure our obligations under the Barings Credit Facility pursuant to which we have a total borrowing capacity of $82.5
million, which has been fully drawn down, may limit our ability to obtain additional debt or other financing.
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. If we
are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be
required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to
develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
Our substantial indebtedness may limit cash flow available to invest in the ongoing needs of our business or otherwise
affect our operations.
Under the Barings Credit Facility, we have $82.5 million, net of unamortized discount and fees, of outstanding
principal indebtedness. Under the Barings Credit Agreement, we are permitted to make payments of interest and fees only
through August 2029, at which time we will be required to repay the full principal amount in addition to any outstanding
interest and fees. In addition, we are obligated to pay a fee, which we refer to as the Royalty Fee, in an amount equal to
$82.5 million, reduced by the total amount of interest and principal prepayment fees paid by us and subject to further
potential reductions as specified in the Barings Credit Agreement. We are required to pay the Royalty Fee in installments to
Barings, for the benefit of the lenders, on a quarterly basis in an amount equal to three and one-half percent (3.5%) of the
net sales of DEXTENZA occurring during such quarter, subject to the terms, conditions and limitations specified in the
Barings Credit Agreement, until the Royalty Fee is paid in full. Any then remaining Royalty Fee is due and payable upon a
change of control of the company.
Our obligations under the Barings Credit Agreement are secured by all of our assets, including our intellectual
property. The Barings Credit Agreement includes customary affirmative and negative covenants and requires us to
maintain a minimum liquidity amount of $20.0 million. We could in the future incur additional indebtedness beyond this
amount, including by potentially amending the Barings 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 and related fees such as the Royalty Fee, which collectively
reduce the amounts available to fund operating expenditures, including working capital, and capital
expenditures and other general corporate purposes and may also have the effect of delaying, deferring or
preventing a change of control;
●
obligating us to additional negative covenants further restricting our activities;
●
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.
A failure to comply with the conditions of the Barings Credit Agreement could result in an event of default under the
agreement. In 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 or operations, the amounts due under our Barings Credit Agreement could
accelerate. As a result, we may not have sufficient funds or may be unable to arrange for additional financing to repay
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our indebtedness or to make any accelerated payments, and the lenders could seek to enforce security interests in the
collateral securing such indebtedness.
We hold our cash and cash equivalents that we use to fund our operating expenses, debt service obligations, and capital
expenditure requirements in deposit accounts that could be adversely affected if the financial institutions holding such
funds fail.
We hold our cash and cash equivalents that we use to fund our operating expenses, debt service obligations, and
capital expenditure requirements in deposit accounts at two financial institutions. The balances held in these accounts
typically exceed the standard deposit insurance limit of the Federal Deposit Insurance Corporation, or FDIC. If a financial
institution in which we hold such funds fails or is subject to significant adverse conditions in the financial or credit
markets, we could be subject to a risk of loss of all or a portion of our uninsured funds or be subject to a delay in accessing
all or a portion of such funds. Any such loss or lack of access to these funds could adversely impact our short-term
liquidity and ability to meet our operating expense, debt service, and capital expenditure obligations.
For example, on March 10, 2023, Silicon Valley Bank, or SVB, was closed by the California Department of
Financial Protection and Innovation, and the FDIC was appointed as receiver. During this time, deposits held at SVB were
temporarily inaccessible to SVB’s customers. At the time SVB was closed by its regulators, we maintained a significant
portion of our cash and cash equivalents in deposit accounts with SVB.
Our cash and cash equivalents remain concentrated in a small number of financial institutions. If any of the financial
institutions in which we hold cash or cash equivalents were to fail in the future, we cannot provide any assurances that any
governmental agencies would take action to protect or provide access to our uninsured deposits, or a third party would
assume the failing financial institution’s obligations, in a similar manner as occurred in connection with the closure,
receivership, and sale of SVB, and we may lose or be unable to access some or all of the uninsured funds we are holding at
such financial institution.
We also maintain investment accounts with multiple financial institutions. If our access to our cash and cash
equivalents in our deposit accounts is impaired, we may not be able to open new operating accounts or to sell investments
or transfer funds from our investment accounts to new operating accounts on a timely basis sufficient to meet our operating
expense, debt service, and capital expenditure obligations.
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, 2024, we had net operating loss, or NOL, carryforwards for federal and state income tax
purposes of $538.0 million and $385.2 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 on or after December 31,
2018, which amount to a total of $412.2 million, can be carried forward indefinitely, although the deduction for such NOLs
is limited to 80% of current year taxable income. As of December 31, 2024, we also had available research and
development tax credit carryforwards for federal and state income tax purposes of $19.7 million and $11.8 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. Even if we attain profitability, we may be unable to
use a material portion of our NOLs and other tax attributes because, among other reasons, federal tax rates and the rules
governing NOL carryforwards might change; state NOLs generated in one state cannot be used to offset income generated
in another state; and the use of NOL carryforwards might become subject to annual limitations under Section 382 of the
Internal Revenue Code of 1986, as amended, or the Code, and similar state provisions.
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Risks Related to Product Development
Clinical trials of AXPAXLI or our other product candidates may not be successful. If clinical trials of our product
candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA or other regulatory authorities or do not
otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be
delayed or unable to complete, the development and commercialization of such product candidate and our business may
be harmed.
Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, including our
lead product candidate AXPAXLI, 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. The sample size for
later stage clinical trials, including for the SOL-1 and SOL-R trial, are determined based on certain assumptions regarding
the efficacy of the product candidate under evaluation. Even if a product candidate, such as AXPAXLI, is an effective
treatment, a clinical trial may not meet its primary efficacy endpoint if the assumptions used to determine the trial sample
size were not correct and therefore the trial is not adequately powered. In addition, as product candidates advance in
development, the number of clinical trial sites and investigators taking part in the trial will increase, particularly as product
candidates enter pivotal studies. New clinical sites or investigators who were not part of prior trials are likely to be
unfamiliar with our protocols and product candidates and may introduce increased variability in product candidate
administration and subject care throughout the trial. Some of our clinical trials also were conducted with different
formulations than those that we are currently evaluating. For example, we are using a single optimized dose of AXPAXLI
with a drug load of 450 µg of a more soluble form of axitinib in our SOL-1 and SOL-R trials, which is different than the
formulation and dosage used in prior clinical trials for AXPAXLI, and intend to use the same formulation being used in the
SOL-1 and SOL-R trials in future clinical trials of AXPAXLI. As we have not evaluated this formulation in earlier trials, it
may not demonstrate the efficacy or safety profile that we anticipate.
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. The protocols for our clinical trials and other supporting
information are subject to review by the FDA and regulatory authorities outside the United States. The FDA is not
obligated to comment on our trial protocols, however, 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 for the initial IND submission, we could
choose to initiate any clinical trial in the United States, including a pivotal clinical trial, without waiting for any additional
period for comments from the FDA. Although the FDA may implicitly clear our clinical trial protocols or may provide
comments regarding our development plans as part of a Special Protocol Assessment, or SPA, agreement or other request
for formal feedback, final determinations for marketing application approval are made after a complete review of a
marketing application and are based on the entirety of the data in the new drug application. We are conducting our SOL-1
trial under an SPA agreement, as amended, agreed to by the FDA. An SPA agreement indicates concurrence by the FDA
with the adequacy and acceptability of specific critical elements of the overall protocol design for a clinical trial intended
to support a future marketing application, but it does not indicate FDA concurrence on every protocol detail. If we
determine to deviate from the terms of the SPA agreement without the FDA’s concurrence, or if the FDA determines that
we have deviated from the terms of the SPA agreement, the SPA agreement could be invalidated. Moreover, the FDA
retains significant discretion in interpreting the terms of an SPA agreement and the data and results from any trial that is the
subject of an SPA agreement. An SPA agreement does not ensure the receipt of marketing approval by the FDA or other
regulatory authorities, even if the clinical trial subject to the SPA agreement is successful or meets its primary endpoint, or
that the approval process will be faster than conventional procedures.
We have devoted a significant portion of our financial resources and business efforts to the development of
DEXTENZA and our product candidates. We are currently investing substantial resources to advance the development of
AXPAXLI for the treatment of wet AMD. We currently have several ongoing clinical trials, including our SOL-1 and SOL-
R trials, and our Phase 2 clinical trial of PAXTRAVA. We also continue to wind down our post-trial monitoring and
surveillance obligations in the HELIOS trial, our Phase 1 clinical trial of AXPAXLI for the treatment of NPDR.
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We have, however, experienced the uncertainty of clinical trials in our own development programs. In our Phase 2
clinical trial for our former product candidate OTX-CSI for the treatment of dry eye disease, for example, OTX-CSI did
not meet the primary endpoint of the clinical trial. The trial was designed to evaluate safety, tolerability, durability, and
efficacy of two different formulations of OTX-CSI by measuring signs and symptoms of dry eye disease in 140 subjects
treated in both eyes over approximately 16 weeks (a 12-week study period, with an additional 4-week safety follow-up).
The four groups evaluated in this study were: OTX-CSI for a shorter duration, OTX-CSI for a longer duration, vehicle
insert for a longer duration and vehicle insert for a very short duration. The study did not show separation between the
OTX-CSI treated subjects (both formulations) and the vehicle treated subjects (both formulations) for the primary endpoint
of increased tear production at 12 weeks as measured by the Schirmer’s Test.
If clinical trials of AXPAXLI or any other product candidate that we develop fail to demonstrate safety and efficacy
to the satisfaction of the FDA or other regulatory authorities or do not otherwise produce clear or 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 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
development and commercialization of products with significant market potential.
If we experience any of a number of possible unforeseen events in connection with our clinical trials, potential
marketing approval or commercialization of AXPAXLI or our other 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 AXPAXLI or our other product candidates, including:
●
clinical trials of AXPAXLI or our other product candidates may produce negative or inconclusive results, in
particular if investigator physicians do not follow the clinical trial protocol, including utilizing appropriate
masking and rescue procedures for both the SOL-1 and SOL-R trial, and we may decide, or regulators may
require us, to conduct additional clinical trials or abandon product development programs;
●
the number of subjects required for clinical trials of AXPAXLI or our other product candidates may be larger
than we anticipate, in particular to establish clinically meaningful efficacy endpoints to a degree of statistical
significance or to satisfy minimum FDA safety standards for AXPAXLI, including for repeat dosing;
●
enrollment and randomization in clinical trials for AXPAXLI may be slower than we anticipate on account of
clinical trial sites’ inability to locate subjects meeting the eligibility criteria or competition at clinical trial sites
for subjects who might otherwise be eligible to participate in other ongoing clinical trials sponsored by third-
parties or from other clinical trials sponsored by third parties in other retinal disease areas, 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 AXPAXLI or our other product candidates may be greater than we anticipate; and
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●
the supply or quality of AXPAXLI or our other product candidates or other materials necessary to conduct
clinical trials of AXPAXLI or our other product candidates may be insufficient or inadequate.
From time to time, we may decide to conduct clinical trials to assess subjects’ 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 OAG or OHT. 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 FDA may also require that New Drug Application, or NDA, submissions for our product candidates include
pediatric data. Under the Pediatric Research Equity Act, or PREA, an NDA, a biological licensing application, or BLA, or
supplement to an NDA or BLA for certain drugs and biological products must contain data to assess the safety and
effectiveness of the drug or biological product in all relevant pediatric subpopulations and to support dosing and
administration for each pediatric subpopulation for which the product is safe and effective, unless the sponsor receives a
deferral or waiver from the FDA. The applicable legislation in the European Union also requires sponsors to either conduct
clinical trials in a pediatric population in accordance with a Pediatric Investigation Plan approved by the Pediatric
Committee of the EMA or to obtain a waiver or deferral from the conduct of these studies by this Committee. For any of
our product candidates for which we are seeking regulatory approval in the United States or the European Union, we
cannot guarantee that we will be able to obtain a waiver or alternatively complete any required studies and other
requirements in a timely manner, or at all, which could result in associated reputational harm and subject us to enforcement
action.
Moreover, principal investigators for our future clinical trials may serve as scientific advisors or consultants to us and
receive compensation in connection with such services. Under certain circumstances, we may be required to report some of
these relationships to the FDA or comparable foreign regulatory authorities. The FDA or a comparable foreign regulatory
authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest
or otherwise affected interpretation of the study. The FDA or comparable foreign regulatory authority may therefore
question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be
jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or comparable
foreign regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or
more of our product candidates.
If we are required to conduct additional clinical trials or other testing of AXPAXLI or our other product candidates
beyond those that we currently contemplate, such as the FDA’s requirement that we provide pediatric data for DEXTENZA
for the treatment of post-surgical ocular inflammation and pain following cataract surgery prior and for the treatment of
ocular itching associated with allergic conjunctivitis in connection with the approval of our NDA for DEXTENZA for
those indications, if we are unable to successfully complete clinical trials of AXPAXLI or our other 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 AXPAXLI or our other 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.
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.
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If we experience delays or difficulties in the enrollment and randomization of subjects in clinical trials of AXPAXLI or
our other product candidates, our receipt of necessary regulatory approvals could be delayed or prevented.
We may not be able to initiate or to continue clinical trials for AXPAXLI or our other product candidates, or other
product candidates that we might develop, if we are unable to locate, enroll and randomize a sufficient number of eligible
subjects 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 subject enrollment and randomization. For example, in the third
quarter of 2017, we initiated a Phase 1 clinical trial of PAXTRAVA outside the United States. After several months, after
not enrolling any subjects, we closed this trial in the second quarter of 2018. Additionally, we intended to initiate our
Phase 1 clinical trial of AXPAXLI outside the United States in 2018, but delays in enrollment prevented us from dosing
subjects until the first quarter of 2019.
A variety of factors affect subject enrollment and randomization of clinical trials, including:
●
the prevalence and severity of the ophthalmic disease or condition under investigation;
●
the design and 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 subjects;
●
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 or other indications that are treated by the same physicians who participate in our clinical trials; and
●
the lack of adequate compensation for prospective clinical trial sites or subjects.
In December 2022, with the passage of the Food and Drug Omnibus Reform Act, or FDORA, Congress required
sponsors to develop and submit a diversity action plan, or DAP, for each phase 3 clinical trial or any other "pivotal study"
of a new drug product. These plans are meant to encourage enrollment of more diverse patient populations in late-stage
clinical trials of FDA-regulated products. In June 2024, as mandated by FDORA, the FDA issued draft guidance outlining
the general requirements for diversity action plans. Unlike most guidance documents issued by the FDA, the diversity
action plan guidance when finalized will have the force of law because FDORA specifically dictates that the form and
manner for submission of DAPs are specified in FDA guidance. On January 27, 2025, in response to an Executive Order
issued by President Trump on January 21, 2025, on Diversity, Equity and Inclusion programs, the FDA removed this draft
guidance from its website. This action raises questions about the applicability of statutory obligations to submit DAPs and
the agency’s current thinking on best practices for clinical development. If we are not able to adhere to these new
requirements, to the extent they are adopted, our ability to conduct clinical trials may be delayed or halted.
Similarly, the regulatory landscape related to clinical trials in the European Union recently evolved. The CTR, which
was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. While the
Clinical Trials Directive required a separate clinical trial application to be submitted in each member state, to both the
competent national health authority and an independent ethics committee, the CTR introduces a centralized
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process and only requires the submission of a single application to all member states concerned. If we are not able to fulfill
these new requirements, our ability to conduct clinical trials may be delayed or halted.
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 Phase 3 clinical trial to evaluate DEXTENZA in pediatric subjects following cataract
surgery, to fulfill FDA post-approval regulatory requirements, proceeded more slowly than we had anticipated due to the
relative scarcity of pediatric cataract surgical subjects. In addition, we may experience delays in enrollment and
randomization due to the design of our trials. For example, to qualify for randomization in the SOL-R trial, participants
will only be eligible for randomization if they receive five aflibercept injections and have no significant retinal fluid
fluctuations, in addition to satisfying other criteria.
Our inability to enroll and randomize a sufficient number of subjects 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 and randomization delays in our clinical trials may result in increased
development costs for our product candidates, which could cause the value of our common stock to decline and limit our
ability to obtain additional financing.
If serious adverse or unacceptable side effects are identified during the development of AXPAXLI or any other product
candidates, we may need to abandon or limit our development of such product candidates.
If AXPAXLI 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.
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 or successful commercialization of the
compound. As the number of subjects exposed to a product candidate or approved product increases, new safety signals
undetectable in smaller patient populations may become apparent. 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 additional products and product candidates based on our proprietary
bioresorbable hydrogel-based formulation technology ELUTYX.
We are currently directing all of our development efforts towards applying our proprietary, bioresorbable hydrogel-
based formulation technology ELUTYX to products and product candidates that are designed to provide local
programmed-release hydrogel-based therapeutic agents to the eye. We have product candidates at mid and late stages of
development based on ELUTYX and we may in the future explore the potential use of ELUTYX for other ophthalmic
diseases and conditions.
AXPAXLI and any other product candidates that we may develop based on ELUTYX may not be suitable for
continued preclinical or clinical development, including as a result of being shown to have harmful side effects or other
characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market
acceptance. If we do not successfully develop and commercialize products and product candidates that are based on
ELUTYX beyond DEXTENZA, we will not be able to obtain substantial product revenues in future periods.
We may expend our limited resources to pursue a particular 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. In addition, if we do not
accurately evaluate the commercial potential of a target market for a particular product candidate, we may relinquish
valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it
would have been more advantageous for us to retain sole development and commercialization rights to such product
candidate.
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We are currently prioritizing the advancement of AXPAXLI through Phase 3 clinical development for the treatment
of wet AMD. We also intend to meet with the FDA in the first half of 2025 to discuss the design of a potential
registrational clinical program for AXPAXLI for the treatment of NPDR and DME and then evaluate our next steps. We are
also focused on the continued commercialization of DEXTENZA and are determining our next steps for PAXTRAVA for
the treatment of OAG or OHT. Although we believe our prioritization of resources is currently the best use of our
resources, we may not be correct.
We have conducted, and may in the future conduct, clinical trials for AXPAXLI and our other 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 are currently conducting the SOL-1 and SOL-R trials both inside and outside of the United States. We have
often conducted our initial and earlier-stage clinical trials for our product candidates outside the United States, including
our Phase 1 clinical trial for our product candidate AXPAXLI for the treatment of wet AMD in Australia.
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. Even if the FDA accepted such data, it could require us to modify our
planned clinical trials to receive clearance to initiate such trials in the United States or to continue such trials once initiated.
Other risks inherent in conducting international clinical trials include:
●
foreign regulatory requirements, differences in healthcare services, and differences in cultural customs that
could restrict or limit our ability to conduct our clinical trials;
●
administrative burdens of conducting clinical trials under multiple sets of foreign regulations;
●
foreign exchange fluctuations;
●
diminished protection of intellectual property in some countries; and
●
political and economic risks relevant to foreign countries.
Risks Related to Commercialization
We depend heavily on the success of DEXTENZA and any of our product candidates for which we may obtain
marketing approval, including AXPAXLI. If we fail to commercialize these products successfully, our ability to
generate significant product revenues and our business would be materially harmed.
The commercial success of DEXTENZA and any of our product candidates for which we may obtain marketing
approval, including AXPAXLI, 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;
●
scaling up our manufacturing processes and capabilities to support commercialization efforts;
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●
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, if
and when approved, whether alone or in collaboration with others;
●
partnering successfully with our current and future collaborators;
●
gaining acceptance of our products, if and when approved, by patients, the medical community and third-party
payors, competing effectively with other therapies, and obtaining and maintaining coverage and adequate
reimbursement from third-party payors;
●
maintaining a continued acceptable safety profile of our products following approval; and
●
protecting our intellectual property rights, including obtaining and maintaining patent and trade secret protection
and regulatory exclusivity.
In certain cases, such as in our ongoing collaboration with AffaMed, many of these factors may be or are 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.
Even though DEXTENZA has received marketing approval from the FDA and even if AXPAXLI or any of our other
product candidates receives marketing approval, 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 or any of our product candidates that may receive marketing approval, including AXPAXLI, may fail
to gain market acceptance by physicians, patients, third-party payors and others in the medical community. We
commercially launched DEXTENZA for the treatment of post-surgical ocular inflammation and pain in July 2019, and
DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis in the first quarter of 2022, and we
cannot yet accurately predict the extent to which DEXTENZA will gain broad market acceptance and become
commercially successful, if at all.
The degree of market acceptance of any of our products, or any product candidate for which we may 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 retention rate for
our intracanalicular insert product;
●
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;
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●
the prevalence and severity of any side effects; and
●
any restrictions on the use of our products together with other medications.
For example, we commercially launched ReSure Sealant, 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, in the United States in 2014. ReSure Sealant was only used in a minority of cataract surgeries, and we only
received limited revenues from this product. In 2021, we suspended the production of ReSure Sealant. Furthermore,
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 or ocular itching
associated with allergic conjunctivitis, market acceptance of DEXTENZA could be less than if we had conducted such
trials, and we may not be able to achieve the market share we anticipate.
Our assessment of the potential market opportunity for DEXTENZA and our product candidates, including
AXPAXLI, 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 or any of our
product candidates, including AXPAXLI, is smaller than we expect, our product revenue may be limited and it may be
more difficult for us to achieve or maintain profitability.
If we are unable to establish and maintain adequate sales, marketing and distribution capabilities, we may not be
successful in commercializing DEXTENZA or any product candidates if and when they are approved, including
AXPAXLI.
We have limited experience in the sale, marketing and distribution of drug and device products. To achieve
commercial success for DEXTENZA and any product candidate for which we obtain marketing approval, including
AXPAXLI, 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 has focused primarily on ambulatory surgical centers, or ASCs, responsible for the largest
volumes of cataract surgery.
We believe that certain of our product candidates, if they are successfully developed and obtain marketing approval,
would be used in ophthalmologists’ offices, similar to DEXTENZA for the treatment of allergic conjunctivitis. We believe
the office setting offers a unique set of potential challenges. If we do not succeed in adapting our marketing efforts to
include the office setting, our ability to commercialize DEXTENZA or AXPAXLI, if approved, to its fullest potential or
any future product candidates used in the office setting would be adversely affected.
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 PAXTRAVA, 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 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
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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 and maintain sales, marketing and distribution capabilities successfully, either on our own or in
collaboration with third parties, we will not be successful in commercializing DEXTENZA or any of our product
candidates, including AXPAXLI.
We are dependent upon a small number of specialty distributors and in-market customers for a significant portion of
our DEXTENZA revenue, and the loss of or significant reduction in sales to these customers would adversely affect our
results of operations.
We sell DEXTENZA in the United States primarily to a small number of specialty distributors, or SDs. These
customers then subsequently resell DEXTENZA to ASCs, hospital outpatient departments, or HOPDs, and physicians’
offices, which we refer to as in-market customers when purchasing through the SD channel. We also sell DEXTENZA
directly to a small population of ASCs and physicians’ offices, which we refer to as direct customers when purchasing
through the direct sales channel. We are heavily dependent on a small number of SDs for our sales of DEXTENZA. For
example, for the years ended December 31, 2024, 2023 and 2022, three SDs accounted for a combined percentage of our
total revenue of 77%, 85%, and 86%, respectively. We also experience significant concentration of sales at the in-market
customer level. For example, for the years ended December 31, 2024, 2023 and 2022, one in-market customer accounted
for approximately 18%, 19%, and 3% of our gross sales of DEXTENZA before adjustments, respectively. A loss of a
significant SD, direct customer, or in-market customer may result in a significant reduction in sales of DEXTENZA and
would adversely affect our results of operations. We expect the significant SD concentration, as well as the significant
concentration at the in-market customer level, to continue for the foreseeable future and a similar dynamic may develop for
any future products we may commercialize, including AXPAXLI if approved.
Our ability to generate and grow sales for DEXTENZA and any other product we may commercialize, including
AXPAXLI if approved, will depend, in part, on the extent to which our SDs are able to provide adequate distribution of
these products, as well as the continued demand for DEXTENZA from our most significant in-market customers and direct
customers. Although we believe we can find additional SDs, if necessary, and continue to broaden our base of direct
customers, our revenue during any period of disruption of sales could suffer and we might incur additional costs. In
addition, our SDs are responsible for a significant portion of our accounts receivables, net, balances. For example, as of
December 31, 2024 and 2023, three SDs accounted for 82% and 89% of our accounts receivables, net, balances,
respectively. The loss of any significant SD or direct customer, or the loss of a significant in-market customer, a significant
reduction in sales we make to them, any cancellation of orders they have made with us, or any failure to pay for the product
we have sold to them could adversely affect our results of operations. Sales of DEXTENZA and any other product we may
commercialize, including AXPAXLI if approved, may also be adversely impacted by vertical integration of private payor
healthcare and insurance programs, health maintenance organizations, and pharmacy benefit managers, or further
consolidation among the healthcare providers served or operated by our SDs if, for example, one or more consolidated
groups of healthcare providers determines not to use, or decides to switch from, such marketed product in favor of a
competing product.
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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. As a result, our
products face, and product candidates, if approved, will face, competition from drugs based on the same or similar active
pharmaceutical ingredients but 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 are primarily 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 or own. 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 or own 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.
Other companies have advanced into Phase 3 clinical development biodegradable, programmed-release drug delivery
product candidates that could compete with our products and product candidates, including EyePoint Pharmaceuticals
which initiated two Phase 3 trials of their product candidate DURAVYU for the treatment of wet AMD in 2024 and 4DMT
which has announced plans to initiate two Phase 3 trials of their product candidate 4D-150 during 2025. Regeneron has
also developed a treatment for wet AMD that requires re-dosing in up to 16-week intervals, marketed in the United States
under the brand name Eylea HD. Multiple companies are in early-stage development to explore alternative means to
deliver anti-VEGF (anti-vascular endothelial growth factors) tyrosine kinase inhibitors, or TKI, products in an extended-
delivery fashion to the back of the eye. In addition, other companies are evaluating novel mechanisms of action for retinal
diseases.
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, are less expensive than our
products or have better reimbursement. 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, manufacturing, marketing, and management personnel,
establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies
complementary to, or necessary for, our programs.
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DEXTENZA and any product candidates for which we may obtain marketing approval, including AXPAXLI, 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 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
or any other product that we may commercialize after obtaining marketing approval, including AXPAXLI. Even if
coverage and reimbursement are available, the level of reimbursement may not be satisfactory.
Inadequate reimbursement may adversely affect the demand for, or the price of, DEXTENZA or any product
candidate, including AXPAXLI, 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 or any product candidates for which we may obtain marketing approval, including
AXPAXLI.
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 or any product candidate for which we may obtain marketing approval in the United States or in other
countries, including AXPAXLI, 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
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products and product candidates profitably. DEXTENZA, for example, is currently considered a post-surgical product, in
the same fashion as eye drops. However, if DEXTENZA were instead categorized as an intra-operative product, it would
not be subject to separate reimbursement in ASCs and hospital out-patient departments, or HOPDs, which could limit its
market acceptance.
CMS evaluates the eligibility of products such as DEXTENZA for separate payment annually, and there can be no
assurance that CMS will not change the criteria applicable to non-opioid pain management drugs for 2025 or beyond. If
DEXTENZA is no longer eligible for reimbursement separately from ophthalmic surgery in the ASC setting, due to the
loss of pass-through status or otherwise, our net product revenues, which currently consist primarily of DEXTENZA sales
in reliance on separate reimbursement through pass-through status, would decline significantly, and our ability to generate
revenues from future sales of DEXTENZA for the treatment of post-surgical ocular inflammation and pain would be
adversely affected.
CMS has also established the fixed reimbursement amount for Category I Current Procedural Terminology, or CPT,
code 68841, the procedure code for the insertion of DEXTENZA. As this fee schedule is lower than reimbursement many
physicians received under the prior Category III CPT code for DEXTENZA, physicians may have less incentive to use
DEXTENZA and, as a result, our ability to continue to commercialize DEXTENZA may decrease. Additionally, CMS will
review such determination as part of its annual rulemaking cycle, and such amount could be further reduced in the future.
Physicians’ desire to use DEXTENZA could also be adversely impacted if competitive products secure higher procedure
payments for their use than DEXTENZA.
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, including AXPAXLI.
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, including AXPAXLI. We face an even greater risk for any products we develop and commercially
sell or have sold, 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 products or product candidates 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 subjects;
●
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 product liability insurance coverage; however these policies may not be adequate to cover all
liabilities that we may incur and we may need to increase our insurance coverage as we expand our clinical trials of
AXPAXLI and our sales of DEXTENZA and any product candidates for which we may obtain marketing approval. 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.
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Risks Related to Manufacturing
If one of our manufacturing facilities is damaged or destroyed or production at any facility is otherwise interrupted, our
business and prospects would be negatively affected.
We manufacture devices and drug products for use in our clinical trials for our product candidates, including
AXPAXLI, in a single-site facility, and we manufacture devices and drug products for DEXTENZA in a separate single-
site facility. If one of our manufacturing facilities 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 a 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 commercial supply. In the case of any disruption in our manufacturing operations at a facility, we may not have
sufficient quantities of our product candidates to meet our clinical trial requirements or of our product inventory to meet
our commercial requirements. Such an event could delay our clinical trials or, particularly because we have sought to adopt
just-in-time manufacturing practices and maintain limited commercial product inventory with our distributors, reduce our
product sales.
Currently, we maintain insurance coverage against damage to our property and equipment and to cover business
interruption and research and development restoration expenses. 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 or any of our product candidates, including AXPAXLI, if there were a catastrophic event or
failure of our current manufacturing facilities or processes.
We will need to upgrade and expand our manufacturing facilities 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.
In order to meet our business plan, which contemplates our scaling up of our manufacturing processes to support the
development and potential commercialization of our current and future product candidates, including AXPAXLI, and
maintain the manufacturing capacity necessary to support the commercialization of DEXTENZA, we will need to upgrade
and expand our existing manufacturing facilities, or relocate to one or more other manufacturing facilities; 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 facilities, or our relocation to one or more alternate facilities, 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 facilities or relocate and recruit necessary additional personnel. If we are unable to expand
our manufacturing facilities or relocate 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 means including its facilities
inspection program and system audits 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
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, audits
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and other requirements in connection with subsequent applications for other product candidates or in connection with
periodic, routine surveillance for products for which we have received marketing authorization.
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
and our product candidates that we manufacture.
Any manufacturing defect 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.
We expect to continue to contract with third parties for at least some aspects of the production of our products and
product candidates. We also depend from time to time on single-source suppliers for certain materials used in the
manufacturing 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 and our product candidates,
including AXPAXLI, for commercialization and preclinical testing and clinical trials. While we expect that our existing
manufacturing facilities, or any expansions of our existing facilities or additional facilities that we might build, will be
sufficient to meet our requirements for manufacturing DEXTENZA and any of our product candidates for which we may
obtain marketing approval, including AXPAXLI, 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 also depend on single-source suppliers for certain materials used in the manufacturing of our products and
product candidates, including our supply of polyethylene glycol, or PEG, the molecule that forms the basis of our
hydrogels, and other raw materials of our products and product candidates and for sterilization and packaging of the
finished product. 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 or any of our product candidates, including AXPAXLI. We purchase
drug substance and raw materials, including the chemical constituents for our hydrogel, from independent suppliers on a
purchase order basis. We cannot ensure that our suppliers will remain in business, have sufficient capacity or supply to
meet our needs or that they will not be purchased by one of our competitors or another company that is not interested in
continuing to work with us. Our use of single-source suppliers of raw materials and other components used in the
manufacturing of our products and product candidates could expose us to several risks, including disruptions in supply,
price increases or late deliveries. 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. Establishing additional or replacement suppliers could take a substantial amount of time, and it may be difficult
to establish replacement suppliers who meet our quality standards and applicable regulatory requirements. For example, 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.
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Third-party suppliers or manufacturers may not be able to comply with our specifications, 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. Further, reliance on third-party suppliers or manufacturers
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 Our Dependence on Third Parties
We have entered into collaborations with third parties to develop certain product candidates, and in the future we may
enter into additional collaborations for the development or commercialization of our product candidates. We may also
enter into collaboration, distribution or marketing arrangements for the commercialization of DEXTENZA or any
product candidates for which we may obtain marketing approval, including AXPAXLI. 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 collaboration with
AffaMed, and expect to utilize a variety of types of collaboration, distribution and other marketing arrangements with third
parties to commercialize DEXTENZA, or any of our product candidates, including AXPAXLI, for which we may 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 such products 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 product candidates, including
AXPAXLI and PAXTRAVA. 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. Our ability to generate revenues from these arrangements will
depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to them in these
arrangements.
Our collaboration with AffaMed poses, 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 be subject to bankruptcy proceedings or other similar arrangements which may result in us
having to return funds that we previously received, or in collaborators selling or transferring product licenses to
other parties;
●
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;
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●
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, or if we are required to return previously received funds, or if product licenses are sold or
transferred to another party as a result of a collaborators’ bankruptcy, our development of our products or product
candidates could be delayed and we may need additional resources to develop our products or product candidates. For
example, our former collaborator Regeneron terminated our collaboration in August 2021. As a result of the termination,
we were relieved of obligations to reimburse Regeneron for certain development costs, up to an aggregate amount of $30.0
million in certain circumstances, were Regeneron to exercise its option but also ceased to be eligible to receive (i)
reimbursement from Regeneron for ongoing research and development activities, (ii) a fee upon exercise of its option, (iii)
payments upon the achievement of specified development and regulatory milestones of the products developed under the
collaboration, or (iv) tiered, escalating royalties on such products. All of the risks relating to product development,
regulatory approval and commercialization described in this periodic report also apply to the activities of our
collaborators.
Additionally, if a collaborator terminates its agreement with us, we may find it more difficult to attract new
collaborators and our perception in the business and financial communities could be harmed.
If we are not able to establish additional collaborations, we may have to alter our development and commercialization
plans and our business could be adversely affected.
For some of our product candidates, we may decide to collaborate with pharmaceutical, biotechnology and medical
device companies for the development and commercialization of one or more of our product candidates, such as our
collaboration with AffaMed for the development and commercialization of DEXTENZA and PAXTRAVA in specified
territories in Asia. 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 subjects, the potential of competing products, and
industry and market conditions generally. The collaborator may also consider
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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 current or future license and collaboration agreements from entering into agreements on certain terms with potential
collaborators. In addition, there have been a significant number of recent business combinations among large
pharmaceutical companies that have resulted in a reduced number of potential future collaborators. If we are unable to
reach agreements with suitable collaborators on a timely basis and on acceptable terms, we may have to curtail the
development of a product candidate, reduce or delay one or more development programs, or limit potential
commercialization activities. 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 to date. However, we also
utilize third parties, such as CROs, to conduct clinical trials of certain of our product candidates, including AXPAXLI for
the treatment of wet AMD, NPDR, and DME and PAXTRAVA for the treatment of OAG or OHT, and we may continue to
do so. If we deem necessary, we may engage additional 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 could be delayed.
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,
including the SOL-1 and the SOL-R 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, even if a third party is
administering certain activities. For example, in May 2020, we disclosed the receipt of interim data regarding our Phase 1
clinical trial of AXPAXLI, in Australia, for the treatment of wet AMD and other retinal diseases. We discovered, however,
that our disclosures did not include complete information when we became aware in July 2020 that a clinical trial site had
not entered certain data concerning these subjects into the clinical trial database in a timely manner. 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. Our licensed and owned patent portfolio that we believe is integral to our
business includes patents with terms that extend from 2025 to 2041. Given the amount of time required for the
development, testing and regulatory review of new product candidates, we may have a reduced patent exclusivity period
upon approval. 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 have failed, or may in the future fail, to identify patentable aspects of our research and
development efforts before it is too late to obtain patent protection.
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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 DEXTENZA, ReSure Sealant and our product
candidates, including AXPAXLI, 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, or
other patent office or tribunal. In such instances, we would be required to rely on our licensor to defend such challenges,
and our licensor 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.
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
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 owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for patent
protection of such inventions. 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 and owned 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. 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.
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 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 an 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 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 and owned patents will be challenged, thereby increasing the uncertainties and costs of
maintaining and enforcing them. Moreover, if such
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challenges occur, as indicated above, we have no right to control the defense of our licensed portfolio. Instead, we would
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 pre-issuance 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 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
and owned 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.
Because the active pharmaceutical ingredients in our products and product candidates are primarily 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 and drug-release design scheme of our
products. As such, if a third party were able to design around the formulation and process patents that we license and own
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
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competitors may obtain approval of competing products following our patent expiration sooner, and our revenue could be
reduced, possibly materially.
We may become involved in lawsuits to protect or enforce our licensed and owned patents or other intellectual property,
which could be expensive, time-consuming and unsuccessful.
Competitors may infringe our licensed or owned patents or other intellectual property. As a result, to counter
infringement or unauthorized use, we may 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. 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 any of our products or 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 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 any claims 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 claims 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. Legal proceedings related to
one of these patents has been dismissed by agreement of the parties without prejudice. The USPTO decided to proceed
with the administrative proceeding related to one of the patents while declining to do so for the other after determining that
we had not established a reasonable likelihood that we would prevail in establishing the unpatentability of certain claims.
In June 2020, for the patent for which the USPTO decided to proceed with administrative proceedings, the PTAB, after an
inter partes review, determined that we had proven by a preponderance of the evidence that all claims of the patent at issue
held by such third party were invalid. The third party appealed this decision, and in November 2021, the United States
Court of Appeals for the Federal Circuit affirmed the holding of the PTAB. The period during which such third party may
appeal the decision of the Court of Appeals has lapsed. We continue to believe that DEXTENZA does not infringe the
claims of these patents 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
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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 cease manufacturing or
commercializing the infringing product or product candidate or to obtain a license from such third party to continue
developing and marketing our products and product candidates. However, we may not be able to obtain any required
license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive,
thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court
order, to cease commercializing the infringing technology or product containing such technology. 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 thereby causing delays, 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 certain portions of our patent rights and the technology
for our products and 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 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
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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, such
agreements may be ineffective, or such agreements may be breached by our counterparty.
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.
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 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.
If the FDA or comparable foreign regulatory authorities approve generic versions of our current commercial product or
any of our future drug products that receive marketing approval through the NDA pathway, or such authorities do not
grant such future products appropriate periods of data exclusivity before approving generic versions of our products,
our sales could be adversely affected.
Once an NDA is approved, the product covered thereby becomes a “reference-listed drug” in the FDA’s publication,
“Approved Drug Products with Therapeutic Equivalence Evaluations,” commonly known as the Orange Book.
Manufacturers may seek approval of generic versions of reference-listed drugs through submission of abbreviated new
drug applications, or ANDAs, in the United States. In support of an ANDA, a generic manufacturer need not conduct
clinical trials to assess safety and efficacy. Rather, the applicant generally must show that its product has the same active
ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as the reference-listed drug
and that the generic version is bioequivalent to the reference-listed drug, meaning it is absorbed in the body at the same rate
and to the same extent. Generic products may be significantly less costly to bring to market than the reference-listed drug
and companies that produce generic products are generally able to offer them at lower
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prices. Thus, following the introduction of a generic drug, a significant percentage of the sales of any branded product or
reference-listed drug is typically lost to the generic product.
The FDA may not approve an ANDA for a generic product until any applicable period of non-patent exclusivity for
the reference-listed drug has expired. The Federal Food, Drug, and Cosmetic Act, or FDCA, provides a period of five years
of non-patent exclusivity for a new drug containing a new chemical entity, or NCE. For the purposes of this provision, an
NCE is a drug that contains an active moiety that has previously been approved by the FDA in any other NDA. This
interpretation was confirmed with enactment of the Ensuring Innovation Act in April 2021. An active moiety is the
molecule or ion responsible for the physiological or pharmacological action of the drug substance. Specifically, in cases
where such exclusivity has been granted, an ANDA may not be submitted to the FDA until the expiration of five years
unless the submission is accompanied by a Paragraph IV certification that a patent covering the reference-listed drug is
either invalid or will not be infringed by the generic product, in which case the applicant may submit its application
four years following approval of the reference-listed drug. The FDCA also provides for a period of three years of
exclusivity if the NDA includes reports of one or more new clinical trials, other than bioavailability or bioequivalence
studies, that were conducted by or for the applicant and are essential to the approval of the application.
Generic drug manufacturers may seek to launch generic products following the expiration of any applicable
exclusivity period we obtain if our product candidates are approved, even if we still have patent protection for such product
candidates. Competition that any such product candidates of ours may face from generic versions of such products could
materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain
a return on the investments we may make in those product candidates.
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 authorities 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 for specified indications in the United States. We have not received approval to
market DEXTENZA or ReSure Sealant in any jurisdiction outside the United States or to market any of our product
candidates anywhere If we are unable to obtain a CE Certificate of Conformity for any of our products or 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, 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.
Moreover, principal investigators for our future clinical trials may serve as scientific advisors or consultants to us and
receive compensation in connection with such services. Under certain circumstances, we may be required to report some of
these relationships to the FDA or comparable foreign regulatory authorities. The FDA or a comparable foreign regulatory
authority may conclude that a financial relationship between us and a principal investigator has created a
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conflict of interest or otherwise affected interpretation of the study. The FDA or comparable foreign regulatory authority
may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical
trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the
FDA or comparable foreign regulatory authority, as the case may be, and may ultimately lead to the denial of marketing
approval of one or more of 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 as well as two inspections of our manufacturing facility. The FDA identified several deficiencies and issued us
multiple Forms 483s and two CRLs, each of which delayed our development and commercialization efforts. We may be
subject to similar inspections in the future for any of our products and product candidates.
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.
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.
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.
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.
Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved
indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for
potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and
efficacy of the product candidate. For example, the FDA required two post-approval studies as a condition for approval of
our premarket approval application for ReSure Sealant, the last of which the FDA confirmed was complete in April 2021.
The studies were expensive, required extensive communication and coordination with the FDA, and took more than five
years to complete. The FDA also has required us to conduct a clinical trial of DEXTENZA for the treatment of post-
surgical ocular inflammation and pain and for the treatment of ocular itching associated with allergic conjunctivitis in
pediatric populations in accordance with the Pediatric Research Equity Act of 2003.
Certain endpoint data we hope to include in any approved product labeling also may not make it into such labeling,
including exploratory or secondary endpoint data such as patient-reported outcome measures. The FDA may also require a
Risk Evaluation and Mitigation Strategy, or REMS, program as a condition of approval of our product candidates, which
could entail requirements for long-term patient follow-up, a medication guide, physician
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communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries
and other risk minimization tools. In addition, if the FDA, EMA or a comparable non-U.S. regulatory authority approves
our product candidates, we will have to comply with requirements including submissions of safety and other post-
marketing information and reports and registration.
The FDA may impose consent decrees or withdraw 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 our product candidates, including adverse events of unanticipated severity or frequency, or with
our third-party manufacturers or 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-marketing studies or clinical trials to
assess new safety risks or imposition of distribution restrictions or other restrictions under a REMS program. Other
potential consequences include, among other things:
●
restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market or
voluntary or mandatory product recalls;
●
fines, warning letters or holds on clinical trials;
●
refusal by the FDA to approve pending applications or supplements to approved applications filed by us or
suspension or revocation of license approvals;
●
product seizure or detention or refusal to permit the import or export of our product candidates; and
●
injunctions or the imposition of civil or criminal penalties.
In addition, we are, or may become, subject to various U.S. federal, state, and local laws, regulations, and
recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of
animals, and the use and disposal of hazardous substances, including radioactive compounds and infectious disease agents,
used in connection with our research work. If we fail to comply with the laws and regulations pertaining to our business,
we may be subject to sanctions, including the temporary or permanent suspension of operations, product recalls, marketing
restrictions, and civil and criminal penalties.
In addition, we could be adversely affected by several significant administrative law cases decided by the U.S.
Supreme Court in 2024. In Loper Bright Enterprises v. Raimondo, for example, the court overruled Chevron U.S.A., Inc. v.
Natural Resources Defense Council, Inc., which for 40 years required federal courts to defer to permissible agency
interpretations of statutes that are silent or ambiguous on a particular topic. The U.S. Supreme Court stripped federal
agencies of this presumptive deference and held that courts must exercise their independent judgment when deciding
whether an agency such as the FDA acted within its statutory authority under the Administrative Procedure Act, or the
APA. Additionally, in Corner Post, Inc. v. Board of Governors of the Federal Reserve System, the court held that actions to
challenge a federal regulation under the APA can be initiated within six years of the date of injury to the plaintiff, rather
than the date the rule is finalized. The decision appears to give prospective plaintiffs a personal statute of limitations to
challenge longstanding agency regulations. Another decision, Securities and Exchange Commission v. Jarkesy, overturned
regulatory agencies’ ability to impose civil penalties in administrative proceedings. These decisions could introduce
additional uncertainty into the regulatory process and may result in additional legal challenges to actions taken by federal
regulatory agencies, including the FDA and CMS, that we rely on. In addition to potential changes to regulations as a result
of legal challenges, these decisions may result in increased regulatory uncertainty and delays and other impacts, any of
which could adversely impact our business and operations.
Further, our ability to develop and market new drug products may be impacted by litigation challenging the FDA’s
approval of another company’s drug product. In April 2023, the U.S. District Court for the Northern District of Texas
invalidated the approval by the FDA of mifepristone, a drug product which was originally approved in 2000 and whose
distribution is governed by various measures adopted under a REMS. The Court of Appeals for the Fifth Circuit declined to
order the removal of mifepristone from the market but did hold that plaintiffs were likely to prevail in their claim that
changes allowing for expanded access of mifepristone, which the FDA authorized in 2016 and 2021, were arbitrary and
capricious. In June 2024, the Supreme Court reversed that decision after unanimously finding that the plaintiffs (anti-
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abortion doctors and organizations) did not have standing to bring this legal action against the FDA. On October 11, 2024,
the Attorneys General of three states (Missouri, Idaho and Kansas) filed an amended complaint in the district court in
Texas challenging FDA’s actions. On January 16, 2025, the district court agreed to allow these states to file an amended
complaint and continue to pursue this challenge. Depending on the outcome of this litigation, our ability to develop new
drug product candidates and to maintain approval of existing drug products could be delayed, undermined or subject to
protracted litigation.
Finally, with the change in presidential administrations in 2025, there is substantial uncertainty as to how, if at all, the
new administration will seek to modify or revise the requirements and policies of the FDA and other regulatory agencies
with jurisdiction over our product candidates. The impending uncertainty could present new challenges or potential
opportunities as we navigate the clinical development and approval process for our product candidates.
Accordingly, in connection with our currently approved products and 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.
Inadequate funding for the FDA, the SEC and other government agencies, including from government shut downs, or
other disruptions to these agencies’ operations, could hinder their ability to hire and retain key leadership and other
personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise
prevent those agencies from performing normal business functions on which the operation of our business may rely,
which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including
government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and
statutory, regulatory and policy changes. Average review times at the agency have fluctuated in recent years as a result.
Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be reviewed
and/or approved by necessary government agencies, which would adversely affect our business. In addition, government
funding of the SEC and other government agencies on which our operations may rely, including those that fund research
and development activities, is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates 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 and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. In
addition, disruptions may result from events similar to the COVID-19 pandemic. During the COVID-19 pandemic, a
number of companies announced receipt of complete response letters due to the FDA’s inability to complete required
inspections for their applications. In the event of a similar public health emergency in the future, the FDA may not be able
to continue its current pace and review timelines could be extended. Regulatory authorities outside the United States facing
similar circumstances may adopt similar restrictions or other policy measures in response to a similar public health
emergency and may also experience delays in their regulatory activities.
Accordingly, if a prolonged government shutdown or other disruption 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. Future shutdowns or other disruptions could also affect other government agencies such as the SEC, which may
also impact our business by delaying review of our public filings, to the extent such review is necessary, and our ability to
access the public markets.
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We may be subject to substantial penalties if we fail to comply with regulatory requirements or if we experience
unanticipated problems with our products.
Any product candidate for which we obtain marketing approval will be subject to continual requirements of and
review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-
marketing information and reports, registration and listing requirements, cGMP requirements relating to quality control and
manufacturing, quality assurance and corresponding maintenance of records and documents, and requirements regarding
the distribution of samples to physicians and recordkeeping. In addition, the approval may be subject to limitations on the
indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for costly
post-marketing testing and surveillance to monitor the safety or efficacy of the medicine, including the requirement to
implement a risk evaluation and mitigation strategy. Accordingly, if we receive marketing approval for one or more of our
product candidates, we will continue to expend time, money and effort in all areas of regulatory compliance, including
manufacturing, production, product surveillance and quality control. If we fail to comply with these requirements, we could
have the marketing approvals for our products withdrawn by regulatory authorities and our ability to market any products
could be limited, which could adversely affect our ability to achieve or sustain profitability.
Notwithstanding the regulatory restrictions on off-label promotion, the FDA and other regulatory authorities allow
companies to engage in truthful, non-misleading, and non-promotional scientific communications concerning their
products in certain circumstances. For example, in January 2025, the FDA published final guidance outlining the agency’s
non-binding policies governing the distribution of scientific information on unapproved uses to healthcare providers. This
final guidance calls for such communications to be truthful, non-misleading, factual, and unbiased and include all
information necessary for healthcare providers to interpret the strengths and weaknesses and validity and utility of the
information about the unapproved use. In addition, under some relatively recent guidance from the FDA and the Pre-
Approval Information Exchange Act, or PIE Act, signed into law as part of the Consolidated Appropriations Act of 2023,
companies may also promote information that is consistent with the prescribing information and proactively speak to
formulary committee members of payors regarding data for an unapproved drug or unapproved uses of an approved drug.
We may engage in these discussions and communicate with healthcare providers, payors and other constituencies in
compliance with all applicable laws, regulatory guidance and industry best practices. We will need to carefully navigate the
FDA’s various regulations, guidance and policies, along with recently enacted legislation, to ensure compliance with
restrictions governing promotion of our products.
In recent years, a significant number of pharmaceutical and biotechnology companies have been the target of
inquiries and investigations by various federal and state regulatory, investigative, prosecutorial and administrative entities
in connection with the promotion of products for unapproved uses and other sales practices, including the Department of
Justice and various U.S. Attorneys’ Offices, the Office of Inspector General of the Department of Health and Human
Services, the FDA, the Federal Trade Commission, or the FTC, and various state Attorneys General offices. These
investigations have alleged violations of various federal and state laws and regulations, including claims asserting antitrust
violations, violations of the of the Federal Food, Drug, and Cosmetic Act, or the FDCA, the False Claims Act, the
Prescription Drug Marketing Act and anti-kickback laws and other alleged violations in connection with the promotion of
products for unapproved uses, pricing and Medicare and/or Medicaid reimbursement. Many of these investigations
originate as “qui tam” actions under the False Claims Act. Under the False Claims Act, any individual can bring a claim on
behalf of the government alleging that a person or entity has presented a false claim or caused a false claim to be submitted
to the government for payment. The person bringing a qui tam suit is entitled to a share of any recovery or settlement. Qui
tam suits, also commonly referred to as “whistleblower suits,” are often brought by current or former employees. In a qui
tam suit, the government must decide whether to intervene and prosecute the case. If it declines, the individual may pursue
the case alone.
Similar restrictions apply to the approval of our products in the European Union. The holder of a 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 European Union’s stringent pharmacovigilance or
safety reporting rules, which can impose post-authorization studies and additional monitoring obligations; the
manufacturing of authorized medicinal products, for which a separate manufacturer’s license is mandatory; and the
marketing and promotion of authorized drugs, which are strictly regulated in the European Union. and are also subject to
EU Member State laws. The failure to comply with these and other requirements of the European Union can also lead to
significant penalties and sanctions.
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Violations of the FDCA and other statutes, including the False Claims Act, relating to the promotion and advertising
of prescription products may lead to investigations and enforcement actions alleging violations of federal and state health
care fraud and abuse laws, as well as state consumer protection laws. 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;
●
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.
Similar restrictions apply to the approval of our products in the European Union. 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.
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 our products 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
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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;
●
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, other healthcare providers and teaching hospitals; 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.
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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 other jurisdictions. The provision of
benefits or advantages to physicians is governed by the national anti-bribery laws of European Union Member States and
the UK Bribery Act 2010. Payments made to physicians in certain European Union Member States must be publicly
disclosed and 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. Failure to
comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or
imprisonment.
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 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 coverage criteria
and in additional downward pressure on the price that we, or any future collaborators, may receive for any approved drugs.
If reimbursement of our products is unavailable or limited in scope, our business could be materially harmed.
In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Affordability Reconciliation Act, or collectively, the ACA. 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 2031 under 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 products or product candidates for which we may obtain regulatory approval or the
frequency with which any such product is prescribed or used. Under current legislation, the actual reductions in Medicare
payments may vary up to 4%.
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 2017 Tax Act, 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 June 17, 2021,the U.S. Supreme Court dismissed an action to challenge
the constitutionality of the ACA after finding that the plaintiffs did not have standing to bring the legal action. Litigation
and legislation over the ACA are likely to continue, with unpredictable and uncertain results.
We expect that these healthcare reforms, as well as other healthcare reform measures that may be adopted in the
future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new
payment methodologies and additional downward pressure on the price that we receive for any approved product and/or
the level of reimbursement physicians receive for administering any approved product we might bring to market.
Reductions in reimbursement levels may negatively impact the prices we receive or the frequency with which our products
are prescribed or administered. Any reduction in reimbursement from Medicare or other government programs may result
in a similar reduction in payments from private payors. Accordingly, such reforms, if enacted, could have an adverse effect
on anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing
approval and may affect our overall financial condition and ability to develop or commercialize product candidates.
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The prices of prescription pharmaceuticals in the United States and foreign jurisdictions are 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.
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 pharmaceutical pricing, review the relationship between
pricing and manufacturer patient programs, reduce the costs of pharmaceuticals under Medicare and Medicaid, and reform
government program reimbursement methodologies for products
In addition, in October 2020, the Department of Health and Human Services, or HHS, and the FDA published a final
rule allowing states and other entities to develop a Section 804 Importation Program, or SIP, to import certain prescription
drugs from Canada into the United States. Seven states (Colorado, Florida, Maine, New Hampshire, New Mexico, Texas
and Vermont) have passed laws allowing for the importation of drugs from Canada. North Dakota and Virginia have
passed legislation establishing workgroups to examine the impact of a state importation program. As of May 2024, five
states (Colorado, Florida, Maine, New Hampshire and New Mexico) had submitted Section 804 Importation Program
proposals to the FDA and, on January 5, 2024, the FDA approved Florida’s plan for Canadian drug importation. That state
now has authority to import certain drugs from Canada for a period of two years once certain conditions are met. Florida
will first need to submit a pre-import request for each drug selected for importation, which must be approved by the FDA.
The state will also need to relabel the drugs and perform quality testing of the products to meet FDA standards.
Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions
from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers,
unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the
point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and
manufacturers. Pursuant to court order, the removal and addition of the aforementioned safe harbors were delayed and
recent legislation imposed a moratorium on implementation of the rule until January 1, 2026.
On August 16, 2022, the Inflation Reduction Act, or IRA, was signed into law by President Biden. The new
legislation has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare
Part A or enrolled in Medicare Part B to give them the option of paying a monthly premium for outpatient prescription
drug coverage. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with
Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B
and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage
gap discount program with a new discounting program (beginning in 2025). The IRA permits the Secretary of the HHS to
implement many of these provisions through guidance, as opposed to regulation, for the initial years.
Specifically, with respect to price negotiations, Congress authorized Medicare to negotiate lower prices for certain
costly single-source drug and biologic products that do not have competing generics or biosimilars and are reimbursed
under Medicare Part B and Part D. CMS may negotiate prices for ten high-cost drugs paid for by Medicare Part D starting
in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and
beyond. This provision applies to drug products that have been approved for at least 9 years and biologics that have been
licensed for 13 years, but it does not apply to drugs and biologics that have been approved for a single rare disease or
condition. Nonetheless, since CMS may establish a maximum price for these products in price negotiations, we would be
fully at risk of government action if our products were to become the subject of Medicare price negotiations. Moreover,
given the risk that could be the case, these provisions of the IRA may also further heighten the risk that we would not be
able to achieve the expected return on our drug products or full value of our patents protecting our products if prices are set
after such products have been on the market for nine years.
The first cycle of negotiations for the Medicare Drug Price Negotiation Program commenced in the summer of
2023. On August 15, 2024, the HHS published the results of the first Medicare drug price negotiations for ten selected
drugs that treat a range of conditions, including diabetes, chronic kidney disease, and rheumatoid arthritis. The prices of
these ten drugs will become effective January 1, 2026. On January 17, 2025, CMS announced its selection of 15 additional
drugs covered by Part D for the second cycle of negotiations by February 1, 2025. While there had been some questions
about the Trump Administration’s position on this program, CMS issued a public statement on January 29, 2025, declaring
that lowering the cost of prescription drugs is a top priority of the new administration and CMS is
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committed to considering opportunities to bring greater transparency in the negotiation program. The second cycle of
negotiations with participating drug companies will occur during 2025, and any negotiated prices for this second set of
drugs will be effective starting January 1, 2027.
Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing
to comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price”
under the law or for taking price increases that exceed inflation. The legislation also requires manufacturers to pay rebates
for drugs in Medicare Part D whose price increases exceed inflation. The new law also caps Medicare out-of-pocket drug
costs at an estimated $4,000 a year in 2024 and, thereafter beginning in 2025, at $2,000 a year. In addition, the IRA
potentially raises legal risks with respect to individuals participating in a Medicare Part D prescription drug plan who may
experience a gap in coverage if they required coverage above their initial annual coverage limit before they reached the
higher threshold, or “catastrophic period” of the plan. Individuals requiring services exceeding the initial annual coverage
limit and below the catastrophic period, must pay 100% of the cost of their prescriptions until they reach the catastrophic
period. Among other things, the IRA contains many provisions aimed at reducing this financial burden on individuals by
reducing the co-insurance and co-payment costs, expanding eligibility for lower income subsidy plans, and price caps on
annual out-of-pocket expenses, each of which could have potential pricing and reporting implications.
On June 6, 2023, Merck & Co. filed a lawsuit against the HHS and CMS asserting that, among other things, the
IRA’s Drug Price Negotiation Program for Medicare constitutes an uncompensated taking in violation of the Fifth
Amendment of the Constitution. Subsequently, a number of other parties, including the U.S. Chamber of Commerce,
Bristol Myers Squibb Company, the PhRMA, Astellas, Novo Nordisk, Janssen Pharmaceuticals, Novartis, AstraZeneca and
Boehringer Ingelheim, also filed lawsuits in various courts with similar constitutional claims against the HHS and CMS.
There have been various decisions by the courts considering these cases since they were filed. The HHS has generally won
the substantive disputes in these cases, and various federal district court judges have expressed skepticism regarding the
merits of the legal arguments being pursued by the pharmaceutical industry. Certain of these cases are now on appeal and,
on October 30, 2024, the Court of Appeals for the Third Circuit heard oral argument in three of these cases. We expect that
litigation involving these and other provisions of the IRA will continue, with unpredictable and uncertain results.
Accordingly, while it is currently unclear how the IRA will be effectuated, we cannot predict with certainty what
impact any federal or state health reforms will have on us, but such changes could impose new or more stringent regulatory
requirements on our activities or result in reduced reimbursement for our products, any of which could adversely affect our
business, results of operations and financial condition.
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. This is increasingly true with respect
to products approved pursuant to the accelerated approval pathway. State Medicaid programs and other payers are
developing strategies and implementing significant coverage barriers, or refusing to cover these products outright, arguing
that accelerated approval drugs have insufficient or limited evidence despite meeting the FDA’s standards for accelerated
approval. In addition, regional healthcare 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
healthcare 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.
In countries outside of the United States, reimbursement and healthcare payment systems vary significantly by
country and many countries have instituted price ceilings on specific products and therapies. In many countries, including
those of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control and access. 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 or our collaborators may be
required to conduct a clinical trial that compares the cost-effectiveness of our product 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 materially harmed.
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Reporting and payment obligations under the Medicaid Drug Rebate Program and other governmental drug pricing
programs are complex and may involve subjective decisions. Any failure to comply with those obligations could subject
us to penalties and sanctions.
As a condition of reimbursement by various federal and state health insurance programs, pharmaceutical companies
are required to calculate and report certain pricing information to federal and state agencies. The regulations governing the
calculations, price reporting and payment obligations are complex and subject to interpretation by various government and
regulatory authorities, as well as the courts. Reasonable assumptions have been made where there is lack of regulations or
clear guidance and such assumptions involve subjective decisions and estimates. Pharmaceutical companies are required to
report any revisions to calculations, price reporting and payment obligations previously reported or paid. Such revisions
could affect liability to federal and state payers and also adversely impact reported financial results of operations in the
period of such restatement.
Uncertainty exists as new laws, regulations, judicial decisions, or new interpretations of existing laws, or regulations
related to our calculations, price reporting or payments obligations increases the chances of a legal challenge, restatement
or investigation. If a company becomes subject to investigations, restatements, or other inquiries concerning compliance
with price reporting laws and regulations, it could be required to pay or be subject to additional reimbursements, penalties,
sanctions or fines, which could have a material adverse effect on the business, financial condition and results of operations.
In addition, it is possible that future healthcare reform measures could be adopted, which could result in increased pressure
on pricing and reimbursement of products and thus have an adverse impact on financial position or business operations.
Further, state Medicaid programs may be slow to invoice pharmaceutical companies for calculated rebates resulting
in a lag between the time a sale is recorded and the time the rebate is paid. This results in a company having to carry a
liability on its consolidated balance sheets for the estimate of rebate claims expected for Medicaid patients. If actual claims
are higher than current estimates, the company’s financial position and results of operations could be adversely affected.
In addition to retroactive rebates and the potential for 340B Program refunds, if a pharmaceutical firm is found to
have knowingly submitted any false price information related to the Medicaid Drug Rebate Program to CMS, it may be
liable for civil monetary penalties. Such failure could also be grounds for CMS to terminate the Medicaid drug rebate
agreement, pursuant to which companies participate in the Medicaid program. In the event that CMS terminates a rebate
agreement, federal payments may not be available under government programs, including Medicaid or Medicare Part B,
for covered outpatient drugs.
Additionally, if a pharmaceutical company overcharges the government in connection with the Federal Supply
Schedules program or Tricare Retail Pharmacy Program, whether due to a misstated Federal Ceiling Price or otherwise, it
is required to refund the difference to the government. Failure to make necessary disclosures and/or to identify contract
overcharges can result in allegations against a company under the False Claims Act and other laws and regulations.
Unexpected refunds to the government, and responding to a government investigation or enforcement action, would be
expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of
operations and growth prospects.
Our collaborators are also subject to similar requirements outside of the United States and thus the attendant risks
and uncertainties. If our collaborators suffer material and adverse effects from such risks and uncertainties, our rights and
benefits for our licensed products could be negatively impacted, which could have a material and adverse impact on our
revenues.
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 our products and 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
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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 obtaining marketing authorization in the United
Kingdom as a result of the withdrawal of the United Kingdom from the European Union, commonly referred to as Brexit.
The United Kingdom is no longer part of the European Single Market and EU Customs Union. As of January 1, 2025, the
Medicines and Healthcare Products Regulatory Agency, or MHRA, is responsible for approving all medicinal products
destined for the United Kingdom market (i.e., Great Britain and Northern Ireland). At the same time, a new international
recognition procedure (“IRP”) will apply, which intends to facilitate approval of pharmaceutical products in the United
Kingdom. The IRP is open to applicants that have already received an authorization for the same product from one of the
MHRA’s specified Reference Regulators (“RRs”). The RRs notably include EMA and regulators in the EU/European
Economic Area (“EEA”) member states for approvals in the European Union centralized procedure and mutual recognition
procedure as well as the FDA (for product approvals granted in the United States). However, the concrete functioning of
the IRP is currently unclear. Any delay in obtaining, or an inability to obtain, any marketing approvals may force us or our
collaborators to restrict or delay efforts to seek regulatory approval in the United Kingdom for our product candidates,
which could significantly and materially harm our business.
In addition, foreign regulatory authorities may change their approval policies and new regulations may be enacted.
For instance, the European Union pharmaceutical legislation is currently undergoing a complete review process, in the
context of the Pharmaceutical Strategy for Europe initiative, launched by the European Commission in November 2020.
The European Commission’s proposal for revision of several legislative instruments related to medicinal products
(potentially reducing the duration of regulatory data protection, revising the eligibility for expedited pathways, etc.) was
published on April 26, 2023. The proposed revisions remain to be agreed and adopted by the European Parliament and
European Council and the proposals may therefore be substantially revised before adoption, which is not anticipated before
early 2026. The revisions may however have a significant impact on the pharmaceutical industry and our business in the
long term.
We expect that we will also be subject to additional risks in commercializing any of our product candidates that
receive marketing approval outside the United States, including tariffs, trade barriers and regulatory requirements;
economic weakness, including inflation, or political instability in particular foreign economies and markets; compliance
with tax, employment, immigration and labor laws for employees living or traveling abroad; foreign currency fluctuations,
which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in
another country; and workforce uncertainty in countries where labor unrest is more common than in the United States.
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
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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 laws and regulations have been approved, or are expected to be approved, in
several jurisdictions beyond the European Union.
There are ongoing concerns about the ability of companies to transfer personal data from the European Union to
other countries. In July 2020, the Court of Justice of the European Union, or the CJEU, invalidated the EU-U.S. Privacy
Shield framework, or Privacy Shield, one of the mechanisms used to legitimize the transfer of personal data from the EEA
to the U.S. While we were not self-certified under the Privacy Shield, this CJEU decision has lead to increased scrutiny on
data transfers from the European Union to the United States generally and increase our costs of compliance with data
privacy legislation as well as our costs of negotiating appropriate privacy and security agreements with our vendors and
business partners.
Following the CJEU decision, in October 2022, President Biden signed an executive order to implement the EU-U.S.
Data Privacy Framework, which would serve as a replacement to the EU-U.S. Privacy Shield. The European Commission
initiated the process to adopt an adequacy decision for the EU-U.S. Data Privacy Framework (“DPF”) in December 2022,
and has now adopted an adequacy decision to permit data transfers from the European Union to the United States going
forward. This development permits data transfers at this point under this framework and more broadly has made
international data transfers more straightforward, but these provisions are being challenged in court. The recent election in
the United States and the new administration may also impact whether the DPF remains an adequate data transfer
framework. The continuing uncertainty around this issue may further impact our business operations in the European
Union.
On June 23, 2016, the electorate in the United Kingdom. voted in favor of leaving the European Union, commonly
referred to as Brexit. As with other issues related to Brexit, there are open questions about how personal data will be
protected in the United Kingdom and whether personal information can transfer from the European Union to the U.K.
Following the withdrawal of the U.K. from the European Union, the U.K. Data Protection Act 2018 applies to the
processing of personal data that takes place in the United Kingdom and includes parallel obligations to those set forth by
GDPR. While the Data Protection Act of 2018 in the United Kingdom that “implements” and complements the GDPR has
achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, it is unclear whether transfer of data
from the EEA to the United Kingdom will remain lawful under the GDPR. The U.K. government has already determined
that it considers all European Union 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. In addition, a recent decision from
the European Commission appears to deem the United Kingdom as being “essentially adequate” for purposes of data
transfer from the European Union to the United Kingdom, although this decision may be re-evaluated in the future. The
United Kingdom and the United States also have agreed on a framework for personal data to be transferred between the
United Kingdom and the United States, called the U.K.-U.S. Data Bridge. The U.K.-U.S. Data Bridge may be challenged
in the future. Continuing uncertainty about these data transfers, including the possibility of future changes, may impact our
business operations.
There are multiple privacy and data security laws that may impact our business activities in the United States. These
laws are evolving and may increase both our obligations and our regulatory risks in the future. In the health care industry
generally, under the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, HHS has issued
regulations to protect the privacy and security of protected health information, or PHI, used or disclosed by covered entities
including certain healthcare providers, health plans and healthcare clearinghouses. HIPAA also imposes certain obligations
on the business associates of covered entities that obtain protected health information in providing services to or on behalf
of covered entities. HIPAA may apply to us in certain circumstances and may also apply to our
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business partners in ways that may impact our relationships with them. Any clinical trials we conduct will be regulated by
Subpart A of 45 CFR 46, also known as the Common Rule, which also includes specific privacy-related provisions. In
addition to federal privacy regulations, there are a number of state laws governing confidentiality and security of health
information that may be applicable to our business. In addition to possible federal civil and criminal penalties for HIPAA
violations, state attorneys general are authorized to file civil actions for damages or injunctions in federal courts to enforce
HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state attorneys general
(along with private plaintiffs) have brought civil actions seeking injunctions and damages resulting from alleged violations
of HIPAA’s privacy and security rules. State attorneys general also have authority to enforce state privacy and security
laws. Moreover, new laws and regulations governing privacy and security may be adopted in the future as well.
In addition to potential enforcement by the HHS, we could also be potentially subject to privacy enforcement from
the Federal Trade Commission (the “FTC”). The FTC has been particularly focused on the unpermitted processing of
health and genetic data through its recent enforcement actions and is expanding the types of privacy violations that it
interprets to be “unfair” under Section 5 of the FTC Act, as well as the types of activities it views to trigger the Health
Breach Notification Rule (which the FTC also has the authority to enforce). The agency is also in the process of developing
rules related to commercial surveillance and data security. We will need to account for the FTC’s evolving rules and
guidance for proper privacy and data security practices in order to mitigate risk for a potential enforcement action, which
may be costly. Finally, both the FTC and HHS’s enforcement priorities (as well as those of other federal regulators) may be
impacted by the change in administration and new leadership. These shifts in enforcement priorities may also impact our
business.
There are also increased restrictions at the federal level relating to transferring sensitive data outside of the United
States to certain foreign countries. For example, in 2024, Congress passed H.B. 815, which included the Protecting
Americans’ Data from Foreign Adversaries Act of 2024. This law creates certain restrictions for entities that disclose
sensitive data (including potential health data) to countries such as China. Failure to comply with these rules can lead to a
potential FTC enforcement action. Additionally, the Department of Justice recently finalized a rule implementing
Executive Order 14117, which creates similar restrictions related to the transfer of sensitive US data to countries such as
China. These data transfer restrictions (and others that may pass in the future) may create operational challenges and legal
risks for our business.
New laws also are being considered at the state level. 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 currently 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. The CCPA also has been amended through a recent
referendum in California that creates additional obligations beginning in 2023. In addition to California, at least eighteen
other states have passed comprehensive privacy laws similar to the CCPA. These laws are either in effect or will go into
effect over the next few years. Like the CCPA, these laws create obligations related to the processing of personal
information, as well as special obligations for the processing of “sensitive” data, which includes health data in some cases.
Some of the provisions of these laws may apply to our business activities. There are also states that are strongly
considering or have already passed comprehensive privacy laws during the 2024 legislative sessions that will go into effect
in 2025 and beyond, including New Hampshire and New Jersey. Other states will be considering these laws in the future,
and Congress has also been debating passing a federal privacy law. There are also states that are specifically regulating
health information that may affect our business. For example, Washington state passed a health privacy law in 2023 that
regulates the collection and sharing of health information, and the law also has a private right of action, which further
increases the relevant compliance risk. Connecticut and Nevada have also passed similar laws regulating consumer health
data, and more states are considering, such legislation in 2025. These laws may impact our business activities, including
our identification of research subjects, relationships with business partners and ultimately the marketing and distribution of
our products.
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 applicable jurisdictions. These 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.
Our internal information technology systems, or those of our vendors, collaborators, contractors, consultants, or other
third parties may fail or suffer security breaches, which could result in a material disruption of our product
development programs, compromise sensitive information related to our business or prevent us from accessing critical
information, trigger contractual and legal obligations, potentially exposing us to liability, reputational harm or
otherwise adversely affecting our business and financial results.
We are dependent upon information technology systems, infrastructure and data to operate our business. In the
ordinary course of business, we collect, store and transmit large amounts of confidential information, including personal
information and information relating to intellectual property, on internal and external information systems and through the
information systems of our vendors, collaborators, contractors, consultants, or other third parties. It is critical that we, our
vendors, collaborators, contractors, consultants, or other third parties, do so in a secure manner to maintain the availability,
security, confidentiality, privacy and integrity of such confidential information.
Despite the implementation of security measures, our internal information technology systems and those of third
parties are vulnerable to damage from computer viruses, malware, computer hackers, malicious code, employee error, theft
or misuse, denial-of-service attacks, sophisticated nation-state supported actors, unauthorized access, natural disasters,
terrorism, war and telecommunication and electrical failures. Such systems are also vulnerable to service interruptions or to
security breaches from inadvertent or intentional actions by our employees, our collaborators, contractors, consultants,
vendors, and other third parties, or from cyberattacks by malicious third parties over the Internet or through other
mechanisms. Cyberattacks are increasing in their frequency, sophistication and intensity, and have become increasingly
difficult to detect. Cyberattacks could include the deployment of harmful malware, ransomware, denial of service attacks,
unauthorized access to or deletion of files, social engineering and other means to affect service reliability and threaten the
confidentiality, integrity and availability of information. Cyberattacks also could include phishing attempts or e-mail fraud
to cause payments or information to be transmitted to an unintended recipient. We may not be able to anticipate all types of
security threats, and we may not be able to implement preventive measures effective against all such security threats. The
techniques used by cyber criminals change frequently, may not be recognized until launched, and can originate from a wide
variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist
organizations or hostile foreign governments or agencies. We cannot guarantee that the measures we have taken to date,
and actions we may take in the future, will be sufficient to prevent any future breaches.
While we have not experienced any such material system failure, accident, cyberattack 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, clinical trials and business operations, whether due to a loss of our trade secrets or other
proprietary or confidential information or other similar disruptions, in addition to possibly requiring substantial
expenditures of resources to remedy. For example, the loss of clinical trial data from clinical trials could result in delays or
termination of our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. In
addition, as risks with respect to our information systems continue to evolve, we will incur additional costs to maintain the
security of our information systems and comply with evolving laws and regulations pertaining to cybersecurity and related
areas.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our or our vendors’,
collaborators’ or other contractors’ or consultants’ data or applications, or inappropriate disclosure of confidential or
proprietary information, we could incur liability, including litigation exposure, penalties and fines, we could become the
subject of regulatory action or investigation, enrollment in our clinical trials could be negatively affected, our competitive
position and reputation could be harmed and the further development and commercialization of our product candidates
could be delayed. As a result of such an event, we may be in breach of our contractual obligations.
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Furthermore, any such event that leads to unauthorized access, use, or disclosure of personal information, including
personal information regarding our customers or employees, could harm our reputation, compel us to comply with federal
and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, and otherwise
subject us to liability under laws and regulations that protect the privacy and security of personal information, which could
result in significant legal and financial exposure and reputational damages. Any of the above could have a material adverse
effect on our business, financial condition, results of operations or prospects.
The financial exposure from the events referenced above could either not be insured against or not be fully covered
through any insurance that we maintain and could have a material adverse effect on our business, financial condition,
results of operations or prospects. In addition, we cannot be sure that our existing insurance coverage will continue to be
available on acceptable terms or that our insurers will not deny coverage as to any future claim. There can be no assurance
that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from
liabilities or damages as a result of the events referenced above.
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.
If and as we expand our operations outside of the United States, 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.
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.
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 Pravin Dugel, M.D., our Executive
Chairman, 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.
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Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel is 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 other
entities 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.
Risks Related to Our Common Stock
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;
●
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.
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We have 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.
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 executive officers and shareholder derivative actions were
filed against certain of our executive officers and directors, 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. We may be the target of similar proceedings in the
future. We also may face securities class-action litigation if we cannot obtain regulatory approvals for or if we otherwise
fail to commercialize our products or product candidates successfully.
In connection with any 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 has been, and in the future 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. 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:
●
results of clinical trials of our product candidates, including AXPAXLI, and the product candidates of our
competitors;
●
our success in commercializing DEXTENZA and any product candidates for which we may obtain marketing
approval, including AXPAXLI;
●
the success of competitive products or technologies;
●
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 results of our efforts and the efforts of our current and future collaborators to discover, develop, acquire or
in-license and out-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 and any potential dilution to our shareholders as a result of these
efforts;
●
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;
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●
market conditions in the pharmaceutical and biotechnology sectors; and
●
the other factors described in this “Risk Factors” section.
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 Barings 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.
Item 1B.
Unresolved Staff Comments
Not Applicable.
Item 1C.
Cybersecurity
We have certain processes for identifying, assessing and managing cybersecurity risks, which are built into our
overall risk management program and are designed to help protect our people, technology, products, information and
operations from internal and external cyber threats and to protect the information of employees, customers, vendors, and
other individuals, such as subjects enrolled in our clinical trials, from unauthorized access or attack, as well as secure our
networks and systems. Our cybersecurity program is built upon, and we periodically assess our processes against, the
National Institute of Standards and Technology, or NIST, Cybersecurity Framework Special Publication 800-53, and our
incident response capabilities align with NIST 800-61, revision 2, or collectively, the NIST Framework. This does not
imply that we meet any particular technical standards, specifications, or requirements of the NIST Framework, but rather
only that we use these standards as a guide to help us mature our security posture in order to identify, assess, and manage
cybersecurity risks relevant to our business. Our processes for identifying, assessing and managing cybersecurity risks
include physical, procedural and technical safeguards, a cybersecurity incident response plan, regular tests on our systems,
incident simulations and routine review of our policies and procedures to identify risks and improve our practices. We
engage certain external parties, including information technology security firms, to assist us with the identification,
verification, and validation of cybersecurity risks, and to support mitigation efforts if necessary. We consider the internal
risk oversight programs of third-party service providers before engaging them in order to help protect us from any related
vulnerabilities.
We do not believe that there are currently any known risks from cybersecurity threats that are reasonably likely to
materially affect us or our business strategy, results of operations or financial condition.
The Audit Committee of our board of directors provides direct oversight over cybersecurity risk and provides
updates to the board of directors regarding such oversight as deemed necessary. The Audit Committee receives periodic
updates from management regarding cybersecurity matters and is notified between such updates regarding significant new
cybersecurity threats or incidents.
Our management team is responsible for day-to-day assessment and management of cybersecurity risks. On our
management team, our Chief Financial Officer and Chief Operating Officer, or CFO and COO, leads the operational
oversight of company-wide cybersecurity strategy, policy, standards and processes and works across relevant departments
to assess and help prepare us and our employees, customers, vendors and other individuals to address cybersecurity risks.
Our CFO and COO has more than ten years of experience managing information technology teams of operating companies
in the biotechnology industry. Our CFO and COO leads a cross-functional Cybersecurity Committee, consisting of
executive-level leaders and other management-level individuals with the requisite skills and education, including our
Executive Director IT and Cybersecurity, that assists the CFO and COO with carrying out these duties. The Executive
Director IT and Cybersecurity has over ten years of offensive and defensive cybersecurity experience with departments of
the U.S. government, international alliances and small to large biopharmaceutical companies. Collectively, the members of
our Cybersecurity Committee have notable experience in managing information security, possess the education and skills
to fulfill these duties, and attend periodic trainings as necessary.
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In an effort to deter and detect cyber threats, we provide all employees, including part-time and temporary
employees, with periodic training, including training related to data protection, cybersecurity and incident response, and
prevention and compliance, which covers timely and relevant topics, including social engineering, phishing, password
protection, confidential data protection, asset use and mobile security, and educates employees on the importance of
reporting all incidents immediately. We also use technology-based tools to mitigate cybersecurity risks and to bolster our
employee-based cybersecurity programs.
Item 2.
Properties
Our facilities consist of leased office space, laboratory space and manufacturing facilities in Bedford, Massachusetts.
We occupy approximately 91,000 square feet of space. The lease for approximately 71,000 square feet of this space expires
in July 2027, and the lease for approximately 20,000 square feet of this space, which includes our manufacturing facility,
expires in July 2028. We believe 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
Not Applicable.
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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 February 27, 2025, there were approximately 10 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.
Securities Authorized for Issuance under Equity Compensation Plans
The information required by this item will be set forth in the definitive proxy statement we will file in connection
with our 2025 Annual Meeting of Stockholders and is incorporated by reference herein.
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, 2024 that were not
registered under the Securities Act of 1933, as amended, or the Securities Act, and that have not otherwise been described
in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
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. [Reserved.]
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107
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, 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
Our Company
We are a biopharmaceutical company committed to redefining the retina experience. AXPAXLI (axitinib intravitreal
hydrogel, also known as OTX-TKI), our product candidate for retinal disease, is based on our proprietary ELUTYX
bioresorbable hydrogel-based formulation technology. AXPAXLI is currently in two repeat-dosing Phase 3 clinical trials
for the treatment of wet age-related macular degeneration, or wet AMD, which we refer to as the SOL-1 and the SOL-R
trials. We have also completed a Phase 1 clinical trial of AXPAXLI for the treatment of non-proliferative diabetic
retinopathy, or NPDR, which we refer to as the HELIOS trial. We intend to meet with the U.S. Food and Drug
Administration, or FDA, in the first half of 2025 to discuss the design of a potential registrational clinical program for
AXPAXLI for the treatment of NPDR and diabetic macular edema, or DME, and then evaluate our next steps.
We also leverage the ELUTYX technology in our commercial product DEXTENZA, an FDA-approved
corticosteroid for the treatment of ocular inflammation and pain following ophthalmic surgery and for the treatment of
ocular itching associated with allergic conjunctivitis, and our product candidate PAXTRAVA (travoprost intracameral
hydrogel also known as OTX-TIC), which is currently in a Phase 2 clinical trial for the treatment of open-angle glaucoma,
or OAG, or ocular hypertension, or OHT.
Key Business and Financial Developments
AXPAXLI for the treatment of wet AMD
In December 2024, the SOL-1 trial, our first registrational Phase 3 clinical trial of AXPAXLI for the treatment of wet
AMD, completed randomization of more than 300 evaluable treatment-naïve subjects with a diagnosis of wet AMD in the
study eye.
On January 14, 2025, we announced that, as of January 10, 2025, we had enrolled 311 subjects across various stages
of loading and randomization in the SOL-R trial, our repeat-dosing registrational Phase 3 clinical trial of AXPAXLI for the
treatment of wet AMD.
On February 24, 2025, we received an agreement letter regarding a second modification of our Special Protocol
Assessment, or SPA, agreement for our SOL-1 trial from the FDA that allows us to add a repeat dose of AXPAXLI at each
of Week 52 and Week 76 for the AXPAXLI arm to generate the required safety data for subjects re-dosed with AXPAXLI
through Week 104 to support long-term dosing. As of March 3, 2025, subject retention in the SOL-1 trial has been
exceptional, and the vast majority of supplemental treatments, reviewed on a masked basis, have been in accordance with
pre-specified criteria under the trial protocol. Because the inclusion of re-dosing requires all data to be masked until Week
52, we now expect topline results for SOL-1 to be available in the first quarter of 2026. The optimized design of the SOL-1
trial enhances the potential for a 6 - 12 month dosing label for AXPAXLI for the treatment of wet AMD and also provides
insights into the long-term durability of AXPAXLI.
We previously intended to randomize 825 subjects in the SOL-R trial. The inclusion of re-dosing in the SOL-1 trial
and the exceptional subject retention to date in the SOl-1 trial allow us to reduce the SOL-R trial size to 555 subjects.
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AXPAXLI for the treatment of NPDR and DME
We have completed the HELIOS trial of AXPAXLI for the treatment of NPDR. We intend to meet with the FDA in
the first half of 2025 to discuss the design of a potential registrational clinical program for AXPAXLI for the treatment of
NPDR and DME and then evaluate our next steps.
Commercial
Our net product revenue is generated from the sale of DEXTENZA to specialty distributors, or SDs, for resale to
certain ambulatory surgery centers, or ASCs, certain hospital outpatient departments, or HOPDs, and certain physicians’
offices, and from the direct sale by us to ASCs and physicians’ offices. Our net product revenue was $63.5 million for the
year ended December 31, 2024, reflecting an increase of $5.6 million or 9.7% over the year ended December 31, 2023.
Pursuant to 42 U.S.C. par. 1395 et seq., or the Medicare Statute, physician administered non-opioid pain medications
will receive separate payment in both the ASC and HOPD settings of care effective as of January 1, 2025. The Medicare
Statute allows for continued separate payment of DEXTENZA in the ASC setting for 2025, and it re-establishes the
separate payment of DEXTENZA in the HOPD setting that was lost for 2024. Additionally, the Medicare Statute limits the
separate payment for physician administered non-opioid pain medications. In November 2024, the Centers for Medicare &
Medicaid Services, or CMS, released the final Medicare Physician Fee Schedule, or MPFS, for the calendar year 2025,
which results in a marginal decrease in physician payments for DEXTENZA. Effective January 2025, a clinician’s cost for
DEXTENZA is included in the cost performance category of CMS’ Merit-based Incentive Payment System, or MIPS. For
eligible clinicians, CMS calculates the MIPS final score based on four performance categories, which is then used by CMS
to determine the payment adjustment applied to the clinicians’ Medicare Part B claims, with clinicians that incur costs
above or below national average spending being penalized or incentivized, respectively.
We believe that DEXTENZA is currently used in less than 5% of cataract procedures and that commercial growth
may be driven by a continued focus on sales to ASCs, specifically corporate accounts that own and control multiple ASCs
and HOPDs.
In June 2024, we submitted the data for our clinical trial to evaluate DEXTENZA in pediatric subjects following
cataract surgery to the FDA to fulfill a post-approval requirement of the FDA in connection with the FDA’s prior approval
of DEXTENZA for the treatment of inflammation and pain following ophthalmic surgery in adults. We anticipate receiving
the FDA’s decision on the pediatric labeling for DEXTENZA during the second quarter of 2025.
Reduction in Force
In May 2024, our board of directors approved a strategic reduction in force to eliminate 37 full-time employees,
primarily in research and development and technical operations and representing approximately 13% of our workforce, as
part of an initiative to prioritize our resources on the clinical development of AXPAXLI for the treatment of wet AMD, or
the Strategic Restructuring. We completed the Strategic Restructuring, recorded the related restructuring charges of $1.6
million, resulting primarily from garden leaves and severance benefits, and paid all previously accrued restructuring
charges in the year ended December 31, 2024.
2024 Private Placement
In February 2024, we sold in a private placement 32,413,560 shares of our common stock at $7.52 per share and, in
lieu of common stock to certain investors, pre-funded warrants to purchase up to an aggregate of 10,805,957 shares of our
common stock at a price of $7.519 per pre-funded warrant for total net proceeds to us of approximately $316.4 million,
after deducting placement agent fees and other offering expenses, or the 2024 Private Placement. Each pre-funded warrant
has an exercise price of $0.001 per share, is currently exercisable and will remain exercisable until exercised in full.
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Convertible Notes
In March 2024, the holder of our $37.5 million unsecured senior subordinated convertible notes, or the Convertible
Notes, converted the principal amount of the Convertible Notes, and we issued to the holder of the Convertible Notes
5,769,232 shares of our common stock with a total fair value of $52.5 million and paid $11.4 million for accrued interest.
The accounting for the extinguishment of the Convertible Notes resulted in a non-cash loss of $28.0 million.
Components of our Financial Performance
Revenue
We recognize product revenue when we sell DEXTENZA in the United States to a network of SDs who then resell
the product to ASCs, HOPDs, and physicians’ offices, and when we sell DEXTENZA on a direct basis to a small number
of ASCs and physicians’ offices. 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.
Operating Expenses
Cost of Product Revenue
Cost of product revenue consists primarily of costs of DEXTENZA product revenue, which include:
●
Direct materials costs;
●
Royalties;
●
Direct labor, which includes employee-related expenses, including salaries, related benefits and payroll taxes,
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.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for the development of our product
candidates, which include:
●
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;
●
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 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;
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●
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 proprietary
bioresorbable hydrogel-based formulation technology ELUTYX, 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 subject 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
●
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.
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, advertising and promotion costs.
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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.
Other Income (Expense)
Interest Expense. Interest expense is incurred on our debt. In August 2023, we entered into a credit and security
agreement, or the Barings Credit Agreement, with Barings Finance LLC, or Barings, as administrative agent, and the
lenders party thereto, providing for a secured term loan facility, or the Barings Credit Facility, in the aggregate principal
amount of $82.5 million. For the year ended December 31, 2024, our interest-bearing debt included the Barings Credit
Facility ($82.5 million outstanding principal) and the Convertible Notes (through March 28, 2024, no outstanding principal
thereafter). For the year ended December 31, 2023, our interest-bearing debt included the Barings Credit Facility (from
August 2, 2023), the Convertible Notes, and our obligations under a credit and security agreement with MidCap Financial
Trust, as administrative agent, and other lenders that we entered into in 2014, or, as amended, the MidCap Credit
Agreement, establishing a credit facility, or the MidCap Credit Facility ($25.0 million outstanding principal through
August 2, 2023, no outstanding principal thereafter).
Change in Fair Value of Derivative Liabilities. In August 2023, in connection with entering into the Barings Credit
Agreement, we identified an embedded derivative liability, or the Royalty Fee 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. In
2019, in connection with the issuance of our Convertible Notes, we identified an embedded derivative liability, or the
Conversion Option 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 settlement of the Conversion Option Derivative
Liability occurred on March 28, 2024. The changes in fair value of these derivative liabilities are recorded through the
consolidated statement of operations and comprehensive loss and are presented under the caption “change in fair value of
derivative liabilities”.
Gains and Losses from Debt Extinguishment. In March 2024, the holder of the Convertible Notes converted the
Convertible Notes. In connection with the conversion, our obligations under the Convertible Notes extinguished, resulting
in a non-cash loss on extinguishment. In August 2023, we amended the Convertible Notes and accounted for the
amendment, or the Convertible Notes Amendment, as an extinguishment of debt in accordance with the guidance in
Accounting Standards Codification Topic 470-50 Debt. Application of this accounting standard resulted in a non-cash gain
on extinguishment. In August 2023, we also extinguished our obligations under the MidCap Credit Facility, resulting in a
non-cash loss on extinguishment.
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Results of Operations
The following table summarizes our results of operations for the years ended December 31, 2024, 2023 and 2022:
Year Ended
December 31,
Increase (Decrease)
2024
2023
2022
2024 - 2023 2023 - 2022
(in thousands)
Revenue:
Product revenue, net
$
63,461
$ 57,870 $ 50,457
$
5,591 $
7,413
Collaboration revenue
262
573
1,037
(311)
(464)
Total revenue, net
63,723
58,443
51,494
5,280
6,949
Costs and operating expenses:
Cost of product revenue
5,626
5,281
4,540
345
741
Research and development
127,635
61,055
53,462
66,580
7,593
Selling and marketing
41,590
40,549
39,922
1,041
627
General and administrative
60,653
33,940
32,224
26,713
1,716
Total costs and
operating expenses
235,504
140,825 130,148
94,679
10,677
Loss from operations
(171,781)
(82,382) (78,654)
(89,399)
(3,728)
Other income (expense):
Interest income
20,282
3,983
798
16,299
3,185
Interest expense
(13,577)
(11,338)
(7,022)
(2,239)
(4,316)
Change in fair value of
derivative liabilities
(480)
(5,188)
13,841
4,708
(19,029)
Gains and losses on
extinguishment of debt, net
(27,950)
14,190
—
(42,140)
14,190
Other expense, net
—
(1)
(1)
1
—
Total other
income, net
(21,725)
1,646
7,616
(23,371)
(5,970)
Net loss
$ (193,506)
$ (80,736)$ (71,038)
$ (112,770) $ (9,698)
Product Revenue, net
Our product revenue, net was $63.5 million and $57.9 million for the years ended December 31, 2024 and 2023,
respectively, reflecting an increase of $5.6 million year-over-year. All of our product revenue, net, was attributable to sales
of DEXTENZA.
Our total gross-to-net provisions, or GTN Provisions, for the years ended December 31, 2024 and 2023 were 38.5%
and 30.1%, respectively, of gross DEXTENZA product sales. We increased the wholesale acquisition cost, or WAC, for
DEXTENZA effective April 2024 and again effective October 2024. Concurrently with the increases of the WAC, and
additionally at other points in time in 2024, we also increased the off-invoice discount, or OID, for DEXTENZA as part of
our overall pricing strategy. The OID amounts are generally determined at the time of resale by SDs or direct sales to ASCs
or physicians’ offices by us. The GTN Provisions relative to gross DEXTENZA product sales increased as a result of the
changes in the OID and are expected to increase with any additional anticipated OID increases, and we expect that GTN
Provisions relative to gross DEXTENZA product sales will remain at this increased level, or might increase further, for
2025 and beyond.
Collaboration Revenue
We recognized $0.3 million of collaboration revenue related to the performance obligation under our license
agreement with AffaMed to conduct a Phase 2 clinical trial of PAXTRAVA during the year ended December 31, 2024
compared to $0.6 million in the year ended December 31, 2023. We recognize collaboration revenue based on a cost-to-
cost method.
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Research and Development Expenses
Year Ended
December 31,
Increase (Decrease)
2024
2023
2022
2024 - 2023 2023 - 2022
(in thousands)
Direct research and development
expenses by program:
AXPAXLI for wet AMD
$ 57,507
$ 8,750 $ 5,296
$ 48,757 $ 3,454
AXPAXLI for NPDR
2,301
2,868
659
(567)
2,209
PAXTRAVA for OAG or OHT
2,331
3,600
2,835
(1,269)
765
DEXTENZA for post-surgical
ocular inflammation and pain
2,115
2,224
1,649
(109)
575
OTX-DED for the short-term
treatment of the signs and
symptoms of dry eye disease
499
837
328
(338)
509
OTX-CSI for treatment of dry eye
disease
—
161
453
(161)
(292)
DEXTENZA for ocular itching
associated with allergic
conjunctivitis
—
—
21
—
(21)
Preclinical programs
853
1,501
1,947
(648)
(446)
Unallocated expenses:
—
Personnel costs
37,818
27,068
25,106
10,750
1,962
All other costs
24,211
14,046
15,168
10,165 (1,122)
Total research and
development expenses
$ 127,635
$ 61,055 $ 53,462
$ 66,580 $ 7,593
Research and development expenses were $127.6 million and $61.1 million for the years ended December 31, 2024
and 2023, respectively, reflecting an increase of $66.6 million year-over-year.
Within research and development expenses, direct expenses for clinical programs increased $46.3 million,
unallocated expenses increased $20.9 million, and expenses for preclinical programs decreased $0.6 million.
For the year ended December 31, 2024, we incurred $65.6 million in direct research and development expenses for
our products and product candidates compared to $19.9 million for the year ended December 31, 2023. The increase of
$45.7 million is related to timing and conduct of our various clinical trials for our product candidates, including the
progression of the SOL-1 trial, which was fully randomized by December 2024, the initiation of the SOL-R trial, the
completion of the HELIOS trial, and development activities related to our preclinical programs.
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We expect that direct research and development expenses for our products and product candidates will increase
significantly for 2025 as we progress with the SOL-1 and the SOL-R trials; complete our other ongoing clinical trials; and
initiate any other clinical trials of our product candidates that we might determine in the future to conduct, partially offset
by reduced costs related to preclinical programs as a result of the Strategic Restructuring. We expect that personnel costs
will increase for 2025 and beyond, as we have strengthened in 2024, and may continue to further strengthen in 2025, our
clinical leadership team and our clinical teams dedicated to the SOL-1 and SOL-R trials, with the addition of several retinal
disease experts and other key professionals. The anticipated increase will be partially offset by reduced personnel costs as a
result of the Strategic Restructuring. We do not anticipate to incur significant research and development costs for our
former product candidates OTX-DED and OTX-CSI in 2025 and beyond.
Selling and Marketing Expenses
Year Ended
December 31,
Increase (Decrease)
2024
2023
2022
2024 - 2023 2023 - 2022
(in thousands)
Personnel-related (including stock-based
compensation)
$ 27,576
$ 27,434 $ 26,679
$
142
$
755
Professional fees
8,899
8,287 9,077
612
(790)
Facility-related and other
5,115
4,828 4,166
287
662
Total selling and marketing
expenses
$ 41,590
$ 40,549 $ 39,922
$ 1,041
$
627
Selling and marketing expenses were $41.6 million and $40.5 million for the years ended December 31, 2024 and
2023, respectively, reflecting an increase of $1.0 million year-over-year.
The increase was primarily due to an increase of $0.6 million in professional fees, an increase in facility-related and
other costs of $0.3 million, and an increase in personnel costs, including stock-based compensation, of $0.1 million.
We expect our selling and marketing expenses to remain stable or increase slightly for 2025 as we continue to
support the commercialization of DEXTENZA.
General and Administrative Expenses
Year Ended
December 31,
Increase (Decrease)
2024
2023
2022
2024 - 2023 2023 - 2022
(in thousands)
Personnel-related (including stock-based
compensation)
$ 40,273
$ 21,356 $ 18,227
$ 18,917 $ 3,129
Professional fees
15,568
10,821 11,634
4,747
(813)
Facility-related and other
4,812
1,763 2,363
3,049
(600)
Total general and administrative
expenses
$ 60,653
$ 33,940 $ 32,224
$ 26,713 $ 1,716
General and administrative expenses were $60.7 million and $33.9 million for the years ended December 31, 2024
and 2023, respectively, reflecting an increase of $26.7 million year-over-year.
The increase was primarily due to an increase of $18.9 million in personnel-related costs including stock-based
compensation, an increase in professional fees of $4.7 million and an increase of $3.0 million in facility related and other
costs. Personnel-related costs, including stock-based compensation, for the year ended December 31, 2024 include $1.6
million related to wages, severance, and other benefits under the Strategic Restructuring, and $9.3 million related to
accrued severance and acceleration of stock-based compensation for certain former members of our senior leadership team
who departed during the year ended December 31, 2024 separate from the Strategic Restructuring.
We anticipate that the level of our general and administrative expenses, exclusive of the one-time charges related to
restructuring activities, will increase for 2025, as we have recently strengthened, and will continue to further
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115
strengthen, our leadership team and other certain functions that support our clinical trials of AXPAXLI, including the SOL-
1 trial and the SOL-R trial, and our business in general.
Other Income (Expense), Net
Interest Income. Interest income was $20.3 million and $4.0 million for the years ended December 31, 2024 and
2023, respectively, reflecting an increase of $16.3 million year-over-year. The increase is primarily due to a higher average
balance of cash and cash equivalents held by us, and higher interest rates.
Interest Expense. Interest expense was $13.6 million and $11.3 million for the years ended December 31, 2024 and
2023, respectively, reflecting an increase of $2.2 million year-over-year. The increase is primarily due to higher average
balances of debt outstanding as a result of us drawing $82.5 million of debt under the Barings Credit Facility in August
2023, partially offset by us paying off the MidCap Credit Facility, of $25.0 million in August 2023, and the conversion of
the Convertible Notes of $37.5 million in March 2024, and higher interest rates.
Change in Fair Value of Derivative Liabilities. We recognized a net loss from the change in fair values of our
derivative liabilities of $0.5 million for the year ended December 31, 2024, compared to a net loss of $5.2 million for the
year ended December 31, 2023. The net loss for 2024 comprises of a gain of $2.6 million from the change in the fair value
of the Conversion Option Derivative Liability, a loss of $0.9 million from the change in the fair value of the Royalty Fee
Derivative Liability, and an expense of $2.2 million related to royalty fees under the Barings Credit Agreement that we
paid or accrued. The net loss for 2023 comprises of a loss of $4.5 million from the change in the fair value of the
Conversion Option Derivative Liability and $0.9 million related to royalty fees under the Barings Credit Agreement that
we paid or accrued, partially offset by a gain of $0.2 million from the change in the fair value of the Royalty Fee Derivative
Liability.
Gains and Losses on Extinguishment of Debt, Net. We recognized a non-cash loss on extinguishment of debt of $28.0
million for the year ended December 31, 2024, compared to a gain, net, on extinguishment of debt of $14.2 million for the
year ended December 31, 2023. The net loss for the year ended December 31, 2024 results from the conversion of the
Convertible Notes in March 2024. The net gain for the year ended December 31, 2023 results from the accounting for the
Convertible Notes Amendment, which resulted in a non-cash gain on extinguishment of debt of $14.9 million, and for the
extinguishment of our obligations under the MidCap Credit Agreement, which resulted in a loss on extinguishment of debt
of $0.7 million.
Comparison of the Years Ended December 31, 2023 and 2022
A discussion of changes in our results of operations during the year ended December 31, 2023 compared to the year
ended December 31, 2022 has been omitted from this Annual Report on Form 10-K but may be found in “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form
10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024, which discussion is incorporated
herein by reference and which is available free of charge on the SECs website at www.sec.gov.
Liquidity and Capital Resources
Sources of Liquidity
We have financed our operations primarily through private placements of our preferred stock, public offerings and
private placements of our common stock and pre-funded warrants to purchase our common stock, borrowings under credit
facilities, the private placements of our convertible notes, and sales of our products.
As of December 31, 2024, we had cash and cash equivalents of $392.1 million, and outstanding notes payable with a
principal amount of $82.5 million par value under the Barings Credit Facility.
In February 2024, we sold 32,413,560 shares of our common stock at $7.52 per share and, in lieu of common stock
to certain investors, pre-funded warrants to purchase up to an aggregate of 10,805,957 shares of our common stock at a
price of $7.519 per pre-funded warrant for total net proceeds of approximately $316.4 million, after deducting placement
agent fees and other offering expenses, in the 2024 Private Placement. Each pre-funded warrant has an exercise price of
$0.001 per share, is currently exercisable and will remain exercisable until exercised in full.
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116
On December 18, 2023, we sold 35,420,000 shares of our common stock in an underwritten public offering at a
public offering price of $3.25 per share. The total net proceeds of the public offering to us were approximately $107.7
million, after deducting underwriting discounts and commissions and other offering expenses payable by us.
In August 2023, we entered into the Barings Credit Agreement with Barings as administrative agent, and the lenders
party thereto, providing for the Barings Credit Facility in the aggregate principal amount of $82.5 million. We borrowed
the full amount of $82.5 million at closing and received proceeds of $77.3 million, after the application of an original issue
discount and fees.
In August 2021, we entered into an Open Market Sale Agreement, or the 2021 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
$100.0 million from time to time through Jefferies, acting as agent. We did not offer or sell shares of our common stock
under the 2021 Sales Agreement during the year ended December 31, 2024. During the year ended December 31, 2023, we
sold 1,514,926 shares of common stock under the 2021 Sales Agreement, resulting in net proceeds to us, after accounting
for issuance costs, of $9.5 million.
In connection with entering the Barings Credit Facility, in August 2023, we paid MidCap Financial Trust, as
administrative agent, and our other lenders an aggregate of $26.2 million in satisfaction of our obligations under the
MidCap Credit Facility.
Funding Requirements
We have a history of incurring significant operating losses. Our net losses were $193.5 million, $80.7 million, and
$71.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, we had an
accumulated deficit of $891.1 million.
We expect to continue to incur losses in connection with our ongoing activities, particularly as we advance the
clinical trials of our product candidates in development, including AXPAXLI, and increase our sales and marketing
resources to support the commercialization of DEXTENZA 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 our ongoing clinical trials, including the SOL-1 and the SOL-R trials, our two registrational Phase 3
clinical trials of AXPAXLI for the treatment of wet AMD;
●
initiate any additional clinical trials we might determine in the future to conduct for our product candidates,
including any clinical trials that we might conduct for AXPAXLI for the treatment of NPDR and DME;
●
scale up our manufacturing processes and capabilities to support sales of commercial products, clinical trials of
our product candidates, including AXPAXLI, 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;
●
scale up our sales, marketing and distribution capabilities to prepare for commercialization of any product
candidates for which we intend to obtain marketing approval;
●
seek marketing approvals for any of our product candidates that successfully complete clinical development;
●
continue to monitor subjects according to the applicable clinical trial protocols, or prepare submission
documentation such as clinical study reports, for our clinical trials that have been completed;
●
continue to commercialize DEXTENZA in the United States;
●
maintain, expand and protect our intellectual property portfolio;
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117
●
expand our operational, quality assurance, financial, administrative and management systems and personnel,
including personnel to support our clinical development, manufacturing and commercialization efforts;
●
defend ourselves against legal proceedings, if any;
●
make investments to improve our defenses against cybersecurity threats and establish and maintain
cybersecurity insurance;
●
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.
The amount and timing of these expenses determines our future capital requirements.
Based on our current operating plan, which includes estimates of anticipated cash inflows from DEXTENZA product
sales and cash outflows from operating expenses and capital expenditures and reflects our observance of the minimum
liquidity covenant of $20.0 million under the Barings Credit Agreement, we believe that our existing cash and cash
equivalents as of December 31, 2024 will enable us to fund our planned operating expenses, debt service obligations and
capital expenditure requirements into 2028. Our planned operating expenses do not include the expenses necessary to
conduct a clinical trial of AXPAXLI for NPDR and DME, or to build out our manufacturing capabilities beyond the
buildout of our existing manufacturing facilities. We have based our estimates 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:
●
the progress, costs and outcome of our ongoing clinical trials of AXPAXLI for the treatment of wet AMD;
●
the timing, scope, progress, costs and outcome of a potential registrational clinical program of AXPAXLI for the
treatment of NPDR and DME;
●
the costs, timing and outcome of regulatory review of AXPAXLI or our other product candidates by the FDA,
the European Medicines Agency, or EMA, or other regulatory authorities;
●
the scope, progress, costs and outcome of preclinical development and any additional clinical trials we might
determine in the future to conduct for our other product candidates, including PAXTRAVA for the reduction of
intraocular pressure, or IOP, in patients with primary open-angle glaucoma, or OAG, or ocular hypertension, or
OHT;
●
the level of product sales from DEXTENZA and any additional products for which we obtain marketing
approval in the future and the level of third-party reimbursement of such products;
●
the costs of sales, marketing, distribution and other commercialization efforts with respect to DEXTENZA and
any of our product candidates for which we obtain marketing approval in the future, including cost increases
due to inflation;
●
the costs of scaling up our manufacturing processes and capabilities to support sales of commercial products,
clinical trials of our product candidates, including AXPAXLI, and commercialization of any of our product
candidates for which we obtain marketing approval, including AXPAXLI, and of expanding our facilities to
accommodate this scale up and any corresponding growth in personnel;
●
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, as reimbursements for clinical trial expenditures, development,
regulatory, and sales milestone payments, and royalty payments under our license agreement with AffaMed;
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●
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 any 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, collaborations, strategic alliances, licensing arrangements, royalty
agreements, and marketing and distribution arrangements. We do not have any committed external source of funds,
although 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 securityholders’ ownership interests will be diluted, and the terms of these securities may include
liquidation or other preferences that adversely affect our existing securityholders’ rights as holders or beneficial owners 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. The covenants under the Barings Credit Facility and our pledge of our assets as
collateral to secure our obligations under the Barings Credit Facility pursuant to which we have a total borrowing capacity
of $82.5 million, which has been fully drawn down, may limit our ability to obtain additional debt or other financing. 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. If we are
unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required
to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop
and market products or product candidates that we would otherwise prefer to develop and market ourselves.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
Year Ended December 31,
2024
2023
2022
Cash used in operating activities
$ (134,677)
$ (70,234)
$ (59,603)
Cash used in investing activities
(1,288)
(6,087)
(3,715)
Cash provided by financing activities
332,110
169,828
1,454
Net increase in cash and cash equivalents
$ 196,145
$ 93,507
$ (61,864)
Operating activities. Net cash used in operating activities was $134.7 million for the year ended December 31, 2024,
primarily resulting from our net loss of $193.5 million and net unfavorable changes in operating assets and liabilities of
$10.2 million, partially offset by non-cash adjustments of $69.1 million. Our net loss was primarily attributed to operating
expenses of $235.5 million, which we incurred primarily for research and development activities, selling and marketing
activities, and general and administrative activities, and non-operating expenses of $21.7 million, partially offset by $63.7
million of revenue. Non-cash adjustments primarily include losses on extinguishment of debt of $28.0 million, stock-based
compensation expense of $33.1 million, depreciation and amortization expense of $3.8 million, non-cash interest expense
of $3.7 million, and a net non-cash loss related to changes in the fair value of our derivative liabilities of $0.5 million. Net
cash used by net unfavorable changes in our operating assets and liabilities during the year ended December 31, 2024
consisted primarily of increases of accounts receivable of $6.2 million, resulting from increased sales of DEXTENZA, and
increases of prepaid expenses and other current assets of $5.7 million, resulting predominantly from our clinical
development activities, partially offset by other decreases, net, of $1.6 million.
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Net cash used in operating activities was $70.2 million for the year ended December 31, 2023, primarily resulting
from our net loss of $80.7 million and net unfavorable changes in operating assets and liabilities of $7.4 million, partially
offset by non-cash adjustments of $17.9 million. Our net loss was primarily attributed to operating expenses of $140.8
million, which we incurred primarily for research and development activities, selling and marketing activities, and general
and administrative activities, partially offset by $58.4 million of revenue and a net non-operating income of $1.6 million.
Non-cash adjustments primarily include a net gain on extinguishment of debt of $14.2 million, stock-based compensation
expense of $17.8 million, non-cash interest expense of $6.1 million, non-cash expenses related to changes in the fair value
of our derivative liabilities of $5.2 million, and depreciation and amortization expense of $3.0 million. Net cash used by net
unfavorable changes in our operating assets and liabilities during the year ended December 31, 2023 consisted primarily of
increases of accounts receivables of $4.9 million, increases of prepaid expenses and other current assets of $3.8 million,
partially offset by increases of other items, net, of $1.2 million.
Net cash used in operating activities was $59.6 million for the year ended December 31, 2022, primarily resulting
from our net loss of $71.0 million, partially offset by non-cash adjustments of $10.1 million and net favorable changes in
operating assets and liabilities of $1.3 million. Our net loss was primarily attributed to operating expenses of $130.1
million, which we incurred primarily for research and development activities, selling and marketing activities, and general
and administrative activities, partially offset by $51.5 million of revenue and a net non-operating income of $7.6 million.
Non-cash adjustments primarily include stock-based compensation expense of $17.0 million, non-cash income related to
changes in the fair value of our derivative liabilities of $13.8 million, non-cash interest expense of $4.9 million, and
depreciation and amortization expense of $2.1 million. Net cash provided by net favorable changes in our operating assets
and liabilities during the year ended December 31, 2022 consisted primarily of increases of accrued expenses of $1.6
million, partially offset by decreases of other items, net, of $0.3 million.
Investing activities. Net cash used in investing activities was $1.3 million for the year ended December 31, 2024,
consisting of cash used to purchase property and equipment and leasehold improvements. Net cash used in investing
activities was $6.1 million for the year ended December 31, 2023, consisting of cash used to purchase property and
equipment and leasehold improvement. Net cash used in investing activities was $3.7 million for the year ended
December 31, 2022, consisting of cash used to purchase property and equipment.
Financing activities. Net cash provided by financing activities for the year ended December 31, 2024 was $332.1
million and consisted of total net proceeds from the issuance of common stock and pre-funded warrants in a private
placement of approximately $316.4 million, proceeds from the exercise of stock options of $14.7 million, and proceeds
from issuing shares under our Employee Stock Purchase Plan, or ESPP, of $1.0 million.
Net cash provided by financing activities for the year ended December 31, 2023 was $169.8 million and consisted of
proceeds from the issuance of common stock in public offerings of $117.3 million, drawings under the Barings Credit
Facility of $77.3 million, net of issuance costs, proceeds from the issuance of common stock pursuant to our employee
stock purchase plan of $0.9 million and proceeds from the exercise of stock options of $0.6 million, partially offset by
repayment of the MidCap Credit Facility of $26.1 million.
Net cash provided by financing activities for the year ended December 31, 2022 was $1.5 million and consisted of
proceeds from the issuance of common stock pursuant to our employee stock purchase plan of $0.9 million and proceeds
from the exercise of stock options of $0.5 million.
Contractual Obligations and Commitments
Less Than
1 to 3
3 to 5
More than
Total
1 Year
Years
Years
5 Years
(in thousands)
Operating lease commitments
$ 8,737
$ 2,722
5,265
750
—
Barings Credit Agreement
82,474
—
—
82,474
—
Total
$ 91,211
$ 2,722
$
5,265
$ 83,224
$
—
The table above includes our enforceable and legally binding obligations and future commitments at
December 31, 2024, 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, 2024. 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
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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 which are not included in contractual obligations and commitments.
Operating lease commitments represent payments due under our leases of office, laboratory and manufacturing space
in Bedford, Massachusetts that expire in July 2027 and July 2028, and leases of equipment that expire between 2026 and
2028.
The commitments under the Barings Credit Agreement represent repayment of principal only. Future payments of
interest under the Barings Credit Agreement depends on the level of the Secured Overnight Financing Rate, or SOFR, and
future payments of royalty fees depend on our future revenue from DEXTENZA, both of which cannot be estimated at this
time.
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.
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.
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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 on Form 10-K, 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 the sales of DEXTENZA product.
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 ASCs,
HOPDs, and physicians’ offices. We also sell DEXTENZA directly to a small population of ASCs and physicians’ offices,
based on individually negotiated direct distribution agreements. In addition, we enter into arrangements with health care
providers and payors that provide for government mandated or privately negotiated 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 component. Product revenues are
recorded net of applicable reserves for variable consideration, including discounts and allowances.
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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 offer 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 our visibility into the inventory remaining in the distribution channel. We have received minimal
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 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.
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Purchaser/Provider Discounts and Rebates—We offer rebate payments for which ASCs, HOPDs and other
prescribers qualify by meeting quarterly purchase volumes of DEXTENZA under our volume-based rebate program. We
calculate rebate payment amounts due under this program quarterly, based on actual qualifying purchases and apply a
contractual discount rate. In the third quarter of 2022, we implemented a separate off-invoice discount, or OID, rebate
program whereby end-users receive the discounted price immediately upon purchase, rather than having to wait until the
end of the quarter for a rebate payment. The OID amounts are generally determined at the time of resale by specialty
distributors, or SDs, or direct sales to ASCs by us. We generally issue credits for such amounts within a few weeks of the
SD’s notification to us of the resale. We include the OID on the invoice when we sell to an ASC directly. The calculation
of the accrual for all rebates is based on an estimate of claims that we expect to receive associated with product that has
been recognized as revenue but also 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 for
volume-based rebates and as a reduction of accounts receivable for OID rebates.
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 payors. 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 accrued expenses and other current liabilities on the consolidated
balance sheets.
Derivative Liabilities
The Barings Credit Agreement contains the Royalty Fee Derivative Liability, an embedded obligation to pay the
Royalty Fee, that meets the criteria to be bifurcated and accounted for separately from the Barings Credit Facility. Royalty
payments are estimated using a Monte Carlo simulation. The main inputs when determining the fair value of the Royalty
Fee Derivative Liability are the amount and timing of our expected future revenue, the estimated volatility of these
revenues, and the discount rate corresponding to the risk of revenue. We measure the value of the Royalty Fee Derivative
Liability 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 Royalty Fee Derivative
Liability is recognized as a derivative liability in our consolidated balance sheet.
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.
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, 2024, we had cash and cash
equivalents of $392.1 million, which includes cash in operating bank accounts, and investments in 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 related to our cash and cash equivalents 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.
We do not enter into financial instruments for trading or speculative purposes.
As of December 31, 2024, we had a secured term loan facility with a principal amount of $82.5 million under a credit
and security agreement with Barings Finance LLC and the lenders party thereto, or the Barings Credit Agreement.
Expected cash outflows from this financial instrument fluctuate based on changes in the Secured Overnight Financing
Rate, or SOFR, which is, among other factors, affected by the general level of U.S. and international central bank
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interest rates. As of December 31, 2024, an immediate 100 basis point increase or decrease in the SOFR would not have a
material effect on the anticipated cash outflows from this instrument.
We account for the obligation to pay royalty fees embedded in the Barings Credit Agreement as a separate financial
instrument, measured at fair value, using a Monte Carlo simulation, which we refer to as the Royalty Fee Derivative
Liability. As of December 31, 2024, the Royalty Fee Derivative Liability was valued at $13.2 million. As of
December 31, 2024, a 10% increase or decrease of the interest rate used in the valuation model would not have a material
effect on the fair value of the Royalty Fee Derivative Liability. Changes of the fair value of the Royalty Fee Derivative
Liability have no impact on anticipated cash outflows.
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-36 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 principal executive officer and our principal financial officer,
evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024. 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 SEC’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, including our principal executive officer
and our principal financial officer, 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, 2024, our principal executive officer and our principal 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 Ocular Therapeutix, Inc. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) 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 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
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125
●
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 principal executive officer and our principal financial officer, assessed the
effectiveness of our internal control over financial reporting as of December 31, 2024. 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, 2024, our internal control over financial reporting was effective.
The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in
this Annual Report on Form 10-K.
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 quarter ended December 31, 2024 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B.
Other Information
A portion of the compensation of our directors and officers (as defined in Rule 16a-1(f) under the Securities
Exchange Act of 1934, as amended, or the Exchange Act) is in the form of equity awards, including stock options and
restricted stock units, or RSUs, and, from time to time, directors and officers engage in open-market transactions with
respect to the securities acquired pursuant to such equity awards or other of our securities, including to satisfy tax
withholding obligations when equity awards vest or are exercised, and for diversification or other personal reasons.
Transactions in our securities by directors and officers are required to be made in accordance with our insider trading
policy, which requires that the transactions be in accordance with applicable U.S. federal securities laws that prohibit
trading while in possession of material nonpublic information. Rule 10b5-1 under the Exchange Act provides an
affirmative defense that enables directors and officers to prearrange transactions in our securities in a manner that avoids
concerns about initiating transactions while in possession of material nonpublic information.
During the fourth quarter of 2024, none of our directors and officers adopted or terminated a trading arrangement for
the sale or purchase of our securities that is either (1) a contract, instruction or written plan intended to satisfy the
affirmative defense conditions of Rule 10b5-1(c), or a “Rule 10b5-1 trading arrangement”, or (2) a “non-Rule 10b5-1
trading arrangement” (as defined in Item 408(c) of Regulation S-K).
Item 9C.
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
Not Applicable.
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126
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
The information required by this item will be set forth in our Proxy Statement for the 2025 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 2025 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 2025 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 2025 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 Merilee Raines qualifies as an “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.
Insider Trading Policies and Procedures
The information required by this item will be set forth in our Proxy Statement for the 2025 Annual Meeting of
Stockholders and is incorporated in this Annual Report on Form 10-K by reference.
Item 11.
Executive Compensation
The information required by this item will be set forth in our Proxy Statement for the 2025 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 2025 Annual Meeting of
Stockholders and is incorporated in this Annual Report on Form 10-K by reference.
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127
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 2025 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 2025 Annual Meeting of
Stockholders and is incorporated in this Annual Report on Form 10-K by reference.
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128
PART IV
Item 15.
Exhibits, Financial Statement Schedules
The following financial statements are filed as part of this Annual Report on Form 10-K:
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
F-2
Consolidated Balance Sheets
F-4
Consolidated Statements of Operations and Comprehensive Loss
F-5
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
F-6
Consolidated Statements of Cash Flows
F-7
Notes to Consolidated Financial Statements
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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129
EXHIBIT INDEX
Incorporated by Reference
Exhibit
Number
Description of Exhibit
Form
File Number
Date of
Filing
Exhibit
Number
Filed
Herewith
3.1
Restated Certificate of Incorporation
of the Registrant, as amended
10-Q
001-36554
8/7/2024
3.1
3.2
Amended and Restated By-laws of
the Registrant
8-K
001-36554
7/30/2014
3.2
4.1
Specimen Stock Certificate
evidencing the shares of common
stock
S-1/A
333-196932
7/11/2014
4.1
4.2
Registration Rights Agreement, dated
as of March 1, 2019, by and among
the Registrant and the Purchasers
identified therein
10-K
001-36554
3/7/2019
4.2
4.3
Registration Rights Agreement, dated
as of February 21, 2024, by and
among the Registrant and the other
parties thereto
8-K
001-36554
2/22/2024
10.2
4.4
Form of Pre-Funded Warrant
8-K
001-36554
2/22/2024
4.1
4.5
Description of Securities Registered
under Section 12 of the Exchange Act
10-K
001-36554
2/28/2022
4.3
10.1+
2006 Stock Incentive Plan, as
amended
S-1
333-196932
6/20/2014
10.1
10.2+
Form of Stock Option Agreement
under 2006 Stock Incentive Plan
S-1
333-196932
6/20/2014
10.2
10.3+
Form of Restricted Stock Agreement
under 2006 Stock Incentive Plan
S-1
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+
Form of Incentive Stock Option
Agreement under 2014 Stock
Incentive Plan
S-1/A
333-196932
7/11/2014
10.5
10.6+
Form of Non-statutory Stock Option
Agreement under 2014 Stock
Incentive Plan
S-1/A
333-196932
7/11/2014
10.6
10.7+
Form of Restricted Stock Agreement
under 2014 Stock Incentive Plan
S-1/A
333-196932
7/11/2014
10.7
10.8+
2019 Inducement Stock Incentive
Plan
10-Q
001-36554
11/12/2019
10.1
10.9+
Amendment to 2019 Inducement
Stock Incentive Plan
10-K
001-36554
3/11/2021
10.9
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130
Incorporated by Reference
Exhibit
Number
Description of Exhibit
Form
File Number
Date of
Filing
Exhibit
Number
Filed
Herewith
10.10+
Amendment No. 2 to 2019
Inducement Stock Incentive Plan
8-K
001-36554
2/22/2024
10.5
10.11+
Amendment No. 3 to 2019
Inducement Stock Incentive Plan
8-K
001-36554
4/18/2024
99.1
10.12+
Amendment No. 4 to 2019
Inducement Stock Incentive Plan
8-K
001-36554
10/9/2024
99.1
10.13+
Form of Non-statutory Stock Option
Agreement under 2019 Inducement
Stock Incentive Plan
10-Q
001-36554
11/12/2019
10.2
10.14+
Form of Restricted Stock Unit
Agreement under 2019 Inducement
Stock Incentive Plan
10-K
001-36554
3/11/2024
10.12
10.15†
Amended and Restated License
Agreement, dated January 27, 2012,
between the Registrant and Incept
LLC
10-Q
001-36554
5/7/2024
10.7
10.16
Lease Agreement dated September 2,
2009, by and between the Registrant
and RAR2-Crosby Corporate Center
QRS, Inc., as amended.
S-1
333-196932
6/20/2014
10.9
10.17+
2014 Employee Stock Purchase Plan
S-1/A
333-196932
7/11/2014
10.10
10.18+
Amendment No. 1 to Employee
Stock Purchase Plan, effective
October 4, 2023
10-Q
001-36554
11/7/2023
10.3
10.19
Form of Indemnification Agreement
by and between the Registrant and
each of its directors and executive
officers
S-1
333-196932
6/20/2014
10.12
10.20
Lease Agreement dated June 17,
2016 between the WS NF 15 Crosby
Drive, LLC and the Registrant
10-Q
001-36554
8/9/2016
10.1
10.21
Open Market Sale Agreement, dated
as of August 9, 2021, by and between
the Registrant and Jefferies LLC
8-K
001-36554
8/9/2021
1.1
10.22+
Employment Agreement, by and
between the Registrant and Philip
Strassburger, dated August 28, 2020
10-K
001-36554
3/11/2021
10.19
Table of Contents
131
Incorporated by Reference
Exhibit
Number
Description of Exhibit
Form
File Number
Date of
Filing
Exhibit
Number
Filed
Herewith
10.23+
Employment Agreement, by and
between the Registrant and Antony
C. Mattessich, dated as of June 20,
2017
8-K
001-36554
6/22/2017
10.2
10.24+
Amendment to Employment
Agreement by and between the
Registrant and Antony C. Mattessich,
dated as of February 21, 2024
8-K
001-36554
2/22/2024
10.4
10.25+
Separation Agreement by and
between the Registrant and Antony
C. Mattessich, dated May 1, 2024
10-Q
001-36554
8/7/2024
10.3
10.26+
Non-Statutory Stock Option
Agreement, by and between the
Registrant and Antony C. Mattessich
dated as of June 20, 2017
8-K
001-36554
6/22/2017
10.3
10.27+
Employment Agreement, by and
between the Registrant and Donald
Notman, dated as of September 25,
2017
8-K
001-36554
9/25/2017
10.1
10.28
Second Amendment to Lease, by and
between the Registrant and CCC
Investors LLC, dated October 10,
2017
8-K
001-36554
10/16/2017
10.1
10.29
Third Amendment to Lease, by and
between the Registrant and Cobalt
PropCo 2020 LLC, dated June 30,
2023
8-K
001-36554
7/7/2023
10.1
10.30†
Second Amended and Restated
License Agreement, dated September
13, 2018, by and between the
Registrant and Incept LLC
8-K
001-36554
9/19/2018
10.1
10.31
Note Purchase Agreement (including
Form of Senior Subordinated
Convertible Notes), dated as of
February 21, 2019, by and among the
Registrant and the Purchasers listed
therein
8-K
001-36554
2/22/2019
10.1
10.32
Amendment No. 1 to Senior
Subordinated Convertible Note, dated
as of August 2, 2023, between the
Registrant and the holders thereof
10-Q
001-36554
11/7/2023
10.2
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132
Incorporated by Reference
Exhibit
Number
Description of Exhibit
Form
File Number
Date of
Filing
Exhibit
Number
Filed
Herewith
10.33
Securities Purchase Agreement, dated
February 21, 2024, by and among the
Registrant and the other parties
thereto
8-K
001-36554
2/22/2024
10.1
10.34*
License Agreement, by and between
the Registrant and AffaMed
Therapeutics Limited, dated as of
October 29, 2020
10-Q
001-36554
11/5/2020
10.1
10.35*
Supplement to License Agreement,
by and between the Registrant and
AffaMed Therapeutics Limited, dated
as of January 18, 2021
10-K
001-36554
3/11/2021
10.36
10.36
Credit and Security Agreement, dated
August 2, 2023, by and among
Barings Finance LLC, as
administrative agent, the Registrant,
and the Lenders listed therein
10-Q
001-36554
11/7/2023
10.1
10.37+
2021 Stock Incentive Plan, as
amended
8-K
001-36554
6/14/2024
99.1
10.38+
Form of Option Grant Agreement
under 2021 Stock Incentive Plan
10-K
001-36554
2/28/2022
10.39
10.39+
Form of Restricted Stock Unit
Agreement under 2021 Stock
Incentive Plan
10-K
001-36554
3/11/2024
10.37
10.40
Amendment No. 1 to License
Agreement, by and between the
Registrant and AffaMed Therapeutics
(HK) Limited, dated as of October
28, 2021
10-K
001-36554
2/28/2022
10.41
10.41+
Employment Agreement, by and
between the Registrant and Rabia
Ozden-Gurses, dated as of September
28, 2022
10-K
001-36554
3/6/2023
10.44
10.42+
Amendment to Employment
Agreement by and between the
Registrant and Rabia Gurses-Ozden,
dated as of March 14, 2024
10-Q
001-36554
5/7/2024
10.8
10.43+
Employment Agreement, by and
between the Registrant and
Christopher White, dated as of
October 13, 2022
10-K
001-36554
3/6/2023
10.45
Table of Contents
133
Incorporated by Reference
Exhibit
Number
Description of Exhibit
Form
File Number
Date of
Filing
Exhibit
Number
Filed
Herewith
10.44+
Employment Agreement, by and
between the Registrant and Dr. Pravin
U. Dugel, dated as of February 21,
2024
8-K
001-36554
2/22/2024
10.3
10.45+
Employment Agreement, by and
between the Registrant and Dr.
Sanjay Nayak, dated as of February
21, 2024
10-K
001-36554
3/11/2024
10.42
10.46+
Employment Agreement by and
between the Registrant and Nadia
Waheed, dated April 15, 2024
10-Q
001-36554
8/7/2024
10.5
10.47+
Letter Agreement by and between the
Registrant and Nadia Waheed, dated
April 22, 2024
10-Q
001-36554
8/7/2024
10.6
10.48+
Employment Agreement by and
between the Registrant and Dr.
Jeffrey Heier, dated as of February
21, 2024
10-Q
001-36554
11/14/2024
10.1
10.49+
Amendment No. 1 to the
Employment Agreement by and
between the Registrant and Dr.
Jeffrey Heier, dated as of March 1,
2025
X
10.50+
Employment Agreement by and
between the Registrant and Dr. Peter
Kaiser, dated as of February 21, 2024
10-Q
001-36554
11/14/2024
10.2
10.51+
Amendment No. 1 to the
Employment Agreement by and
between the Registrant and Dr. Peter
Kaiser, dated as of March 28, 2024
10-Q
001-36554
11/14/2024
10.3
10.52+
Amendment No. 2 to the
Employment Agreement by and
between the Registrant and Dr. Peter
Kaiser, dated as of March 1, 2025
X
10.53+
Employment Agreement by and
between the Registrant and Todd
Anderman, dated as of October 4,
2024
10-Q
001-36554
11/14/2024
10.4
19.1
Insider Trading Policies and Procedures
X
21.1
Subsidiaries of the Registrant
X
23.1
Consent of PricewaterhouseCoopers LLP
X
Table of Contents
134
Incorporated by Reference
Exhibit
Number
Description of Exhibit
Form
File Number
Date of
Filing
Exhibit
Number
Filed
Herewith
31.1
Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as amended
X
31.2
Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as amended
X
32.1
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
X
32.2
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
X
97.1
Ocular Therapeutix, Inc.
Compensation Recovery Policy
10-K
001-36554
3/11/2024
97.1
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)
X
101.SCH
Inline XBRL Taxonomy Extension Schema Document
X
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
X
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Database
X
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
X
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
X
104
The cover page from this Annual Report on Form 10-K, formatted in Inline XBRL and contained in
Exhibit 101
X
†
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.
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 3, 2025
OCULAR THERAPEUTIX, INC.
By: /s/ Donald Notman
Donald Notman
Chief Financial Officer and Chief Operating 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/ Pravin Dugel
Executive Chairman of the Board of Directors,
President, Chief Executive Officer
Pravin Dugel
(Principal Executive Officer)
March 3, 2025
/s/ Donald Notman
Chief Financial Officer and Chief Operating Officer
March 3, 2025
Donald Notman
(Principal Financial and Accounting Officer)
/s/ Adrienne Graves, Ph.D.
Director
March 3, 2025
Adrienne Graves, Ph.D.
/s/ Seung Suh Hong, Ph.D.
Director
March 3, 2025
Seung Suh Hong, Ph.D.
/s/ Richard L. Lindstrom, M.D.
Director
March 3, 2025
Richard L. Lindstrom, M.D.
/s/ Merilee Raines
Director
March 3, 2025
Merilee Raines
/s/ Charles Warden
Director
March 3, 2025
Charles Warden
/s/ Leslie Williams
Director
March 3, 2025
Leslie Williams
Table of Contents
F-1
OCULAR THERAPEUTIX, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
F-2
Consolidated Balance Sheets
F-4
Consolidated Statements of Operations and Comprehensive Loss
F-5
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
F-6
Consolidated Statements of Cash Flows
F-7
Notes to Consolidated Financial Statements
F-8
Table of Contents
F-2
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Ocular Therapeutix, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Ocular Therapeutix, Inc. and its subsidiaries
(the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of operations and
comprehensive loss, of changes in stockholders' equity and of cash flows for each of the three years in the period
ended December 31, 2024, including the related notes (collectively referred to as the "consolidated financial
statements"). We also have audited the Company's internal control over financial reporting as of
December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2024, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting, included in Management’s Annual Report on Internal Control Over Financial
Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated
financial statements and on the Company's internal control over financial reporting 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 in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are
free of material misstatement, whether due to error or fraud, and whether effective internal control over
financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements 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. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation
Table of Contents
F-3
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 (iii) 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.
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.
Revenue Recognition – DEXTENZA
As described in Note 2 to the consolidated financial statements, the Company sells DEXTENZA in the United
States primarily to a limited number of specialty distributors (SDs) under individually negotiated distribution
agreements. These customers then subsequently resell DEXTENZA to ambulatory surgery centers, hospital
outpatient departments and physicians’ offices. 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). Product revenues are recorded net of applicable reserves for variable consideration, including
discounts and allowances. As disclosed by management, the delivery of DEXTENZA to customers constitutes a
single performance obligation. For the year ended December 31, 2024, the Company recognized $63.5 million of
product revenue, net, relating to the sale of DEXTENZA.
The principal consideration for our determination that performing procedures relating to revenue recognition
for DEXTENZA is a critical audit matter is a high degree of auditor effort in performing procedures related to
revenue recognition for DEXTENZA.
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 testing the
effectiveness of controls relating to the revenue recognition process for DEXTENZA, including controls over the
recording of revenue for DEXTENZA at the transaction price when the customer obtains control. These
procedures also included, among others, (i) evaluating management’s revenue recognition policy; (ii) testing
the, on a sample basis, completeness, accuracy, and occurrence of amounts invoiced for DEXTENZA by
obtaining and inspecting source documents, such as purchase orders, invoices, proof of delivery, and
subsequent cash receipts; (iii) testing, on a sample basis, the accuracy of variable consideration applied related
to the sale of DEXTENZA by obtaining and inspecting source documents, such as contracts, units sold, rebate
payments made and other related documentation; and (iv) confirming, on a sample basis, the accuracy and
existence of outstanding accounts receivable balances as of December 31, 2024 and, for confirmations not
returned, obtaining and inspecting source documents, such as, purchase orders, invoices, proof of delivery, and
subsequent cash receipts.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 3, 2025
We have served as the Company’s auditor since 2008.
Table of Contents
F-4
OCULAR THERAPEUTIX, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 31,
December 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$
392,102
$
195,807
Accounts receivable, net
32,388
26,179
Inventory
3,040
2,305
Restricted cash
—
150
Prepaid expenses and other current assets
13,457
7,794
Total current assets
440,987
232,235
Property and equipment, net
9,389
11,739
Restricted cash
1,614
1,614
Operating lease assets
5,945
6,472
Total assets
$
457,935
$
252,060
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
4,176
$
4,389
Accrued expenses and other current liabilities
35,117
28,666
Deferred revenue
128
255
Operating lease liabilities
1,933
1,586
Total current liabilities
41,354
34,896
Other liabilities:
Operating lease liabilities, net of current portion
5,345
6,878
Derivative liabilities
13,246
29,987
Deferred revenue, net of current portion
14,000
14,135
Notes payable, net
68,505
65,787
Other non-current liabilities
141
108
Convertible Notes, net
—
9,138
Total liabilities
142,591
160,929
Commitments and contingencies (Note 18)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized and no shares issued
or outstanding at December 31, 2024 and December 31, 2023, respectively
—
—
Common stock, $0.0001 par value; 400,000,000 and 200,000,000 shares authorized
and 157,749,490 and 114,963,193 shares issued and outstanding at
December 31, 2024 and December 31, 2023, respectively
16
12
Additional paid-in capital
1,206,412
788,697
Accumulated deficit
(891,084)
(697,578)
Total stockholders’ equity
315,344
91,131
Total liabilities and stockholders’ equity
$
457,935
$
252,060
The accompanying notes are an integral part of these consolidated financial statements.
Table of Contents
F-5
OCULAR THERAPEUTIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
Year Ended December 31,
2024
2023
2022
Revenue:
Product revenue, net
$
63,461
$
57,870
$
50,457
Collaboration revenue
262
$
573
$
1,037
Total revenue, net
63,723
58,443
51,494
Costs and operating expenses:
Cost of product revenue
5,626
$
5,281
$
4,540
Research and development
127,635
$
61,055
$
53,462
Selling and marketing
41,590
$
40,549
$
39,922
General and administrative
60,653
$
33,940
$
32,224
Total costs and operating expenses
235,504
140,825
130,148
Loss from operations
(171,781)
(82,382)
(78,654)
Other income (expense):
Interest income
20,282
$
3,983
$
798
Interest expense
(13,577)
$
(11,338)
$
(7,022)
Change in fair value of derivative liabilities
(480)
$
(5,188)
$
13,841
Gains and losses on extinguishment of debt, net
(27,950)
$
14,190
$
—
Other expense
—
$
(1)
$
(1)
Total other income (expense), net
(21,725)
1,646
7,616
Net loss
$
(193,506)
$
(80,736)
$
(71,038)
Net loss per share, basic
$
(1.22)
$
(1.01)
$
(0.92)
Weighted average common shares outstanding, basic
158,265,162
79,827,362
76,875,035
Net loss per share, diluted
$
(1.22)
$
(1.02)
$
(0.97)
Weighted average common shares outstanding, diluted
158,265,162
85,596,594
82,644,267
The accompanying notes are an integral part of these consolidated financial statements.
Table of Contents
F-6
OCULAR THERAPEUTIX, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except share data)
Additional
Total
Common Stock
Paid-in
Accumulated
Stockholders’
Shares
Par Value
Capital
Deficit
Equity
Balances at December 31, 2021
76,731,940
8
633,795
(545,804)
87,999
Issuance of common stock upon exercise of stock options
137,502
—
514
—
514
Issuance of common stock in connection with employee stock purchase plan
332,377
—
940
—
940
Stock-based compensation expense
—
—
16,964
—
16,964
Net loss
—
—
—
(71,038)
(71,038)
Balances at December 31, 2022
77,201,819
8
652,213
(616,842)
35,379
Issuance of common stock upon exercise of stock options
141,952
—
551
—
551
Issuance of common stock in connection with employee stock purchase plan
290,691
—
851
—
851
Issuance of common stock upon public offering, net of issuance costs
36,934,926
4
117,257
—
117,261
Issuance of common stock upon vesting of restricted stock units
393,805
—
—
—
—
Stock-based compensation expense
—
—
17,825
—
17,825
Net loss
—
—
—
(80,736)
(80,736)
Balances at December 31, 2023
114,963,193
12
788,697
(697,578)
91,131
Issuance of common stock upon exercise of stock options
3,112,976
—
14,741
—
14,741
Issuance of common stock in connection with employee stock purchase plan
213,131
—
1,016
—
1,016
Issuance of common stock and pre-funded warrants upon private placement
32,413,560
3
316,350
—
316,353
Issuance of common stock upon exercise of conversion option
5,769,232
1
52,499
—
52,500
Issuance of common stock upon vesting of restricted stock units
1,277,398
—
—
—
—
Stock-based compensation expense
—
—
33,109
—
33,109
Net Loss
—
—
—
(193,506)
(193,506)
Balances at December 31, 2024
157,749,490
$
16
$ 1,206,412
$ (891,084)
$
315,344
The accompanying notes are an integral part of these consolidated financial statements.
Table of Contents
F-7
OCULAR THERAPEUTIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2024
2023
2022
Cash flows from operating activities:
Net loss
$ (193,506)
$ (80,736)
$ (71,038)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense
33,109
17,825
16,964
Non-cash interest expense
3,734
6,106
4,853
Change in fair value of derivative liabilities
480
5,188
(13,841)
Depreciation and amortization expense
3,786
2,983
2,109
Gains and losses on extinguishment of debt, net
27,950
(14,190)
—
Gain on disposal of property and equipment
—
1
1
Changes in operating assets and liabilities:
Accounts receivable
(6,209)
(4,854)
(190)
Prepaid expenses and other current assets
(5,663)
(3,766)
723
Inventory
(735)
(331)
(724)
Accounts payable
(318)
583
(621)
Operating lease assets
505
1,570
(3,175)
Accrued expenses
3,638
773
1,644
Deferred revenue
(262)
427
963
Operating lease liabilities
(1,186)
(1,813)
2,729
Net cash used in operating activities
(134,677)
(70,234)
(59,603)
Cash flows from investing activities:
Purchases of property and equipment
(1,288)
(6,087)
(3,715)
Net cash used in investing activities
(1,288)
(6,087)
(3,715)
Cash flows from financing activities:
Proceeds from issuance of short-term bridge loan
—
2,000
—
Proceeds from issuance of Barings notes payable
—
82,474
—
Proceeds from exercise of stock options
14,741
551
514
Proceeds from issuance of common stock pursuant to employee stock purchase plan
1,016
851
940
Payments of debt refinancing costs
—
(5,184)
—
Proceeds from issuance of common stock upon public offering, net of issuance costs
—
117,261
—
Repayment of MidCap notes payable
—
(26,125)
—
Repayment from issuance of short-term bridge loan
—
(2,000)
—
Proceeds from issuance of common stock and pre-funded warrants upon private
placement, net of issuance costs
316,353
—
—
Net cash provided by financing activities
332,110
169,828
1,454
Net increase in cash, cash equivalents and restricted cash
196,145
93,507
(61,864)
Cash, cash equivalents and restricted cash at beginning of period
197,571
104,064
165,928
Cash, cash equivalents and restricted cash at end of period
$ 393,716
$ 197,571
$ 104,064
Supplemental disclosure of cash flow information:
Cash paid for interest
$
21,533
$
5,464
$
2,147
Supplemental disclosure of non-cash investing and financing activities:
Additions to property and equipment included in accounts payable and accrued
expenses
$
121
$
16
$
1,384
The accompanying notes are an integral part of these consolidated financial statements.
Table of Contents
F-8
OCULAR THERAPEUTIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
1. Nature of the Business
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 committed to redefining the retina experience. AXPAXLI
(axitinib intravitreal hydrogel, also known as OTX-TKI), the Company’s product candidate for retinal disease, is based on
its proprietary ELUTYX bioresorbable hydrogel-based formulation technology. AXPAXLI is currently in two repeat-
dosing Phase 3 clinical trials for the treatment of wet age-related macular degeneration (“wet AMD”), which the Company
refers to as the SOL-1 and the SOL-R trials. The Company has also completed a Phase 1 clinical trial of AXPAXLI for the
treatment of non-proliferative diabetic retinopathy (“NPDR”), which the Company refers to as the HELIOS trial and
intends to meet with the U.S. Food and Drug Administration (“FDA”), in the first half of 2025 to discuss the design of a
potential registrational clinical program for AXPAXLI for the treatment of NPDR and diabetic macular edema (“DME”)
and then evaluate its next steps.
The Company also leverages the ELUTYX technology in its commercial product DEXTENZA, an FDA-approved
corticosteroid for the treatment of ocular inflammation and pain following ophthalmic surgery and ocular itching associated
with allergic conjunctivitis, and its product candidate PAXTRAVA (travoprost intracameral hydrogel also known as OTX-
TIC), which is currently in a Phase 2 clinical trial for the treatment of open-angle glaucoma (“OAG”) or ocular
hypertension (“OHT”).
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, dependence on specific
programs, compliance with government regulations, regulatory approval and compliance, reimbursement, uncertainty of
market acceptance of products and the need to obtain additional financing. 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. Approved products will require significant sales, marketing and
distribution support. 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, 2024, the Company had an accumulated deficit of $891,084. Based on its current operating plan which
includes estimates of anticipated cash inflows from product sales and cash outflows from operating expenses and capital
expenditures, the Company believes that its existing cash and cash equivalents of $392,102 as of December 31, 2024 will
enable it to fund its planned operating expenses, debt service obligations and capital expenditures at least through the next
12 months from the issuance date of these consolidated financial statements while the Company observes a minimum
liquidity covenant of $20,000 in its credit facility (Note 9).
The future viability of the Company is dependent on the Company’s ability to generate cash flows from the sales of
the Company’s product candidates, such as AXPAXLI, if and as approved, and the sales of DEXTENZA, and to raise
additional capital to finance its operations. The Company will need to finance its operations through public or private
securities offerings, debt financings, collaborations, strategic alliances, licensing agreements, royalty agreements, or
marketing and distribution agreements. 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 on a timely basis, in sufficient amounts, or at all, the Company could be
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forced to delay, reduce or eliminate some or all of its research and development programs for product candidates, product
portfolio expansion or commercialization efforts, any of which could adversely affect its business prospects, or the
Company may be unable to continue operations.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements
reflect the operations of the Company and its wholly-owned subsidiaries. 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, the measurement and recognition of reserves for variable consideration related to product sales,
revenue recognition related to a collaboration agreement that contains multiple promises, the fair value of derivatives,
stock-based compensation, and realizability of net deferred tax assets. 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 investments in money market funds,
are stated at fair value.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606 –
Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, an entity recognizes revenue when a 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 ASC 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. At contract
inception, 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.
Product Revenue
The Company sells DEXTENZA in the United States primarily to a limited number of specialty distributors (“SDs”)
under individually negotiated distribution agreements. These customers then subsequently resell DEXTENZA to
ambulatory surgery centers (“ASCs”), hospital outpatient departments (“HOPDs”) and physicians’ offices. The Company
also sells DEXTENZA directly to a small population of ASCs and physicians’ offices based on individually negotiated
direct distribution agreements (the “Direct Customers”). In addition, the Company enters into arrangements with health
care providers and payors that provide for government mandated or privately negotiated rebates and chargebacks with
respect to the purchase of DEXTENZA.
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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). 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 net of off-invoice
discounts and reserves which are established for our estimate of variable consideration. 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. 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 ASC 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 based on the products expiration date. 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.
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 entities that are subject to the U.S. federal government 340B Drug Discount Program at
prices lower than the list prices charged to SDs and Direct Customers. Chargeback amounts are generally determined at the
time of resale to the qualified government healthcare provider by SDs and Direct 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 also 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. 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.
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
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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.
Purchaser/Provider Discounts and Rebates— The Company offers rebate payments for which ASCs, HOPDs and
other prescribers qualify by meeting quarterly purchase volumes of DEXTENZA under the Company’s volume-based
rebate program. The Company calculates rebate payment amounts due under this program quarterly, based on actual
qualifying purchases and applies a contractual discount rate. In the third quarter of 2022, the Company implemented a
separate off-invoice discount (“OID”) rebate program whereby end-users receive the discounted price immediately upon
purchase, rather than having to wait until the end of the quarter for a rebate payment. The OID amounts are generally
determined at the time of resale by SDs or direct sales to ASCs by the Company. The Company generally issues credits for
such amounts within a few weeks of the SD’s notification to the Company of the resale. The Company includes the OID on
the invoice when it sells to an ASC directly. The calculation of the accrual for all rebates is based on an estimate of claims
that the Company expects to receive associated with product that has been recognized as revenue but also 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 for volume-based rebates and as a reduction of accounts
receivable for OID rebates.
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 payors. 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
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 Company considers the existence of any significant financing component within its arrangements based on
whether a substantive business purpose exists 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
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method. Milestone payments that are not within the Company’s control or the control of 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, adjusts 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.
Accounts Receivable
Accounts receivable arise from product sales and are recognized at the amounts invoiced to customers, net of
applicable reserves for variable consideration. The Company analyzes the actual payment history of its customers, the
aging of receivables, current customer-specific developments and economic trends to estimate the reserve for current
expected credit losses.
Inventory
The Company values its inventories at the lower of cost or estimated net realizable value. Costs, which include
amounts related to direct labor, materials and manufacturing overhead, are determined using standard costs, which
approximate average cost. The Company performs an assessment of the recoverability of capitalized inventory during each
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 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.
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.
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Derivative Instruments
The Company recognizes all derivative instruments as either assets or liabilities at fair value through profit or loss on
the Company's consolidated balance sheet. Changes in the estimated fair value of derivative instruments are recognized in
other income (expense), net in the consolidated statements of operations and comprehensive loss.
If the Company determines that a financial or non-financial contract, a ‘host contract’, includes implicit or explicit
terms that affect the cash flows of the contract in a manner similar to a stand-alone derivative instrument, an ‘embedded
derivative’, the Company analyzes whether to account for the embedded derivative separately. The Company accounts for
an embedded derivative not separately from the host contract if it is clearly and closely related to the host contract or if the
entire contract is measured at fair value through profit or loss. In other cases, the Company accounts for an embedded
derivative separately.
The Company measures the value of embedded derivatives that are accounted for separately at their respective fair
values and recognizes changes in the respective estimated fair values in other income (expense), net in the consolidated
statements of operations and comprehensive loss during the period of change. Embedded derivatives that are accounted for
separately are recognized as derivative liabilities 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.
Leases
The Company determines whether an arrangement is or contains a lease at inception. Operating leases are recognized
on the consolidated balance sheets as operating lease assets, current portion of lease liabilities and long-term lease
liabilities. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease
liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease liabilities and
their corresponding operating lease assets are recorded based on the present value of lease payments over the expected
remaining lease term. The operating lease assets also include any lease payments made and adjustments for prepayments
and lease incentives. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the
Company utilized its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a
similar term an amount equal to the lease payments in a similar economic environment. Lease terms may include options to
extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company
reassesses the lease term and remeasures the lease liability if triggering events occur. Lease expense for lease payments is
recognized on a straight-line basis over the lease term.
Impairment of Long-Lived Assets
Long-lived assets consist of property and equipment and right-of-use assets. 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.
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Warrants
The Company accounts for issued warrants, including pre-funded warrants, as either liability or equity. Warrants are
considered liabilities if they are mandatorily redeemable and they require settlement in cash or other assets, or a variable
number of shares. Contracts that may require settlement for cash are liabilities, regardless of the probability of the
occurrence of the triggering event. If warrants do not otherwise require liability classification, the Company assesses
whether the warrants are indexed to its common stock. Liability-classified warrants are measured at fair value on the
issuance date and at the end of each reporting period. Any change in the fair value of the warrants after the issuance date is
recorded in the consolidated statements of operations as a gain or loss. Equity-classified warrants are accounted for at fair
value on the issuance date with no changes in fair value recognized after the issuance date.
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.
The Company records accruals for estimated ongoing research and development 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, estimates provided by vendors, 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.
Advertising Costs
Advertising costs are expensed as incurred.
Accounting for Stock-Based Compensation
The Company measures all stock options and other stock-based awards granted to employees, directors, and
nonemployees at the fair value on the date of the grant. 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. For awards that include
both service and performance conditions, the Company starts recognizing the fair value of the awards as expense when
achievement of the underlying performance conditions is probable, based on the portion of the requisite service period
completed.
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.
Compensation cost related to shares purchased through the Company’s employee stock purchase plan, which is
considered compensatory, is based on the estimated fair value of the shares on the offering date, including consideration of
the discount and the look-back period. The Company estimates the fair value of the shares using a Black-Scholes option
pricing model. Compensation expense is recognized over the six-month withholding period prior to the purchase date.
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.
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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.
Interest and penalties related to income taxes are recorded as part of the income tax provision.
Segment Data
The Company manages its operations as a single segment for the purposes of assessing performance and making
operating decisions. The Company has adopted Accounting Standards Update (“ASU”) No. 2023-07 Segment Reporting -
Improvements to Reportable Segment Disclosures in these Consolidated Financial Statements.
Comprehensive Loss
Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions
and economic events other than those with stockholders. For the years ended December 31, 2024, 2023 and 2022, 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
reallocate undistributed earnings based on the potential impact of dilutive securities, outstanding stock options, and
outstanding restricted stock units, 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 convertible debt securities, the exercise of outstanding stock options, and the vesting of
outstanding restricted stock units. In the diluted net loss per share calculation, net loss would also be adjusted for the
elimination of interest expense on convertible debt securities and the mark-to-market gain or loss on bifurcated conversion
options, if the impact was not anti-dilutive.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board
(“FASB”) and adopted by the Company as of the specified effective date.
In December 2023, the FASB issued ASU No. 2023-09 Income Taxes - Improvements to Income Tax Disclosures.
The amendments require (i) enhanced disclosures in connection with an entity's effective tax rate reconciliation and (ii)
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income taxes paid disaggregated by jurisdiction. The amendments are effective for annual periods beginning after
December 15, 2024. The Company does not expect the adoption of the amendments to have a significant impact on its
consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03 Disaggregation of Income Statement Expenses. The new
standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the
income statement as well as disclosures about selling expenses and is effective for annual reporting periods beginning after
December 15, 2026 and interim reporting periods beginning after December 15, 2027. The Company does not expect the
adoption of the amendments to have a significant impact on its consolidated financial statements.
The Company believes that other recently issued accounting pronouncements that are not yet effective will not have
a material impact on our consolidated financial statements and disclosures.
3. Licensing Agreements and Deferred Revenue
Incept License Agreement (in-licensing)
On September 13, 2018, the Company entered into a second amended and restated license agreement with Incept,
LLC (“Incept”) to use and develop certain intellectual property (the “Incept License”). Under the Incept License, as
amended and restated, the Company was granted a worldwide, perpetual, exclusive license to use specific Incept
technology 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.
Royalties paid under this agreement related to product sales were $1,834, $1,713 and $1,466 for the years ended
December 31, 2024, 2023 and 2022, respectively. Royalties have been charged to cost of product revenue.
AffaMed License Agreement (out-licensing)
On October 29, 2020, the Company entered into a 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 PAXTRAVA, formerly known as OTX-TIC, product candidate (collectively
with DEXTENZA, the “AffaMed Licensed Products”) regarding OAG or OHT (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 (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, a $1,000 milestone in the fourth quarter of 2021, a $2,000 clinical support payment in the second quarter of 2022,
and a $1,000 milestone payment in the second quarter of 2023. The Company is also eligible to receive up to an additional
$87,000 in aggregate 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-
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F-17
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 PAXTRAVA 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 “DEXTENZA Field performance
obligation”);
●
the license, regulatory filings and manufacturing for the Company’s PAXTRAVA product candidate regarding
OAG or OHT in the Territories (the “PAXTRAVA Field performance obligation”);
●
the conduct of a Phase 2 clinical trial of PAXTRAVA (the “Phase 2 Clinical Trial of PAXTRAVA performance
obligation”); and
●
obligations to participate on various joint research, development and project committees, which the Company
has concluded is not a material performance obligation.
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 obligations, 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, 2024, the transaction price was determined to be $16,000. All potential regulatory, development
and commercial milestone payments in the amount of $87,000 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, 2024. Furthermore, under the expected value method the
Company excluded the potential royalties from the transaction price.
The Company recognizes revenue related to the amounts allocated to the DEXTENZA Field performance obligation
and the PAXTRAVA Field performance obligation based on the point in time upon which control of supply is
Table of Contents
F-18
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 recognized $262, $573 and $1,037 of collaboration revenue related to the Phase 2 Clinical Trial of
PAXTRAVA performance obligation for the years ended December 31, 2024, 2023 and 2022, respectively.
As of December 31, 2024, the aggregate amount of the transaction price allocated to the partially unsatisfied Phase 2
Clinical Trial of PAXTRAVA performance obligation was $128. This amount is expected to be recognized as this
performance obligation is satisfied through June 2025.
Deferred revenue activity for the year ended December 31, 2024 was as follows:
Deferred Revenue
Deferred revenue at December 31, 2023
$
14,390
Amounts recognized into revenue
(262)
Deferred revenue at December 31, 2024
$
14,128
4. Cash Equivalents and Restricted Cash
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:
December 31,
December 31,
December 31,
2024
2023
2022
Cash and cash equivalents
$
392,102
$
195,807
$
102,300
Restricted cash (current)
0
150
0
Restricted cash (non-current)
1,614
1,614
1,764
Total cash, cash equivalents and restricted
cash as shown on the statements of cash
flows
$
393,716
$
197,571
$
104,064
The Company held restricted cash as security deposits for its real estate leases.
5. Inventory
Inventory consisted of the following:
December 31,
December 31,
2024
2023
Raw materials
$
214
$
302
Work-in-process
1,489
1,012
Finished goods
1,337
991
$
3,040
$
2,305
Table of Contents
F-19
6. Property and Equipment, net
Property and equipment, net consisted of the following:
December 31,
December 31,
2024
2023
Equipment
$
16,782
$
15,515
Leasehold improvements
14,528
14,699
Furniture and fixtures
1,268
1,268
Software
324
236
Construction in progress
119
281
33,021
31,999
Less: Accumulated depreciation and amortization
(23,632)
(20,260)
$
9,389
$
11,739
Depreciation and amortization expense was $3,786, $2,983 and $2,109 for the years ended the years ended
December 31, 2024, 2023 and 2022, respectively.
7. Leases
The Company leases real estate, including laboratory, manufacturing and office space, and certain equipment. The
Company’s two real estate leases have remaining lease terms of approximately 2.5 years and 3.5 years, respectively. The
Company’s equipment leases have remaining lease terms ranging from approximately 2 to 3.5 years. All of the Company’s
leases qualify as operating leases.
The lease for the Company’s 20,445 square feet of manufacturing space located at 36 Crosby Drive in Bedford,
Massachusetts commenced on June 30, 2018. On October 18, 2022, the Company exercised its option to extend the lease
agreement by an additional five-year term, resulting in a new expiration date of July 31, 2028. Under the terms of the
existing lease, rent for the five-year extension period was based on the current fair market rent for comparable space in the
building and in other similar buildings in the same rental market as of August 1, 2023, the commencement date of the
additional five-year term. The Company estimated the prevailing market rental rates at the time when the Company
exercised the renewal option and included these in the remeasurement of the operating lease asset and the lease liability.
This resulted in an increase of the operating lease assets and operating lease liabilities of $4,284 as of the remeasurement
date. As this is an estimate for variable payments that depend on an index or a rate, the Company has not remeasured the
payments for the five-year renewal period as of the commencement date of the five-year extension term. On June 30, 2023,
the Company and the landlord executed an amendment to this lease, formally extending the term of the lease through July
31, 2028. This lease does not include any additional renewal options.
The lease for the Company’s approximately 70,712 square feet of general office, research and development and
manufacturing space located at 15 Crosby Drive in Bedford, Massachusetts commenced on February 1, 2017 and will
expire on July 31, 2027. The Company has the option to extend the lease for two additional periods of five years each by
delivering written notice of the exercise not earlier than fifteen months nor later than 12 months before expiration of the
original term.
The lease for the Company’s approximately 30,036 square feet of office space located at 24 Crosby Drive in
Bedford, Massachusetts commenced on April 18, 2019 and terminated on March 31, 2024.
Certain equipment leases include options to renew on a month-by-month basis, at the sole discretion of the Company.
Table of Contents
F-20
Recognized lease costs were as follows:
For the
For the
For the
Year Ended
Year Ended
Year Ended
December 31, December 31,
December 31,
2024
2023
2022
Operating lease costs
$
3,027 $
2,663
$
2,369
Variable lease costs
969
987
756
Total lease costs
$
3,996 $
3,650
$
3,125
The minimum lease payments for the next five years and thereafter are expected to be as follows:
December 31,
Year Ending December 31,
2024
2025
2,722
2026
3,086
2027
2,179
2028
750
2029
—
Thereafter
—
Total lease payments
$
8,737
Less: interest
1,459
Present value of operating lease liabilities
$
7,278
The following table summarizes the weighted average remaining lease term and the weighted average incremental
borrowing rate used to determine the operating lease liability:
December 31,
December 31,
2024
2023
Weighted average remaining lease term in years
3.1
4.1
Weighted average discount rate
11.85 %
12.00 %
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
For the
For the
Year Ended
Year Ended
Year Ended
December 31,
December 31,
December 31,
2024
2023
2022
Cash paid for amounts included in the measurement of lease liabilities
$
3,027 $
2,663
$
2,549
Table of Contents
F-21
8. Expenses
The Company recognized $917, $880, and $1,166 of advertising expenses for the years ended December 31, 2024,
2023 and 2022, respectively.
Accrued expenses consisted of the following:
December 31,
December 31,
2024
2023
Accrued payroll and related expenses
$
14,272
$
8,156
Accrued rebates and programs
5,265
5,117
Accrued professional fees
1,879
691
Accrued research and development expenses
11,054
1,488
Accrued interest payable on Convertible Notes (Note 9)
—
10,886
Accrued interest payable on Barings Credit Facility (Note 9)
592
803
Accrued Other
2,055
1,525
Other
$
35,117
$
28,666
9. Financial Liabilities
Barings Credit Agreement
On August 2, 2023 (the “Closing Date”), the Company entered into a credit and security agreement (the “Barings
Credit Agreement”) with Barings Finance LLC (“Barings”), as administrative agent, and the lenders party thereto,
providing for a secured term loan facility for the Company (the “Barings Credit Facility”) in the aggregate principal
amount of $82,474 (the “Total Credit Facility Amount”). The Company borrowed the full amount of $82,474 at closing and
received proceeds of $77,290, after the application of an original issue discount and fees. Indebtedness under the Barings
Credit Facility matures on the earlier to occur of (i) the six-year anniversary of the Closing Date and (ii) the date that is 91
days prior to the maturity date for the Company’s Convertible Notes (as defined below). Indebtedness under the Barings
Credit Facility incurs interest based on the Secured Overnight Financing Rate (“SOFR”), subject to a minimum 1.50%
floor, plus 6.75%. The Company is obligated to make interest payments on its indebtedness under the Barings Credit
Facility on a monthly basis, commencing on the Closing Date; to pay annual administration fees; and to pay, on the
maturity date, any principal and accrued interest that remains outstanding as of such date. In addition, the Company is
obligated to pay a fee in an amount equal to the Total Credit Facility Amount, which amount shall be reduced by the total
amount of interest and principal prepayment fees paid under the Barings Credit Agreement (such fee, the “Barings Royalty
Fee”). The Company is required to pay the Barings Royalty Fee in installments to Barings, for the benefit of the lenders, on
a quarterly basis in an amount equal to three and one-half percent (3.5%) of the net sales of DEXTENZA occurring during
such quarter, subject to the terms, conditions and limitations specified in the Barings Credit Agreement, until the Barings
Royalty Fee is paid in full. The Barings Royalty Fee is due and payable upon a change of control of the Company. The
Company may, at its option, prepay any or all of the Barings Royalty Fee at any time without penalty. In connection with
the Barings Credit Agreement, the Company granted the lenders thereto a first-priority security interest in all assets of the
Company, including its intellectual property, subject to certain agreed-upon exceptions. The Barings Credit Agreement
includes customary affirmative and negative covenants and requires the Company to maintain a minimum liquidity amount
of $20,000. As of December 31, 2024, the Company was not in violation of any of its covenants under the Barings Credit
Agreement.
The Company determined that the embedded obligation to pay the Barings Royalty Fee (the “Barings Royalty Fee
Obligation”) is required to be separated from the Barings Credit Facility and accounted for as a freestanding derivative
instrument subject to derivative accounting. The allocation of proceeds to the Barings Royalty Fee Obligation resulted in a
discount on the Barings Credit Facility. The Company is amortizing the discount to interest expense over the term of the
Barings Credit Facility using the effective interest method. Accrued or paid Barings Royalty Fees are included in the
change in fair value of derivative liabilities on the consolidated statements of operations and comprehensive loss. For the
years ended December 31, 2024 and 2023, Barings Royalty Fees were $2,221 and $901, respectively.
Table of Contents
F-22
A summary of the Barings Credit Facility is as follows:
December 31,
December 31,
2024
2023
Barings Credit Facility
$
82,474
82,474
Less: unamortized discount
(13,969)
(16,687)
Total
$
68,505
65,787
As of December 31, 2024, the full principal for the Barings Credit Facility of $82,474 was due for repayment in
2029.
Convertible Notes
On March 1, 2019, the Company issued $37,500 of convertible notes (as amended, the “Convertible Notes”).
On March 28, 2024, the Company issued 5,769,232 shares of its common stock with a total fair value of $52,500 to
the holder of the Convertible Notes in connection with the conversion of the principal amount of the Convertible Notes (the
“Conversion”) and paid the holder $11,361 for accrued interest. The extinguishment of obligations under the Convertible
Notes and the resulting derecognition of the principal of the Convertible Notes ($37,500), the unamortized discount
($27,950), and the Conversion Option Derivative Liability ($15,000), resulted in a net loss of $27,950, which was charged
to gains and losses on extinguishment of debt, net on the consolidated statements of operations and comprehensive loss for
the year ended December 31, 2024.
Concurrently with entering into the Barings Credit Agreement, on August 2, 2023, the Company and the holders of
the Convertible Notes extended the maturity of the Convertible Notes, which would otherwise have matured on March 1,
2026, to a date 91 days following the maturity of the indebtedness under the Barings Credit Facility, unless earlier
converted, repurchased or redeemed (the “Amendment”). The Company accounted for the Amendment as an
extinguishment of debt in accordance with the guidance in Accounting Standards Codification Topic 470-50 Debt (“ASC
470-50”) and derecognized all liabilities related to the Convertible Notes, including the outstanding principal less
unamortized discount, a derivative liability, and accrued interest, with a total carrying value of $51,090 as of the date of the
Amendment. The Company determined that, after the Amendment, the embedded conversion option continues to be
required to be separated from the Convertible Notes and accounted for the embedded conversion option as a freestanding
derivative instrument subject to derivative accounting (the “Conversion Option Derivative Liability”). The total fair value
of the Convertible Notes on August 2, 2023 after the Amendment, including the conversion option, was $36,183. The
Company recognized the Convertible Notes and the Conversion Option Derivative Liability after the Amendment at their
fair values as of the date of the Amendment of $18,482 and $17,701, respectively. A portion of the fair value of the
Convertible Notes as of the date of the Amendment of $9,943 was presented in accrued expenses and other current
liabilities on the consolidated balance sheets as of December 31, 2023 because the Convertible Notes were convertible at
that date, and this amount represented interest that was accrued before the Amendment and that would be payable in cash
upon conversion. The allocation of a portion of the total fair value of the Convertible Notes to the Conversion Option
Derivative Liability results in a discount on the Convertible Notes. Application of ASC 470-50 resulted in a gain on
extinguishment of $14,907, which was charged to gains and losses on extinguishment of debt, net on the consolidated
statements of operations and comprehensive loss for the year ended December 31, 2023.
The holders of the Convertible Notes were entitled to convert all or part of the outstanding principal amount of their
Convertible Notes into shares of the Company’s common stock, par value $0.0001 per share, prior to maturity based on
certain terms and conditions. The Company determined that the embedded conversion option was required to be separated
from the 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 Convertible Notes. The Company amortized the
discount to interest expense over the term of the Convertible Notes using the effective interest method.
The Company presented accrued interest in accrued current liabilities because the notes were convertible and the
interest was payable in cash. The effective annual interest rate for the Convertible Notes was 19.4% and 14.8% for the
years ended December 31, 2023 and 2022, respectively.
Table of Contents
F-23
A summary of the Convertible Notes at December 31, 2023 is as follows:
December 31,
2023
Convertible Notes
$
37,500
Less: unamortized discount and current portion
(28,362)
Total
$
9,138
Interest recognized with regard to the Convertible Notes was as follows:
Year Ended December 31,
2024
2023
2022
Coupon Interest
$
475
2,130
2,281
Amortization of discount
412
2,042
2,314
Total
$
887
4,172
4,595
Notes Payable
The Company entered into a credit and security agreement in 2014 (as amended, the “MidCap Credit Agreement”)
establishing a credit facility (as amended, the “MidCap Credit Facility”). The Company satisfied its obligations under the
MidCap Credit Agreement in August 2023, as discussed below. In connection with its satisfaction of its obligations, the
Company extinguished the MidCap Credit Facility, and all liens and security interests securing the indebtedness under the
MidCap Credit Agreement were released.
In June 2021, the Company entered into a Fourth Amended and Restated Credit and Security Agreement (the “Fourth
Amendment”) to amend the terms of its debt with existing lenders for total indebtedness of $20,833 and borrowed an
incremental $4,167, for a total of $25,000. Under the Fourth Amendment, the Company was required to make interest-only
payments through April 2024. Commencing in May 2024, the Company was required to make 19 equal monthly
installments of principal in the amount of $1,042, plus interest, then on the maturity date, November 30, 2025 the
remaining balance of $5,208 plus the exit fee, as defined below. Amounts borrowed under the MidCap Credit Facility
based on the Fourth Amendment were initially at LIBOR base rate, subject to 1.00% floor, plus 6.75%. In addition, a final
payment (exit fee) equal to 3.5% of amounts drawn under the MidCap Credit Facility, or $875 based on borrowings of
$25,000, was due upon the maturity date of November 30, 2025. The Company had accrued the exit fee through November
30, 2025. The Company accounted for the Fourth Amendment as a modification in accordance with the guidance in ASC
470-50 Debt. Amounts paid to the lenders were recorded as debt discount and a new effective interest rate was established.
On March 12, 2023, the Company requested, and received, a protective advance of $2,000 under the MidCap Credit
Agreement as a short-term bridge loan in response to the closure of Silicon Valley Bank by the California Department of
Financial Protection and Innovation. This protective advance was deemed a credit extension. The Company repaid the full
principal amount of $2,000 in March 2023.
On March 31, 2023, the Company entered into Amendment No. 1 to the MidCap Credit Agreement (“Amendment
No. 1”) to replace the LIBOR-based interest rate provisions of the MidCap Credit Agreement with interest rate provisions
based on SOFR, establish a benchmark replacement mechanism and make additional administrative updates. The Company
accounted for Amendment No. 1 as a modification in accordance with the guidance in ASC 470-50 Debt. Application of
the modification accounting guidance did not have a material effect on the carrying amount of the long-term notes payable.
On May 4, 2023, the Company entered into Amendment No. 2 to the MidCap Credit Agreement (“Amendment No.
2”). Amendment No. 2 provided that the Company may maintain up to 50% of its consolidated cash and cash equivalents
with banks or financial institutions other than Silicon Valley Bank and made additional administrative updates.
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F-24
In August 2023, in connection with the Company’s establishment of the Barings Credit Facility, the Company paid
an aggregate of $26,157 to MidCap Financial Trust and the other lenders party to the MidCap Credit Agreement,
comprised of $25,017 in principal and interest accrued thereunder and $1,140 in exit and prepayment fees, in satisfaction
of the Company’s obligations under the MidCap Credit Agreement. In connection with the payment, all liens and security
interests securing the indebtedness under the MidCap Credit Agreement were released. The extinguishment of the MidCap
Credit Facility has resulted in a loss of $717, which was charged to gains and losses on extinguishment of debt, net on the
consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.
10. Derivatives
Barings Credit Agreement
The Barings Credit Agreement (Note 9) contains an embedded Royalty Fee Obligation that meets the criteria to be
bifurcated and accounted for separately from the Barings Credit Facility (the "Royalty Fee Derivative Liability"). The
Royalty Fee Derivative Liability was recorded at fair value upon the entering into the Barings Credit Facility and is
subsequently remeasured to fair value at each reporting period. The Royalty Fee Derivative Liability was initially valued
and is remeasured using a “with-and-without” method. The “with-and-without” methodology involves valuing the whole
instrument on an as-is basis with the embedded Royalty Fee Obligation and then valuing the instrument without the
embedded Royalty Fee Obligation. Royalty payments are estimated using a Monte Carlo simulation. Refer to Note 11 for
details regarding the determination of fair value.
A roll-forward of the Royalty Fee Derivative Liability is as follows:
As of
Balance at December 31, 2023
$
12,389
Change in fair value
857
Balance at December 31, 2024
$
13,246
Convertible Notes
The Convertible Notes (Note 9) contained the Conversion Option Derivative Liability, an embedded conversion
option that met the criteria to be bifurcated and accounted for separately from the Convertible Notes. The Conversion
Option Derivative Liability was recorded at fair value upon the issuance of the Convertible Notes and was subsequently
remeasured to fair value at each reporting period. The Conversion Option Derivative Liability was initially valued and
subsequently remeasured using a “with-and-without” method. The “with-and-without” methodology involved valuing the
whole instrument on an as-is basis with the embedded conversion option 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 was the fair value of the derivative, recorded as the Conversion
Option Derivative Liability. Refer to Note 11 for details regarding the determination of fair value.
A roll-forward of the Conversion Option Derivative Liability is as follows:
As of
Balance at December 31, 2023
$
17,598
Change in fair value
(2,598)
Balance at March 28, 2024
15,000
Extinguishment in connection with Conversion
(15,000)
Balance at December 31, 2024
$
—
11. Risks and Fair Value
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 its cash and cash equivalents balances at two accredited
financial institutions, 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.
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F-25
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 product sales could be adversely affected by a significant interruption in the
supply of any of the components of these products.
Three specialty distributor customers accounted for the following percentages of the Company’s total revenue:
Year Ended December 31,
2024
2023
2022
Customer 1
44 %
49 %
44 %
Customer 2
23
25
25
Customer 3
10
11
17
Three specialty distributor customers accounted for the following percentages of the Company’s accounts
receivables:
As of
December 31,
December 31,
2024
2023
Customer 1
46 %
50 %
Customer 2
28
28
Customer 3
8
11
Change in Fair Value of Derivative Liabilities
Other income (expenses) from the change in the fair values of derivative liabilities as presented on the Company’s
consolidated statements of operations and comprehensive loss includes the following:
Year Ended
December 31,
2024
2023
2022
Change in the fair value of the Conversion Option Derivative Liability
$
2,598
$
(4,502) $
13,841
Change in the fair value of Royalty Fee Derivative Liability
(857)
215
—
Barings Royalty Fee
(2,221)
(901)
—
Total
$
(480)
$
(5,188)
13,841
Table of Contents
F-26
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, 2024 and 2023 and indicate the level of the fair value hierarchy utilized to
determine such fair value:
Fair Value Measurements as of
December 31, 2024 Using:
Level 1
Level 2
Level 3
Total
Assets:
Cash equivalents:
Money market funds
$ 378,112
$
—
$
—
$ 378,112
Liability:
Derivative liability
$
—
$
—
$ 13,246
$
13,246
Fair Value Measurements as of
December 31, 2023 Using:
Level 1
Level 2
Level 3
Total
Assets:
Cash equivalents:
Money market funds
$ 187,951
$
—
$
—
$ 187,951
Liability:
Derivative liabilities
$
—
$
—
$ 29,987
$
29,987
During the years ended December 31, 2024 and 2023, there were no transfers between levels of the fair value
hierarchy.
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.
Barings Credit Agreement and Royalty Fee Derivative Liability
At December 31, 2024, the Barings Credit Facility, net of the Royalty Fee Derivative Liability, was carried at
amortized cost totaling $69,097, comprised of the $68,505 non-current liability (Note 9) and $592 accrued interest (Note
8). The estimated fair value of the Barings Credit Facility, without the Royalty Fee Derivative Liability, was $73,608 at
December 31, 2024. At December 31, 2023, the Barings Credit Facility, net of the Royalty Fee Derivative Liability, was
carried at amortized cost totaling $66,590 comprised of the $65,787 non-current liability (Note 9) and $803 accrued
interest (Note 8). The estimated fair value of the Barings Credit Facility, without the Royalty Fee Derivative Liability, was
$72,295 at December 31, 2023.
The fair value of the Royalty Fee Derivative Liability is estimated using a Monte Carlo simulation. The use of this
approach requires the use of Level 3 unobservable inputs. The main inputs when determining the fair value of the Royalty
Fee Derivative Liability are the amount and timing of the expected future revenue of the Company, the estimated volatility
of these revenues, and the discount rate corresponding to the risk of revenue. 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.
The main inputs to valuing the Royalty Fee Derivative Liability are as follows:
As of
December 31,
December 31,
2024
2023
Revenue volatility
64.0 %
67.0 %
Revenue discount rate
16.0 %
15.8 %
Table of Contents
F-27
The main inputs to valuing the Royalty Fee Derivative Liability as of the Closing Date were revenue volatility of
61.0%, and a revenue discount rate of 15.8%.
Convertible Notes and Conversion Option Derivative Liability
At December 31, 2023, the Convertible Notes, net of the Conversion Option Derivative Liability, were carried at
amortized cost totaling $20,024, comprised of the $9,138 non-current liability (Note 9) and $10,886 accrued interest (Note
8). The estimated fair value of the Convertible Notes, without the Conversion Option Derivative Liability, was $22,665 at
December 31, 2023.
The fair value of the Convertible Notes with and without the conversion option as of December 31, 2023 and
previous periods was estimated using a binomial lattice approach. The use of this approach required the use of Level 3
unobservable inputs. The main input when determining the fair value of the Convertible Notes was the bond yield that
pertained to the host instrument without the conversion option. The significant assumption used in determining the bond
yield was the market yield movements of a comparable instrument issued as of the valuation date, which was assessed and
updated each period. The main input when determining the fair value for disclosure purposes was the bond yield which was
updated each period to reflect the yield of a comparable instrument issued as of the valuation date. The estimated fair value
presented was not necessarily indicative of an amount that could have been realized in a current market exchange. The fair
value of the Conversion Option Derivative Liability immediately before the Conversion was determined based on the
intrinsic value of the separated conversion option.
The main inputs to valuing the Convertible Notes with the conversion option are as follows:
As of
December 31,
2023
Company's stock price
$
4.46
Volatility
88.4 %
Bond yield
20.8 %
The bond yield was derived by making the fair value of the 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.
12. Equity
Preferred Stock
The Amended and Restated Certificate of Incorporation has 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, 2024 and 2023.
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. In June 2021, the Company adopted an amendment to the amended and restated certificate of incorporation
increasing the number of its authorized shares of its common stock to 200,000,000 shares, and in June 2024, the Company
adopted a further amendment to the amended and restated certificate of incorporation increasing the number of its
authorized shares of its common stock by 200,000,000 shares to 400,000,000 shares.
On February 21, 2024, the Company entered into a securities purchase agreement (the “Securities Purchase
Agreement”) with certain institutional accredited investors (the “Investors”), pursuant to which the Company issued and
sold to the Investors in a private placement an aggregate of 32,413,560 shares of the Company’s common stock, par value
$0.0001 per share (the “Shares”), at a price of $7.52 per share, and, to certain Investors in lieu of Shares, pre-funded
warrants to purchase 10,805,957 shares of the Company’s common stock (the “Pre-Funded Warrants”), at a price
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F-28
of $7.519 per Pre-Funded Warrant (the “2024 Private Placement”). Each Pre-Funded Warrant issued in the 2024 Private
Placement has an exercise price of $0.001 per share, is currently exercisable and will remain exercisable until the Pre-
Funded Warrant is exercised in full. The 2024 Private Placement closed on February 26, 2024. The Company received total
net proceeds from the 2024 Private Placement of approximately $316,353 after deducting placement agent fees and
offering expenses. The Company accounts for the Pre-Funded Warrants as a component of permanent equity. In connection
with entering into the Securities Purchase Agreement, also on February 21, 2024, the Company entered into a registration
rights agreement with the Investors, pursuant to which the Company agreed to register for resale the Shares and the shares
of the Company’s common stock issuable upon exercise of the Pre-Funded Warrants (together with the Shares, the
“Registrable Securities”). The Company filed a registration statement regarding the Registrable Securities on Form S-3
with the SEC on March 25, 2024.
On March 28, 2024, the Company issued 5,769,232 shares of its common stock to the holder of the Convertible
Notes in connection with the Conversion. The newly issued shares of common stock were valued at fair value, being the
closing price of the Company’s common stock on that day, resulting in an increase in par value of the Company’s common
stock of $1 and an increase in additional paid-in capital of $52,499.
On April 5, 2019, the Company entered into an Open Market Sales Agreement (the “2019 Sales Agreement”) with
Jefferies LLC (“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. The Company did not sell any shares of common stock
under the 2019 Sales Agreement in the twelve months ended December 31, 2021. On August 9, 2021, the Company and
Jefferies mutually terminated the 2019 Sales Agreement and entered into another Open Market Sale Agreement (the “2021
Sales Agreement”) under which the Company may offer and sell shares of common stock of the Company having an
aggregate offering price of up to $100,000 from time to time through Jefferies, acting as agent. The Company did not offer
or sell shares of its common stock under the 2021 Sales Agreement during the twelve months ended December 31, 2024
and 2022, respectively. In the twelve months ended December 31, 2023, the Company sold 1,514,926 shares of common
stock under the 2021 Sales Agreement, resulting in gross proceeds to the Company of $9,897, and net proceeds, after
accounting for issuance costs, of $9,532.
On December 13, 2023, the Company entered into an underwriting agreement with Jefferies, BofA Securities, Inc.
and Piper Sandler & Co. (collectively “the Underwriters”) in connection with an underwritten public offering of
30,800,000 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 4,620,000 shares of common stock at the public offering
price, less the underwriting discounts and commissions. On December 17, 2023, the Company sold all 35,420,000 shares
of common stock and closed this underwritten public offering. The public offering price of the shares in this offering was
$3.25 per share, and the Underwriters purchased all of the shares from the Company at a price of $3.055 per share. After
deducting underwriting discounts and commissions and offering expenses, the Company received net proceeds from the
offering of $107,725.
As of December 31, 2024, the Company had reserved 9,260,579 shares of common stock for future grants of stock-
based awards under its stock-based compensation plans (Note 13).
13. Stock-Based Awards
For the years ended December 31, 2024 and 2023, the Company had three stock-based compensation plans under
which it was able to grant stock-based awards, the 2021 Stock Incentive Plan, as amended (the “2021 Plan”), the 2019
Inducement Stock Incentive Plan, as amended (the “2019 Inducement Plan”), and the 2014 Employee Stock Purchase Plan
(the “ESPP”) (collectively the “Stock Plans”). Certain inducement awards made prior to inception of the 2019 Inducement
Plan were issued outside of the Stock Plans. The purpose of the Stock Plans is to provide incentives to employees,
directors, and nonemployee consultants. The 2021 Plan and the 2019 Inducement Plan provide for the grant of non-
statutory stock options, restricted stock awards, restricted stock units (“RSUs”), stock appreciation rights and other stock-
based awards. The 2021 Plan also provides for the grant of incentive stock options.
As of December 31, 2024 and 2023, respectively, the Company had a number of vested stock awards outstanding
that were granted under the Company’s 2014 Stock Incentive Plan (the “2014 Plan”). Effective as of the adoption of the
2021 Plan on June 18, 2021 by the Company’s stockholders, no new awards have been granted under the 2014 Plan.
However, as of December 31, 2024, all then-outstanding awards under the 2014 Plan remained in effect and continued to
be governed by the terms of the 2014 Plan. As of December 31, 2024 and 2023, respectively, the Company had an
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F-29
immaterial number of vested stock awards outstanding that were granted under the Company’s 2006 Stock Incentive Plan
(the “2006 Plan”). Effective as of the adoption of the 2014 Plan by the Company’s stockholders in 2014, no new awards
have been granted under the 2006 Plan. As of December 31, 2024, all then outstanding awards under the 2006 Plan
remained in effect and continued to be governed by the terms of the 2006 Plan.
2021 Plan - The number of shares initially reserved for issuance under the 2021 Plan was 6,000,000 shares of
common stock; plus 456,334 shares remaining available for grant under the 2014 Plan as of immediately prior to the
effective date of the 2021 Plan and 9,766,336 shares subject to awards granted under the 2014 Plan or the 2006 Plan, which
awards expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original
issuance price pursuant to a contractual repurchase right (subject to certain limitations). On June 16, 2022, the Company’s
stockholders approved an amendment (“Amendment No. 1”) to the Company’s 2021 Plan. Amendment No. 1 increased the
number of shares of common stock that is reserved for issuance under the 2021 Plan by 3,600,000. On June 14, 2023, the
Company’s stockholders approved an amendment (“Amendment No. 2”) to the Company’s 2021 Plan. Amendment No. 2
increased the number of shares of common stock that is reserved for issuance under the 2021 Plan by 3,900,000. On June
12, 2024, the Company’s stockholders approved an amendment (“Amendment No. 3”) to the Company’s 2021 Plan.
Amendment No. 3 increased the number of shares of common stock that is reserved for issuance under the 2021 Plan by
7,000,000. As of December 31, 2024, 8,019,151 shares remained available for issuance under the 2021 Plan.
2019 Inducement Plan - Awards under the 2019 Inducement Plan may only be granted to persons who (a) were not
previously an employee or 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. On February 20, 2024, the Company’s board of directors amended the
2019 Inducement Plan to increase the aggregate number of shares issuable thereunder from 1,054,000 to 3,804,000 shares
of common stock. On April 16, 2024, the board of directors of the Company further amended the 2019 Inducement Plan to
increase the aggregate number of shares issuable thereunder from 3,804,000 to 4,804,000 shares of common stock. On
October 4, 2024, the board of directors of the Company further amended the 2019 Inducement Plan to increase the
aggregate number of shares issuable thereunder from 4,804,000 to 6,054,000 shares of common stock. As of December 31,
2024, 848,373 shares remained available for issuance under the 2019 Inducement Plan.
ESPP – The number of shares initially reserved for issuance under the ESPP was 207,402 shares of common stock.
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, 2023, the number of shares available for issuance under the ESPP increased by 207,402. On January 1, 2024,
the number of shares available for issuance under the ESPP increased from 398,784 to 606,186. As of December 31, 2024,
393,055 shares of common stock remained available for issuance.
Stock options granted pursuant to the Stock Plans, excluding awards under the ESPP, are granted at exercise prices
not to be less than the fair value of common shares as of the date of grant. They generally require a service period of 4
years and generally vest monthly, or 1/4 on the first anniversary of the grant date, with the remainder vesting monthly over
the remaining three years. Stock Options granted under the 2019 Inducement Plan may in addition be subject to
performance-based vesting. The maximum contractual term of Stock Options granted under the Stock Plans is generally 10
years. RSUs granted pursuant to the Stock Plans generally require a service period of 3 years and generally vest 1/3 on
each anniversary of the grant date. Certain RSUs granted to certain newly hired executive and senior-level employees in
the year ended December 31, 2024 require a service period of 3 years and vest quarterly. An immaterial number of RSUs
granted to employees in the year ended December 31, 2024 vest fully on the first anniversary of the grant and are, in
addition, subject to performance conditions.
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F-30
Valuation of Awards
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 utilizes the simplified method because the Company does 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 non-employees 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. The Company uses its historical volatility to
estimate expected volatility.
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:
Year Ended
December 31,
2024
2023
2022
Risk-free interest rate
4.11 % 3.72 % 2.10 %
Expected term (in years)
6.0
6.0
6.0
Expected volatility
80.12 % 77.32 % 81.14 %
Expected dividend yield
0.0 %
0.0 %
0.0 %
For RSUs, the grant date fair value is the closing price of the Company’s stock on the grant date.
Stock Options
The following table summarizes the Company’s stock option activity:
Weighted
Weighted
Average
Average
Remaining
Aggregate
Shares Issuable
Exercise
Contractual
Intrinsic
Under Options
Price
Term
Value
(In years)
Outstanding as of December 31, 2023
16,136,791
$
7.51
6.10
$
3,364
Granted
9,207,383
7.62
Exercised
(3,112,976)
4.74
Cancelled/forfeited
(2,343,515)
8.07
Outstanding as of December 31, 2024
19,887,683
$
7.93
6.05
$ 41,570
Options vested and expected to vest as of December 31, 2024
18,406,424
$
8.10
5.89
$ 37,139
Options exercisable as of December 31, 2024
11,419,466
$
8.26
3.90
$ 27,814
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 $11,102, $275
and $186 during the years ended December 31, 2024, 2023 and 2022, respectively.
The weighted average grant date fair value of stock options granted during the years ended December 31, 2024, 2023
and 2022 was $5.59, $2.74 and $4.95 per share, respectively.
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F-31
RSUs
The following table summarizes the Company’s activity of unvested RSUs:
Weighted
average
grant date
RSU's
fair value
Unvested balance at December 31, 2023
1,627,341
$
4.40
Granted
3,628,824
7.89
Released
(1,277,398)
5.84
Cancelled/forfeited
(589,163)
4.79
Unvested balance at December 31, 2024
3,389,604
$
7.52
Each RSU is equivalent to one share of common stock upon vesting. Holders of RSUs are not entitled to vote on any
matters and are not entitled to dividends.
Stock-based Compensation
The Company recorded stock-based compensation expense in the following expense categories of its statements of
operations and comprehensive loss:
Year Ended December 31,
2024
2023
2022
Research and development
$ 9,276
$ 4,508
$ 4,166
Selling and marketing
3,071
3,682
4,684
General and administrative
20,762
9,635
8,114
$ 33,109
$ 17,825
$ 16,964
As of December 31, 2024, the Company had an aggregate of $53,813 of unrecognized stock-based compensation
cost, which is expected to be recognized over a weighted average period of 2.8 years.
14. Employee Benefits
The Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code
(the “401(k) Plan”). The 401(k) Plan covers substantially all employees who meet minimum age and service requirements
and allows participants to defer a portion of their annual compensation based on a pre-tax or post-tax basis as elected by
the participants. Company contributions to the plan may be made at the discretion of the board of directors. For the years
ended December 31, 2024, 2023 and 2022, the Company has made contributions of $675, $625, and $593, respectively, to
the 401(k) Plan.
15. Income Taxes
During the years ended December 31, 2024, 2023 and 2022, 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.
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F-32
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as
follows:
Year Ended December 31,
2024
2023
2022
Federal statutory income tax rate
21.0 % 21.0 % 21.0 %
Research and development tax credits
3.5
3.6
5.4
State taxes, net of federal benefit
1.8
2.0
2.6
Stock-based compensation
(1.9)
(2.3)
(2.1)
Derivative liability
—
—
2.7
Change in tax rate
—
(0.4)
1.4
Debt extinguishment
(1.9)
—
—
Other
(1.1)
(0.2)
(0.1)
Change in the valuation allowance
(21.4)
(23.7)
(30.9)
Effective income tax rate
— %
— %
— %
Changes in the valuation of the Royalty Fee Derivative Liability, except to the extent that they relate to actual
royalties paid or accrued, do not provide a future tax benefit. To the extent the deferred tax asset related to the Royalty Fee
Derivative Liability exceeds the deferred tax liability related to the Barings Credit Agreement, the excess is recorded as a
permanent item.
Net deferred tax assets consisted of the following:
December 31,
2024
2023
Deferred tax assets:
Net operating loss carryforwards
$ 134,571
$ 120,971
Tax credit carryforwards
29,311
22,597
Capitalized start-up costs
—
121
Capitalized research and development expenses, net - Sec. 59(e):
1,814
3,570
Capitalized research and development expenses, net Sec. 174
38,244
19,491
Operating lease liabilities
1,693
1,970
Derivative liability
3,082
6,981
Stock-based Awards
9,976
10,443
Accrued expenses and other
10,186
8,433
Total deferred tax assets
228,877
194,577
Valuation allowance
(225,248)
(183,737)
Net deferred tax assets
3,629
10,840
Deferred tax liabilities:
Operating lease right of use assets
(1,383)
(1,507)
Convertible Notes
—
(6,603)
Barings Credit Facility
(2,246)
(2,730)
Total deferred tax liabilities
(3,629)
(10,840)
Net deferred tax assets
$
—
$
—
Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2024, 2023 and
2022, resulting primarily from increases in net operating loss carryforwards, additions to and amortization of capitalized
research and development expenses, and increases in research and development tax credit carryforwards, were as follows:
Year Ended December 31,
2024
2023
2022
Valuation allowance as of beginning of year
$ 183,737
$ 164,546
$ 142,637
Increases recorded to income tax provision
41,511
19,191
21,909
Valuation allowance as of end of year
$ 225,248
$ 183,737
$ 164,546
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F-33
As of December 31, 2024, the Company had net operating loss (“NOL”) carryforwards for federal and state income
tax purposes of $538,025 and $385,224, 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 on or after December
31, 2018, which amount to a total of $412,220, can be carried forward indefinitely, although the deduction for such NOLs
is limited to 80% of current year taxable income. As of December 31, 2024, the Company also had available research and
development tax credit carryforwards for federal and state income tax purposes of $19,666 and $11,848, 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 (“Section 382”) 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 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, 2024, 2023 and 2022.
The Company has not recorded any amounts for unrecognized tax benefits as of December 31, 2024, 2023 or 2022.
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 that are expected to have a material impact on the Company’s Consolidated
Financial Statements. The Company’s tax years are still open under statute from the Company’s fiscal year 2021 to the
present. Earlier years may be examined to the extent that tax credit or net operating loss carryforwards are used in future
periods.
16. Net Loss Per Share
Basic net loss per share attributable to common stockholders was calculated as follows for the years ended
December 31, 2024, 2023 and 2022:
Year Ended
December 31,
2024
2023
2022
Numerator:
Net loss attributable to common stockholders
$
(193,506)
$
(80,736)$
(71,038)
Denominator:
Weighted average common shares outstanding, basic
158,265,162
79,827,362 76,875,035
Net loss per share - basic
$
(1.22)
$
(1.01)$
(0.92)
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F-34
Diluted net loss per share was calculated as follows for the years ended December 31, 2023 and 2022:
Year Ended
December 31,
2023
2022
Net loss attributable to common stockholders, basic
$
(80,736) $
(71,038)
Interest expense on Convertible Notes
4,172
4,596
Gain on extinguishment of debt (Note 9)
(14,907)
—
Change in fair value of derivative liability
4,502
(13,841)
Net loss attributable to common stockholders, diluted
$
(86,969) $
(80,283)
Weighted average common shares outstanding, basic
79,827,362
76,875,035
Shares issuable in connection with conversion of Convertible Notes, as if
converted
5,769,232
5,769,232
Weighted average common shares outstanding, diluted
85,596,594
82,644,267
Net loss per share attributable to common stockholders, diluted
$
(1.02) $
(0.97)
For the year ended December 31, 2024, there was no dilutive impact from potentially issuable common shares.
Therefore, diluted net loss per share was the same as basic net loss per share. As of December 31, 2024, the Pre-Funded
Warrants (Note 12) are included in the calculation of basic and diluted net loss per share.
The Company excluded the following common stock equivalents, outstanding as of December 31, 2024, 2023 and
2022 from the computation of diluted net loss per share attributable to common stockholders for the years ended
December 31, 2024, 2023 and 2022 because they had an anti-dilutive impact due to the net loss incurred for the periods.
December 31,
2024
2023
2022
Options to purchase common stock
19,887,683
16,136,791
13,669,711
Restricted stock units
3,389,604
1,627,341
1,092,682
23,277,287
17,764,132
14,762,393
17. Segment Reporting
The Company operates as a single operating segment. Its operations consist of developing and commercializing
innovative therapies for retinal diseases and other eye conditions based on its ELUTYX proprietary bioresorbable
hydrogel-based formulation technology.
Resources are allocated and performance is assessed by the Company’s Chief Executive Officer and the Company’s
Chief Financial Officer and Chief Operating Officer, who the Company has determined to be, collectively, the Company’s
Chief Operating Decision Maker (“CODM”).
The Company’s research and development function is responsible for research and discovery of new product
candidates, and the pre-clinical and clinical development of, and related registration efforts for, the Company’s product
candidates. The Company’s operations and technical function is responsible for supply chain, the manufacturing of the
Company’s commercial products and clinical trial material, and facilities. The Company’s sales and marketing function is
responsible for the commercialization of its products and market access activities. The Company’s operations are supported
by corporate functions. Managing and allocating resources on a total company basis enables the Company’s CODM to
assess the overall level of resources available and how to best deploy these resources across functions and development
projects in line with the Company’s strategy. Consistent with this approach, the CODM uses consolidated, single-segment
financial information for the purposes of developing budgets and forecasts, assessing performance, allocating resources,
and setting incentive targets.
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F-35
The accounting policies for the Company’s one segment are the same as those described in Note 2 Summary of
Significant Accounting Policies. The CODM evaluates the performance of its one segment and allocates resources based on
Net Loss.
The following table provides information about the Company’s single segment:
Year Ended December 31,
2024
2023
2022
Revenue
$
63,723
$
58,443
$
51,494
Cost of Product Revenue
5,626
5,281
4,540
Research & Development (a)
Direct Program Expenses
AXPAXLI for wet AMD
57,507
8,750
5,296
Other clinical and preclinical programs
8,099
11,191
7,892
Unallocated expenses
Personnel costs
28,625
22,617
20,854
All other costs
16,236
5,720
8,510
Selling & Marketing (a)
38,029
36,564
34,920
General & Administrative (a)
38,861
23,838
23,766
Facilities (b)
5,626
6,056
5,297
Stock-based compensation
33,109
17,825
16,964
Depreciation
3,786
2,983
2,109
Interest income
20,282
3,983
798
Interest expense
(13,577)
(11,338)
(7,022)
Other non-operating items
(28,430)
9,001
13,840
Net Loss
$
(193,506)
$
(80,736)
$
(71,038)
(a) excluding stock-based compensation, depreciation, and facilities expenses
(b) excluding stock-based compensation and depreciation
For the years ended December 31, 2024, 2023 and 2022, respectively, the Company has generated all of its Product
Revenue, net, in the United States. Collaboration revenue is attributable to a customer in China (Note 3). All of the
Company’s long-lived assets were located in the United States. Refer to Note 11 for information regarding the Company’s
major customers.
18. Commitments and Contingencies
Indemnification Agreements
In the ordinary course of business, the Company enters into agreements that may include indemnification provisions.
Pursuant to such agreements, the Company may indemnify, hold harmless and defend indemnified parties for losses
suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party
actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential
amount of future payments the Company could be required to make under these provisions is not determinable. To date, the
Company has not incurred any material costs as a result of such indemnifications.
19. Related Party Transactions
The Company has engaged Boston Image Reading Center LLC (“BIRC”) to provide certain clinical development-
related services to the Company. Nadia Waheed, M.D. M.P.H., who has served as the Company’s Chief Medical Officer
since June 1, 2024, is a Director of BIRC. For the year ended December 31, 2024, the Company incurred fees for clinical
development-related services rendered by BIRC while being deemed a related party since June 1, 2024 of $81. As of
December 31, 2024, there was $0 and $5 recorded in accounts payable and accrued expenses for BIRC, respectively.
Table of Contents
F-36
Jeffrey Heier, M.D., a former member of the Company’s Board of Directors and the Company’s current Chief
Scientific Officer, and Peter Kaiser, M.D., the Company’s Chief Development Officer since April 16, 2024, are each
affiliated with i2Vision, Inc. and its affiliated entities (collectively “i2Vision”). The Company has engaged i2Vision to
provide services with respect to the clinical advancement of AXPAXLI. For the year ended December 31, 2024, the
Company incurred fees and expenses related to services rendered by i2Vision of $2,368, including $526 for pass-through
costs. The Company incurred fees and expenses related to services rendered by i2Vision of $271, including $102 for pass-
through costs, for the year ended December 31, 2023, and $131, including $0 for pass-through costs, for the year ended
December 31, 2022. As of December 31, 2024 and 2023, there was $132 and $0 recorded in accounts payable for i2Vision,
respectively. As of December 31, 2024 and 2023, there was $383 and $0 recorded in accrued expenses for i2Vision,
respectively. As of December 31, 2024 and 2023, there was $176 and $0 recorded in prepaid expenses and other current
assets for i2Vision, respectively.
The Company has engaged Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) to provide certain legal
services to the Company. Christopher White, who served as the Company’s Chief Business Officer until March 6, 2024, is
the brother of a partner at WilmerHale who has not participated in providing legal services to the Company. Upon Mr.
White’s departure, WilmerHale ceased to be a related party to the Company. For the year ended December 31, 2024, the
Company incurred fees for legal services rendered by WilmerHale while being deemed a related party through March 31,
2024 of $1,080. The Company incurred fees for legal services rendered by WilmerHale of approximately $1,472 and $959
for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, there was $298 recorded in
accounts payable for WilmerHale. As of December 31, 2023, there was $0 recorded in accrued expenses for WilmerHale.
The Company had engaged Heier Consulting, LLC (“Heier Consulting”), an entity affiliated with Dr. Heier, to
provide advice or expertise on one or more of the Company’s development-stage drug or medical device products relating
to retinal diseases or conditions under a consultant agreement (the “Consultant Agreement”). On February 21, 2024, the
Company entered into an employment agreement with Dr. Heier (the “Heier Employment Agreement”) under which Dr.
Heier agreed to serve as Chief Scientific Officer of the Company. In connection with entering into the Heier Employment
Agreement, the Heier Consulting Agreement was terminated. In addition, in connection with his commencement of
employment, Dr. Heier resigned from the Company’s board of directors, effective February 21, 2024. Compensation for the
consulting services was in the form of cash and stock-based awards. The total grant date fair value of stock-based awards
granted to Dr. Heier was $96, which was recognized to expense on a straight-line basis over the respective vesting periods.
The Company incurred cash-based fees for services rendered by Heier Consulting before termination of the Consultant
Agreement of approximately $5 for the year ended December 31, 2024. The Company incurred cash-based fees for
services rendered by Heier Consulting of approximately $32 and $24 for the years ended December 31, 2023 and 2022,
respectively. As of December 31, 2023, there were $6 recorded in accounts payable for Heier Consulting. As of December
31, 2023, there were $0 recorded in accrued expenses for Heier Consulting, respectively.
20. Subsequent Events
No subsequent events noted.
1
Exhibit 10.49
Ocular Therapeutix, Inc.
15 Crosby Drive
Bedford, MA 01730
March 1, 2025
Jeffrey Heier, MD
Ocular Therapeutix, Inc.
RE:
First Amendment to Employment Agreement
Dear Jeff,
This letter agreement (the “First Amendment”) amends that certain Employment
Agreement, dated as of February 21, 2024 (the “Employment Agreement”) by and between you
and Ocular Therapeutix, Inc. (the “Company”).
1.
Section 1(b) of the Employment Agreement shall be amended to reflect your current
status as a full-time employee. Accordingly, by this First Amendment, Section 1(b) of the
Employment Agreement shall be deleted and replaced with the following:
“(b)
Devotion of Duties; Representations. Executive will be employed to serve
on a full-time basis (minimum of 40 hours per week, other than vacation). Executive agrees
to devote Executive’s best efforts and 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 engage in any other employment,
consulting or other outside activities except as follows: (i) Executive may continue to work
at Ophthalmic Consultants of Boston as a staff physican; and (ii) in the case of
consultancies or other non-employment, non-consulting outside activities, provided that
such activity (A) would not (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 and (B) has been disclosed to the Company (including the Company’s
CEO) in writing (subject to any applicable confidentiality restrictions, which restrictions
shall not prevent Executive from providing the Company the name and address of any
individual corporation, association or other entity or organization for whom such
consultanty or other non-employment outside activity is undertaken and the name or title of
Executive’s business relationship or position with such entity), Executive may consult for
clients on projects not involving (1) any tyrosine kinase inhibitor, and/or (2) any travoprost
formulation or otherwise undertake outside activities that are not employment or other
consultantancies. Executive’s normal place of work will be remote in Massachusetts, with
occasional time in the Company’s office as necessary. In addition, Executive agrees to
travel on any business of the Company as may be required for the performance of
Executie’s duties upon reasonable advance notice and subject to scheduling
2
so that Executive is in compliance with his outside commitments. Executive agrees to
abide by the rules, regulations, instructions, peronnel practices and policies of the Company
and any changes therein that may be adopted from time to time by the Company.”
2.
Section 2(b)(ii)(A) of the Employment Agreement shall be deleted and replaced
with the following:
“(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 satisfactory to Executive (or
Executive’s legal representative) upon examination requested by the Company (to which
Executive hereby agrees to submit). Notwithstanding the above, Executive shall not be
regarded as having a Disability (I) if Executive is able to perform the essential functions of
Executive’s job with or without reasonable accommodation or (II) unless such Disability
results in Executive being “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.”)”
3.
Section 2(d)(ii) of the Employment Agreement shall be deleted and replaced with
the following:
“(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 date of the First Amendment hereto where such change is not remedied within ten (10)
business days after written notice thereof by Executive;”
4.
Section 3(a) of the Employment Agreement shall be amended to reflect that your
base salary shall be at a rate of $550,000 per year. This modification to base salary shall be
effective as of July 1, 2024. The Company will provide you a true-up payment to reconcile base
salary amounts owed for the period of time between July 1, 2024, and the date of this First
Amendment.
5.
You agree that any target annual bonus (“Bonus”) you may be eligible for calendar
year 2024 pursuant to Section 3(b) of the Employment Agreement shall be prorated based on
actual base salary received during calendar year 2024.
6.
You acknowledge that, on October 2, 2024, the Company granted you, under the
Company’s 2021 Stock Incentive Plan, as amended (the “Plan”), (i) stock options to purchase
3
200,000 shares of the Company’s common stock (the “Options”) and (ii) a restricted stock unit
award with respect to 100,000 shares of the Company’s common stock (the “RSUs”). The Options
will vest over four years in equal monthly installments, with 1/48th of the shares underlying the
Options vesting on the one-month anniversary of October 1, 2024 (the “Vesting Commencement
Date”) and with respect to the balance of the shares underlying the Options in monthly installments
thereafter, ending on the fourth anniversary of the Vesting Commencement Date, and will
otherwise be subject to the terms and conditions of a stock option agreement and the Plan. The
RSUs will vest over three years in equal annual installments, with 1/3rd of the shares underlying
the RSUs vesting on the first anniversary of the Vesting Commencement Date and with respect to
the balance of the shares underlying the RSUs in annual installments thereafter, ending on the third
anniversary of the Vesting Commencement Date, and will otherwise be subject to the terms and
conditions of an RSU agreement and the Plan. For the avoidance of doubt, you will not be eligible
for an additional equity award in January or February of 2025.
7.
Section 3(d) of the Employment Agreement relating to employee benefits shall be
deleted and replaced with the following: “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”). These Fringe Benefits may
be discontinued, modified or changed from time to time at the sole discretion of the Company.
Where a particular Fringe Benefit is subject to a formal plan (for example, medical or life
insurance), eligibility to participate in and receive any particular Fringe Benefit is governed solely
by the applicable plan document.”
8.
Section 3(e) of the Employment Agreement shall be amended “Reimbursement of
Expenses. Executive shall be entitled to reimbursement for all ordinary and reasonable out-of-
pocket business expenses that are reasonably incurred by Executive in furtherance of the
Company’s business in accordance with its policies for senior executives, subject to Section 4(d)
(v). The Company shall either reimburse the Executive for, or pay directly for, legal fees he
reasonably incurs in connection with the First Amendment hereto, not to exceed $5,000.”
9.
A Section 3(g) shall be added to the Employment Agreement stating the following:
“Vacation. Executive shall be eligible to take up to 20 days of paid vacation during each year of
the Term, subject to the accrual described in the following sentence, to be taken at such time or
times as shall be mutually convenient and consistent with Executive’s 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.”
10.
Sections 4(a)-(c) of the Employment Agreement relating to special termination
benefits shall be deleted and replaced with the following:
“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 portion of
4
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 approved by the
Board for payment to Executive but not yet paid, which amount shall not include any pro
rata portion of any Bonus 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 Good Reason or (ii) by the Company without Cause, the Company
shall pay to Executive the Accrued Obligations and shall make the severance payments and
provide the benefits described below; provided that receipt of any such severance payments
and benefits (other than the Accrued Obligations) shall be dependent upon Executive’s
execution and, to the extent applicable, non-revocation of a separation and general release
of claims agreement in a form to be provided by the Company to Executive in connection
with Executive’s termination (which will include, at a minimum, a release of all releasable
claims against the Company, non-disparagement and cooperation obligations, a
reaffirmation of Executive’s continuing obligations under any existing restrictive covenant
agreements, and an agreement not to compete with the Company for twelve (12) months
following Executive’s separation from employment on terms that are comparable and no
more restrictive than the non-competition obligation in the Restrictive Covenants
Agreement (as defined below) (the “Release”)). The 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, or such earlier date as determined
by the Company. The severance payments and benefits shall be paid or commence, as
applicable, on the first payroll period following the date of the Executive’s termination and
an effective Release (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, the Payment Date shall be no earlier than January 1 of
such subsequent calendar year.
(i)
If Executive’s termination occurs prior to or after the period
commencing on the date ninety (90) days prior to a Corporate Change and ending
twelve (12) months following a Corporate Change (the “Protected Period”), the
Company shall continue to pay Executive’s highest base salary for the past two
years for twelve (12) months following Executive’s termination of employment 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 Executive’s employment terminates
through the Payment Date had the Release become effective on the date of
termination. If Executive’s termination of employment occurs during the Protected
Period, then, in lieu of the foregoing, the Company shall pay Executive eighteen
(18) months of Executive’s base salary in a lump sum on the Payment Date.
5
(ii)
Only if the termination occurs during the Protected Period,
then the Company shall pay Executive an amount equal to one and one-half times
Executive’s 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 the termination occurs during the Protected Period,
one hundred percent (100%) of Executive’s then outstanding unvested time-based
equity awards granted by the Company shall vest immediately upon the Payment
Date. For the avoidance of doubt, any equity awards that vest based on the
achievement of performance metrics shall be governed by the terms of the
applicable award agreement and shall not be entitled to accelerated vesting pursuant
to the previous sentence.
(iv)
Should Executive timely elect and be eligible to continue
receiving group medical coverage pursuant to the law known as COBRA, and so
long as the Company can provide such benefit without violating the
nondiscrimination requirements of applicable law, the Company will continue to
pay the share of the premium for such coverage that is paid by the Company for
active and similarly-situated employees who receive the same type of coverage, as
well as any administrative fee, for twelve (12) months following Executive’s
termination of employment (or, if the termination occurs during the Protected
Period, for eighteen (18) months following such termination of employment),
subject to applicable law and the terms of the respective policies; provided that the
Company’s obligation to provide the premium payments 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 Obligations. The Company shall have no obligation to pay Executive (or
Executive’s estate) any other compensation or provide any other benefit(s) following such
termination except as provided in Section 4(a).”
11.
Section 5 of the Employment Agreement is hereby amended to reflect that the
“Commencement Date” shall mean Executive’s first day of employment with the Company.
12.
Section 9(a) of the Employment Agreement shall be amended to reflect the
Company’s updated notice address:
If to the Company:
Ocular Therapeutix, Inc.
15 Crosby Drive
Bedford, MA 01730
6
USA
Attention: Chief Operating Officer
Telephone: (781) 357-4000
With an email copy to:
VP, Human Resources: hr@ocutx.com
VP, Law Department: law@ocutx.com
In all other respects, the Employment Agreement will remain in full force and effect without
modification.
[Remainder of Page Intentionally Left Blank]
7
Please indicate your agreement to the foregoing by signing below.
Very truly yours,
/s/ Pravin U. Dugel, MD
Pravin U. Dugel, MD
Executive Chair
Accepted and Agreed as of March 1, 2025
/s/ Jefferty Heier, MD
Jeffrey Heier, MD
1
Exhibit 10.52
Ocular Therapeutix, Inc.
15 Crosby Drive
Bedford, MA 01730
March 1, 2025
Peter K. Kaiser, MD
Ocular Therapeutix, Inc.
RE:
Second Amendment to Employment Agreement
Dear Peter,
This letter agreement (the “Second Amendment”) amends that certain Employment
Agreement, dated as of February 21, 2024, and amended in a letter agreement dated March 28,
2024 (as amended to date, the “Employment Agreement”) by and between you and Ocular
Therapeutix, Inc. (the “Company”).
1.
Section 1(a) of the Employment Agreement shall be amended to reflect your new
title of Chief Development Officer.
2.
Section 1(b) of the Employment Agreement shall be amended to reflect your current
status as a full-time employee. Accordingly, by this Second Amendment, Section 1(b) of the
Employment Agreement shall be deleted and replaced with the following:
“(b)
Devotion of Duties; Representations. Executive will be employed to serve
on a full-time basis (minimum of 40 hours per week, other than vacation). Executive agrees
to devote Executive’s best efforts and 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 engage in any other employment,
consulting or other outside activities except as follows: (i) Executive may continue to work
at Cleveland Clinic as a physican consultant; and (ii) in the case of consultancies or other
non-employment, non-consulting outside activities, provided that such activity (A) would
not (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 and
(B) has been disclosed to the Company (including the Company’s CEO) in writing (subject
to any applicable confidentiality restrictions, which restrictions shall not prevent Executive
from providing the Company the name and address of any individual corporation,
association or other entity or organization for whom such consultanty or other non-
employment outside activity is undertaken and the name or title of Executive’s business
relationship or position with such entity), Executive may consult for clients on projects not
involving (1) any tyrosine kinase inhibitor, and/or (2) any travoprost formulation or
otherwise undertake outside activities that are not employment or other
2
consultantancies. Executive’s normal place of work will be remote in Ohio. However,
Executive agrees to travel on any business of the Company as may be required for the
performance of Executie’s duties upon reasonable advance notice and subject to scheduling
so that Executive is in compliance with his outside commitments. Executive agrees to
abide by the rules, regulations, instructions, peronnel practices and policies of the Company
and any changes therein that may be adopted from time to time by the Company.”
3.
Section 2(b)(ii)(A) of the Employment Agreement shall be deleted and replaced
with the following:
“(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 satisfactory to Executive (or
Executive’s legal representative) upon examination requested by the Company (to which
Executive hereby agrees to submit). Notwithstanding the above, Executive shall not be
regarded as having a Disability (I) if Executive is able to perform the essential functions of
Executive’s job with or without reasonable accommodation or (II) unless such Disability
results in Executive being “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.”)”
4.
Section 2(d)(ii) of the Employment Agreement shall be deleted and replaced with
the following:
“(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 date of the Second Amendment hereto where such change is not remedied within ten
(10) business days after written notice thereof by Executive;”
5.
Section 3(a) of the Employment Agreement shall be amended to reflect that your
base salary shall be at a rate of $550,000 per year. This modification to base salary shall be
effective as of July 1, 2024. The Company will provide you a true-up payment to reconcile base
salary amounts owed for the period of time between July 1, 2024, and the date of this Second
Amendment.
6.
Section 3(b) of the Employment Agreement shall be amended to reflect to that your
target annual bonus (“Bonus”) shall be 55% of base salary. You agree that any Bonus you may be
3
eligible for calendar year 2024 pursuant to Section 3(b) of the Employment Agreement shall be
prorated based on actual base salary received during calendar year 2024.
7.
You acknowledge that, on October 2, 2024, the Company granted you, under the
Company’s 2021 Stock Incentive Plan, as amended (the “Plan”), (i) stock options to purchase
200,000 shares of the Company’s common stock (the “Options”) and (ii) a restricted stock unit
award with respect to 100,000 shares of the Company’s common stock (the “RSUs”). The Options
will vest over four years in equal monthly installments, with 1/48th of the shares underlying the
Options vesting on the one-month anniversary of October 1, 2024 (the “Vesting Commencement
Date”) and with respect to the balance of the shares underlying the Options in monthly installments
thereafter, ending on the fourth anniversary of the Vesting Commencement Date, and will
otherwise be subject to the terms and conditions of a stock option agreement and the Plan. The
RSUs will vest over three years in equal annual installments, with 1/3rd of the shares underlying
the RSUs vesting on the first anniversary of the Vesting Commencement Date and with respect to
the balance of the shares underlying the RSUs in annual installments thereafter, ending on the third
anniversary of the Vesting Commencement Date, and will otherwise be subject to the terms and
conditions of an RSU agreement and the Plan. For the avoidance of doubt, you will not be eligible
for an additional equity award in January or February of 2025.
8.
Section 3(e) of the Employment Agreement shall be amended “Reimbursement of
Expenses. Executive shall be entitled to reimbursement for all ordinary and reasonable out-of-
pocket business expenses that are reasonably incurred by Executive in furtherance of the
Company’s business in accordance with its policies for senior executives, subject to Section 4(d)
(v). The Company shall either reimburse the Executive for, or pay directly for, legal fees he
reasonably incurs in connection with the Second Amendment hereto, not to exceed $5,000.”
9.
A Section 3(g) shall be added to the Employment Agreement stating the following:
“Vacation. Executive shall be eligible to take up to 20 days of paid vacation during each year of
the Term, subject to the accrual described in the following sentence, to be taken at such time or
times as shall be mutually convenient and consistent with Executive’s 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.”
10.
Sections 4(a)-(c) of the Employment Agreement relating to special termination
benefits shall be deleted and replaced with the following:
“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 portion 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 approved by the
4
Board for payment to Executive but not yet paid, which amount shall not include any pro
rata portion of any Bonus 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 Good Reason or (ii) by the Company without Cause, the Company
shall pay to Executive the Accrued Obligations and shall make the severance payments and
provide the benefits described below; provided that receipt of any such severance payments
and benefits (other than the Accrued Obligations) shall be dependent upon Executive’s
execution and, to the extent applicable, non-revocation of a separation and general release
of claims agreement in a form to be provided by the Company to Executive in connection
with Executive’s termination (which will include, at a minimum, a release of all releasable
claims against the Company, non-disparagement and cooperation obligations, a
reaffirmation of Executive’s continuing obligations under any existing restrictive covenant
agreements, and an agreement not to compete with the Company for twelve (12) months
following Executive’s separation from employment on terms that are comparable and no
more restrictive than the non-competition obligation in the Restrictive Covenants
Agreement (as defined below) (the “Release”)). The 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, or such earlier date as determined
by the Company. The severance payments and benefits shall be paid or commence, as
applicable, on the first payroll period following the date of the Executive’s termination and
an effective Release (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, the Payment Date shall be no earlier than January 1 of
such subsequent calendar year.
(i)
If Executive’s termination occurs prior to or after the period
commencing on the date ninety (90) days prior to a Corporate Change and ending
twelve (12) months following a Corporate Change (the “Protected Period”), the
Company shall continue to pay Executive’s highest base salary for the past two
years for twelve (12) months following Executive’s termination of employment 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 Executive’s employment terminates
through the Payment Date had the Release become effective on the date of
termination. If Executive’s termination of employment occurs during the Protected
Period, then, in lieu of the foregoing, the Company shall pay Executive eighteen
(18) months of Executive’s base salary in a lump sum on the Payment Date.
(ii)
Only if the termination occurs during the Protected Period,
then the Company shall pay Executive an amount equal to one and one-half times
Executive’s 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.
5
(iii)
Only if the termination occurs during the Protected Period,
one hundred percent (100%) of Executive’s then outstanding unvested time-based
equity awards granted by the Company shall vest immediately upon the Payment
Date. For the avoidance of doubt, any equity awards that vest based on the
achievement of performance metrics shall be governed by the terms of the
applicable award agreement and shall not be entitled to accelerated vesting pursuant
to the previous sentence.
(iv)
Should Executive timely elect and be eligible to continue
receiving group medical coverage pursuant to the law known as COBRA, and so
long as the Company can provide such benefit without violating the
nondiscrimination requirements of applicable law, the Company will continue to
pay the share of the premium for such coverage that is paid by the Company for
active and similarly-situated employees who receive the same type of coverage, as
well as any administrative fee, for twelve (12) months following Executive’s
termination of employment (or, if the termination occurs during the Protected
Period, for eighteen (18) months following such termination of employment),
subject to applicable law and the terms of the respective policies; provided that the
Company’s obligation to provide the premium payments 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 Obligations. The Company shall have no obligation to pay Executive (or
Executive’s estate) any other compensation or provide any other benefit(s) following such
termination except as provided in Section 4(a).”
11.
Section 5 of the Employment Agreement is hereby amended to reflect that the
“Commencement Date” shall mean Executive’s first day of employment with the Company.
12.
Section 9(a) of the Employment Agreement shall be amended to reflect the
Company’s updated notice address:
If to the Company:
Ocular Therapeutix, Inc.
15 Crosby Drive
Bedford, MA 01730
USA
Attention: Chief Operating Officer
Telephone: (781) 357-4000
With an email copy to:
6
VP, Human Resources: hr@ocutx.com
VP, Law Department: law@ocutx.com
In all other respects, the Employment Agreement will remain in full force and effect without
modification.
[Remainder of Page Intentionally Left Blank]
7
Please indicate your agreement to the foregoing by signing below.
Very truly yours,
/s/ Pravin U. Dugel, MD
Pravin U. Dugel, MD
Executive Chair
Accepted and Agreed as of March 1, 2025
/s/ Peter K. Kaiser, MD
_____________________
Peter K. Kaiser, MD
Exhibit 19.1
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OCULAR THERAPEUTIX, INC.
Insider Trading Policy
1.
BACKGROUND AND PURPOSE
The federal securities laws prohibit any member of the Board of Directors (a “Director”) or
employee of Ocular Therapeutix, Inc. (together with its subsidiaries, the “Company”) from
purchasing or selling Company securities on the basis of material nonpublic information
concerning the Company, or from tipping material nonpublic information to others. These laws
impose severe sanctions on individuals who violate them. In addition, the SEC has the authority to
impose large fines on the Company and on the Company’s Directors, executive officers and
controlling stockholders if the Company’s employees engage in insider trading and the Company
has failed to take appropriate steps to prevent it (so-called “controlling person” liability).
This insider trading policy is being adopted in light of these legal requirements, and with
the goal of helping:
●
prevent inadvertent violations of the insider trading laws;
●
avoid embarrassing proxy disclosure of reporting violations by persons
subject to Section 16 of the Securities Exchange Act of 1934 (the
“Exchange Act”);
●
avoid even the appearance of impropriety on the part of those employed by,
or associated with, the Company;
●
protect the Company from controlling person liability; and
●
protect the reputation of the Company, its Directors and its employees.
As detailed below, this policy applies to family members and certain other persons and
entities with whom Directors and employees have relationships. However, nothing in this policy is
applicable to transactions by the Company itself.
1.1
What Type of Information is “Material”?
Information concerning the Company is considered “material” if there is a substantial
likelihood that a reasonable shareholder would consider the information important in making a
decision to buy or sell the Company’s securities. Stated another way, there must be a substantial
likelihood that a reasonable shareholder would view the information as having significantly altered
the “total mix” of information available about the Company. Material information can include
positive or negative information about the Company. Information concerning any of the following
subjects, or the Company’s plans with respect to any of these subjects, would often be considered
material:
●
the Company’s revenues or earnings;
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●
a merger or acquisition or licensing transaction involving the Company;
●
a change in management or the Board of Directors of the Company;
●
the Company’s decision to commence or terminate the payment of cash dividends;
●
the public or private sale of a significant amount of securities of the Company;
●
the establishment of a program to repurchase securities of the Company;
●
a stock split;
●
a default on outstanding debt of the Company or a bankruptcy filing;
●
a new product release or a significant development, invention or discovery;
●
information concerning upcoming FDA actions or other significant regulatory
developments, including significant new clinical trial results or a significant product
recall;
●
a significant licensing or collaboration agreement, or serious discussions regarding
such an agreement;
●
the loss, delay or gain of a significant contract, sale or order or other important
development regarding customers or suppliers;
●
any litigation or dispute to which the Company may be a party;
●
a conclusion by the Company or a notification from its independent auditor that any
of the Company’s previously issued financial statements should no longer be relied
upon; or
●
a change in or dispute with the Company’s independent auditor.
This list is illustrative only and is not intended to provide a comprehensive list of
circumstances that could give rise to material information.
1.2
When is Information “Nonpublic”?
Information concerning the Company is considered nonpublic if it has not been
disseminated in a manner making it available to investors generally.
Information will generally be considered nonpublic unless (1) the information has been
disclosed in a press release, in a public filing made with the Securities and Exchange Commission
(such as a Report on Form 10-K, Form 10-Q or Form 8-K), or through a news wire service or daily
newspaper of wide circulation, and (2) a sufficient amount of time has passed so that the
information has had an opportunity to be digested by the marketplace.
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2.
PROHIBITIONS RELATING TO TRANSACTIONS IN THE COMPANY’S
SECURITIES
2.1
Covered Persons. This Section 2 applies to:
●
all Directors;
●
all employees;
●
all family members of Directors and employees who share the same address
as, or are financially dependent on, the Director or employee and any other
person who shares the same address as the Director or employee (other than
(x) an employee or tenant of the Director or employee or (y) another
unrelated person whom the Chief Financial Officer determines should not be
covered by this policy); and
●
all corporations, partnerships, trusts or other entities controlled by any of the
above persons, unless the entity has implemented policies or procedures
designed to ensure that such person cannot influence transactions involving
Company securities by the entity.
2.2
Prohibition on Trading While Aware of Material Nonpublic Information.
(a)
Prohibited Activities. Except as provided in Section 2.2(b), no person or
entity covered by Section 2 may:
◾
purchase, sell or donate any securities of the Company while he or
she is aware of any material nonpublic information concerning the
Company or recommend to another person that they do so;
◾
disclose to any other person any material nonpublic information
concerning the Company if such person may misuse that
information, such as by purchasing or selling Company securities or
tipping that information to others;
◾
purchase, sell or donate any securities of another company while he
or she is aware of any material nonpublic information concerning
such other company which he or she learned in the course of his or
her service as a Director or employee of the Company or recommend
to another person that they do so; or
◾
disclose to any other person any material nonpublic information
concerning another company which he or she learned in the course
of his or her service as a Director or employee of the Company if
such person may misuse that information, such as by purchasing or
selling securities of such other company or tipping that information
to others.
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(b)
Exceptions. The prohibitions in Sections 2.2(a) and 2.3 on purchases, sales
and donations of Company securities do not apply to:
◾
exercises of stock options or other equity awards or the surrender of
shares to the Company in payment of the exercise price or in
satisfaction of any tax withholding obligations, in each case in a
manner permitted by the applicable equity award agreement;
provided, however, that the securities so acquired may not be sold
(either outright or in connection with a “cashless” exercise
transaction through a broker) while the employee or Director is
aware of material nonpublic information or during a blackout period
(as defined in Section 2.3(b));
◾
acquisitions or dispositions of Company common stock under the
Company’s 401(k) or other individual account plan that are made
pursuant to standing instructions not entered into or modified while
the employee or Director is aware of material nonpublic information
or during a blackout period;
◾
other purchases of securities from the Company (including purchases
under any employee stock purchase plan of the Company) or sales of
securities to the Company;
◾
bona fide gifts, unless the person making the gift has reason to
believe that the recipient intends to sell the securities while the
employee or Director is aware of material nonpublic information or
during a blackout period; and
◾
purchases or sales made pursuant to a binding contract, written plan
or specific instruction (a “trading plan”) which is adopted and
operated in compliance with Rule 10b5-1; provided such trading
plan: (1) is in writing; (2) was submitted to the Company for review
by the Company prior to its adoption; and (3) was not adopted while
the employee or Director was aware of material nonpublic
information or during a blackout period; and provided further that (i)
any trade under such trading plan shall not occur until at least 30
days after the date of such trading plan and (ii) if such trading plan is
amended in any material respect or terminated, trades may not occur
pursuant to such trading plan or a subsequent trading plan until at
least 30 days after such amendment or termination.
(c)
Application of Policy After Cessation of Service. If a person ceases to be a
Director or employee of the Company at a time when he or she is aware of material nonpublic
information concerning the Company, the prohibition on purchases, sales or donations of Company
securities in Section 2.2(a) shall continue to apply to such person until that information has become
public or is no longer material.
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2.3
Blackout Periods.
(a)
Regular Blackout Periods. Except as provided in Section 2.2(b), no person
or entity covered by this Section 2 may purchase, sell or donate any securities of the Company
during the period beginning two weeks prior to the end of each fiscal quarter and ending upon the
completion of the second full trading day after the public announcement of earnings for such
quarter (a “regular blackout period”).
(b)
Corporate News Blackout Periods. The Company may from time to time
notify Directors, executive officers and other specified employees that an additional blackout
period (a “corporate news blackout period”) is in effect in view of significant events or
developments involving the Company. In such event, except as provided in Section 2.2(b), no
such individual may purchase, sell or donate any securities of the Company during such corporate
news blackout period or inform anyone else that a corporate news blackout period is in effect. (In
this policy, regular blackout periods and corporate news blackout periods are each referred to as a
“blackout period.”)
2.4
Prohibition on Pledges. No person or entity covered by this Section 2 may purchase
Company securities on margin, borrow against Company securities held in a margin account, or
pledge Company securities as collateral for a loan. However, an exception may be granted where a
person wishes to pledge Company securities as collateral for a loan and clearly demonstrates the
financial capacity to repay the loan without resort to the pledged securities. Any person who
wishes to pledge Company securities as collateral for a loan must submit a request for approval to
the Chief Financial Officer.
2.5
Prohibition on Short Sales and Derivative Transactions. No person or entity
covered by this Section 2 may engage in any of the following types of transactions:
●
short sales of Company securities, including short sales “against the box”; or
●
purchases or sales of puts, calls or other derivative securities based on the
Company’s securities.
2.6
Partnership Distributions. Nothing in this policy is intended to limit the ability of a
venture capital partnership or other similar entity with which a Director is affiliated to distribute
Company securities to its partners, members or other similar persons. It is the responsibility of
each affected Director and the affiliated entity, in consultation with their own counsel (as
appropriate), to determine the timing of any distributions, based on all relevant facts and
circumstances and applicable securities laws.
2.7
Underwritten Public Offering. Nothing in this policy is intended to limit the ability
of any person to sell Company securities as a selling stockholder in an underwritten public offering
pursuant to an effective registration statement in accordance with applicable securities law.
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3.
ADDITIONAL PROHIBITIONS APPLICABLE TO DIRECTORS, EXECUTIVE
OFFICERS AND DESIGNATED EMPLOYEES
3.1
Covered Persons. This Section 3 applies to:
●
all Directors;
●
all executive officers;
●
such other employees as are designated from time to time by the Board of
Directors, the Chief Executive Officer or the Chief Financial Officer as
being subject to this Section 3 (the “Designated Employees”);
●
all family members of Directors, executive officers and Designated
Employees who share the same address as, or are financially dependent on,
the Director, executive officer or Designated Employee and any other person
who shares the same address as the Director, executive officer or Designated
Employee (other than (x) an employee or tenant of the Director, executive
officer or Designated Employee or (y) another unrelated person whom the
Chief Financial Officer determines should not be covered by this policy);
and
●
all corporations, partnerships, trusts or other entities controlled by any of the
above persons, unless the entity has implemented policies or procedures
designed to ensure that such person cannot influence transactions by the
entity involving Company securities.
3.2
Notice and Pre-Clearance of Transactions.
(a)
Pre-Transaction Clearance. No person or entity covered by this Section 3 (a
“Pre-Clearance Person”) may purchase or sell or otherwise acquire or dispose of securities of the
Company, other than in a transaction permitted under Section 2.2(b), unless such person pre-clears
the transaction with either the Chief Executive Officer or the Chief Financial Officer. A request
for pre-clearance shall be made in accordance with the procedures established by the Chief
Financial Officer. The Chief Executive Officer and the Chief Financial Officer shall have sole
discretion to decide whether to clear any contemplated transaction. (The Chief Executive Officer
shall have sole discretion to decide whether to clear transactions by the Chief Financial Officer or
persons or entities subject to this policy as a result of their relationship with the Chief Financial
Officer, and the Chief Financial Officer shall have sole discretion to decide whether to clear
transactions by the Chief Executive Officer or persons or entities subject to this policy as a result
of their relationship with the Chief Executive Officer.) All trades that are pre-cleared must be
effected within five business days of receipt of the pre-clearance unless a specific exception has
been granted by the Chief Executive Officer and/or the Chief Financial Officer. A pre-cleared trade
(or any portion of a pre-cleared trade) that has not been effected during the five business day
period must be pre-cleared again prior to execution. Notwithstanding receipt of pre-clearance, if
the Pre-Clearance Person becomes aware of material non-public information or
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becomes subject to a blackout period before the transaction is effected, the transaction may not be
completed.
(b)
Post-Transaction Notice. Each person or entity covered by this Section 3
who is subject to reporting obligations under Section 16 of the Exchange Act shall also notify the
Chief Financial Officer (or his or her designee) of the occurrence of any purchase, sale or other
acquisition or disposition of securities of the Company as soon as possible following the
transaction, but in any event within one business day after the transaction. Such notification may
be oral or in writing (including by e-mail) and should include the identity of the covered person,
the type of transaction, the date of the transaction, the number of shares involved and the purchase
or sale price.
(c)
Deemed Time of a Transaction. For purposes of this Section 3.2, a
purchase, sale or other acquisition or disposition shall be deemed to occur at the time the person
becomes irrevocably committed to it (for example, in the case of an open market purchase or sale,
this occurs when the trade is executed, not when it settles).
4.
REGULATION BTR
If the Company is required to impose a “pension fund blackout period” under
Regulation BTR, each Director and executive officer shall not, directly or indirectly sell, purchase
or otherwise transfer during such blackout period any equity securities of the Company acquired in
connection with his or her service as a director or officer of the Company, except as permitted by
Regulation BTR.
5.
PENALTIES FOR VIOLATION
Violation of any of the foregoing rules is grounds for disciplinary action by the Company,
including termination of employment. In addition to any disciplinary actions the Company may
take, insider trading can also result in administrative, civil or criminal proceedings which can result
in significant fines and civil penalties, being barred from service as an officer or director of a
public company, or being sent to jail.
6.
COMPANY ASSISTANCE AND EDUCATION
6.1
Education. The Company shall take reasonable steps designed to ensure that all
Directors and employees of the Company are educated about, and periodically reminded of, the
federal securities law restrictions and Company policies regarding insider trading.
6.2
Assistance. The Company shall provide reasonable assistance to all Directors and
executive officers, as requested by such Directors and executive officers, in connection with the
filing of Forms 3, 4 and 5 under Section 16 of the Exchange Act. However, the ultimate
responsibility, and liability, for timely filing remains with the Directors and executive officers.
6.3
Limitation on Liability. None of the Company, the Chief Executive Officer, the
Chief Financial Officer or the Company’s other employees will have any liability for any delay in
reviewing, or refusal of, a trading plan submitted pursuant to Section 2.2(b), a request for pre-
clearance submitted pursuant to Section 3.2(a) or a request to allow a pledge submitted pursuant
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to Section 2.4. Notwithstanding any review of a trading plan pursuant to Section 2.2(b) or pre-
clearance of a transaction pursuant to Section 3.2(a), none of the Company, the Chief Executive
Officer, the Chief Financial Officer or the Company’s other employees assumes any liability for
the legality or consequences of such trading plan or transaction to the person engaging in or
adopting such trading plan or transaction.
Exhibit 21.1
Subsidiaries of Ocular Therapeutix, Inc.
Jurisdiction of Incorporation or Organization
Ocular Therapeutix Europe B.V.
The Netherlands
Ocular Therapeutix Securities Corp.
The Commonwealth of Massachusetts
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-278216
and 333-275373) and Form S-8 (Nos. 333-198240, 333-202886, 333-210059, 333-216622, 333-223513, 333-230126,
333-237115, 333-254143, 333-258642, 333-263091, 333-266648, 333-270297, 333-273770, 333-277244, 333-277818,
333-279176, 333-280266 and 333-283215) of Ocular Therapeutix, Inc. of our report dated March 3, 2025 relating to
the financial statements and effectiveness of control over financial reporting, which appears in this Form 10-K for the
year ended December 31, 2024.
/s/PricewaterhouseCoopers LLP
Boston, Massachusetts
March 3, 2025
Exhibit 31.1
CERTIFICATIONS
I, Pravin U. Dugel, MD, 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 3, 2025
By: /s/ Pravin U. Dugel. MD
Pravin U. Dugel, MD
Executive Chairman, 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 3, 2025
By: /s/ Donald Notman
Donald Notman
Chief Operating Officer & Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Ocular Therapeutix, Inc. (the “Company”) for the period
ended December 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned, Pravin U. Dugel, MD, Executive Chairman, 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 3, 2025
By:/s/Pravin U. Dugel, MD
Pravin U. Dugel, MD
Executive Chariman, President and Chief Executive
Officer
(Principal Executive Officer)
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Ocular Therapeutix, Inc. (the “Company”) for the period
ended December 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned, Donald Notman, Chief Operating Officer & 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 3, 2025
By:/s/ Donald Notman
Donald Notman
Chief Operating Officer & Chief Financial Officer
(Principal Financial and Accounting Officer)