What changed in this filing

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Item 1A. Risk Factors

2020-08-06 compared with 2020-05-07 · 213 added, 245 removed, 992 unchanged (32% of the section changed)

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Since inception, we have incurred significant losses from operations and negative cash flows from operations.

Our net losses were $22.0 million for the three months ended March 31, 2020 and $94.3million for the year ended December 31, 2019.

As of March 31, 2020, we had an accumulated deficit of $317.4 million.

In January 2019, we launched our first product, INVELTYS ®

(loteprednol etabonate ophthalmic suspension) 1% for the treatment of post-operative inflammation and pain following ocular surgery, and have had limited revenues to date from product sales.

Our net losses were $23.3 million and $45.3 million for the three and six months ended June 30, 2020, respectively, and $94.3 million for the year ended December 31, 2019.

As of June 30, 2020, we had an accumulated deficit of $340.7 million.

In January 2019, we launched our first product, INVELTYS (loteprednol etabonate ophthalmic suspension) 1% for the treatment of post-operative inflammation and pain following ocular surgery, and have had limited revenues to date from product sales.

We have financed our operations primarily through proceeds from public offerings of common stock, private placements of preferred stock, convertible debt financings, borrowings under credit facilities, warrants, and sales under our at-the-market offering facility, or the ATM Offering.

We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and clinical trials and engaging in activities to commercialize INVELTYS.

We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and clinical trials, and engaging in activities to launch and commercialize INVELTYS.

Although we expect to continue to generate revenue from sales of INVELTYS, there can be no assurance as to the amount or timing of any such revenue, and we expect to continue to incur significant expenses and operating losses.

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Our net losses may fluctuate significantly from quarter to quarter and year to year.

We anticipate that our expenses will increase substantially as compared to prior periods as we continue to commercialize INVELTYS in the United States and engage in activities to prepare for commercialization of our lead product candidate, KPI-121 0.25%, which if approved we plan to commercialize under the brand name EYSUVIS TM (loteprednol etabonate ophthalmic suspension) 0.25%, for the short-term treatment of the signs and symptoms of dry eye disease, as a result of increased headcount, including our plan to increase our sales force from 57 sales representatives to a total of approximately 100 to 125 sales representatives if EYSUVIS is approved by the U.S.

We anticipate that our expenses will increase substantially as compared to prior periods as we continue to commercialize INVELTYS in the United States and engage in activities to prepare for commercialization of our lead product candidate, KPI-121 0.25%, which if approved we plan to commercialize under the brand name EYSUVIS TM (loteprednol etabonate ophthalmic suspension) 0.25%, for the short-term treatment of the signs and symptoms of dry eye disease, as a result of increased headcount, including our plan to increase, pending the status of the COVID-19 pandemic, our sales force from 56 sales representatives to a total of approximately 100 to 125 sales representatives if EYSUVIS is approved by the U.S.

Food and Drug Administration, or FDA, as well as management personnel to support our clinical, manufacturing and commercialization activities, expanded infrastructure, increased legal, compliance, accounting and investor and public relations expenses associated with being a public company and increased insurance premiums, among other factors.

Our expenses will also increase if and as we:

continue to grow our sales, marketing and distribution capabilities in connection with the commercialization of INVELTYS and any product candidates, including EYSUVIS, for which we recently resubmitted our NDA to obtain marketing approval;

● continue to grow our sales, marketing and distribution capabilities in connection with the commercialization of INVELTYS and any product candidates, including EYSUVIS, for which a new drug application, or NDA, is under review by the FDA with a goal date under the Prescription Drug User Fee Act, or PDUFA, set for October 30, 2020 for the completion of its review of our NDA;

● conduct any necessary clinical trials and other development activities and/or seek marketing approvals for EYSUVIS and any other product candidates;

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● obtaining, maintaining and protecting our intellectual property rights;

adapting our business in response to the current pandemic health event resulting from the novel coronavirus (COVID-19) and its collateral consequences.

● adapting our business in response to the current pandemic health event resulting from COVID-19 and its collateral consequences.

INVELTYS is our only product that has been approved for sale and it has only been approved in the United States.

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In addition, our recent commercialization efforts have been hampered by the operational restrictions on our sales force from quarantines, travel restrictions and bans and other governmental restrictions related to COVID-19.

As a result of these restrictions, our sales force have suspended substantially all in-person interactions with physicians and customers and are mostly restricted to conducting educational and promotional activities for INVELTYS virtually, which is hampering our ability to market INVELTYS.

In addition, these restrictions have led to a moratorium on elective ocular surgeries in many jurisdictions, which has, in turn, significantly reduced the demand for INVELTYS, which is indicated for the treatment of inflammation and pain following ocular surgery.

As a result of these restrictions, we previously suspended our sales force from substantially all in-person interactions with physicians and customers and were limited to conducting educational and promotional activities virtually, and we may be forced to suspend all or some in-person interactions again in the future.

To the extent we restrict in-person interactions with physicians and customers, we will again be limited to conducting educational and promotional activities virtually, which has hampered, and may continue to hamper, our ability to market INVELTYS and could adversely affect our ability to launch and market EYSUVIS, if and when approved.

In addition, government restrictions have at times led to moratoria on elective ocular surgeries in many jurisdictions, which has significantly reduced, and may in the future continue to significantly reduce, the demand for INVELTYS, which is indicated for the treatment of inflammation and pain following ocular surgery.

The extent of the impact of COVID-19 on our commercialization efforts will depend on the length and severity of this pandemic, which is uncertain and cannot be predicted.

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We are an early-stage commercial company.

Our operations to date have been limited to organizing and staffing our company, acquiring rights to intellectual property, business planning, raising capital, developing INVELTYS and our product candidates, including EYSUVIS, and preparing for and commercially launching INVELTYS.

Our operations to date have been limited to organizing and staffing our company, acquiring rights to intellectual property, business planning, raising capital, developing INVELTYS and our product candidates, including EYSUVIS, commercially launching INVELTYS and preparing to commercially launch EYSUVIS, if approved.

We are in the early stages of the process of transitioning from a company solely with a research and development focus to a company engaging in commercial activities.

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We only launched INVELTYS in January 2019 and are still in the process of executing our commercial launch plan, have no history of commercializing products, and, to date, have generated limited revenue from the sale of INVELTYS.

In addition, our commercial operations and INVELTYS sales are being negatively impacted by the current pandemic health event resulting from the novel coronavirus (COVID-19) and its collateral consequences.

In addition, our commercial operations and INVELTYS sales have been and continue to be negatively

impacted by the current pandemic health event resulting from the novel coronavirus (COVID-19) and its collateral consequences.

Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating and commercialization history.

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If we obtain marketing approval for any product candidate that we develop, we may incur significant additional commercialization expenses for such product candidate.

For example, if EYSUVIS is approved, we plan to increase our sales force from 57 sales representatives to a total of approximately 100 to 125 sales representatives, who will promote both EYSUVIS and INVELTYS.

For example, if EYSUVIS is approved, we plan to increase, pending the status of the COVID-19 pandemic, our sales force from 56 sales representatives to a total of approximately 100 to 125 sales representatives, who will promote both EYSUVIS and INVELTYS.

Furthermore, we incur additional costs associated with operating as a public company, hiring additional personnel and expanding our facilities.

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Net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

We expect that our existing cash on hand of $196.5 million as of March 31, 2020, will enable us to fund our planned operations, lease and debt service obligations, and capital expenditure requirements into at least the second quarter of 2022.

We expect that our existing cash, cash equivalents, and short-term investments of $184.6 million as of June 30, 2020, will enable us to fund our planned operations, lease and debt service obligations, and capital expenditure requirements into at least the second quarter of 2022.

We have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us.

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Although we commercially launched INVELTYS in early 2019, we do not anticipate that our revenue from product sales of INVELTYS will be sufficient for us to become profitable for several years, if at all.

Additionally, in August 2019, we announced that we received a complete response letter, or CRL, from the FDA regarding our new drug application, or NDA, for EYSUVIS for the short-term treatment of the signs and symptoms of dry eye disease.

Additionally, in August 2019, we announced that we received a complete response letter, or CRL, from the FDA regarding our NDA for EYSUVIS for the short-term treatment of the signs and symptoms of dry eye disease.

In the CRL, the FDA indicated that positive efficacy data from an additional clinical trial would be needed to support a resubmission of the NDA.

On March 9, 2020, we announced positive top-line results for our STRIDE 3 clinical trial, which will serve as the basis of our response to the CRL along with data from the three previous trials.

On April 30, 2020, we resubmitted the NDA for EYSUVIS.

On March 9, 2020, we announced positive top-line results for our STRIDE 3 clinical trial, which served as the basis of our response to the CRL along with data from the three previous trials.

On May 26, 2020, we announced that the FDA stated that our NDA resubmission was a complete, Class 2 response to the CRL and set a PDUFA goal date of October 30, 2020 for the completion of its review of the NDA.

While we believe our clinical trials of EYSUVIS to date have generated sufficient data to support regulatory approval of EYSUVIS, the FDA may determine otherwise, and we may need to conduct additional clinical trials to support approval of EYSUVIS.

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Debt financing and preferred equity financing, if available, may involve agreements that include pledging of assets as collateral, covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Our pledge of our assets as collateral to secure our obligations under our credit facility with Athyrium Opportunities III Acquisition LP, or Athyrium Credit Facility, may limit our ability to obtain additional debt financing.

Under our credit facility with Athyrium Opportunities III Acquisition LP, or Athyrium Credit Facility, we are also restricted from paying dividends on our common stock and limited with respect to certain other uses of our cash without the lenders’

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 or product candidates or grant licenses on terms that may not be favorable to

Our pledge of our assets as collateral to secure our obligations under our credit facility with Athyrium Opportunities III Acquisition LP, or Athyrium Credit Facility, may limit our ability to obtain

additional debt financing.

Under the Athyrium Credit Facility, we are also restricted from paying dividends on our common stock and limited with respect to certain other uses of our cash without the lenders’ consent.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or current 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.

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We have a significant amount of indebtedness.

As of March 31, 2020, we had $75.0 million of outstanding borrowings under the Athyrium Credit Facility.

As of June 30, 2020, we had $75.0 million of outstanding borrowings under the Athyrium Credit Facility.

Amounts outstanding under the Athyrium Credit Facility bear interest at a rate of 9.875% per annum.

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The preparation of financial statements in conformity with generally accepted accounting principles in the United States, or U.S.

GAAP, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

GAAP, requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses.

Such estimates and judgments include revenue recognition, inventory, the present value of lease liabilities and the corresponding right-of-use assets, the fair value of warrants, stock compensation, accrued expenses and the recoverability of our net deferred tax assets and related valuation allowance.

Such estimates and judgments include revenue recognition, inventory, the present value of lease

liabilities and the corresponding right-of-use assets, the fair value of warrants, stock compensation, accrued expenses and the recoverability of our net deferred tax assets and related valuation allowance.

We base our estimates and judgments on historical experience, expected future experience and on various other assumptions that we believe to be reasonable under the circumstances.

In addition, from time to time, we may rely on projections regarding our expected future performance that represent our management’s then-current estimates.

However, any of these estimates, judgments or projections, or the assumptions underlying them, may change over time or may otherwise prove to be inaccurate.

results of operations may be adversely affected if our estimates, assumptions or projections change or if actual circumstances differ from those in our estimates or assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.

Our results of operations may be adversely affected if our estimates, assumptions or projections change or if actual circumstances differ from those in our estimates or assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.

For example, we rely on third-party data providers to collect and report estimates of prescription information and pipeline inventory levels as components of our estimations for revenue recognition.

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In August 2019, we announced that we received a CRL from the FDA indicating that positive efficacy data from an additional clinical trial would be needed to support a resubmission of the NDA.

On March 9, 2020, we announced that STRIDE 3 met both of its primary symptom endpoints and its key secondary sign endpoint.

On April 30, 2020, we resubmitted the NDA for EYSUVIS.

We believe the data from STRIDE 3 replicates the positive efficacy data from the previous clinical trials for both signs and symptoms of dry eye disease and will satisfy the recommendation in the CRL for an additional positive trial.

However, the FDA may determine otherwise, and we may need to conduct additional clinical trials to support approval of EYSUVIS.

On March 9, 2020, we announced that STRIDE 3 met both of its primary symptom endpoints and its key secondary sign endpoint, and on April 30, 2020, we resubmitted our NDA with the positive data from STRIDE 3.

The FDA may still determine that we need to conduct additional clinical trials to support approval of EYSUVIS.

Moreover, the FDA has announced that in order to bring new therapies to patients sick with COVID-19 as quickly as possible, it has redeployed medical and regulatory staff from other areas to work on COVID-19 therapies.

Although we believe the resubmission of our NDA for EYSUVIS would be subject to a six-month review by the FDA under PDUFA, it is unknown whether the demands and operational restrictions placed on the FDA by COVID-19 will delay the FDA’s review of the NDA for EYSUVIS.

Although the FDA has set a PDUFA goal date of October 30, 2020 for the completion of its review of our NDA, it is unknown whether the demands and

operational restrictions placed on the FDA by COVID-19 will delay the FDA’s review of the NDA for EYSUVIS.

We cannot accurately predict when or if EYSUVIS will receive marketing approval.

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● successfully developing and applying for and receiving marketing approvals from applicable regulatory authorities for EYSUVIS and other product candidates;

receiving regulatory approval of our manufacturing processes and our third‑party manufacturers’

facilities from applicable regulatory authorities and maintaining adequate supply of our products;

● receiving regulatory approval of our manufacturing processes and our third-party manufacturers’ facilities from applicable regulatory authorities and maintaining adequate supply of our products;

● maintaining a workforce of experienced scientists and others with experience in AMPPLIFY technology and eye diseases to continue to develop our product candidates;

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● protecting our rights in our intellectual property portfolio;

not infringing, misappropriating or otherwise violating others’

intellectual property rights.

● not infringing, misappropriating or otherwise violating others’ intellectual property rights.

Successful development of KPI-121 for additional indications, if any, or for use in broader patient populations will depend on similar factors.

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

Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, 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.

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In August 2019, we announced that we received a CRL from the FDA indicating that positive efficacy data from an additional clinical trial will be needed to support a resubmission of the NDA.

On March 9, 2020, we announced that STRIDE 3 met both of its primary symptom endpoints and its key secondary sign endpoint.

On April 30, 2020, we resubmitted the NDA for EYSUVIS.

However, the FDA may determine otherwise, and we may need to conduct additional clinical trials to support approval of EYSUVIS.

The FDA may still determine that we need to conduct additional clinical trials to support approval of EYSUVIS.

If we conduct additional clinical trials of EYSUVIS, our expenses will significantly increase and could delay or halt our ability to obtain marketing approval.

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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, such as

those developing treatments for dry eye disease, to bring products to market before we do and impair our ability to successfully commercialize our product candidates.

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, such as those developing treatments for dry eye disease, to bring products to market before we do and impair our ability to successfully commercialize our product candidates.

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

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If INVELTYS or any of our product candidates, including EYSUVIS, are associated with serious adverse events or undesirable side effects in clinical trials or following approval and/or commercialization, or if our product or product candidates have characteristics that are unexpected, we may need to abandon their development or limit development or marketing to narrower 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.

The most common adverse effects to date in trials evaluating the safety and efficacy of INVELTYS and EYSUVIS have been

eye pain, instillation site pain, blurred vision and photophobia, which is discomfort or pain due to exposure to light.

most common adverse effects to date in trials evaluating the safety and efficacy of INVELTYS and EYSUVIS have been eye pain, instillation site pain, blurred vision and photophobia, which is discomfort or pain due to exposure to light.

There have been no serious adverse events related to the administration of KPI-121 reported in any of our clinical trials to date.

Increases in IOP and cataract formation are additional adverse effects associated with the use of corticosteroids.

Increases in IOP and cataract formation are additional adverse effects associated with the use of corticosteroids in general.

We have no clinical safety data on or patient exposure to either KPI-121 concentration for longer than 28 days.

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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 could delay or permanently halt our development of the applicable product candidates.

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 could delay or permanently halt our development of the applicable product candidates.

Risks Related to the Commercialization of INVELTYS and our Product Candidates, Including EYSUVIS

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and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services has fallen significantly.

In particular, the moratorium on routine medical appointments and elective surgeries in many jurisdictions, including ocular surgeries, has adversely affected the market for INVELTYS, which is indicated for the treatment of inflammation and pain following ocular surgery, resulting in a significant reduction in the demand for INVELTYS.

In particular, from time to time moratoria have been put in place on routine medical appointments and elective surgeries in many jurisdictions, including ocular surgeries, which have adversely affected, and may adversely affect in the future, the market for INVELTYS, which is indicated for the treatment of inflammation and pain following ocular surgery, resulting in a significant reduction in the demand for INVELTYS.

The COVID-19 pandemic has negatively impacted revenues from INVELTYS and we expect it to continue to do so until surgeries return to historical levels.

Shelter-in-place orders and other mandated local travel and social interaction prohibitions have also restricted the activities of our sales force, which has suspended substantially all in-person interactions with physicians and customers and is mostly restricted to conducting educational and promotional activities virtually until such time that they can safely return to the field.

Furthermore, while the majority of our day-to-day operations are continuing as our employees are working remotely, our laboratory facilities that support our early-stage research activities are limited as we evaluate ways in which our laboratory-based employees can safely resume their full activities.

The effects of COVID-19 may also disrupt the review of our resubmitted NDA for EYSUVIS and the timing of its review by the FDA.

Shelter-in-place orders and other mandated local travel and social interaction prohibitions have also restricted the activities of our sales force.

We previously suspended substantially all in-person interactions with physicians and customers and were limited to conducting educational and promotional activities virtually, and we may be forced to suspend all or some in-person interactions again in the future.

Furthermore, while the majority of our day-to-day operations are continuing as our employees are working remotely, our laboratory facilities that support our early-stage research activities were partially limited, and may be limited again in the future, as a result of COVID-19.

The effects of COVID-19 may also disrupt the review of our resubmitted NDA for EYSUVIS and the timing of its review by the FDA and, if approved, the commercialization of EYSUVIS.

Although the FDA has set a PDUFA goal date of October 30, 2020 for the completion of its review of our NDA for EYSUVIS, it is unknown whether the demands and operational restrictions placed on the FDA by COVID-19 will delay the FDA’s review of the NDA.

Additionally, while we currently are not experiencing interruptions in our manufacturing of INVELTYS or EYSUVIS, quarantines, travel restrictions and other measures may significantly impact the ability of employees of our third-party suppliers to get to their places of work to manufacture and deliver future supplies if and when needed.

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Our current estimates of potential future revenue from sales of INVELTYS are based, in part, on market research data we have commissioned.

For example, based on a market survey we commissioned in 2018 of 100

ophthalmologists, we believe INVELTYS offers advantages over existing post‑surgical treatment options due to its AMPPLIFY technology and being the first and only topical twice‑daily dosing, two‑week course of treatment and safety data, including low incidence of reported IOP spikes, and efficacy data from our clinical trials.

For example, based on a market survey we commissioned in 2018 of 100 ophthalmologists, we believe INVELTYS offers advantages over existing post-surgical treatment options due to its AMPPLIFY technology and being the first and only topical twice-daily dosing, two-week course of treatment and safety data, including low incidence of reported IOP spikes, and efficacy data from our clinical trials.

In this market survey, a majority of surveyed ophthalmologists indicated they were likely to prescribe INVELTYS.

We also conducted an Attitudes, Trial and Usage Study (ATU) in August 2019 with approximately 200 eye care professionals, or ECPs, which indicated that many current INVELTYS prescribers intend to increase their usage of INVELTYS.

We also conducted an Attitudes, Trial and Usage Study (ATU) in August 2019 with approximately 200 eye care professionals, which indicated that many current INVELTYS prescribers intend to increase their usage of INVELTYS.

However, doctors may continue to rely on ocular steroids other than INVELTYS and other treatments rather than INVELTYS.

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It is also possible that other therapeutics will be approved for treatment of inflammation and pain following ocular surgery with twice-a-day or less frequent dosing.

, Xiidra ®

, Cequa TM , off‑label use of corticosteroids and various drugs that are produced by compounding pharmacies.

While there are no drugs currently approved in the United States for the short-term relief of the signs and symptoms of dry eye disease, current treatments that are used in the United States for dry eye disease include over-the-counter artificial tears, Restasis ® , Xiidra ® , Cequa TM , off-label use of corticosteroids and various drugs that are produced by compounding pharmacies.

Generic versions of Restasis are also expected to become available in the United States in 2020.

Our current expectations regarding market potential for EYSUVIS are based, in part, on market research data we have commissioned.

For example, based on two surveys we commissioned of 503 and 297 dry eye disease patients in 2017 and 2018, respectively, which we refer to as our patient surveys, 80% to 90% of surveyed patients reported experiencing dry eye flares, with the majority experiencing on average four days of flares six times per year, and the most common reason given by patients for discontinuing the two leading branded dry eye treatments were insufficient efficacy and side effects.

However, it is possible that doctors may continue to rely on other existing treatments rather than EYSUVIS, if and when it is approved for marketing by the FDA.

For example, based on two surveys we commissioned of 503 and 297 dry eye disease patients in 2017 and 2018, respectively, which we refer to as our patient surveys, 80% to 90% of surveyed patients reported experiencing dry eye flares, with the majority experiencing four to six times per year, and the most common reason given by patients for discontinuing the two leading branded dry eye treatments were insufficient efficacy and side effects.

However, it is possible that doctors may continue to rely on other existing treatments rather than EYSUVIS, if and when it is approved by the FDA.

In addition, if generic versions of any products that compete with any of our product candidates are approved for marketing by the FDA, they would likely be offered at a substantially lower price than we expect to offer for our product candidates, if approved.

As a result, clinicians, patients and third-party payors may choose to rely on such products rather than our product candidates.

The market opportunity for INVELTYS may be further impacted and, if approved, the market opportunity for EYSUVIS may also be adversely impacted by extraordinary events, such as the current pandemic health event resulting from COVID-19, and their collateral consequences.

For example, the moratorium on routine medical appointments and elective surgeries in many jurisdictions, including ocular surgeries, has adversely affected the market for INVELTYS, which is indicated for the treatment of inflammation and pain following ocular surgery, resulting in a significant reduction in the demand for INVELTYS.

Shelter-in-place orders and other mandated local travel prohibitions have also restricted the activities of our sales force, which has suspended substantially all in-person interactions with physicians and customers and is mostly restricted to conducting educational and promotional activities virtually until such time that they can safely return to the field.

These restrictions have adversely affected our ability to market INVELTYS and could adversely affect our ability to launch and market EYSUVIS, if and when approved.

The market opportunity for INVELTYS may be further impacted and, if approved, the market opportunity for EYSUVIS may also be adversely impacted, by extraordinary events such as the current pandemic health event resulting from COVID-19 and its collateral consequences.

For example, from time to time moratoria have been put in place on routine medical appointments and elective surgeries in many jurisdictions, including ocular surgeries such as cataract and refractive, which have adversely affected, and may adversely affect in the future, the market for INVELTYS, which is indicated for the treatment of inflammation and pain following ocular surgery, resulting in a significant reduction in the demand for INVELTYS.

Shelter-in-place orders and other mandated local travel prohibitions have also restricted the activities of our sales force.

To the extent we restrict in-person interactions with physicians and customers, we will again be limited to conducting educational and promotional activities virtually, which

has hampered, and may continue to hamper, our ability to market INVELTYS and could adversely affect our ability to launch and market EYSUVIS, if and when approved.

Our assessment of the potential market opportunity for INVELTYS and our product candidates, including EYSUVIS, is based on industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties, some of which we commissioned.

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Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.

There can be no assurance that INVELTYS or our product candidates, including EYSUVIS, even if such product candidates are approved for sale in the United States or in other countries, will be considered medically reasonable and necessary for a specific indication or cost‑effective by third‑party payors, or that coverage and an adequate level of reimbursement will be available or that third‑party payors’

reimbursement policies will not adversely affect our ability to sell INVELTYS or our product candidates profitably.

There can be no assurance that INVELTYS or our product candidates, including EYSUVIS, even if such product candidates are approved for sale in the United States or in other countries, will be considered medically reasonable and necessary for a specific indication or cost-effective by third-party payors, or that coverage and an

adequate level of reimbursement will be available or that third-party payors’ reimbursement policies will not adversely affect our ability to sell INVELTYS or our product candidates profitably.

If we are unable to maintain our sales, marketing and distribution capabilities, establish additional capabilities if and when necessary, or enter into sales, marketing and distribution agreements with third parties, we may not be successful in commercializing INVELTYS or any of our product candidates, including EYSUVIS, that we may develop if and when they are approved.

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In 2019, we completed the buildout of our specialty sales, marketing and distribution infrastructure in the United States to commercialize INVELTYS and may need to expand that infrastructure to market any of our product candidates that we develop in the United States, if and when such product candidates are approved.

There are risks involved with establishing , maintaining and expanding our own sales, marketing and distribution capabilities.

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Further, we may underestimate the size of the sales force required for a successful product launch and may need to expand our sales force earlier and at a higher cost than we anticipated.

If the commercial launch of any of our product candidates for which we

establish additional commercial infrastructure is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses.

If the commercial launch of any of our product candidates for which we establish additional commercial infrastructure 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.

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Topical steroid drops are the main competition to INVELTYS for the treatment of inflammation and pain following ocular surgery.

The current branded market leaders for topical steroids in the United States, based on revenue, are Lotemax ®

products and Durezol ®

The current branded market leaders for topical steroids in the United States, based on revenue, are Lotemax ® products and Durezol ® .

Generic topical steroid formulations consist mainly of products containing prednisolone, fluorometholone or dexamethasone.

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Eyepoint Pharmaceutical, or Eyepoint, launched Dexycu TM , an intraocular suspension of dexamethasone for the treatment of post-operative inflammation, in July 2019.

Also in July 2019, Ocular Therapeutix launched Dextenza ®

, an intracanalicular insert of dexamethasone, for the treatment of ocular pain following ophthalmic surgery.

Also in July 2019, Ocular Therapeutix launched Dextenza ® , an intracanalicular insert of dexamethasone, for the treatment of ocular pain following ophthalmic surgery.

There are also a number of companies in the United States developing products and therapies in preclinical research and clinical development for the treatment of inflammation and pain following ocular surgery.

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devices, such as punctal plugs that are inserted into the tear ducts to inhibit tear drainage, resulting in more moisture on the surface of the eye;

and TrueTear®

Intranasal Tear Neurostimulator, a neurostimulator that received marketing approval from the FDA in April 2017, which provides electrical pulses within the nasal cavity to stimulate tear production.

and TrueTear® Intranasal Tear Neurostimulator, a neurostimulator that received marketing approval from the FDA in April 2017, which provides electrical pulses within the nasal cavity to stimulate tear production.

Pharmaceutical therapies for dry eye disease include on label prescription drugs, including Restasis, Xiidra, and Cequa, which are the only prescription pharmaceutical products that are approved in the United States for use in patients with dry eye disease;

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If any of these product candidates is approved and such product candidate either treats the signs or symptoms of dry eye disease or reduces the frequency of flares in dry eye patients, it could reduce the overall market opportunity for EYSUVIS.

reproxalap ophthalmic solution, Aurinia Pharmaceuticals’

voclosporin ophthalmic solution, Novaliq’s Cyclasol candidate as well as its NOV03 candidate, which has been licensed to Bausch Health Companies Inc., Silk Technologies’

SDP-4 ophthalmic solution, and others.

These product candidates are being developed by pharmaceutical companies, biotechnology companies, and specialty pharmaceutical and generic drug companies of various sizes, such as Oyster Point Pharma’s OC-01 nasal spray, Aldeyra Therapeutics’ reproxalap ophthalmic solution, Aurinia Pharmaceuticals’ voclosporin ophthalmic solution, Novaliq’s Cyclasol candidate as well as its NOV03 candidate, which has been licensed to Bausch Health Companies Inc., Silk Technologies’ SDP-4 ophthalmic solution, and others.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than our products.

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Specifically, we rely on the following:

Catalent Pharma Solutions, LLC, or Catalent, to manufacture and supply to us a minimum amount of INVELTYS and EYSUVIS for commercial use;

Catalent Pharma Solutions, LLC, or Catalent, to manufacture and supply to us a minimum amount of INVELTYS and EYSUVIS bottles for commercial use;

Alliance Contract Pharma, LLC, or Alliance, for manufacturing bulk KPI-121 concentrates;

and Chemo Iberica SA, or Chemo Iberica, to manufacture and supply to us a bulk supply of loteprednol etabonate, or LE.

We expect to rely on third parties to manufacture clinical supplies of any other product candidates and commercial supplies of any other products, if and when approved for marketing by applicable regulatory authorities, as well as for packaging, serialization, storage, distribution and other production logistics.

We expect to rely on third parties to manufacture clinical

supplies of any other product candidates and commercial supplies of any other products, if and when approved for marketing by applicable regulatory authorities, as well as for packaging, serialization, storage, distribution and other production logistics.

If these third parties do not successfully carry out their contractual duties, meet expected deadlines or manufacture our product or our product candidates in accordance with regulatory requirements, if there are disagreements between us and such parties, or if such parties are unable to expand capacities to support commercialization of our product or any of our product candidates for which we obtain marketing approval, we may not be able to compete, or may be delayed in producing sufficient product or product candidates to meet our supply requirements.

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Depending on the severity of any potential regulatory action, our clinical or commercial supply could be interrupted or limited, which could have a material adverse effect on our business.

We or our third‑party manufacturers may also encounter shortages in the raw materials or active pharmaceutical ingredient necessary to produce our product candidates in the quantities needed for our clinical trials or, our product or our product candidates if approved, in sufficient quantities for commercialization or to meet an increase in demand, as a result of capacity constraints or delays or disruptions in the market for the raw materials or active pharmaceutical ingredient, including shortages caused by the purchase of such raw materials or active pharmaceutical ingredient by our competitors or others and shortages related to the COVID-19 pandemic.

The failure of us or our third‑party manufacturers to obtain the raw materials or active pharmaceutical ingredient necessary to manufacture sufficient quantities of our product candidates, may have a material adverse effect on our business.

Product liability lawsuits against us could divert our resources and could cause us to incur substantial liabilities and to limit commercialization of INVELTYS and any other products that we may develop.

We or our third-party manufacturers may also encounter shortages in the raw materials or active pharmaceutical ingredient, or API, necessary to produce our product candidates in the quantities needed for our clinical trials or, our product or our product candidates if approved, in sufficient quantities for commercialization or to meet an increase in demand, as a result of capacity constraints or delays or disruptions in the market for the raw materials or API, including shortages caused by the purchase of such raw materials or API by our competitors or others and shortages related to epidemics or pandemics, such as the COVID-19 pandemic.

The failure of us or our third-party manufacturers to obtain the raw materials or API necessary to manufacture sufficient quantities of our product candidates, may have a material adverse effect on our business.

Product liability lawsuits against us could divert our resources and could cause us to incur substantial liabilities and limit commercialization of INVELTYS and any other products that we may 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.

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We do not own or operate manufacturing facilities for the production of commercial quantities of INVELTYS, EYSUVIS or any other product candidates.

We rely on Catalent to manufacture and supply to us a minimum amount of INVELTYS and expect to rely on Catalent to manufacture and supply to us a minimum amount EYSUVIS for commercial use, if approved.

We rely on Catalent to manufacture and supply to us a minimum amount of INVELTYS bottles and expect to rely on Catalent to manufacture and supply to us a minimum amount EYSUVIS bottles for commercial use, if approved.

We also rely on Alliance for manufacturing bulk KPI-121 concentrates, and Chemo Iberica to manufacture and supply to us a bulk supply of LE.

We expect to rely on third‑party manufacturers to manufacture commercial supplies of all of our products and clinical supplies of any other product candidates if and when

approved for marketing by applicable regulatory authorities.

We expect to rely on third-party manufacturers to manufacture commercial supplies of all of our products and clinical supplies of any other product candidates if and when approved for marketing by applicable regulatory authorities.

Our current and anticipated future dependence upon others for the manufacture of INVELTYS, EYSUVIS and any other product or product candidate that we develop may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

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We have supply agreements in place with these contract manufacturers to provide commercial supply.

We obtain the active pharmaceutical ingredient, or API, for KPI‑121 from Chemo Iberica, a third‑party API manufacturer.

We obtain the API for KPI-121 from Chemo Iberica, a third-party API manufacturer.

While we have long-term commercial supply agreements with these third-party manufacturers, if these suppliers do not perform as we expect, we may be required to replace one or more suppliers.

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We also may seek third-party collaborators for development and commercialization of our product candidates.

We may also consider potential collaborative partnership opportunities prior to initiating IND‑enabling studies on KPI‑285, our lead rTKI compound, or any other product candidates we develop, including our novel next-generation anti-inflammatories designed to exhibit steroid-like anti-inflammatory action with the goal of eliminating the risk of IOP increase and cataract formation.

For example, we may consider potential collaborative partnership opportunities prior to initiating IND-enabling studies on KPI-285, our lead rTKI compound, or any other product candidates we develop, including our novel next-generation anti-inflammatories.

Our likely collaborators for any sales, marketing, distribution, development, licensing or broader collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies.

We are not currently party to any such arrangement.

However, if we do enter into any such arrangements with any third parties in the future, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our products and product candidates.

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 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.

Collaborations that we enter into may pose a number of risks, including the following:

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● collaborators may not perform their obligations as expected;

collaborators may not pursue development of our product candidates or may elect not to continue or renew development 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 not pursue commercialization of our product candidates that receive marketing approval or may elect not to continue or renew commercialization programs based on 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 not pursue development of our product candidates or may elect not to continue or renew development 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 not pursue commercialization of our product candidates that receive marketing approval or may elect not to continue or renew commercialization programs based on 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;

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We rely on third parties, such as clinical research organizations, or CROs, clinical data management organizations, medical institutions and clinical investigators, in conducting our clinical trials and expect to continue to rely on such parties to conduct clinical trials of any product candidate that we develop.

We or these third parties may

terminate their engagements with us at any time for a variety of reasons, including a failure to perform by the third parties.

We or these third parties may terminate their engagements with us at any time for a variety of reasons, including a failure to perform by the third parties.

If we need to enter into alternative arrangements, that could delay our product development activities.

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We face significant competition in seeking appropriate collaborators.

Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally.

conditions generally.

The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product or product candidate.

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Our pending and future patent applications may not result in patents being issued which protect our technology, products or product candidates, in whole or in part, or which effectively prevent others from commercializing competitive technologies, products and product candidates.

In particular, during prosecution of any patent application, the issuance of any patents based on the application may depend upon our ability to generate additional preclinical or clinical data that support the patentability of our proposed claims.

In particular, during prosecution of any patent application, the issuance of any patents based on the

application may depend upon our ability to generate additional preclinical or clinical data that support the patentability of our proposed claims.

We may not be able to generate sufficient additional data on a timely basis, or at all.

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The issuance of a patent is not conclusive as to its inventorship, ownership, scope, validity, or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad.

technology, products or product candidates, or limit the duration of the patent protection of our technology, products and product candidates.

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, products or product candidates, or limit the duration of the patent protection of our technology, products and product candidates.

Given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.

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The Hatch-Waxman Act allows a maximum of one patent to be extended per FDA approved product as compensation for the patent term lost during the FDA regulatory review process.

A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only those claims covering such approved drug product, a method for using it or a method for manufacturing it may be extended.

A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product

approval and only those claims covering such approved drug product, a method for using it or a method for manufacturing it may be extended.

Also, the regulatory review period of an FDA-approved product may not serve as a basis for a patent term extension if the active ingredient of such product was subject to regulatory review and approval in an earlier product approved by the FDA.

We do not expect the U.S.

patents covering INVELTYS to be eligible for patent term extension due to this limitation.

patents covering INVELTYS and EYSUVIS to be eligible for patent term extension due to this limitation.

Patent term extension also may be available in certain foreign countries upon regulatory approval of our product candidates.

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Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents or that our asserted patents are invalid.

In addition, in a patent infringement or other intellectual property related proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.

An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly, and could put any of our patent applications at risk of not yielding an issued patent.

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We may be subject to a third-party preissuance submission of prior art to the U.S.

Patent and Trademark Office, or become involved in other contested proceedings such as opposition, derivation, reexamination, inter partes review, post‑grant review, or interference proceedings in the United States or elsewhere, challenging our patent rights or the patent rights of others.

Patent and Trademark Office, or become involved in other contested proceedings such as opposition, derivation, reexamination, inter partes review, post-grant review, or interference proceedings in the United States or elsewhere, 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, products or product candidates 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 product candidates.

In the United States, the FDA does not prohibit clinicians 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.

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We may not be aware of all such intellectual property rights potentially relating to our products or product candidates and their uses.

Thus, we do not know with certainty that INVELTYS or any of our product candidates, including EYSUVIS, or our development and commercialization thereof, do not and will not infringe or otherwise violate any third-party’s intellectual property.

If we are found to infringe, misappropriate or otherwise violate a third-party’s intellectual property rights, we could be required to obtain a license from such third-party to continue developing, manufacturing, marketing and selling our products, product candidates and technology.

However, we may not be able to obtain any required license on commercially reasonable terms or at all.

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We could be forced, including by court order, to cease commercializing the infringing technology, products or product candidates.

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.

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, which could materially harm our business.

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While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.

Non‑compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non‑payment of

fees and failure to properly legalize and submit formal documents.

Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents.

If we or our licensors fail to maintain the patents and patent applications covering our product candidates, it would have a material adverse effect on our business.

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This could have a material adverse effect on our competitive business position and our financial condition, results of operations and our business prospects.

Some intellectual property which we own or have licensed may have been discovered through government funded programs and thus may be subject to federal regulations such as “march‑in”

rights, certain reporting requirements, and a preference for United States industry.

Some intellectual property which we own or have licensed may have been discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements, and a preference for United States industry.

Compliance with such regulations may limit our exclusive rights, subject us to expenditure of resources with respect to reporting requirements, and limit our ability to contract with non-U.S.

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(ii) government action is necessary to meet public health or safety needs;

or (iii) government action is necessary to meet requirements for public

use under federal regulations (also referred to as “march‑in rights”).

or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as “march-in rights”).

The United States government also has the right to take title to these inventions if we fail to disclose the invention to the government and fail to file an application to register the intellectual property within specified time limits.

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Moreover, if our license agreement with JHU is terminated, JHU and/or its assignors may be able to prevent us from utilizing the technology covered by the licensed or assigned patents and patent applications.

If we breach the agreement (including by failing to meet our payment obligations) and do not adequately cure such breach, the rights in the technology licensed to us under the JHU license agreement will revert to JHU at no cost to JHU.

If we breach the agreement (including by failing to meet our payment obligations) and do not adequately cure such breach,

the rights in the technology licensed to us under the JHU license agreement will revert to JHU at no cost to JHU.

This could have a material adverse effect on our competitive business position, our financial condition, our results of operations and our business prospects.

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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 and our licensors’

employees and contractors were previously employed at other biotechnology, medical device or pharmaceutical companies, including our competitors or potential competitors.

Although we try to ensure that our employees and contractors do not use the proprietary information or know‑how of others in their work for us, we may be subject to claims that these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer.

Many of our and our licensors’ employees and contractors were previously employed at other biotechnology, medical device or pharmaceutical companies, including our competitors or potential competitors.

Although we try to ensure that our employees and contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these individuals have used or disclosed intellectual property, including trade

secrets or other proprietary information, of any such employee’s former employer.

Litigation may be necessary to defend against these claims.

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If we or our licensors fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel which could have a material adverse effect on our competitive business position and prospects.

Such intellectual property rights could be awarded to a third-party, and we could be required to obtain a license from such third-party to commercialize our technology or products, which may not

be available on commercially reasonable terms or at all.

Such intellectual property rights could be awarded to a third-party, and we could be required to obtain a license from such third-party to commercialize our technology or products, which may not be available on commercially reasonable terms or at all.

Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.

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In August 2019, we announced that we received a CRL from the FDA regarding our NDA for EYSUVIS for the short-term treatment of the signs and symptoms of dry eye disease.

In the CRL, the FDA indicated that positive efficacy data from an additional clinical trial would be

needed to support a resubmission of the NDA.

On March 9, 2020, we announced that STRIDE 3 met both of its primary symptom endpoints and its key secondary sign endpoint.

On April 30, 2020, we resubmitted the NDA for EYSUVIS.

However, the FDA may determine otherwise, and we may need to conduct additional clinical trials to support approval of EYSUVIS.

In the CRL, the FDA indicated that positive efficacy data from an additional clinical trial would be needed to support a resubmission of the NDA.

The FDA may still determine that we need to conduct additional clinical trials to support approval of EYSUVIS.

In addition, we may never generate the necessary data or results required to obtain regulatory approval of any other products with the market potential sufficient to enable us to achieve profitability.

We have only limited experience in submitting and supporting the applications necessary to gain marketing approvals and have relied on, and expect to continue to rely on, third-party consultants and vendors to assist us in this process.

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 efficacy.

Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.

The FDA or other regulatory authorities may determine that any product candidate that we develop is not effective, is only moderately effective or has undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use.

The FDA or other regulatory authorities may determine that any product candidate that we develop is not effective, is only moderately effective, is not safe or has undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use.

The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved.

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In the United States, the FDA also approves the proprietary brand name used to market an approved drug.

The FDA has not yet approved our use of the brand name “EYSUVIS”, which we plan to use to market KPI-121 0.25%.

If the FDA does not approve the brand name “EYSUVIS”

or any other brand name or trademark we propose to use in connection with the sale of any product that receives regulatory approval, we would need to adopt and seek approval for a new name and our marketing efforts may be adversely effected.

If we experience delays in obtaining approval or if we fail to obtain approval of EYSUVIS or any other product candidate that we develop, the commercial prospects for such product candidate may be harmed and our ability to generate revenues will be materially impaired.

The FDA has not yet approved our use of the brand name “EYSUVIS”, which we plan to use to market KPI-121 0.25%.

If the FDA does not approve the brand name “EYSUVIS” or any other brand name or trademark we propose to use in connection with the sale of any product that receives regulatory approval, we would need to adopt and seek approval for a new name and our marketing efforts may be adversely effected.

If we experience delays in obtaining approval or if we fail to obtain

approval of EYSUVIS or any other product candidate that we develop, the commercial prospects for such product candidate may be harmed and our ability to generate revenues will be materially impaired.

If the FDA does not conclude that EYSUVIS satisfies the approval requirements under Section 505(b)(2) of the Federal Food Drug and Cosmetics Act, or if the requirements for EYSUVIS under Section 505(b)(2) are not as we expect, the approval for EYSUVIS may take longer, cost more and entail greater complications and risks than anticipated, and may not be achieved.

The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the Federal Food, Drug and Cosmetic Act, or FDCA.

Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies that were not conducted by or for the applicant, and for which the applicant has not received a right of reference, which could expedite the development program for EYSUVIS by potentially decreasing the amount of preclinical and clinical data that we would need to generate in order to obtain FDA approval.

Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from findings of safety and efficacy based on studies that were not conducted by or for the applicant, and for which the applicant has not received a right of reference, which could expedite the development program for EYSUVIS by potentially decreasing the amount of preclinical and clinical data that we would need to generate in order to obtain FDA approval.

We are seeking FDA approval of EYSUVIS through the Section 505(b)(2) regulatory pathway.

The FDA previously approved INVELTYS through the Section 505(b)(2) regulatory pathway.

If the FDA does not allow us to

pursue the Section 505(b)(2) regulatory pathway as anticipated, we may need to conduct additional non‑clinical and clinical trials, provide additional data and information and meet additional standards for regulatory approval.

If the FDA does not allow us to pursue the Section 505(b)(2) regulatory pathway as anticipated, we may need to conduct additional non-clinical and clinical trials, provide additional data and information and meet additional standards for regulatory approval.

If this were to occur, the time and financial resources required to obtain FDA approval for EYSUVIS, and complications and risks associated with approval of EYSUVIS, would likely substantially increase.

Even if we are allowed to pursue the Section 505(b)(2) pathway to FDA approval, we cannot assure you that EYSUVIS will receive the requisite approvals for commercialization.

In addition, notwithstanding the approval of a number of products by the FDA under Section 505(b)(2) over the last few years, certain competitors and others have objected to the FDA’s interpretation of Section 505(b)(2).

If the FDA’s interpretation of Section 505(b)(2) is successfully challenged, the FDA may be required to change its 505(b)(2) policies and practices, which could delay or even prevent the FDA from approving any NDA that we submit under Section 505(b)(2), including our NDA for EYSUVIS.

In addition, notwithstanding the approval of a number of products by the FDA under Section 505(b)(2), certain competitors and others have objected to the FDA’s interpretation of Section 505(b)(2).

In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA.

These requirements may give rise to patent litigation and to mandatory delays in approval of our NDAs for up to 30 months, depending on the outcome of any litigation.

It is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products.

In addition, it is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products.

If successful, such petitions can significantly delay, or even prevent, the approval of the new product.

However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition.

However, even if the FDA ultimately denies such a petition, the FDA may in certain cases substantially delay approval while it considers and responds to the petition.

Thus, even if we are able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this would ultimately lead to faster product development or earlier approval of EYSUVIS.

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The time required to obtain approval outside of the United States 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.

The regulatory approval process outside the United States generally includes all of the risks

associated with obtaining FDA approval.

In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be sold in that country.

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Under the withdrawal agreement, there is a transitional period until December 31, 2020 (extendable up to two years).

Discussions between the United Kingdom and the EU have so far mainly focused on finalizing withdrawal issues and transition agreements but have been extremely difficult.

Discussions between the United Kingdom and the European Union have so far mainly focused on finalizing withdrawal issues and transition agreements but have been extremely difficult.

To date, only an outline of a trade agreement has been reached.

Much remains open but the UK Prime Minister has indicated that the United Kingdom will not seek to extend the transitional period beyond the end of 2020.

If no trade agreement has been reached before the end

of the transitional period, there may be significant market and economic disruption.

The UK Prime Minister has also indicated that the UK will not accept high regulatory alignment with the EU.

Much remains open but the Prime Minister of the United Kingdom has indicated that the United Kingdom will not seek to extend the transitional period beyond the end of 2020.

If no trade agreement has been reached before the end of the transitional period, there may be significant market and economic disruption..

Since the regulatory framework for pharmaceutical products in the United Kingdom covering quality, safety and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales, and distribution of pharmaceutical products is derived from European Union directives and regulations, Brexit could materially impact the future regulatory regime that applies to products and the approval of product candidates in the United Kingdom.

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We, and any potential collaborators we may have in the future, must therefore comply with requirements concerning advertising and promotion for INVELTYS or for any of our products for which we or our collaborators obtain marketing approval.

Promotional communications with respect to drug products and medical devices are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling.

Thus, we are limited to promoting INVELTYS in accordance with its approved label and the accompanying label may limit the approved use of any other product for which we obtain marketing approval, which could limit sales of such product.

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The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling and regulatory requirements.

The FDA imposes stringent restrictions on manufacturers’

communications regarding off‑label use and if we do not restrict the marketing of our products only to their approved indications, we may be subject to enforcement action for off‑label marketing.

The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we do not restrict the marketing of our products only to their approved indications, we may be subject to enforcement action for off-label marketing.

Violations of the FDCA relating to the promotion of prescription drugs or the promotion or manufacturing of drug products or medical devices may lead to investigations by the FDA, Department of Justice and state Attorneys General alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws.

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● product seizure;

● exclusion and debarment from federal healthcare reimbursement programs;

● injunctions or the imposition of civil or criminal penalties.

Non-compliance with European Union requirements or laws of other countries regarding safety monitoring or pharmacovigilance can also result in significant financial penalties.

Similarly, failure to comply with the European Union’s or other countries’

requirements regarding the protection of personal information can lead to significant penalties and sanctions.

In addition, manufacturers of approved products and those manufacturers’

facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs applicable to drug 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.

Similarly, failure to comply with the European Union’s or other countries’ requirements regarding the protection of personal information can lead to significant penalties and sanctions.

In addition, manufacturers of approved products and those manufacturers’ facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs applicable to drug 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, our contract manufacturers, any contract manufacturers we may engage in the future, our future collaborators and their contract manufacturers will also be subject to other regulatory requirements, including submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements regarding the distribution of samples to clinicians, recordkeeping, and costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product such as the requirement to implement a risk evaluation and mitigation strategy.

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

Under the Trump Administration’s regulatory reform initiatives, the FDA’s policies, regulations and guidance may be revised or revoked and that could prevent, limit or delay regulatory approval of our product candidates, which would impact our ability to generate revenue.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.

For example, certain policies of the Trump administration may impact our business and industry.

Namely, the Trump administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications.

An under‑staffed FDA could result in delays in the FDA’s responsiveness or in its ability to review submissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely fashion or at all.

An under-staffed FDA could result in delays in the FDA’s responsiveness or in its ability to review submissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely fashion or at all.

Moreover, on January 30, 2017, President Trump issued an Executive Order, applicable to all executive agencies, including the FDA, which required that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency must identify at least two existing regulations to be repealed, unless prohibited by law.

These requirements are referred to as the “two‑for‑one”

These requirements are referred to as the “two-for-one” provisions.

This Executive Order included a budget neutrality provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances.

For fiscal years 2018 and beyond, the Executive Order requires agencies to identify regulations to offset any incremental cost of a new regulation and approximate the total costs or savings associated with each new regulation or repealed regulation.

provisions may apply not only to agency regulations, but also to significant agency guidance documents.

In addition, on February 24, 2017, President Trump issued an executive order directing each affected agency to designate an agency official as a “Regulatory Reform Officer”

and establish a “Regulatory Reform Task Force”

to implement the two‑for‑one provisions and other previously issued executive orders

relating to the review of federal regulations .

More recently, on October 9, 2019, the President issued another executive order (“Executive Order on Promoting the Rule of Law Through Improved Agency Guidance Documents”).

In interim guidance issued by the Office of Information and Regulatory Affairs within the Office of Management and Budget on February 2, 2017, the administration indicated that the “two-for-one” provisions may apply not only to agency regulations, but also to significant agency guidance documents.

In addition, on February 24, 2017, President Trump issued an executive order directing each affected agency to designate an agency official as a “Regulatory Reform Officer” and establish a “Regulatory Reform Task Force” to implement the two-for-one provisions and other previously issued executive orders relating to the review of federal regulations.

More recently, on October 9, 2019, the President issued another executive order (“Executive Order on Promoting the Rule of Law Through Improved Agency Guidance Documents”).

The order is meant to ensure that agency guidance documents do not establish legally binding requirements and it directs each agency to rescind guidance documents that it determines should no longer be in effect.

It is difficult to predict how these requirements will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority.

If these executive actions impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

Inadequate funding for the FDA, the Securities and Exchange Commission and other government agencies 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.

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For example, the FDA has announced that in order to bring new therapies to patients sick with COVID-19 as quickly as possible, it has redeployed medical and regulatory staff from other areas to work on COVID-19 therapies.

Additionally, over the last several years, the U.S.

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● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective implementing regulations, which imposes obligations, including mandatory contractual terms, on covered healthcare providers, health plans and healthcare clearinghouses, as well as their business associates, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

analogous state and foreign laws and regulations, such as state anti‑kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non‑governmental third‑party payors, including private insurers, state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers, state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to clinicians and other healthcare providers or marketing expenditures, and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

If our operations are found to be in violation of any of the laws described above or any governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, individual imprisonment, integrity obligations, and the curtailment or restructuring of our operations.

● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers, state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to clinicians and other healthcare providers or marketing expenditures, and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

individual imprisonment, integrity obligations, and the curtailment or restructuring of our operations.

Any penalties, damages, fines, individual imprisonment, integrity obligations, exclusion from funded healthcare programs, or curtailment or restructuring of our operations could adversely affect our financial results.

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● an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;

a new Medicare Part D coverage gap discount program, in which participating manufacturers must agree to offer 70% point‑of‑sale discounts off negotiated drug prices during the coverage gap period as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

● a new Medicare Part D coverage gap discount program, in which participating manufacturers must agree to offer 70% point-of-sale discounts off negotiated drug prices during the coverage gap period as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

● expansion of healthcare fraud and abuse laws, including the federal False Claims Act and the federal Anti-Kickback Statute, and the addition of new government investigative powers, and enhanced penalties for noncompliance;

extension of manufacturers’

Medicaid rebate liability;

● extension of manufacturers’ Medicaid rebate liability;

● expansion of eligibility criteria for Medicaid programs;

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In addition, other legislative changes have been proposed and adopted since the ACA was enacted.

These changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and, due to subsequent legislative amendments to the statute, will stay in effect through 2025 unless additional congressional action is taken, and the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several types of providers and increased

the statute of limitations period for the government to recover overpayments to providers from three to five years.

The Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which was enacted on March 27, 2020, suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2020, and extended the sequester by one year, through 2030.

The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for INVELTYS and for any of our product candidates for which we may obtain regulatory approval or the frequency with which INVELTYS or any product candidate is prescribed or used.

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Since enactment of the ACA, there have been numerous legal challenges and Congressional actions to repeal and replace provisions of the law.

For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by the President on December 22, 2017, Congress repealed the “individual mandate.”

The repeal of this provision, which required most Americans to carry a minimal level of health insurance, became effective in 2019.

For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by the President on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which required most Americans to carry a minimal level of health insurance, became effective in 2019.

According to the Congressional Budget Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 and premiums in insurance markets may rise.

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Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA.

One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.

One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grant

exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.

The second Executive Order terminates the cost-sharing subsidies that reimburse insurers under the ACA.

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Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued were owed to them.

The effects of this gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet known.

On April 27, 2020, however, the United States Supreme Court reversed the federal circuit decision upholding Congress' denial of such risk corridor funding.

Further, on December 14, 2018, a U.S.

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The Trump administration and CMS have both stated that the ruling will have no immediate effect, and on December 30, 2018 the same judge issued an order staying the judgment pending appeal.

The Trump Administration represented to the Court of Appeals considering this judgment that it does not oppose the lower court’s ruling.

On July 10, 2019, the Court of Appeals for the Fifth Circuit heard oral argument in this case.

In those arguments, the Trump administration argued in support of upholding the lower court decision.

On December 18, 2019, that court affirmed the lower court’s ruling that the individual mandate portion of the ACA is unconstitutional and it remanded the case to the district court for reconsideration of the severability question and additional analysis of the provisions of the ACA.

March 3, 2020, the U.S.

On March 3, 2020, the U.S.

Supreme Court agreed to hear the case.

Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.

On June 25, 2020, the Trump Administration and a coalition of 18 states asked the court to strike down the entirety of the ACA.

It is unclear how such litigation and other efforts to repeal and replace the ACA will impact the ACA and our business.

The costs of prescription pharmaceuticals in the United States has also been the subject of considerable discussion in the United States, and members of Congress and the Trump Administration have stated that they will address such costs through new legislative and administrative measures.

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In addition, increased scrutiny by the U.S.

Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us and any future collaborators to more stringent product labeling and post‑marketing testing and other requirements with respect to INVELTYS or any other product candidate for which we obtain approval.

Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us and any future collaborators to more stringent product labeling and post-marketing testing and other requirements with respect to INVELTYS or any other product candidate for which we obtain approval.

Specifically, there have been several recent U.S.

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advance biosimilars and generics to boost price competition;

evaluate the inclusion of prices in drug makers’

ads to enhance price competition;

speed access to and lower the cost of new drugs by clarifying policies for sharing information between insurers and drug makers;

evaluate the inclusion of prices in drug makers’ ads to enhance price competition;

speed access to and lower the cost of new drugs by clarifying policies for sharing information between insurers and drug

avoid excessive pricing by relying more on value-based pricing by expanding outcome-based payments in Medicare and Medicaid;

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examine which Medicare Part B drugs could be negotiated for a lower price by Part D plans, and improving the design of the Part B Competitive Acquisition Program;

update Medicare’s drug-pricing dashboard to increase transparency;

prohibit Part D contracts that include “gag rules”

that prevent pharmacists from informing patients when they could pay less out-of-pocket by not using insurance;

update Medicare’s drug-pricing dashboard to increase transparency;

prohibit Part D contracts that include “gag rules” that prevent pharmacists from informing patients when they could pay less out-of-pocket by not using insurance;

and require that Part D plan members be provided with an annual statement of plan payments, out-of-pocket spending, and drug price increases.

In addition, on December 23, 2019, the Trump Administration published a proposed rulemaking that, if finalized, would allow states or certain other non-federal government entities to submit importation program proposals to the FDA for review and approval.

Applicants would be required to demonstrate their importation plans pose no additional risk to public health and safety and will result in significant cost savings for consumers.

At the same time, the FDA issued draft guidance that would allow manufacturers to import their own FDA-approved drugs that are authorized for sale in other countries (multi-market approved products).

Finally, the current presidential administration’s budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs.

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.

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

We and any third‑party manufacturers we engage or may engage are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage,

treatment and disposal of hazardous materials and wastes.

We and any third-party manufacturers we engage or may engage are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes.

From time to time and in the future, our operations may involve the use of hazardous materials, including chemicals and biological materials, and produce hazardous waste products.

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We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

Although we maintain general liability insurance as well as workers’

compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities.

Although we maintain general liability insurance as well as workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities.

We hold $3.0 million of environmental liability insurance for claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

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Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

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

Further, with respect to the operations of any future third-party contract manufacturers, it is possible that if they fail to operate in compliance with applicable environmental, health and safety laws and regulations or properly dispose

of wastes associated with our products, we could be held liable for any resulting damages, suffer reputational harm or experience a disruption in the manufacture and supply of our product candidates or products.

We are subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing our operations.

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We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the United Kingdom and the United States, and authorities in the European Union, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws.

In addition, various laws, regulations

and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non‑U.S.

In addition, various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S.

nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products.

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The SEC also may suspend or bar issuers from trading securities on U.S.

exchanges for violations of the FCPA’s accounting provisions.

Any investigation of any potential violations of the FCPA, the Bribery Act, other anti-corruption laws or Trade Control laws by U.S., U.K.

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Recent changes in tax law may adversely affect our business or financial condition.

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, or the 2017 Tax Act, which significantly revised the Internal Revenue Code of 1986, as amended, or the Code.

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, or the 2017 Tax Act, which significantly revised the

Internal Revenue Code of 1986, as amended, or the Code.

The 2017 Tax Act, among other things, contained significant changes to corporate taxation, including a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, the limitation of the tax deduction for net interest expense to 30% of adjusted earnings (except for certain small businesses), the limitation of the deduction for net operating losses arising in taxable years ending after December 31, 2017 to 80% of current year taxable income and elimination of net operating loss carrybacks for losses arising in taxable years ending after December 31, 2017 (though any such net operating losses may be carried forward indefinitely), the imposition of a one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, the elimination of U.S.

tax on foreign earnings (subject to certain important exceptions), the allowance of immediate deductions for certain new investments instead of deductions for depreciation expense over time, and the modification or repeal of many business deductions and credits.

As part of Congress’s response to the COVID-19 pandemic, the Families First Coronavirus Response Act, or FFCR Act, was enacted on March 18, 2020, and the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was enacted on March 27, 2020.

As part of Congress’s response to the COVID-19 pandemic, the Families First Coronavirus Response Act, or FFCR Act, was enacted on March 18, 2020, and the CARES Act was enacted on March 27, 2020.

Both contain numerous tax provisions.

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Regulatory guidance under the 2017 Tax Act, the FFCR Act and the CARES Act is and continues to be forthcoming, and such guidance could ultimately increase or lessen impact of these laws on our business and financial condition.

It is also likely that Congress will enact additional legislation in connection with the COVID-19 pandemic, some of which could have an impact on our company.

It is also possible that Congress will enact additional legislation in connection with the COVID-19 pandemic, some of which could have an impact on our company.

In addition, it is uncertain if and to what extent various states will conform to the 2017 Tax Act, the FFCR Act or the CARES Act.

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As of December 31, 2019, we had federal net operating loss, or NOL, carryforwards of $168.8 million, which may be available to offset future federal tax liabilities and expire at various dates beginning in 2030.

At December 31, 2019, we also had state net operating loss carryforwards of $171.8 million, which may be available to offset future state income tax liabilities and expire at various dates beginning in 2030.

These net operating loss carryforwards could expire unused and be unavailable to offset our future income tax liabilities.

In general, under Section 382 of the Code, the amount of benefits from our NOL carryforwards may be impaired or limited if we incur an “ownership change,”

generally defined as a greater than 50% change (by value) in our equity ownership by certain stockholders, over a three-year period.

At December 31, 2019, we also had state NOL carryforwards of $171.8 million, which may be available to offset future state income tax liabilities and expire at various dates beginning in 2030.

These NOL carryforwards could expire unused and be unavailable to offset our future income tax liabilities.

In general, under Section 382 of the Code, the amount of benefits from our NOL carryforwards may be impaired or limited if we incur an “ownership change,” generally defined as a greater than 50% change (by value) in our equity ownership by certain stockholders, over a three-year period.

We may have experienced ownership changes in the past and may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which are outside our control.

As a result, our use of federal NOL carryforward could be limited.

As a result, our use of federal NOL carryforwards could be limited.

State NOL carryforwards may be similarly limited.

Any such limitations may result in greater tax liabilities than we would incur in the absence of such limitations and increased liabilities could adversely affect our business, results of operations, financial position and cash flows.

If our ability to use our historical net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

If our ability to use our historical NOL carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise become unavailable to offset future income tax liabilities.

As described above in “Changes in tax laws or in their implementation or interpretation could adversely affect our business and financial condition,”

the 2017 Tax Act, as amended by the CARES Act, includes changes to U.S.

As described above in “Changes in tax laws or in their implementation or interpretation could adversely affect our business and financial condition,” the 2017 Tax Act, as amended by the CARES Act, includes changes to U.S.

federal tax rates and the rules governing NOL carryforwards that may significantly impact our ability to utilize our NOLs to offset taxable income in the future.

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Although we have entered into employment agreements with our executive officers, each of them may terminate their employment with us at any time.

We do not maintain “key person”

insurance for any of our executives or other employees.

We do not maintain “key person” insurance for any of our executives or other employees.

Recruiting and retaining qualified scientific, clinical, manufacturing, accounting, legal and sales and marketing personnel will also be critical to our success.

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In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy.

Our consultants and advisors may be employed by employers other than us and may have commitments under consulting

or advisory contracts with other entities that may limit their availability to us.

Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

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Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

Our internal computer systems, or those of our contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs and commercialization of our products.

Despite the implementation of security measures, our internal computer systems and those of our current and any future contractors or consultants, including any collaborator, are vulnerable to damage from cyber-attacks, computer viruses, worms and other destructive or disruptive software, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

Our internal computer systems, or those of our vendors, contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs and commercialization of our products.

Despite the implementation of security measures, our internal computer systems and those of our current and any future vendors, contractors or consultants, including any collaborator, are vulnerable to damage from cyber-attacks, computer viruses, worms and other destructive or disruptive software, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

Cyber incidents or attacks 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.

Cyber incidents also could include phishing attempts or e-mail fraud to cause payments or information to be transmitted to an unintended recipient.

incidents also could include phishing attempts or e-mail fraud to cause payments or information to be transmitted to an unintended recipient.

System failures, accidents, cyberattacks or security breaches could cause interruptions in our operations, it could result in a material disruption of our development programs, the commercialization of our products and our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions, in addition to possibly requiring substantial expenditures of resources to remedy.

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We could be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information maintained in the information systems and networks of our company, including personal information of our employees.

In addition, outside parties may attempt to penetrate our systems or those of our vendors or fraudulently induce our employees or employees of our vendors to disclose sensitive information in order to gain access to our data.

In addition, outside parties may attempt to penetrate our systems or those of our vendors, contractors or consultants or fraudulently induce our employees or employees of our vendors, contractors or consultants to disclose sensitive information in order to gain access to our data.

Like other companies, we may experience threats to our data and systems, including malicious codes and viruses, and other cyber-attacks.

The number and complexity of these threats continue to increase over time.

If a material breach of our security or that of our vendors occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose business and our reputation and credibility could be damaged.

If a material breach of our security or that of our vendors, contractors or consultants occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose business and our reputation and credibility could be damaged.

We could be required to expend significant amounts of money and other resources to repair or replace information systems or networks.

Although we develop and maintain systems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and

efforts to overcome security measures become more sophisticated.

Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely.

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Our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to significantly influence all matters submitted to stockholders for approval.

As of March 31, 2020, our executive officers and directors and principal stockholders in the aggregate, owned shares representing approximately 40.09% of our capital stock, based on the most recent institutional shareholder ownership filings with the SEC.

As of June 30, 2020, our executive officers and directors and principal stockholders in the aggregate, owned shares representing approximately 39.50% of our capital stock, based on the most recent institutional shareholder ownership filings with the SEC.

As a result, if these stockholders were to choose to act together, they may be able to significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs.

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● 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;

● 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;

● 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.

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● the success of competitive products or technologies;

regulatory or legal developments in the United States and other countries, including in the U.K.

in connection with Brexit;

● regulatory or legal developments in the United States and other countries;

● developments or disputes concerning patent applications, issued patents or other proprietary rights;

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● general economic, industry and market conditions;

the other factors described in this “Risk Factors”

In the past, following periods of volatility in the market price of a company’s securities, securities class‑action litigation has often been instituted against that company.

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

In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company.

We also may face securities class-action litigation if we fail to successfully commercialize INVELTYS, or if we cannot obtain regulatory approvals for or otherwise fail to successfully develop or commercialize EYSUVIS or our other product candidates.

Such litigation, if instituted against us, could cause us to incur substantial costs to defend such claims and divert management’s attention and resources.

Sale of a substantial number of shares of our common stock into the market could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

As of May 5, 2020, we had outstanding 55,715,876 shares of common stock.

As of August 3, 2020, we had outstanding 56,059,865 shares of common stock.

Shares of our common stock may be freely sold in the public market at any time to the extent permitted by Rules 144 and 701 under the Securities Act of 1933, as amended, or the Securities Act, or to the extent such shares have already been registered under the Securities Act and are held by non-affiliates of ours.

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These shares can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.

We are an “emerging growth company”

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

We are an “emerging growth company,”

as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain an emerging growth company until December 31, 2022, although if the market value of our common stock that is held by non‑affiliates exceeds $700 million as of the prior June 30th or if we have annual gross revenues of $1.07 billion or more in any fiscal year, we would cease to be an emerging growth company as of December 31 of the applicable year.

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

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain an emerging growth company until December 31, 2022, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th or if we have annual gross revenues of $1.07 billion or more in any fiscal year, we would cease to be an emerging growth company as of December 31 of the applicable year.

We also would cease to be an emerging growth company if we issue more than $1 billion of non-convertible debt over a three-year period.

We are also a “smaller reporting company,”

as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended.

We are also a “smaller reporting company,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended.

We would cease to be a smaller reporting company if we have a public float in excess of $250 million or have annual revenues in excess of $100 million and a public float in excess of $700 million, determined on an annual basis.

2 unchanged sentences

● not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

● not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

● reduced disclosure obligations regarding executive compensation;

2 unchanged sentences

These exemptions include:

being permitted to provide only two years of audited financial statements in our annual report on Form 10-K, with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure;

not being required to furnish a contractual obligations table in "Management's Discussion and Analysis of Financial Condition and Results of Operations";

● being permitted to provide only two years of audited financial statements in our annual report on Form 10-K, with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations"

● not being required to furnish a contractual obligations table in "Management's Discussion and Analysis of Financial Condition and Results of Operations";

● not being required to furnish a stock performance graph in our annual report.

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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 Athyrium Credit Facility preclude us from paying dividends without the lenders’

consent, and any future debt agreements that we may enter into may preclude us from paying dividends without the lenders’

consent or at all.

In addition, the terms of our Athyrium Credit Facility preclude us from paying dividends without the lenders’ consent, 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 your sole source of gain for the foreseeable future.

2 unchanged sentences

We do not expect this choice of forum provision will apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act, or any other claim for which federal courts have exclusive jurisdiction.

This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employee s.

Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and operating results.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors