−Removed: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer’s Purchases of Equity Securities
−Removed: Our common stock has been publicly traded on the Nasdaq Global Market under the symbol “OCUL”
−Removed: since July 25, 2014.
+Added: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer’s Purchases of Equity Securities
+Added: Our common stock has been publicly traded on the Nasdaq Global Market under the symbol “OCUL” since July 25, 2014.
As of March 1, 2021, there were approximately 20 holders of record of our common stock.
4 unchanged sentences
We did not sell any shares of our common stock, shares of our preferred stock or warrants to purchase shares of our stock, or grant any stock options or restricted stock awards, during the year ended December 31, 2020 that were not registered under the Securities Act of 1933, as amended, or the Securities Act, and that have not otherwise been described in an Annual Report on Form 10-K or a Quarterly Report on Form 10-Q.
+Added: In February 2021, we issued an employee non-statutory stock options to purchase up to 150,000 shares of our common stock outside our 2014 Stock Incentive Plan and under our 2019 Inducement Stock Incentive Plan as an inducement material to the individual’s acceptance of an offer of employment with us in accordance with Nasdaq Listing Rule 5635(c)(4).
+Added: We intend to file a registration statement on a Form S-8 to register the shares of common stock underlying this inducement award prior to the time at which the award becomes exercisable.
Purchase of Equity Securities
1 unchanged sentence
Selected Financial Data
−Removed: The following selected financial data should be read together with our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
−Removed: section of this Annual Report on Form 10-K.
−Removed: We have derived the statements of operations data for the years ended December 31, 2019, 2018, and 2017, and the balance sheet data as of December 31, 2019 and 2018 from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
−Removed: We have derived the statements of operations data for the years ended December 31, 2016 and 2015 and the balance sheet data as of December 31, 2017, 2016 and 2015 from our audited consolidated financial statements not included in this Annual Report on Form 10-K.
−Removed: Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.
−Removed: (in thousands, except per share data)
−Removed: Statement of Operations Data:
−Removed: Product revenue, net
−Removed: Collaboration revenue
−Removed: Total revenue
−Removed: Costs and operating expenses:
−Removed: Cost of product revenue
−Removed: Research and development
−Removed: Selling and marketing
−Removed: General and administrative
−Removed: Total costs and operating expenses
−Removed: Loss from operations
−Removed: Other income (expense):
−Removed: Interest income
−Removed: Interest expense
−Removed: Change in fair value of derivative liability
−Removed: Other income (expense), net
−Removed: Total other expense, net
−Removed: Net loss per share attributable to common stockholders, basic and diluted
−Removed: Weighted average common shares outstanding, basic and diluted
−Removed: As of December 31,
−Removed: (in thousands)
−Removed: Balance Sheet Data:
−Removed: Cash, cash equivalents and marketable securities
−Removed: Working capital
−Removed: Operating lease assets (1)
−Removed: Total assets (1)
−Removed: Operating lease liabilities, including current portion (1)
−Removed: Long-term debt, net of discount, including current portion
−Removed: Total stockholders’
−Removed: equity (deficit) (1)
−Removed: Amounts prior to 2019 do not reflect the impact of the adoption of Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), in the first quarter of 2019 under the modified retrospective transition method.
−Removed: See Note 2 - Summary of Significant Accounting Policies to the consolidated financial statements included elsewhere in this Annual Report on 10-K for additional information.
−Removed: Management’s Discussion and Analysis of Financial Condition and Results of Operations
−Removed: The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.
−Removed: Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties and should be read together with the “Risk Factors”
−Removed: section of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
−Removed: We are a biopharmaceutical company focused on the formulation, development and commercialization of innovative therapies for diseases and conditions of the eye using our proprietary, bioresorbable hydrogel platform technology.
−Removed: We use this technology to tailor duration and amount of delivery of a range of therapeutic agents of varying duration in our product candidates.
−Removed: We currently incorporate therapeutic agents that have previously received regulatory approval from the U.S.
−Removed: Food and Drug Administration, or FDA, including small molecules and proteins, into our hydrogel technology with the goal of providing local programmed-release of drug to the eye.
−Removed: We believe that our local programmed-release drug delivery technology has the potential to treat conditions and diseases of both the front and the back of the eye and can be administered through a range of different modalities including intracanalicular inserts, intracameral implants and intravitreal implants.
−Removed: We have products and product candidates in early commercial, clinical and preclinical development applying this technology to treat post-surgical ocular inflammation and pain, ocular itching associated with allergic conjunctivitis, dry eye disease, glaucoma and ocular hypertension, and wet age-related macular degeneration, or wet AMD, among other conditions.
−Removed: In November 2018, the FDA approved our new drug application, or NDA, for DEXTENZA ®
−Removed: (dexamethasone ophthalmic insert) 0.4mg for intracanalicular use for the treatment of ocular pain following ophthalmic surgery.
−Removed: In June 2019, the FDA approved our supplemental new drug application, or sNDA, for DEXTENZA to treat post-surgical ocular inflammation.
−Removed: On July 1, 2019, we commercially launched DEXTENZA in the United States for the treatment of post-surgical ocular inflammation and pain.
−Removed: DEXTENZA is the first FDA-approved intracanalicular insert delivering dexamethasone to treat post-surgical ocular inflammation and pain for up to 30 days with a single administration.
−Removed: We have also initiated a pivotal Phase 3 clinical trial evaluating DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis.
−Removed: In May 2019, we announced the results of the Phase 3 clinical trial of our product candidate OTX-TP (intracanalicular travoprost insert) for the reduction of intraocular pressure, or IOP, in patients with glaucoma and ocular hypertension.
−Removed: Both DEXTENZA and OTX-TP are local programmed-release, drug-eluting, preservative-free intracanalicular inserts that are placed into the canaliculus through a natural opening called the punctum located in the portion of the lower eyelid near the nose.
−Removed: In October 2019, we announced that we had met with FDA who determined that the results did not achieve clinical meaningfulness for OTX-TP .
−Removed: As a result, we informed the market that we did not intend to advance OTX-TP without a partner.
−Removed: Our earlier stage assets include two development programs that have initiated clinical trials:
−Removed: OTX-TIC, an intracameral travoprost implant for the reduction of IOP in patients with glaucoma and ocular hypertension when greater IOP reduction is needed, and OTX-TKI, an intravitreal injection by fine gauge needle of a hydrogel, anti-angiogenic formulation of a tyrosine kinase inhibitor, or TKI, for the treatment of wet AMD.
−Removed: We also have a collaboration with Regeneron Pharmaceuticals, Inc., or Regeneron, for the development and potential commercialization of products containing our local programmed-release hydrogel in combination with Regeneron’s VEGF inhibitor, aflibercept, currently marketed under the brand name Eylea.
−Removed: We delivered an initial formulation to Regeneron in late 2018 that was subsequently determined to not achieve the goals of the program.
−Removed: We are currently negotiating an amendment to the initial collaboration to deliver additional formulations going forward.
−Removed: In addition to our ongoing drug product development, we currently market ReSure ®
−Removed: Sealant, a hydrogel ophthalmic wound sealant approved by the FDA to seal corneal incisions following cataract surgery.
−Removed: ReSure Sealant is the first and only surgical sealant to be approved by the FDA for ophthalmic use.
−Removed: We are also assessing the potential use of our hydrogel platform technology in other areas of the body.
−Removed: Inflammation and Pain after Ocular Surgery
−Removed: DEXTENZA ®
−Removed: (dexamethasone ophthalmic insert)
−Removed: DEXTENZA incorporates the FDA-approved corticosteroid dexamethasone as an active pharmaceutical ingredient into a hydrogel, drug-eluting intracanalicular insert.
−Removed: In November 2018, the FDA approved our NDA for DEXTENZA for the treatment of post-surgical ocular pain.
−Removed: In June 2019, the FDA approved our sNDA, for DEXTENZA to treat post-surgical ocular inflammation.
−Removed: In connection with our July 1, 2019 commercial launch of DEXTENZA for post-surgical ocular inflammation and pain, we have built our own highly targeted, key account manager, or KAM, sales force that focuses on the ambulatory surgical centers, or ASCs, responsible for the largest volumes of cataract surgery.
−Removed: Since the commercial launch of DEXTENZA, we have expanded our field sales team to a total of 30 KAMs.
−Removed: DEXTENZA is now available through a network of distributors.
−Removed: Our initial commercial efforts are focused on the two million cataract procedures performed annually under Medicare Part B.
−Removed: Following our receipt of FDA approval on November 30, 2018, we submitted an application for a C-code for transitional pass-through payment status.
−Removed: On May 29, 2019, we received formal notification from the Centers for Medicare and Medicaid Services, or CMS, that it had approved transitional pass-through payment status and established a new reimbursement code for DEXTENZA.
−Removed: The code, C9048, became effective on July 1, 2019.
−Removed: On December 28, 2018, we submitted an application for a J-Code for permanent payment status.
−Removed: In July 2019, we subsequently received a specific and permanent J-Code, J1096, that became effective October 1, 2019.
−Removed: A J-Code is a permanent code used to report drugs that ordinarily cannot be self-administered.
−Removed: With the effectiveness of our permanent J-Code as of October 1, 2019, our C-code is no longer in effect.
−Removed: We have completed three Phase 3 clinical trials of DEXTENZA for the treatment of post-surgical ocular inflammation and pain.
−Removed: The data from two of these three completed Phase 3 clinical trials and a prior Phase 2 clinical trial were used to support our NDA for post-surgical ocular pain;
−Removed: data from a subsequent Phase 3 clinical trial was used to support our subsequent sNDA for post-surgical ocular inflammation.
−Removed: In June 2019, the FDA approved the sNDA.
−Removed: We have also completed two Phase 3 clinical trials of DEXTENZA for the treatment of allergic conjunctivitis and a Phase 2 clinical trial of DEXTENZA for the treatment of episodic dry eye disease.
−Removed: In the third quarter of 2019, we began dosing patients in an 80-subject, pivotal Phase 3 clinical trial evaluating DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis.
−Removed: This Phase 3 clinical trial is a U.S.-based, multi-center, 1:1 randomized, double-masked, placebo-controlled trial that intends to enroll approximately 96 subjects, testing the safety and efficacy of DEXTENZA (dexamethasone ophthalmic insert) 0.4 mg versus a placebo vehicle punctum plug using the Ophthalmic Research Associates’
−Removed: modified Conjunctival Allergen Challenge (Ora-Cac®) Model for the treatment of ocular itching associated with allergic conjunctivitis.
−Removed: The trial is designed to assess the effect of DEXTENZA compared with a placebo on allergic reactions using a series of successive allergen challenges over a 30-day period.
−Removed: The primary efficacy endpoint being evaluated in the study is ocular itching one week following the insertion of DEXTENZA.
−Removed: DEXTENZA is administered by a physician as a bioresorbable intracanalicular insert and designed for drug release to the ocular surface for up to 30 days.
−Removed: Previously, we completed two Phase 3 clinical trials, in which DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis.
−Removed: In the first Phase 3 clinical trial, DEXTENZA achieved the co-primary endpoint of improvement in ocular itching compared with placebo but failed to achieve on the co-primary endpoint of improvement in conjunctival redness compared with placebo, in each case, at certain prespecified timepoints.
−Removed: For the second Phase 3 trial, DEXTENZA failed to achieve the primary endpoint of improvement in ocular itching compared with placebo, at certain prespecified timepoints.
−Removed: This trial represents the third Phase 3 clinical trial in allergic conjunctivitis conducted by us and, if successful, we plan to submit a supplemental NDA to the FDA for ocular itching associated with allergic conjunctivitis.
−Removed: We have recently completed enrollment and topline results from this trial are anticipated to be reported in the second quarter of 2020.
−Removed: We are also planning to evaluate DEXTENZA in pediatric subjects that are 0 to 3 years of age undergoing cataract surgery beginning in the second half of 2020.
−Removed: The planned pediatric trial is a post-approval commitment to the FDA.
−Removed: Additionally, we have received proposals for, and plan to support, several investigator-initiated trials evaluating DEXTENZA in different clinical situations.
−Removed: Glaucoma Programs
−Removed: Glaucoma is a large market and a disease that is estimated to impact more than 2.7 million people age 40 or older in the U.S.
−Removed: The primary goal of glaucoma treatment is to slow the progression of this chronic disease by reducing intraocular pressure, and many medications can accomplish this.
−Removed: Importantly, however, adherence to current topical glaucoma therapies is known to be particularly poor with reported rates of non-adherence from 30% to 80%.
−Removed: These low compliance rates may be associated with disease progression and loss of vision, and may be part of the reason that glaucoma is a leading cause of blindness in people over 60 years of age.
−Removed: Prostaglandins are the most commonly used class of medications to treat patients with glaucoma and are administered via daily eye drops as the current standard of care.
−Removed: The ability of patients to use and place daily eye drops is challenging.
−Removed: The products that we are developing are designed to address the issue of compliance by delivering a prostaglandin analog formulated with our programmed release hydrogel to lower intraocular pressure for several months with a single insert.
−Removed: OTX-TIC (travoprost implant for intracameral injection)
−Removed: OTX-TIC is our product candidate for glaucoma patients in need of a significant reduction in IOP and ocular hypertension.
−Removed: OTX-TIC is a bioresorbable hydrogel implant incorporating travoprost that is designed to be administered by a physician as an intracameral injection with an initial target duration of drug release of four to six months.
−Removed: Preclinical studies to date have demonstrated reduction of IOP and pharmacokinetics in the aqueous humor that suggest a pharmacodynamic response of IOP reduction in humans.
−Removed: Our investigational new drug application, or IND, for our U.S.
−Removed: trial became effective in the first quarter of 2018, and we dosed the first patient in May 2018.
−Removed: This clinical trial is a multi-center, open-label, dose-escalation, proof-of-concept study designed to evaluate the safety, durability, tolerability, and biological activity of OTX-TIC in patients with primary open-angle glaucoma or ocular hypertension.
−Removed: We presented initial results from the first cohort, comprised of five patients, in this clinical trial at the Association of Research and Vision of Ophthalmology (ARVO) meeting in April 2019 and the American Society of Cataract and Refractive Surgery annual meeting in May 2019.
−Removed: This data demonstrated that, with a single implant, subjects were able to achieve IOP lowering for up to thirteen months at a level least as good as standard of care topical eye drop that was placed in each subject’s non-study eye.
−Removed: In addition, the hydrogel carrier, as designed, biodegraded in five to seven months.
−Removed: There were no clinically meaningful changes in corneal health as measured by endothelial cell evaluation and corneal pachymetry.
−Removed: Several subjects reported low grade inflammation and peripheral anterior synechiae that we believe may be addressable with modifications to the implants.
−Removed: We are currently collecting additional data from the first two cohorts and have begun enrollment in a third and fourth cohort to assess the impact of a faster degrading implant with the same therapeutic dose as administered in cohort one.
−Removed: We have developed an additional formulation to test a smaller implant of OTX-TIC and expect to evaluate this formulation in a fourth cohort of this clinical trial in the future.
−Removed: OTX-TP (intracanalicular travoprost insert)
−Removed: Our product OTX-TP is an intracanalicular insert that delivers a preservative-free formulation of the drug travoprost for the reduction of intraocular pressure, or IOP, in patients with primary open-angle glaucoma or ocular hypertension.
−Removed: OTX-TP is designed to lower IOP for up to 90 days and to address the poor adherence associated with chronic, daily eye drop regimens, the current standard of care.
−Removed: On May 20, 2019, we reported topline results of the Phase 3 randomized, double blind, placebo-controlled clinical trial that was conducted across more than 50 sites and enrolled 554 subjects with open-angle glaucoma or ocular hypertension in the full analysis set, or FAS, population.
−Removed: The trial’s primary efficacy endpoint was an assessment of mean IOP at nine different time points, three diurnal time points (8:00 a.m, 10:00 a.m.
−Removed: and 4:00 p.m.) at each of 2, 6, and 12 weeks following insertion.
−Removed: The secondary endpoints included an evaluation of whether OTX-TP demonstrated a statistically superior mean reduction of IOP from baseline for OTX-TP treated subjects compared with placebo insert treated subjects (Table 1) compared with placebo insert treated subjects at the same nine time points.
−Removed: Topline results show that the trial did not achieve its endpoint of statistically significant superiority in mean reduction of IOP compared with placebo at all nine time points.
−Removed: OTX-TP was generally well tolerated and no ocular serious adverse events were observed.
−Removed: The most common ocular adverse events seen in the study eye were dacryocanaliculitis (approximately 7.0% in OTX-TP vs.
−Removed: 3.0% in placebo) and lacrimal structure disorder (approximately 6.0% in OTX-TP vs.
−Removed: 4.0% in placebo).
−Removed: We have met with the FDA to discuss data we reported in May 2019 from our completed phase three trial.
−Removed: Our conversation with the FDA was productive and involved a discussion around the importance of compliance and how a product like OTX-TP could address the issue of non-compliance by delivering a prostaglandin analog formulated with our programmed release hydrogel to lower intraocular pressure for up to 12 weeks with a single insert.
−Removed: While the FDA did not feel that the data from this clinical trial met the standard of clinical meaningfulness in the population studied, there were constructive discussions about potential pathways forward in specific patient populations for whom drops are problematic.
−Removed: Therefore, we do not intend to initiate a second Phase 3 clinical trial at this time without the assistance of a collaborative partner.
−Removed: We believe that if we were to partner OTX-TP, we may choose to conduct additional Phase 2 clinical trials to address feedback from the FDA.
−Removed: Given the anticipated use of OTX-TP as a chronic therapy, however, we generated six-month and one year safety data on a limited number of subjects in an open-label one year safety extension study to support a potential future product registration.
−Removed: Back-of-the-Eye Programs
−Removed: We are engaged in the development of formulations of our hydrogel administered via intravitreal injection to address the large and growing markets for diseases and conditions of the back of the eye.
−Removed: Our initial development efforts are focused on the use of our extended-delivery hydrogel in combination with anti-angiogenic drugs, such as protein-based anti-VEGF drugs, or small molecule drugs, such as TKIs, for the treatment of retinal diseases such as wet AMD, retinal vein occlusion and diabetic macular edema.
−Removed: Our initial goal for these programs is to provide extended delivery over a four to nine month period thereby reducing the frequency of the current monthly or bi-monthly immediate release intravitreal injection regimen for wet AMD and other retinal diseases.
−Removed: OTX-TKI (tyrosine kinase inhibitor intravitreal impaling containing axitinib)
−Removed: OTX-TKI is a preformed, bioresorbable hydrogel fiber incorporating axitinib, a small molecule TKI with anti-angiogenic properties delivered by intravitreal injection.
−Removed: TKIs have shown promise in the treatment of wet AMD.
−Removed: In May 2017, we reported data from preclinical studies evaluating the efficacy, tolerability and pharmacokinetics of OTX-TKI.
−Removed: In this study, OTX-TKI was well-tolerated, and high levels of drug were maintained in the tissue for up to twelve months in Dutch belted rabbits.
−Removed: In the first quarter of 2019, we began dosing patients in a Phase 1 clinical trial in Australia.
−Removed: This clinical trial is a multi-center, open-label, dose escalation study designed to evaluate the safety, durability and tolerability of OTX-TKI.
−Removed: We also plan to evaluate biological activity by following visual acuity over time and measuring retinal thickness using standard optical coherence tomography.
−Removed: The independent Data Safety and Monitoring Committee met to review the safety from the first cohort of subjects in the Phase 1 clinical trial and recommended moving to a higher dose of OTX-TKI for the next cohort of subjects to be treated, as the first cohort of subjects reported no safety concerns.
−Removed: Two cohorts of six subjects each have been enrolled, a lower dose cohort of 200 μg and a higher dose cohort of 400 μg.
−Removed: In the first two fully enrolled cohorts, OTX-TKI was generally well tolerated and observed to have a favorable safety profile with no ocular serious adverse events noted.
−Removed: In the higher dose cohort, OTX-TKI showed a decrease in central subfield retinal thickness as measured by mean change in central subfield thickness by decreases in intraretinal and/or subretinal fluid in some subjects.
−Removed: The Company plans to continue long-term evaluation of the first two cohorts.
−Removed: We plan to amend our current trial protocol to enroll a third, higher-dose cohort.
−Removed: This Phase 1 clinical trial is not powered to measure any efficacy endpoints with statistical significance.
−Removed: OTX-IVT (intravitreal aflibercept implant) in collaboration with Regeneron
−Removed: In October 2016, we entered into a strategic collaboration, option and license agreement, or Collaboration Agreement, with Regeneron for the development and potential commercialization of products using our hydrogel in combination with Regeneron’s large molecule VEGF-targeting compounds for the treatment of retinal diseases, with the initial focus on the VEGF trap aflibercept, currently marketed under the brand name Eylea.
−Removed: Under the terms of the agreement, we granted Regeneron an option, or the Option, to enter into an exclusive, worldwide license under our intellectual property to develop and commercialize products using our hydrogel in combination with Regeneron’s large molecule VEGF-targeting compounds, or Licensed Products.
−Removed: The Collaboration Agreement does not cover the development of any products that deliver small molecule drugs, including TKIs, for any target including VEGF, or any products that deliver large molecule drugs other than those that target VEGF proteins.
−Removed: Under the terms of the
−Removed: Collaboration Agreement, we and Regeneron have agreed to conduct a joint research program with the aim of developing an extended-delivery formulation of aflibercept that is suitable for advancement into clinical development.
−Removed: We refer to the formulation we are developing with Regeneron as OTX-IVT.
−Removed: Under the terms of the Collaboration Agreement, Regeneron is responsible for funding an initial preclinical tolerability study, which it initiated in early 2018.
−Removed: If the Option is exercised, Regeneron will conduct further preclinical development and an initial clinical trial under a collaboration plan.
−Removed: We are obligated to reimburse Regeneron for certain development costs during the period through the completion of the initial clinical trial, subject to a cap of $25 million, which cap may be increased by up to $5 million under certain circumstances.
−Removed: We do not expect our funding requirements under the collaboration to be material over the next twelve months.
−Removed: If Regeneron elects to proceed with further development beyond the initial clinical trial, it will be solely responsible for conducting and funding further development and commercialization of product candidates.
−Removed: If the Option is exercised, Regeneron is required to use commercially reasonable efforts to research, develop and commercialize at least one Licensed Product.
−Removed: Such efforts shall include initiating the dosing phase of a subsequent clinical trial within specified time periods following the completion of the first-in-human clinical trial or the initiation of preclinical toxicology studies, subject to certain extensions.
−Removed: Under the terms of the Collaboration Agreement, Regeneron has agreed to pay us $10 million upon exercise of the Option.
−Removed: We are also eligible to receive up to $145 million per Licensed Product upon the achievement of specified development and regulatory milestones, including successful results from the first-in-human clinical trial, $100 million per Licensed Product upon first commercial sale of such Licensed Product and up to $50 million based on the achievement of specified sales milestones for all Licensed Products.
−Removed: In addition, we are entitled to tiered, escalating royalties, in a range from a high-single digit to a low-to-mid teen percentage of net sales of Licensed Products.
−Removed: In December 2017, we delivered to Regeneron a proposed final formulation for the initial preclinical tolerability study.
−Removed: Regeneron initiated the preclinical study in early 2018.
−Removed: We and Regeneron have subsequently reached an understanding that the proposed formulation was not final and have ceased development of it.
−Removed: We are currently in discussions with Regeneron, in accordance with the terms of the Collaboration Agreement, regarding the development of an alternative formulation.
−Removed: ReSure ®
−Removed: Following our receipt of FDA approval for ReSure Sealant, we commercially launched this product in the United States in 2014.
−Removed: ReSure Sealant is approved to seal corneal incisions following cataract surgery and is the first and only surgical sealant to be approved by the FDA for ophthalmic use.
−Removed: In the pivotal clinical trials that formed the basis for FDA approval, ReSure Sealant provided superior wound closure and a better safety profile than sutured closure.
−Removed: While ReSure Sealant remains commercially available in the United States, there is no sales support currently provided to the product.
−Removed: We have received only limited revenues from ReSure Sealant to date and anticipate only limited sales for 2020.
−Removed: The FDA required two post-approval studies as a condition for approval of our premarket approval, or PMA, application for ReSure Sealant.
−Removed: The first post-approval study, identified as the Clinical PAS, was to enroll at least 598 patients to confirm that ReSure Sealant can be used safely by physicians in a standard cataract surgery practice and to confirm the incidence of the most prevalent adverse ocular events identified in our pivotal study in eyes treated with ReSure Sealant.
−Removed: We submitted the final study report of the Clinical PAS to the FDA in June 2016, and the FDA has confirmed the Clinical PAS has been completed.
−Removed: The second post-approval study, identified as the Device Exposure Registry Study, is intended to link to the Medicare database to ascertain if patients are diagnosed or treated for endophthalmitis within 30 days following cataract surgery and application of ReSure Sealant.
−Removed: The Device Exposure Registry Study is required to include at least 4,857 patients.
−Removed: Due to difficulties in establishing an acceptable way to link ReSure Sealant to the Medicare database and lack of investigator interest, we have been unable to enroll trial sites and patients, collect patient data and report study data to the FDA.
−Removed: We have provided regular periodic reports to the FDA on the progress of this post-approval study.
−Removed: We received a warning letter from the FDA in October 2018 relating to our compliance with data collection and information reporting obligations in the Device Exposure Registry Study.
−Removed: The FDA warning letter refers to a lack of progress with the enrollment and related data collection and information reporting obligations for a required post-approval trial.
−Removed: In November 2018, we appealed this warning letter.
−Removed: In December 2018, the FDA rejected our appeal.
−Removed: Failure by us to conduct the required post-approval trial for ReSure Sealant to the FDA’s satisfaction may result in withdrawal of the FDA’s approval of ReSure Sealant or other regulatory action.
−Removed: A teleconference was held with the FDA in January 2019 resulting in tentative agreement on a proposed retrospective registry study of endophthalmitis rates to satisfy the Device Exposure Registry Study requirements.
−Removed: In a letter dated June 7, 2019 from the FDA, the agency acknowledged receipt of a letter dated March 29, 2019 from us in which we proposed conducting the proposed retrospective analysis of the IRIS Registry, comparing endophthalmitis rates from sites that purchased ReSure versus those sites that did not purchase ReSure.
−Removed: If the rates are no different, the FDA has indicated that it will consider the post-approval requirement to have been fulfilled.
−Removed: If there is a statistically significant increase in endophthalmitis rates at sites purchasing ReSure compared with those not purchasing ReSure, a prospective study will be required.
−Removed: The FDA has indicated it will consider our response to the warning letter adequate once it approves the study protocol for the retrospective analysis of the IRIS Registry and the outline of the prospective study.
−Removed: We submitted the protocol for the agreed-upon retrospective study and prospective study outline, as required per the terms of the warning letter in December 2019.
−Removed: We have received feedback from the FDA in February 2020 and we responded to the FDA in March 2020.
−Removed: We expect a response from the FDA in the middle of 2020.
−Removed: ReSure Sealant currently remains commercially available in the United States, though there is no sales support provided to the product at this time.
−Removed: We have received only limited revenues from ReSure Sealant to date and anticipate only limited sales for 2020.
−Removed: Additional Potential Areas for Growth
−Removed: We continue to leverage the potential of our hydrogel platform to explore areas for growth with our focus on formulating, developing and commercializing innovative therapies for diseases and conditions of the eye.
−Removed: We are also assessing the potential use of our hydrogel platform technology in other areas of the body and are studying several localized delivery platforms including via wound inlays;
−Removed: sinus and ear inserts;
−Removed: and subcutaneous, peripheral, and intra-articular injections.
−Removed: In September 2018, we entered into a second amended and restated license agreement, or Second Amended Agreement, with Incept LLC, an intellectual property holding company, or Incept.
−Removed: The Second Amended Agreement expands the scope of our intellectual property license to include products delivered for the treatment of acute post-surgical pain or for the treatment of ear, nose and/or throat diseases or conditions, subject to specified exceptions.
−Removed: Financial Position
−Removed: We have generated limited revenue to date.
−Removed: All of our local programmed-release drug delivery products are in various phases of early commercial, clinical and preclinical development.
−Removed: Our ability to generate product revenues sufficient to achieve profitability will depend heavily on our commercialization of DEXTENZA for the treatment of ocular inflammation and pain following ophthalmic surgery and our obtaining marketing approval for and commercializing other products with significant market potential, including DEXTENZA for additional indications, OTX-TIC for glaucoma and ocular hypertension, and OTX-TKI for wet AMD.
−Removed: Since inception, we have incurred significant operating losses.
−Removed: Our net losses were $86.4 million, $60.0 million and $63.4 million for the years ended December 31, 2019, 2018 and 2017, respectively.
−Removed: As of December 31, 2019, we had an accumulated deficit of $383.6 million.
−Removed: Our total cost and operating expenses were $90.0 million, $61.1 million and $63.8 million for the years ended December 31, 2019, 2018 and 2017, respectively, including $8.8 million, $7.5 million and $7.3 million, respectively, in non-cash stock-based compensation expense.
−Removed: Our operating expenses have grown as we prepared for the commercial launch of DEXTENZA in July 2019;
−Removed: continue to pursue the clinical development OTX-TIC, OTX-TKI and DEXTENZA for additional indications;
−Removed: continue the internal development of our intravitreal hydrogel formulation for the local programmed-release of protein-based or small molecule anti-angiogenic drugs, such as OTX-IVT for the treatment of wet AMD and other back-of-the-eye diseases;
−Removed: continue the research and development of our other product candidates;
−Removed: and seek marketing approval for any such product candidate for which we obtain favorable pivotal clinical trial results.
−Removed: We expect to incur substantial sales and marketing expenses in connection with the ongoing DEXTENZA commercial launch and that of any of our other product candidates.
−Removed: In addition, we will continue to incur additional costs associated with operating as a public company , including legal costs associated with any pending legal proceedings.
−Removed: Although we expect to generate revenue from sales of DEXTENZA and potentially ReSure Sealant, we will need to obtain substantial additional funding to support our continuing operations and the commercialization of DEXTENZA.
−Removed: If we are unable to raise capital or access our borrowing capacity when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts or to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
−Removed: Through December 31, 2015, we raised $132.0 million through the sale of common stock in various offerings.
−Removed: In November 2016, we entered into a Controlled Equity Offering Sales Agreement, or the 2016 Sales Agreement with Cantor Fitzgerald & Co., or Cantor, under which we could offer and sell our common stock having aggregate proceeds of up to $40.0 million from time to time.
−Removed: Through February 26, 2019, we sold an aggregate of 6,330,222 shares of common stock under the 2016 Sales Agreement resulting in net proceeds of approximately $38.4 million after commission and other offering expenses.
−Removed: On February 28, 2019, pursuant to the 2016 Sales Agreement, we delivered a termination notice to Cantor, terminating the 2016 Sales Agreement.
−Removed: In January 2017, we completed a follow-on offering of our common stock at a public offering price of $7.00 per share.
−Removed: The offering consisted of 3,571,429 shares of common stock sold by us.
−Removed: We received net proceeds from the follow-on offering of approximately $23.3 million after deducting underwriting discounts, commissions and expenses.
−Removed: In January 2018, we completed a follow-on offering of our common stock at a public offering price of $5.00 per share.
−Removed: The offering consisted of 7,475,000 shares of common stock sold by us, including those shares sold in connection with the exercise by the underwriter of its option to purchase additional shares.
−Removed: We received net proceeds from the follow-on offering of approximately $35.1 million after deducting underwriting discounts and commissions.
−Removed: On March 1, 2019, we issued $37.5 million of unsecured senior subordinated convertible notes, or the 2026 Convertible Notes.
−Removed: The 2026 Convertible Notes accrue interest at an annual rate of 6% of its outstanding principal amount, payable at maturity, on March 1, 2026, unless earlier converted, repurchased or redeemed.
−Removed: The holders of the 2026 Convertible Notes may convert all or part of the outstanding principal amount of their 2026 Convertible Notes into shares of our common stock, par value $0.0001 per share, prior to maturity and provided that no conversion results in a holder beneficially owning more than 19.99% of our issued and outstanding common stock.
−Removed: The conversion rate is initially 153.8462 shares of our common stock per $1,000 principal amount of the 2026 Convertible Notes, which is equivalent to an initial conversion price is $6.50 per share.
−Removed: The conversion rate is subject to adjustment in customary circumstances such as stock splits or similar changes to our capitalization.
−Removed: On April 5, 2019, we entered into an Open Market Sale Agreement SM , or the 2019 Sales Agreement, with Jefferies LLC, or Jefferies, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $50.0 million from time to time through Jefferies, acting as agent.
−Removed: In the twelve months ended December 31, 2019, the Company sold 7,337,459 shares of common stock under the 2019 Sales Agreement, resulting in net proceeds of approximately $32.7 million, respectively, after commissions and expenses.
−Removed: From inception to March 10, 2020 , we have sold 9,556,973 shares of common stock under the 2019 Sales Agreement, resulting in net proceeds of approximately $43.3 million after commissions and expenses.
−Removed: On August 2, 2019, we entered into the Second Amendment of our Third Amended and Restated Credit and Security Agreement, between us and our senior note lenders MidCap Financial and Silicon Valley Bank, whereby the lenders agreed to remove the restrictions on the $5.0 million of restricted cash required under the Third Amended and Restated Credit and Security Agreement as of June 30, 2019.
−Removed: Based on our current plans and forecasted expenses, which includes estimates related to anticipated cash inflows from DEXTENZA and ReSure Sealant product sales and cash outflows from operating expenses, we believe that our existing cash and cash equivalents, as of December 31, 2019, together with the first quarter net proceeds through March 10, 2020 from sales of our common stock pursuant to the 2019 Sales Agreement discussed in Note 22 of our consolidated financial statements, will enable us to fund our planned operating expenses, debt service obligations and capital expenditure requirements into the first quarter of 2021.
−Removed: We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.
−Removed: See “—Liquidity and Capital Resources.”
−Removed: Financial Operations Overview
−Removed: From our inception through December 31, 2019, we have generated limited amounts of revenue from the sales of our products.
−Removed: We began to recognize limited product revenue from DEXTENZA during the second quarter of 2019 with the first commercial shipments to customers in June 2019.
−Removed: Our ReSure Sealant product received premarket approval, or PMA, from the FDA in January 2014.
−Removed: We commenced sales of ReSure Sealant in the first quarter of 2014, have received only limited revenues from ReSure Sealant to date and anticipate only limited sales for 2020.
−Removed: Until June 2019, ReSure Sealant was our only source of revenue from product sales.
−Removed: We may generate revenue in the future if we successfully commercialize DEXTENZA and develop and commercialize one or more of our product candidates and receive marketing approval for any such product candidate or if we enter into longer-term collaboration agreements with third parties.
−Removed: For the year ended December 31, 2019, two individual customers accounted for 27% and 11% of our total revenue and three customers accounted for 39%, 18% and 11% of our total accounts receivable.
−Removed: No other customer accounted for more than 10% of total revenue or accounts receivable for the year ended December 31, 2019.
−Removed: Operating Expenses
−Removed: Cost of Product Revenue
−Removed: Cost of product revenue consists primarily of costs of DEXTENZA, for 2019, and ReSure product revenue , which include:
−Removed: Direct materials costs;
−Removed: Direct labor, which includes employee-related expenses, including salaries, related benefits and payroll taxes, travel and stock-based compensation expense for employees engaged in the production process;
−Removed: Manufacturing overhead costs, which includes rent, depreciation, and indirect labor costs associated with the production process;
−Removed: Transportation costs;
−Removed: Cost of scrap material.
−Removed: Research and Development Expenses
−Removed: Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:
−Removed: employee-related expenses, including salaries, related benefits and payroll taxes, travel and stock-based compensation expense for employees engaged in research and development, clinical and regulatory and other related functions;
−Removed: expenses incurred in connection with the clinical trials of our product candidates, including with the investigative sites that conduct our clinical trials and under agreements with contract research organizations, or CROs;
−Removed: expenses relating to regulatory activities, including filing fees paid to the FDA for our submissions for product approvals;
−Removed: expenses associated with developing our pre-commercial manufacturing capabilities and manufacturing clinical study materials;
−Removed: ongoing research and development activities relating to our core bioresorbable hydrogel technology and improvements to this technology;
−Removed: facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies;
−Removed: costs relating to the supply and manufacturing of product inventory, prior to approval by the FDA or other regulatory agencies of our products;
−Removed: expenses associated with preclinical development activities.
−Removed: We expense research and development costs as incurred.
−Removed: We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our clinical investigative sites.
−Removed: Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical trials and regulatory fees.
−Removed: We do not allocate employee and contractor-related costs, costs associated with our platform technology, costs related to manufacturing or purchasing clinical trial materials, and facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified.
−Removed: We use internal resources in combination with third-party CROs, including clinical monitors and clinical research associates, to manage our clinical trials, monitor patient enrollment and perform data analysis for many of our clinical trials.
−Removed: These employees work across multiple development programs and, therefore, we do not track their costs by program.
−Removed: The table below summarizes our research and development expenses incurred by product development program:
−Removed: Year Ended December 31,
−Removed: (in thousands)
−Removed: ReSure Sealant
−Removed: DEXTENZA for post-surgical ocular inflammation and pain
−Removed: DEXTENZA for allergic conjunctivitis
−Removed: DEXTENZA for dry eye disease
−Removed: OTX-TP for glaucoma and ocular hypertension
−Removed: OTX-TIC for glaucoma and ocular hypertension
−Removed: OTX-TKI for Wet AMD
−Removed: Preclinical programs
−Removed: Unallocated expenses
−Removed: Total research and development expenses
−Removed: We expect that our expenses will increase in connection with our ongoing activities.
−Removed: We estimate that in 2020, we will incur approximately $15.0 million to $22.0 million of research and development expenses, including costs related to clinical trials and other research and development activities.
−Removed: Of this amount, we estimate we will incur approximately $5.0 million to $10.0 million of external research and development expenses related to clinical trial and regulatory costs for DEXTENZA, OTX-TP, OTX-TKI, OTX-TIC and other product candidates and approximately $10.0 million to $12.0 million of other research and development activities that we do not expect to track by program
−Removed: We estimate that we will incur external research and development expenses for 2020, as follows:
−Removed: approximately $1.0 million to $2.0 million for OTX-TP and OTX-TIC for glaucoma and ocular hypertension;
−Removed: approximately $2.0 million to $4.0 million for OTX-TKI for Wet AMD;
−Removed: approximately $2.0 million to $4.0 million for other external research and development activities.
−Removed: The successful development and commercialization of our products or product candidates is highly uncertain.
−Removed: This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:
−Removed: the scope, progress, outcome and costs of our clinical trials and other research and development activities;
−Removed: the timing, receipt and terms of any marketing approvals;
−Removed: the efficacy and potential advantages of our products or product candidates compared to alternative treatments, including any standard of care;
−Removed: the market acceptance of our products or product candidates;
−Removed: significant and changing government regulation.
−Removed: Any changes in the outcome of any of these variables with respect to the development of our product candidates in clinical and preclinical development could mean a significant change in the costs and timing associated with the development of these product candidates.
−Removed: For example, if the FDA or another regulatory authority were to require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.
−Removed: General and Administrative Expenses
−Removed: General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance, information technology, human resources and administrative functions.
−Removed: General and administrative expenses also include insurance, facility-related costs and professional fees for legal, patent, consulting and accounting and audit services.
−Removed: We anticipate that our general and administrative expenses will increase in the future as we support our continued development and commercialization of our product candidates.
−Removed: We also anticipate that we will continue to incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance costs as well as investor and public relations expenses associated with being a public company.
−Removed: Selling and Marketing Expenses
−Removed: Selling and marketing expenses consist primarily of salaries and related costs for personnel in selling and marketing functions as well as consulting and advertising and promotion costs.
−Removed: During the years ended December 31, 2019, 2018 and 2017, we incurred limited marketing expenses in connection with ReSure Sealant, which we began commercializing in 2014, while selling and marketing expenses in connection with the commercial launch of DEXTENZA in July 2019.
−Removed: We anticipate that our selling and marketing expenses associated with DEXTENZA will continue to increase.
−Removed: Other Income (Expense)
−Removed: Interest Income .
−Removed: Interest income consists primarily of interest income earned on cash and cash equivalents.
−Removed: In each of 2019, 2018, and 2017, our interest income has not been significant due to the low rates of interest being earned on our invested balances.
−Removed: Interest Expense .
−Removed: Interest expense consists of interest expense on our debt.
−Removed: We borrowed $15.0 million in aggregate principal amount in April 2014.
−Removed: In December 2015, we amended our credit and security agreement, or as amended, our Credit Agreement, in connection with our credit facility, or our Credit Facility, to increase the aggregate principal amount to $15.6 million, extend the interest-only payment period through December 2016, and extend the maturity date to December 1, 2019.
−Removed: In March 2017, we amended our Credit Agreement to increase the aggregate principal amount under our Credit Facility to $18.0 million, extend the interest-only payment period through February 2018, and extend the maturity date to December 1, 2020.
−Removed: In December 2018, we amended the Credit Agreement to
−Removed: increase the aggregate principal amount to $25.0 million, extend the interest-only payment period through December 2020, and extend the maturity date to December 2023.
−Removed: On March 1, 2019, we issued $37.5 million of unsecured senior subordinated convertible notes, or the 2026 Convertible Notes.
−Removed: The 2026 Convertible Notes accrue interest at an annual rate of 6% of the outstanding principal amount, payable at maturity, on March 1, 2026, unless earlier converted, repurchased or redeemed.
−Removed: Change in Fair Value of Derivative Liability.
−Removed: In 2019, in connection with the issuance of our 2026 Convertible Notes, we identified an embedded derivative liability, which we are required to measure at fair value at inception and then at the end of each reporting period until the embedded derivative is settled.
−Removed: The changes in fair value are recorded through the statement of operations and comprehensive loss and are presented under the caption change in fair value of derivative liability.
−Removed: Critical Accounting Policies and Significant Judgments and Estimates
−Removed: Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America.
−Removed: The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements.
−Removed: On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, accrued research and development expenses and stock-based compensation.
−Removed: We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
−Removed: Actual results may differ from these estimates under different assumptions or conditions.
−Removed: While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this annual report, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
−Removed: Revenue Recognition
−Removed: We recognize product revenue from DEXTENZA for the treatment of post-surgical ocular inflammation and pain, which we began selling to customers in June 2019, and ReSure Sealant.
−Removed: We have generated limited revenues from ReSure Sealant to date and do not expect significant future sales.
−Removed: In November 2018, the FDA approved DEXTENZA for the treatment of ocular pain following ophthalmic surgery .
−Removed: We entered into a limited number of arrangements with specialty distributors in the United States to distribute DEXTENZA.
−Removed: Topic 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance arrangements and financial instruments.
−Removed: Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services.
−Removed: To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps:
−Removed: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
−Removed: We only apply the five-step model to arrangements that meet the definition of a contract with a customer under Topic 606, including when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.
−Removed: At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct.
−Removed: We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
−Removed: For a complete discussion of accounting for product revenue, see Product Revenue, Net (below).
−Removed: Product Revenue, Net —
−Removed: We derive our product revenues from the sale of DEXTENZA in the United States to customers, which includes a limited number of specialty distributors, who then subsequently resell DEXTENZA to physicians, clinics and certain medical centers or hospitals.
−Removed: In addition to distribution agreements with customers, we
−Removed: enter into arrangements with government payers that provide for government mandated rebates and chargebacks with respect to the purchase of DEXTENZA.
−Removed: We recognize revenue on product sales when the customer obtains control of our product, which occurs at a point in time (upon delivery to the customer).
−Removed: We have determined that the delivery of DEXTENZA to our customers constitutes a single performance obligation.
−Removed: There are no other promises to deliver goods or services beyond what is specified in each accepted customer order.
−Removed: We have assessed the existence of a significant financing component in the agreements with our customers.
−Removed: The trade payment terms with our customers do not exceed one year and therefore we have elected to apply the practical expedient and no amount of consideration has been allocated as a financing component.
−Removed: Product revenues are recorded net of applicable reserves for variable consideration, including discounts and allowances.
−Removed: Transaction Price, including Variable Consideration —
−Removed: Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established.
−Removed: Components of variable consideration include trade discounts and allowances, product returns, government chargebacks, discounts and rebates, and other incentives, such as voluntary patient assistance, and other fee-for-service amounts that are detailed within contracts between us and our customers relating to our sale of DEXTENZA.
−Removed: These reserves, as detailed below, are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer).
−Removed: These estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in Topic 606 for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns.
−Removed: Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the respective underlying contracts.
−Removed: The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net sales price, only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period.
−Removed: Actual amounts of consideration ultimately received may differ from our estimates.
−Removed: If actual results in the future vary from our original estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.
−Removed: Trade Discounts and Allowances —We compensate (through trade discounts and allowances) our customers for sales order management, data, and distribution services.
−Removed: However, we have determined such services received to date are not distinct from our sale of products to the customer and, therefore, these payments have been recorded as a reduction of revenue within the statement of operations and comprehensive loss, as well as a reduction to trade receivables, net on the consolidated balance sheets.
−Removed: Product Returns —
−Removed: Consistent with industry practice, we generally offers customers a limited right of return for product that has been purchased from us in certain circumstances as further discussed below.
−Removed: We estimate the amount of our product sales that may be returned by our customers and record this estimate as a reduction of revenue in the period the related product revenue is recognized, as well as within accrued expenses and other current liabilities, in the accompanying consolidated balance sheets.
−Removed: We currently estimate product return reserves using available industry data and our own sales information, including its visibility into the inventory remaining in the distribution channel.
−Removed: We have received no returns to date and believe the returns of DEXTENZA will be minimal.
−Removed: Our limited right of return allows for eligible returns of DEXTENZA in the following circumstances:
−Removed: Shipment errors that were the result of an error by us;
−Removed: Quantity delivered that is greater or less than the quantity ordered;
−Removed: Product distributed by us that is damaged in transit prior to receipt by the customer;
−Removed: Product from physicians, clinics, medical centers and hospitals that was not administered to the patient that is rendered non-unusable due to spoilage or mishandling;
−Removed: Expired product, previously purchased directly from us, that is returned during the period beginning six months prior to the product’s expiration date and ending twelve months after the product’s expiration date;
−Removed: Product subject to a recall;
−Removed: Product that we, at our sole discretion, have specified to be returned.
−Removed: Government Chargebacks —
−Removed: Chargebacks for fees and discounts to qualified government healthcare providers represent the estimated obligations resulting from contractual commitments to sell products to qualified U.S.
−Removed: Department of Veterans Affairs hospitals and 340B entities at prices lower than the list prices charged to customers who directly purchase the product from us.
−Removed: The 340B Drug Discount Program is a U.S.
−Removed: federal government program created in 1992 that requires drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at significantly reduced prices.
−Removed: Customers charge us for the difference between what they pay for the product and the statutory selling price to the qualified government entity.
−Removed: These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and trade receivables, net.
−Removed: Chargeback amounts are generally determined at the time of resale to the qualified government healthcare provider by customers, and we generally issue credits for such amounts within a few weeks of the customer’s notification to us of the resale.
−Removed: Reserves for chargebacks consist of credits that we expect to issue for units that remain in the distribution channel inventories at each reporting period-end that we expect will be sold to qualified healthcare providers, and chargebacks that customers have claimed, but for which we have not yet issued a credit.
−Removed: Government Rebates —
−Removed: We are subject to discount obligations under state Medicaid programs and Medicare.
−Removed: These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses and other current liabilities on the consolidated balance sheets.
−Removed: For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program.
−Removed: For Medicaid programs, we estimate the portion of sales attributed to Medicaid patients and record a liability for the rebates to be paid to the respective state Medicaid programs.
−Removed: Our liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel inventories at the end of each reporting period.
−Removed: Other Incentives —
−Removed: Other incentives which we offer include voluntary patient assistance programs, such as the co-pay assistance program, which are intended to provide financial assistance to qualified commercially-insured patients with prescription drug co-payments required by payers.
−Removed: The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period.
−Removed: The adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included as an accrued expenses and other current liabilities on the consolidated balance sheets.
−Removed: Derivative Liability
−Removed: The 2026 Convertible Notes allow the holders to convert all or part of the outstanding principal of their 2026 Convertible Notes into shares our common stock provided that no conversion results in a holder beneficially owning more than 19.99% of our issued and outstanding common stock.
−Removed: The entire embedded conversion option is required to be separated from the 2026 Convertible Notes and accounted for as a freestanding derivative instrument subject to derivative accounting.
−Removed: Therefore, the entire conversion option is bifurcated from the underlying debt instrument and accounted for and valued separately from the host instrument.
−Removed: We measure the value of the embedded conversion option at its estimated fair value and recognize changes in the estimated fair value in other income (expense), net in the consolidated statements of operations and comprehensive loss during the period of change.
−Removed: The embedded conversion is recognized as a derivative liability in our consolidated balance sheet.
−Removed: Smaller Reporting Company Status
−Removed: As of January 1, 2020, we are no longer an “emerging growth company,”
−Removed: as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.
−Removed: However, we remain a “smaller reporting company,”
−Removed: as defined in Rule 12b-2
−Removed: under the Securities Exchange Act of 1934, as amended.
−Removed: We would cease to be a smaller reporting company if we have a non-affiliate public float in excess of $250 million and annual revenues in excess of $100 million, or a non-affiliate public float in excess of $700 million, determined on an annual basis.
−Removed: Even though we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company.
−Removed: As a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not smaller reporting companies.
−Removed: These exemptions include:
−Removed: being permitted to provide only two years of audited consolidated financial statements in this Annual Report on Form 10-K, with correspondingly reduced “Management's Discussion and Analysis of Financial Condition and Results of Operations”
−Removed: reduced disclosure obligations regarding executive compensation;
−Removed: not being required to furnish a contractual obligations table in “Management's Discussion and Analysis of Financial Condition and Results of Operations”;
−Removed: not being required to furnish a stock performance graph in our annual report.
−Removed: We expect to continue to take advantage of some or all of the available exemptions.
−Removed: Results of Operations
−Removed: Comparison of the Years Ended December 31, 2019 and December 31, 2018
−Removed: The following table summarizes our results of operations for the years ended December 31, 2019 and 2018:
−Removed: (in thousands)
−Removed: Product revenue, net
−Removed: Total revenue, net
−Removed: Costs and operating expenses:
−Removed: Cost of product revenue
−Removed: Research and development
−Removed: Selling and marketing
−Removed: General and administrative
−Removed: Total costs and operating expenses
−Removed: Loss from operations
−Removed: Other income (expense):
−Removed: Interest income
−Removed: Interest expense
−Removed: Change in fair value of derivative liability
−Removed: Other income (expense), net
−Removed: Total other income (expense), net
−Removed: We generated $4.2 million of revenue during the year ended December 31, 2019 from sales of our DEXTENZA and ReSure Sealant products.
−Removed: We generated $2.0 million of product revenue during the year ended December 31, 2018, from sales of our ReSure Sealant product.
−Removed: Because we began to recognize product revenue from DEXTENZA during the second quarter of 2019 with the first commercial shipments to customers in June 2019, we did not recognize product revenue from DEXTENZA in 2018.
−Removed: Research and Development Expenses
−Removed: (in thousands)
−Removed: Direct research and development expenses by program:
−Removed: ReSure Sealant
−Removed: DEXTENZA for post-surgical ocular inflammation and pain
−Removed: DEXTENZA for allergic conjunctivitis
−Removed: OTX-TP for glaucoma and ocular hypertension
−Removed: OTX-TIC for glaucoma and ocular hypertension
−Removed: OTX-TKI for wet AMD
−Removed: Preclinical activities
−Removed: Unallocated expenses:
−Removed: Personnel costs
−Removed: All other costs
−Removed: Total research and development expenses
−Removed: Research and development expenses were $41.1 million for the year ended December 31, 2019, compared to $36.9 million for the year ended December 31, 2018.
−Removed: The increase of $4.2 million was primarily due to an increase of $2.6 million in unallocated expenses and $1.5 million in clinical trial expenses.
−Removed: For the year ended December 31, 2019, we incurred $7.5 million in direct research and development expenses for our intracanalicular insert product candidates, including $1.0 million for DEXTENZA for the treatment of post-surgical ocular inflammation and pain, $2.1 million for DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis, $1.5 million for our OTX-TP product candidate for the treatment of glaucoma and ocular hypertension which was in Phase 3 clinical trials, $0.7 million for OTX-TIC for glaucoma and ocular hypertension, and $1.0 million for OTX-TKI for wet AMD.
−Removed: In comparison, for the year ended December 31, 2018, we incurred $6.4 million in direct research and development expenses for our intracanalicular insert product candidates, including $5.3 million for clinical trials of OTX-TP for glaucoma and ocular hypertension which was in Phase 3 clinical trials, and $1.1 million for DEXTENZA for ocular inflammation and pain following cataract surgery.
−Removed: Unallocated research and development costs increased $2.6 million for the year ended December 31, 2019, compared to the year ended December 31, 2018 primarily due to an increase in unallocated personnel costs of $2.4 million.
−Removed: Selling and Marketing Expenses
−Removed: (in thousands)
−Removed: Personnel related (including stock-based compensation)
−Removed: Professional fees
−Removed: Facility related and other
−Removed: Total selling and marketing expenses
−Removed: Selling and marketing expenses were $24.5 million for the year ended December 31, 2019, compared to $4.9 million for the year ended December 31, 2018.
−Removed: The increase of $19.5 million was primarily due to an increase of $10.7 million in personnel costs, including stock-based compensation, $6.5 million in professional fees including consulting, trade shows, marketing material and conferences and $2.4 million in facility related and other costs as we continued the support of the launch of DEXTENZA.
−Removed: We expect our selling and marketing expenses to increase in 2020 and beyond, as we continue to support the commercial launch of DEXTENZA.
−Removed: General and Administrative Expenses
−Removed: (in thousands)
−Removed: Personnel related (including stock-based compensation)
−Removed: Professional fees
−Removed: Facility related and other
−Removed: Total general and administrative expenses
−Removed: General and administrative expenses were $22.1 million for the year ended December 31, 2019, compared to $18.8 million for the year ended December 31, 2018.
−Removed: The increase of $3.3 million was primarily due to an increase of $3.0 million in personnel costs, including stock-based compensation.
−Removed: Other Income (Expense), Net
−Removed: Other expense, net was $0.6 million for the year ended December 31, 2019, compared to $0.9 million for the year ended December 31, 2018.
−Removed: The change of $0.3 million, was due to higher interest expense of $6.1 million associated with the 2026 Convertible Notes and the Credit Agreement, partially offset by an unrealized gain of $4.3 million on the change in fair value of the derivative liability associated with the 2026 Convertible Notes.
−Removed: The change in fair value of the derivative liability was a gain in the amount of $4.3 million during the year ended December 31, 2019 due changes in the underlying assumptions of the derivative liability, primarily related to a decline in our common stock price between the date of issuance of the 2026 Convertible Notes and December 31, 2019.
−Removed: We expect the change in fair value of the derivative liability will continue to fluctuate until it is settled based on the extent changes occur in the underlying assumptions.
−Removed: There was no change in fair value of derivative liability during the year ended December 31, 2018 as there were no embedded derivatives during that period.
−Removed: Comparison of the Years Ended December 31, 2018 and December 31, 2017
−Removed: The following table summarizes our results of operations for the years ended December 31, 2018 and 2017:
−Removed: (in thousands)
−Removed: Product revenue
−Removed: Collaboration revenue
−Removed: Total revenue
−Removed: Costs and operating expenses:
−Removed: Cost of product revenue
−Removed: Research and development
−Removed: Selling and marketing
−Removed: General and administrative
−Removed: Total costs and operating expenses
−Removed: Loss from operations
−Removed: Other income (expense):
−Removed: Interest income
−Removed: Interest expense
−Removed: Other income (expense), net
−Removed: Total other expense, net
−Removed: We generated $2.0 and $1.9 million of product revenue during the years ended December 31, 2018 and December 31, 2017, respectively, from sales of our ReSure Sealant product.
−Removed: The increase in revenue was related to an increase in the total number of units shipped in 2018.
−Removed: Research and Development Expenses
−Removed: Year Ended December 31,
−Removed: (in thousands)
−Removed: Direct research and development expenses by program:
−Removed: ReSure Sealant
−Removed: DEXTENZA for post-surgical ocular inflammation and pain
−Removed: DEXTENZA for allergic conjunctivitis
−Removed: DEXTENZA for dry eye disease
−Removed: OTX-TP for glaucoma and ocular hypertension
−Removed: Unallocated expenses:
−Removed: Personnel costs
−Removed: All other costs
−Removed: Total research and development expenses
−Removed: Research and development expenses were $36.9 million for the year ended December 31, 2018, compared to $30.9 million for the year ended December 31, 2017.
−Removed: The increase of $6.0 million was primarily due to an increase of $6.8 million in unallocated expenses offset by decreases in clinical trial expenses of $0.8 million.
−Removed: Clinical trial expenses decreased in the year ended December 31, 2018, compared to the year ended December 31, 2017, primarily due to the timing and number of clinical trials conducted for DEXTENZA for the treatment of post-surgical ocular inflammation and pain, allergic conjunctivitis and episodic dry eye disease, partially offset by increases in clinical trial expenses related to OTX-TP for the treatment of glaucoma and ocular hypertension.
−Removed: For the year ended December 31, 2018, we incurred $6.4 million in direct research and development expenses for our intracanalicular insert product candidates, including $1.1 million for DEXTENZA for the treatment of post-surgical ocular inflammation and pain, and $5.3 million for our OTX-TP product candidate for the treatment of glaucoma and ocular hypertension which was in Phase 3 clinical trials.
−Removed: In comparison, for the year ended December 31, 2017, we incurred $7.2 million in direct research and development expenses for our intracanalicular insert product candidates, including $5.3 million for clinical trials of OTX-TP for glaucoma and ocular hypertension which was in Phase 3 clinical trials, $0.6 million for DEXTENZA for the treatment of allergic conjunctivitis which was in Phase 3 clinical trials and $1.3 million for DEXTENZA for ocular inflammation and pain following cataract surgery which was in Phase 3 clinical trials.
−Removed: Unallocated research and development costs increased $6.8 million for the year ended December 31, 2018, compared to the year ended December 31, 2017 primarily due to an increase in unallocated personnel costs of $2.5 million, relating to an increase of $2.5 million from additional hiring primarily in our clinical, regulatory and quality department, a $2.1 million increase in professional services, and an increase in facility related costs of $1.8 million.
−Removed: Selling and Marketing Expenses
−Removed: Year Ended December 31,
−Removed: (in thousands)
−Removed: Personnel related (including stock-based compensation)
−Removed: Professional fees
−Removed: Facility related and other
−Removed: Total selling and marketing expenses
−Removed: Selling and marketing expenses were $4.9 million for the year ended December 31, 2018, compared to $17.0 million for the year ended December 31, 2017.
−Removed: The decrease of $12.1 million was primarily due to a decrease of $4.0 million in personnel costs, a decrease of $7.7 million in professional fees due to decreased spending on external costs
−Removed: and $0.3 million in facility-related and other costs.
−Removed: The decrease overall was driven by a delay in the anticipated 2017 launch of DEXTENZA that occurred in mid-2019.
−Removed: In August 2017, we reorganized our DEXTENZA commercial plans and realized savings in operating expenses, including reduced personnel costs, as a result of streamlining headcount, as part of an initiative to enhance operations and reduce expenses.
−Removed: General and Administrative Expenses
−Removed: Year Ended December 31,
−Removed: (in thousands)
−Removed: Personnel related (including stock-based compensation)
−Removed: Professional fees
−Removed: Facility related and other
−Removed: Total general and administrative expenses
−Removed: General and administrative expenses were $18.8 million for the year ended December 31, 2018, compared to $15.5 million for the year ended December 31, 2017.
−Removed: The increase of $3.3 million was primarily due to an increase of $3.3 million in professional fees related to our defense in legal proceedings.
−Removed: Other Income (Expense), Net
−Removed: Other expense, net was $0.9 million for the year ended December 31, 2018, compared to $1.5 million for the year ended December 31, 2017.
−Removed: Liquidity and Capital Resources
−Removed: Since inception, we have incurred significant operating losses.
−Removed: Our net losses were $86.4 million, $60.0 million and $63.4 million for the years ended December 31, 2019, 2018 and 2017, respectively.
−Removed: As of December 31, 2019, we had an accumulated deficit of $383.6 million.
−Removed: We have generated limited revenue to date.
−Removed: In 2014, we began recognizing revenue from sales of ReSure Sealant.
−Removed: We commercially launched DEXTENZA for post-surgical ocular inflammation and pain in July 2019.
−Removed: All of our other sustained drug delivery products are in various phases of pre-commercial, clinical and preclinical development.
−Removed: Our ability to generate product revenues sufficient to achieve profitability will depend heavily on our commercialization of DEXTENZA for the treatment of ocular inflammation and pain following ophthalmic surgery and our obtaining marketing approval for and commercializing other products with significant market potential, including DEXTENZA for additional indications, OTX-TIC for glaucoma and ocular hypertension, and OTX-TIC for wet AMD.
−Removed: Through December 31, 2019, we have financed our operations primarily through private placements of our preferred stock, public offerings of our common stock, private placements of our convertible notes and borrowings under credit facilities, which has resulted in net proceeds of $ 412.6 million to us.
−Removed: In April 2019, we entered into the 2019 Sales Agreement with Jefferies, acting as agent, for the issuance of up to $50.0 million of our common stock.
−Removed: Through March 10, 2020, we have sold 9,566,973 shares of common stock under the 2019 Sales Agreement, resulting in net proceeds of approximately $43.4 million after commissions and expenses.
−Removed: We have $5.2 million available for issuance as of March 10, 2020.
−Removed: On March 2019, we issued $37.5 million of unsecured senior subordinated convertible notes, or the 2026 Convertible Notes.
−Removed: The 2026 Convertible Notes accrue interest at an annual rate of 6% of its outstanding principal amount, payable at maturity, on March 1, 2026, unless earlier converted, repurchased or redeemed.
−Removed: The holders of the 2026 Convertible Notes may convert all or part of the outstanding principal amount of their 2026 Convertible Notes into shares of our common stock, par value $0.0001 per share, prior to maturity and provided that no conversion results in a holder beneficially owning more than 19.99% of our issued and outstanding common stock.
−Removed: The conversion rate is initially 153.8462 shares of our common stock per $1,000 principal amount of the 2026 Convertible Notes, which is
−Removed: equivalent to an initial conversion price is $6.50 per share.
−Removed: The conversion rate is subject to adjustment in customary circumstances such as stock splits or similar changes to our capitalization.
−Removed: In April 2014, we borrowed $15.0 million in aggregate principal amount under a new credit facility and used $1.9 million of this amount to repay $1.7 million aggregate principal amount of indebtedness and pay $0.2 million of other amounts due in connection with our termination of a prior credit facility.
−Removed: In December 2015, we amended the Credit Agreement to increase the aggregate principal amount to $15.6 million, extend the interest-only payment period through December 2016, and extend the maturity date to December 1, 2019.
−Removed: In March 2017, we amended the Credit Agreement to increase the total indebtedness to $18.0 million and extend the interest only period through February 1, 2018 and extend the maturity date to February 1, 2020.
−Removed: In December 2018, we amended the Credit Agreement to increase the total indebtedness to $25.0 million and extend the interest-only payment period through December 2020 and extend the to maturity to date to December 2023.
−Removed: See “—Contractual Obligations and Commitments”
−Removed: for additional information.
−Removed: As of December 31, 2019, we had cash and cash equivalents of $54.4 million, notes payable of $25.0 million face value and senior subordinated convertible notes of $37.5 million par value, plus accrued interest of $1.9 million.
−Removed: Based on our current plans and forecasted expenses, which includes estimates related to anticipated cash inflows from DEXTENZA and ReSure Sealant product sales and cash outflows from operating expenses, we believe that our existing cash and cash equivalents, as of December 31, 2019, together with the first quarter net proceeds through March 10, 2020 from sales of our common stock pursuant to the 2019 Sales Agreement discussed in Note 22 of our consolidated financial statements, will enable us to fund our planned operating expenses, debt service obligations and capital expenditure requirements into the first quarter of 2021.
−Removed: We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.
−Removed: These factors, and the factors described above, continue to raise substantial doubt about our ability to continue as a going concern.
−Removed: The following table summarizes our sources and uses of cash for each of the periods presented:
−Removed: Year Ended December 31,
−Removed: (in thousands)
−Removed: Cash used in operating activities
−Removed: Cash provided by (used in) investing activities
−Removed: Cash provided by financing activities
−Removed: Net increase in cash and cash equivalents
−Removed: Operating activities.
−Removed: Net cash used in operating activities was $77.6 million for the year ended December 31, 2019, primarily resulting from our net loss of $86.4 million, partially offset by non-cash charges of $10.7 million and cash provided by changes in our operating assets and liabilities of $1.9 million.
−Removed: Our net loss was primarily attributed to research and development activities, selling and marketing costs and our general and administrative expenses partially offset by $4.2 million of revenue in the period.
−Removed: Our net non-cash charges during the year ended December 31, 2019 primarily consisted of $8.8 million of stock-based compensation expense, $2.5 million of depreciation expense and non-cash interest expense partially offset by the change in fair value of the derivative liability of $4.3 million.
−Removed: Net cash provided by changes in our operating assets and liabilities during the year ended December 31, 2019 consisted primarily of a $1.7 million increase in accrued expenses and deferred rent and an $2.3 million increase in accounts receivables.
−Removed: Net cash used in operating activities was $49.2 million for the year ended December 31, 2018, primarily resulting from our net loss of $60.0 million, partially offset by non-cash charges of $10.2 million and cash provided by changes in our operating assets and liabilities of $0.6 million.
−Removed: Our net loss was primarily attributed to research and development activities and our general and administrative expenses partially offset by $2.0 million of revenue in the period.
−Removed: Our net non-cash charges during the year ended December 31, 2018 primarily consisted of $7.5 million of stock-based compensation expense and $2.3 million of depreciation expense.
−Removed: Net cash provided by changes in our operating assets and liabilities during the year ended December 31, 2018 consisted primarily of a $1.7 million increase in accrued expenses and deferred rent and a $0.8 million decrease in accounts payable, which was due to the timing of vendor invoicing and payments.
−Removed: Net cash used in operating activities was $50.5 million for the year ended December 31, 2017, primarily resulting from our net loss of $63.4 million, partially offset by non-cash charges of $9.4 million and cash provided by changes in our operating assets and liabilities of $3.6 million.
−Removed: Our net loss was primarily attributed to research and development activities and our general and administrative expenses partially offset by $1.9 million of revenue in the period.
−Removed: Our net non-cash charges during the year ended December 31, 2017 primarily consisted of $7.3 million of stock-based compensation expense and $1.6 million of depreciation expense.
−Removed: Net cash provided by changes in our operating assets and liabilities during the year ended December 31, 2017 consisted primarily of a $2.6 million increase in accrued expenses and deferred rent and a $0.9 million increase in accounts payable, which was due to the timing of vendor invoicing and payments.
−Removed: Investing activities.
−Removed: Net cash used in investing activities was $2.2 million for the year ended December 31, 2019, consisting of cash used to purchase property and equipment of $2.2 million.
−Removed: Net cash used in investing activities was $1.9 million for the year ended December 31, 2018, consisting of cash used to purchase property and equipment of $1.9 million.
−Removed: Net cash provided by investing activities was $27.1 million for the year ended December 31, 2017 consisted of maturities of marketable securities of $38.2 million offset by cash used to purchase property and equipment of $8.3 million and cash used to purchase marketable securities of $3.0 million.
−Removed: Financing activities.
−Removed: Net cash provided by financing activities for 2019 was $75.3 million and consisted primarily of proceeds from the 2026 Convertible Notes of $37.3 million and the 2016 Sales Agreement of $4.9 million, net of commissions and other offering expenses and the 2019 Sales Agreement of $32.6 million, net of commissions and other offering expenses.
−Removed: Net cash provided by financing activities for 2018 was $68.6 million and consisted primarily of proceeds from our follow-on offering in January 2018 of $34.7 and the 2016 Sales Agreement of $26.9 million, net of commissions and other offering expenses, $6.4 million (net) in borrowings under our amended credit facility, proceeds from the exercise of common stock options of $0.4 million;
−Removed: and proceeds from issuance of common stock pursuant to our employee stock purchase plan of $0.3 million.
−Removed: Net cash provided by financing activities for 2017 was $32.0 million and consisted primarily of proceeds from our follow-on offering in January 2017 of $23.3 and the 2016 Sales Agreement of $5.9 million, net of commissions and other offering expenses, $2.4 million (net) in borrowings under our amended credit facility, proceeds from the exercise of common stock options of $0.7 million;
−Removed: and proceeds from issuance of common stock pursuant to our employee stock purchase plan of $0.3 million partially offset by payments of $0.6 million for insurance costs financed by a third party.
−Removed: Funding Requirements
−Removed: We expect to continue to incur losses in connection with our ongoing activities, particularly as we advance the clinical trials of our products in development and increase our sales and marketing resources to support the DEXTENZA launch and the potential launch of our product candidates, subject to receiving FDA approval.
−Removed: We anticipate we will incur substantial expenses if and as we:
−Removed: continue to commercialize DEXTENZA in the United States;
−Removed: continue to develop and expand our sales, marketing and distribution capabilities for DEXTENZA and any of our product candidates ;
−Removed: continue to pursue the clinical development of DEXTENZA for additional indications;
−Removed: continue clinical trials of our product candidates OTX-TIC and OTX-TKI;
−Removed: conduct joint research and development under our strategic collaboration with Regeneron , for the development and potential commercialization of products containing our extended-delivery hydrogel formulation in combination with Regeneron’s large molecule , VEGF-targeting compounds to treat retinal diseases;
−Removed: continue the research and development of our other product candidates;
−Removed: seek to identify and develop additional product candidates, including through additional preclinical development activities associated with our intracanalicular insert and back-of-the-eye programs and potential opportunities outside the field of ophthalmology;
−Removed: seek marketing approvals for any of our product candidates that successfully complete clinical development;
−Removed: scale up our manufacturing processes and capabilities to support sales of commercial products, our ongoing clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval, and expand our facilities to accommodate this scale up and any corresponding growth in personnel;
−Removed: renovate our new facility including research and development laboratories, manufacturing space and office space;
−Removed: maintain, expand and protect our intellectual property portfolio;
−Removed: expand our operational, financial and management systems and personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company;
−Removed: defend ourselves against legal proceedings;
−Removed: increase our product liability and clinical trial insurance coverage as we expand our clinical trials and commercialization efforts;
−Removed: continue to operate as a public company.
−Removed: Based on our current plans and forecasted expenses, which includes estimates related to anticipated cash inflows from DEXTENZA and ReSure Sealant product sales and cash outflows from operating expenses, we believe that our existing cash and cash equivalents, as of December 31, 2019, together with the first quarter net proceeds through March 10, 2020 from sales of our common stock pursuant to the 2019 Sales Agreement discussed in Note 22 of our consolidated financial statements, will enable us to fund our planned operating expenses, debt service obligations and capital expenditure requirements into the first quarter of 2021.
−Removed: We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.
−Removed: Our future capital requirements will depend on many factors, including:
−Removed: our ability to successfully commercialize and sell DEXTENZA in the United States;
−Removed: the costs, timing and outcome of regulatory review of our product candidates by the FDA, the EMA or other regulatory authorities;
−Removed: the level of product sales from DEXTENZA and any additional products for which we obtain marketing approval in the future;
−Removed: the costs of manufacturing, sales, marketing, distribution and other commercialization efforts with respect to DEXTENZA and any additional products for which we obtain marketing approval in the future;
−Removed: the costs of expanding our facilities to accommodate our manufacturing needs and headcount;
−Removed: the progress, costs and outcome of the clinical trials of our extended-delivery drug delivery product candidates, in particular DEXTENZA for additional indications, OTX-TIC for glaucoma and ocular hypertension, and OTX-TKI for wet AMD;
−Removed: the progress and status of our collaboration with Regeneron, including any development costs for which we reimburse Regeneron, the potential exercise by Regeneron of its option for a license for the development and potential commercialization of products containing our extended-delivery hydrogel formulation in
−Removed: combination with Regeneron’s large molecule VEGF-targeting compounds, and our potential receipt of future milestone payments from Regeneron;
−Removed: the scope, progress, costs and outcome of preclinical development and clinical trials of our other product candidates;
−Removed: the extent of our debt service obligations;
−Removed: the extent to which we choose to establish additional collaboration, distribution or other marketing arrangements for our products and product candidates;
−Removed: the costs and outcomes of legal actions and proceedings, including the current lawsuits described under “Part I, Item 3 —
−Removed: Legal Proceedings”;
−Removed: the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;
−Removed: the extent to which we acquire or invest in other businesses, products and technologies.
−Removed: Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through equity offerings, debt financings, government or other third-party funding, collaborations, strategic alliances, licensing arrangements, royalty agreements and marketing and distribution arrangements.
−Removed: We do not have any committed external source of funds , although our collaboration agreement with Regeneron provides for the potential receipt of option exercise, development, regulatory and sales milestone payments and royalties.
−Removed: To the extent that we raise additional capital through the sale of equity or convertible debt securities, each security holder’s ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect each security holder’s rights as a common stockholder.
−Removed: Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
−Removed: The covenants under our existing Credit Agreement, the pledge of our assets as collateral and the negative pledge of intellectual property limit our ability to obtain additional debt financing.
−Removed: If we raise additional funds through government or other third-party funding, collaborations, strategic alliances, licensing arrangements, royalty agreements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
−Removed: If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
−Removed: As discussed in Note 1 of the Notes to the Consolidated Financial Statements under Accounting Standards Update, or ASU, 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40), or, ASC 205-40, we have the responsibility to evaluate whether conditions or events raise substantial doubt about our ability to meet our future financial obligations as they become due within one year after the date the financial statements are issued.
−Removed: Under ASC 205-40, this evaluation initially cannot take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued.
−Removed: Since we currently anticipate that our existing capital resources and anticipated cash inflows from DEXTENZA and ReSure Sealant product sales and cash outflows from operating expenses, will enable us to meet our planned operational expenses, debt service obligations, and capital expenditures, based on our current operating plans, into the first quarter of 2021, we have determined that this cash runway of less than 12 months along with our accumulated deficit, history of losses, and future expected losses meet the ASC 205-40 standard for raising substantial doubt about our ability to continue as a going concern within one year of the issuance date of these financial statements.
−Removed: While we have plans in place to mitigate this risk, which primarily consist of raising additional capital through a combination of equity or debt financings, and, depending on the availability and level of additional financings, potentially new collaborations and reducing cash expenditures, there is no guarantee that we will be successful in these mitigation efforts
−Removed: Since our inception in 2006, we have not recorded any U.S.
−Removed: federal or state income tax benefits for the net losses we have incurred in each year or our earned research and development tax credits, due to our uncertainty of realizing a benefit from those items.
−Removed: As of December 31, 2019, we had federal net operating loss carryforwards of $274.3 million,
−Removed: of which $126.1 million begin to expire in 2026, and $148.2 are not subject to expiration.
−Removed: We also have state net operating loss carryforwards of $219.4 million, which begin to expire in 2029.
−Removed: As of December 31, 2019, we also had federal research and development tax credit carryforwards of $8.2 million and state research and development tax credit carryforwards $4.3 million, which begin to expire in 2026 and 2025, respectively.
−Removed: We have not completed a study to assess whether an ownership change, generally defined as a greater than 50% change (by value) in the equity ownership of our corporate entity over a three-year period, has occurred or whether there have been multiple ownership changes since our inception, due to the significant costs and complexities associated with such studies.
−Removed: Accordingly, our ability to utilize our tax carryforwards may be limited.
−Removed: Additionally, U.S.
−Removed: tax laws limit the time during which these carryforwards may be utilized against future taxes.
−Removed: As a result, we may not be able to take full advantage of these carryforwards for federal and state tax purposes.
−Removed: Contractual Obligations and Commitments
−Removed: The following table summarizes our contractual obligations at December 31, 2019 and the effects such obligations are expected to have on our liquidity and cash flow in future periods:
−Removed: (in thousands)
−Removed: Operating lease commitments
−Removed: Purchase commitments
−Removed: Debt obligations including interest
−Removed: 2026 Convertible Notes
−Removed: In the table above, we set forth our enforceable and legally binding obligations and future commitments at December 31, 2019, as well as obligations related to contracts that we are likely to continue, regardless of the fact that they may be cancelable at December 31, 2019.
−Removed: Some of the figures that we include in this table are based on management’s estimates and assumptions about these obligations, including their duration, and other factors.
−Removed: Because these estimates and assumptions are necessarily subjective, the obligations we will actually pay in future periods may vary from those reflected in the table.
−Removed: Operating lease commitments represent payments due under our leases of office, laboratory and manufacturing space in Bedford, Massachusetts and certain office equipment under operating leases that expire in July 2023, March 2024 and July 2027.
−Removed: In June 2016, we entered into a lease agreement for approximately 70,712 square feet of general office, research and development and manufacturing space.
−Removed: The lease term commenced on February 1, 2017 and expires on July 31, 2027.
−Removed: No base rent was due under the lease until August 1, 2017.
−Removed: The initial annual base rent is approximately $1.2 million and will increase annually beginning on February 1 of each year.
−Removed: We are obligated to pay all real estate taxes and costs related to the premises, including costs of operations, maintenance, repair, and replacement and management of the new leased premises.
−Removed: We posted a customary letter of credit in the amount of $1.5 million as a security deposit.
−Removed: We relocated our corporate headquarters to the new leased premises in June 2017.
−Removed: The lease agreement allowed for a construction allowance not to exceed approximately $2.8 million to be applied to the total construction costs of the new leased premises.
−Removed: The construction allowance had to be used before December 31, 2017, or it would be deemed forfeited with no further obligation by the landlord of the new leased premises.
−Removed: As of December 31, 2017, we billed the landlord for $2.7 million and subsequently, we have received payments of $2.7 million from the landlord.
−Removed: We forfeited $0.1 million under the construction allowance.
−Removed: On October 10, 2017, we entered into an amendment to the lease agreement for our laboratory and manufacturing space located at 34 Crosby Drive and 36 Crosby Drive, each in Bedford, Massachusetts, which we refer to as the Second Amendment.
−Removed: The Second Amendment extends the term of our lease for 36 Crosby Drive from June 30, 2018 to July 31, 2023.
−Removed: Further, the Second Amendment acknowledges that we have previously vacated and surrendered, and the lease has expired with regards to 34 Crosby Drive, reducing the total laboratory and manufacturing space subject to the lease to 20,445 square feet.
−Removed: Accordingly, the Second Amendment reduces the required security deposit under the lease from $0.2 million to $0.1 million.
−Removed: Under the Second Amendment, the annual base rent for 36 Crosby Drive shall be approximately $0.5 million until June 30, 2018, shall be $0 from July 1, 2018 to July 31, 2018, and shall be
−Removed: approximately $0.5 million from August 1, 2018 to July 31, 2019.
−Removed: The annual base rent shall increase annually thereafter.
−Removed: The Second Amendment also provides us a one-time option to terminate the Lease on July 31, 2021, upon the delivery to the landlord on or before July 31, 2020, of a termination notice and the payment to the landlord of a termination fee of approximately $0.3 million.
−Removed: On April 4, 2019, we entered into a sublease agreement for approximately 30,036 square feet of general office space located at 24 Crosby Drive in Bedford, Massachusetts.
−Removed: The lease term commenced on April 4, 2019 and expires on March 31, 2024.
−Removed: No base rent was due under the lease until July 2019.
−Removed: The initial annual base rent is approximately $0.6 million and will increase annually beginning on April 1 of each year.
−Removed: We are obligated to pay all real estate taxes and costs related to the premises.
−Removed: We posted a customary letter of credit in the amount of approximately $0.2 million as a security deposit.
−Removed: These rent payments have not been included in the table of contractual obligations and commitments above.
−Removed: We relocated our corporate headquarters to the new leased premises in August 2019.
−Removed: Purchase commitments represent non-cancelable contractual commitments associated with certain clinical trial activities with our CROs.
−Removed: Manufacturing commitments generally provide for termination on notice, and therefore are cancelable contracts but are contracts that we are likely to continue, regardless of the fact that they are cancelable.
−Removed: We enter into contracts in the normal course of business to assist in the performance of our research and development activities and other services and products for operating purposes.
−Removed: These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.
−Removed: In April 2014, we entered into the Credit Agreement to establish the Credit Facility with Silicon Valley Bank and MidCap Financial SBIC, LP, pursuant to which we were able to borrow an aggregate principal amount of up to $20.0 million, of which we borrowed $15.0 million.
−Removed: We did not borrow the remaining $5.0 million, and this amount is no longer available to us.
−Removed: The Credit Facility carried a fixed annual interest rate of 8.25% on outstanding borrowings.
−Removed: In December 2015, we amended the Credit Agreement to increase the aggregate principal amount to $15.6 million to capitalize certain accrued interest.
−Removed: The Credit Agreement provided for monthly, interest-only payments on outstanding borrowings through December 2016.
−Removed: Thereafter, we were required to pay thirty-six consecutive, equal monthly installments of principal and interest through December 1, 2019.
−Removed: In March 2017, we further amended the Credit Agreement to increase the aggregate principal amount under the Credit Facility to $18.0 million.
−Removed: The interest-only payment period was extended through February 1, 2018.
−Removed: There were no financial covenants associated with the Credit Agreement.
−Removed: In December 2018, we further amended the Credit Agreement to increase the aggregate principal amount borrowed under the Credit Facility to $25.0 million.
−Removed: The interest-only payment period was extended through December 2020.
−Removed: Commencing in January 2021, we are required to make 36 equal monthly installments of principal in the amount of $0.7 million, plus interest, through December 2023.
−Removed: Under the December 2018 amendment, we became obligated maintain a minimum of $5.0 million of cash and/or cash equivalents on hand as a financial covenant to the borrowing arrangement.
−Removed: On August 2, 2019, we entered into a second amendment to the Credit Agreement in which the lenders agreed to remove the financial covenant requiring us to maintain a minimum of $5.0 million of cash on hand.
−Removed: There are no other financial covenants associated with the Credit Agreement;
−Removed: however, there are negative covenants restricting our activities, including limitations on dispositions, mergers or acquisitions;
−Removed: incurring indebtedness , liens or encumbrances;
−Removed: paying dividends;
−Removed: making certain investments;
−Removed: and engaging in certain other business transactions.
−Removed: The obligations under the Credit Agreement are subject to acceleration upon the occurrence of specified events of default, including a material adverse change in our business, operations or financial or other condition.
−Removed: The debt is collateralized by a first-priority lien on all of our assets, including our intellectual property.
−Removed: In connection with our entry into the Purchase Agreement, as described below, in February 2019, we further amended the Credit Agreement to permit our issuance and sale of the 2026 Convertible Notes in March 2019.
−Removed: The February amendment added, among other provisions, a negative covenant restricting us from paying the holders of the 2026 Convertible Notes ahead in priority to the senior lenders, for so long as indebtedness remains outstanding under the Credit Agreement, and a cross-default provision to establish that an event of default under the Purchase Agreement also constituted an event of default under the Credit Agreement.
−Removed: In August 2019, we entered into the Second Amendment to
−Removed: the Credit Agreement to further amended the Credit Agreement to remove restrictions on us to maintain a minimum of $5.0 million of cash on hand as a financial covenant.
−Removed: We have in-licensed a significant portion of our intellectual property from Incept, an intellectual property holding company, under an amended and restated license agreement , or the License Agreement, that we entered into with Incept in January 2012 , which was most recently amended in September 2018.
−Removed: We are obligated to pay Incept a royalty equal to a low-single-digit percentage of net sales made by us or our affiliates of any products , devices, materials, or components thereof, or the Licensed Products, including or covered by Original IP (as defined in the License Agreement), excluding the Shape-Changing IP (as defined in the License Agreement), in the Ophthalmic Field of Use (as defined in the License Agreement).
−Removed: We are obligated to pay Incept a royalty equal to a mid-single-digit percentage of net sales made by us or our affiliates of any Licensed Products including or covered by Original IP, excluding the Shape-Changing IP, in the Additional Field of Use (as defined in the License Agreement).
−Removed: We are obligated to pay Incept a royalty equal to a low-single-digit percentage of net sales made by us or our affiliates of any Licensed Products including or covered by Incept IP (as defined in the License Agreement) or Joint IP (as defined in the License Agreement) in the field of drug delivery.
−Removed: Any sublicensee of ours also will be obligated to pay Incept a royalty on net sales of Licensed Products made by it and will be bound by the terms of the agreement to the same extent as we are.
−Removed: We are obligated to reimburse Incept for our share of the reasonable fees and costs incurred by Incept in connection with the prosecution of the patent applications licensed to us under the agreement.
−Removed: Our share of these fees and costs is equal to the total amount of such fees and costs divided by the total number of Incept’s exclusive licensees of the patent application.
−Removed: We have not included in the table above any payments to Incept under this license agreement as the amount, timing and likelihood of such payments are not known.
−Removed: In October 2016, we entered into the Collaboration Agreement with Regeneron.
−Removed: If the Option is exercised, Regeneron will conduct further preclinical development and an initial clinical trial under a collaboration plan.
−Removed: We are obligated to reimburse Regeneron for certain development costs during the period through the completion of the initial clinical trial, subject to a cap of $25.0 million, which cap may be increased by up to $5.0 million under certain circumstances.
−Removed: We have not included in the table above any payments to Regeneron under this Collaboration Agreement as the timing of such payments are not known.
−Removed: Regeneron will be responsible for funding an initial preclinical tolerability study, which Regeneron initiated in early 2018.
−Removed: We do not expect our funding requirements under our collaboration with Regeneron to be material over the next twelve months.
−Removed: If Regeneron elects to proceed with further development beyond the initial clinical trial, it will be solely responsible for conducting and funding further development and commercialization of product candidates.
−Removed: On March 2019, we issued the 2026 Convertible Notes pursuant to a note purchase agreement, or the Purchase Agreement with Cap 1 LLC, an affiliate of Summer Road LLC to issue and sell the 2026 Convertible Notes.
−Removed: The 2026 Convertible Notes accrue interest at an annual rate of 6% of its outstanding principal amount, payable at maturity, on March 1, 2026, unless earlier converted, repurchased or redeemed.
−Removed: The holders of the 2026 Convertible Notes may convert all or part of the outstanding principal amount of their 2026 Convertible Notes into shares of our common stock, par value $0.0001 per share, prior to maturity and provided that no conversion results in a holder beneficially owning more than 19.99% of our issued and outstanding common stock.
−Removed: The conversion rate is initially 153.8462 shares of our common stock per $1,000 principal amount of the 2026 Convertible Notes, which is equivalent to an initial conversion price is $6.50 per share.
−Removed: The conversion rate is subject to adjustment in customary circumstances such as stock splits or similar changes to our capitalization.
−Removed: At our election, we may choose to make such conversion payment in cash, in shares of common stock, or in a combination thereof.
−Removed: Upon any conversion of any 2026 Convertible Note, we are obligated to make a cash payment to the holder of such 2026 Convertible Note for any interest accrued but unpaid on the principal amount converted.
−Removed: Upon the occurrence of a Corporate Transaction (as defined in the 2026 Convertible Notes), the holder of a 2026 Convertible Note is entitled, at such holder’s option, to convert all of the outstanding principal amount of the 2026 Convertible Note in accordance with the foregoing and receive an additional, “make-whole”
−Removed: cash payment in accordance with a table set forth in each 2026 Convertible Note.
−Removed: Upon the occurrence of a Corporate Transaction, each holder of a 2026 Convertible Note has the option to require us to repurchase all or part of the outstanding principal amount of such 2026 Convertible Note at a repurchase price equal to 100% of the outstanding principal amount of the 2026 Convertible Note to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.
−Removed: On or after March 1, 2022, if the last reported sale price of the common stock has been at least 130% of the conversion rate then in effect for twenty of the preceding thirty trading days (including the last trading day of such
−Removed: period), we are entitled, at our option, to redeem all or part of the outstanding principal amount of the 2026 Convertible Notes, on a pro rata basis, at an optional redemption price equal to 100% of the outstanding principal amount of the 2026 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the optional redemption date.
−Removed: The Purchase Agreement contains customary representations and warranties by us and the noteholder.
−Removed: The Purchase Agreement does not include any financial covenants.
−Removed: Our obligations under the Purchase Agreement and the 2026 Convertible Notes are subject to acceleration upon the occurrence of specified events of default, including a default or breach of certain contracts material to us and the delisting and deregistration of our common stock.
−Removed: Off-Balance Sheet Arrangements
−Removed: We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission, such relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.
−Removed: Recently Issued Accounting Pronouncements
−Removed: Information regarding new accounting pronouncements is included in Note 2 –
−Removed: Summary of Significant Accounting Policies to the current period’s consolidated financial statements.
+Added: Not applicable.
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.