OCULAR THERAPEUTIX, INC 10-Q

Item 1. Financial Statements. Ocular Therapeutix, Inc. Condensed Consolidated Balance Sheets (In thousands, except share and per share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, ​ 2023 2022 Assets ​ ​ Current assets: ​ ​ ​ Cash and cash equivalents ​ $ 66,606 ​ $ 102,300 Accounts receivable, net ​ 27,309 ​ 21,325 Inventory ​ 2,204 ​ 1,974 Prepaid expenses and other current assets ​ 4,593 ​ 4,028 Total current assets ​ 100,712 ​ 129,627 Property and equipment, net ​ 12,830 ​ 9,856 Restricted cash ​ 1,764 ​ 1,764 Operating lease assets ​ ​ 7,252 ​ ​ 8,042 Total assets ​ $ 122,558 ​ $ 149,289 Liabilities and Stockholders’ Equity ​ ​ ​ Current liabilities: ​ ​ ​ Accounts payable ​ $ 3,572 ​ $ 5,123 Accrued expenses and other current liabilities ​ 24,598 ​ 24,097 Deferred revenue ​ 391 ​ 576 Operating lease liabilities ​ ​ 1,713 ​ ​ 1,599 Notes payable, net of discount, current ​ 2,083 ​ — Total current liabilities ​ 32,357 ​ 31,395 Other liabilities: ​ ​ ​ ​ Operating lease liabilities, net of current portion ​ ​ 7,689 ​ ​ 8,678 Derivative liability ​ ​ 11,783 ​ ​ 6,351 Deferred revenue, net of current portion ​ ​ 14,254 ​ ​ 13,387 Notes payable, net of discount, net of current portion ​ 23,303 ​ 25,257 Other non-current liabilities ​ ​ 104 ​ ​ 93 Convertible Notes, net ​ 29,981 ​ 28,749 Total liabilities ​ 119,471 ​ 113,910 Commitments and contingencies (Note 14) ​ ​ ​ ​ Stockholders’ equity: ​ ​ ​ Preferred stock, $ 0.0001 par value; 5,000,000 shares authorized and no shares issued or outstanding at June 30, 2023 and December 31, 2022, respectively ​ — ​ — Common stock, $ 0.0001 par value; 200,000,000 shares authorized and 79,233,804 and 77,201,819 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively ​ 8 ​ 8 Additional paid-in capital ​ 670,921 ​ 652,213 Accumulated deficit ​ ( 667,842 ) ​ ( 616,842 ) Total stockholders’ equity ​ 3,087 ​ 35,379 Total liabilities and stockholders’ equity ​ $ 122,558 ​ $ 149,289 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ ​ 3 Table of Contents Ocular Therapeutix, Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss (In thousands, except share and per share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, ​ 2023 2022 2023 2022 Revenue: ​ ​ ​ ​ Product revenue, net ​ $ 15,029 ​ $ 12,144 ​ $ 28,243 ​ $ 24,642 Collaboration revenue ​ 157 ​ 122 ​ 318 ​ 811 Total revenue, net ​ 15,186 ​ 12,266 ​ 28,561 ​ ​ 25,453 Costs and operating expenses: ​ ​ ​ ​ ​ Cost of product revenue ​ 1,304 ​ 1,155 ​ 2,517 ​ ​ 2,454 Research and development ​ 15,094 ​ 13,100 ​ 29,842 ​ ​ 26,200 Selling and marketing ​ 11,153 ​ 10,140 ​ 21,989 ​ ​ 19,203 General and administrative ​ 8,205 ​ 7,787 ​ 17,332 ​ ​ 15,344 Total costs and operating expenses ​ 35,756 ​ 32,182 ​ 71,680 ​ ​ 63,201 Loss from operations ​ ( 20,570 ) ​ ( 19,916 ) ​ ( 43,119 ) ​ ​ ( 37,748 ) Other income (expense): ​ ​ ​ ​ ​ Interest income ​ 748 ​ 73 ​ 1,312 ​ ​ 89 Interest expense ​ ( 1,991 ) ​ ( 1,696 ) ​ ( 3,760 ) ​ ​ ( 3,378 ) Change in fair value of derivative liability ​ ​ 1,131 ​ ​ 2,773 ​ ​ ( 5,432 ) ​ ​ 9,731 Other expense, net ​ — ​ — ​ ( 1 ) ​ ​ ( 2 ) Total other (expense) income, net ​ ( 112 ) ​ 1,150 ​ ( 7,881 ) ​ ​ 6,440 Net loss ​ $ ( 20,682 ) ​ $ ( 18,766 ) ​ $ ( 51,000 ) ​ $ ( 31,308 ) Net loss per share, basic ​ $ ( 0.26 ) ​ $ ( 0.24 ) ​ $ ( 0.66 ) ​ $ ( 0.41 ) Weighted average common shares outstanding, basic ​ 78,047,705 ​ 76,764,296 ​ 77,718,823 ​ 76,755,028 Net loss per share, diluted ​ $ ( 0.26 ) ​ $ ( 0.25 ) ​ $ ( 0.66 ) ​ $ ( 0.47 ) Weighted average common shares outstanding, diluted ​ 78,047,705 ​ 82,533,528 ​ 77,718,823 ​ 82,524,260 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 4 Table of Contents Ocular Therapeutix, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ 2023 2022 Cash flows from operating activities: ​ ​ ​ Net loss ​ $ ( 51,000 ) ​ $ ( 31,308 ) Adjustments to reconcile net loss to net cash used in operating activities ​ ​ ​ ​ Stock-based compensation expense ​ 8,985 ​ 8,490 Non-cash interest expense ​ 2,481 ​ 2,391 Change in fair value of derivative liability ​ ​ 5,432 ​ ​ ( 9,731 ) Depreciation and amortization expense ​ 1,135 ​ 1,109 Gain (loss) on disposal of property and equipment ​ ( 1 ) ​ 2 Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable ​ ( 5,984 ) ​ 653 Prepaid expenses and other current assets ​ ( 565 ) ​ 950 Inventory ​ ( 230 ) ​ ( 250 ) Accounts payable ​ ( 320 ) ​ ( 809 ) Operating lease assets and liabilities ​ ​ ( 85 ) ​ ​ ( 216 ) Accrued expenses ​ ( 578 ) ​ ( 1,946 ) Deferred revenue ​ ​ 682 ​ ​ 1,189 Net cash used in operating activities ​ ( 40,048 ) ​ ( 29,476 ) Cash flows from investing activities: ​ ​ ​ Purchases of property and equipment ​ ( 5,369 ) ​ ( 771 ) Net cash used in investing activities ​ ( 5,369 ) ​ ( 771 ) Cash flows from financing activities: ​ ​ ​ Proceeds from issuance of short-term bridge loan ​ 2,000 ​ — Proceeds from exercise of stock options ​ 481 ​ 140 Proceeds from issuance of common stock pursuant to employee stock purchase plan ​ 418 ​ 482 Proceeds from issuance of common stock upon public offering, net of issuance costs ​ 8,824 ​ — Repayment of short-term bridge loan ​ ( 2,000 ) ​ ​ — Net cash provided by financing activities ​ 9,723 ​ 622 Net decrease in cash, cash equivalents and restricted cash ​ ( 35,694 ) ​ ( 29,625 ) Cash, cash equivalents and restricted cash at beginning of period ​ 104,064 ​ 165,928 Cash, cash equivalents and restricted cash at end of period ​ $ 68,370 ​ $ 136,303 Supplemental disclosure of cash flow information: ​ ​ ​ Cash paid for interest ​ $ 1,521 ​ $ 990 Supplemental disclosure of non-cash investing and financing activities: ​ ​ ​ Additions to property and equipment included in accounts payable and accrued expenses ​ $ 116 ​ $ 245 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 5 Table of Contents Ocular Therapeutix, Inc. Condensed Consolidated Statements of Stockholders’ Equity (In thousands, except share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Stockholders’ ​ Shares Par Value Capital Deficit Equity Balances at December 31, 2022 ​ 77,201,819 ​ $ 8 ​ $ 652,213 ​ $ ( 616,842 ) ​ $ 35,379 Issuance of common stock upon exercise of stock options 26,443 ​ — ​ 78 ​ — ​ 78 Issuance of common stock upon vesting of restricted stock units ​ 288,376 ​ ​ — ​ — ​ — ​ — Stock-based compensation expense — ​ — ​ 4,572 ​ — ​ 4,572 Net loss — ​ — ​ — ​ ( 30,318 ) ​ ( 30,318 ) Balances at March 31, 2023 77,516,638 ​ $ 8 ​ $ 656,863 ​ $ ( 647,160 ) ​ $ 9,711 Issuance of common stock upon exercise of stock options 97,435 ​ ​ — ​ ​ 403 ​ ​ — ​ 403 Issuance of common stock in connection with employee stock purchase plan 176,406 ​ ​ — ​ ​ 418 ​ ​ — ​ 418 Issuance of common stock upon vesting of restricted stock units ​ 73,117 ​ ​ — ​ ​ — ​ ​ — ​ — Issuance of common stock upon public offering, net of issuance costs 1,370,208 ​ ​ — ​ ​ 8,824 ​ ​ — ​ 8,824 Stock-based compensation expense — ​ ​ — ​ ​ 4,413 ​ ​ — ​ 4,413 Net loss — ​ ​ — ​ ​ — ​ ​ ( 20,682 ) ​ ( 20,682 ) Balances at June 30, 2023 79,233,804 ​ $ 8 ​ $ 670,921 ​ $ ( 667,842 ) ​ $ 3,087 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ ​ ​ ​ 6 Table of Contents Ocular Therapeutix, Inc. Condensed Consolidated Statements of Stockholders’ Equity (In thousands, except share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Stockholders’ ​ Shares Par Value Capital Deficit Equity Balances at December 31, 2021 76,731,940 ​ $ 8 ​ $ 633,795 ​ $ ( 545,804 ) ​ $ 87,999 Issuance of common stock upon exercise of stock options 27,674 ​ — ​ 129 ​ — ​ 129 Stock-based compensation expense — ​ — ​ 4,209 ​ — ​ 4,209 Net loss — ​ — ​ — ​ ( 12,542 ) ​ ( 12,542 ) Balances at March 31, 2022 76,759,614 ​ $ 8 ​ $ 638,133 ​ $ ( 558,346 ) ​ $ 79,795 Issuance of common stock upon exercise of stock options 9,469 ​ — ​ 11 ​ — ​ 11 Issuance of common stock in connection with employee stock purchase plan 140,943 ​ — ​ 482 ​ — ​ 482 Stock-based compensation expense — ​ — ​ 4,281 ​ — ​ 4,281 Net loss — ​ — ​ — ​ ( 18,766 ) ​ ( 18,766 ) Balances at June 30, 2022 76,910,026 ​ $ 8 ​ $ 642,907 ​ $ ( 577,112 ) ​ $ 65,803 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ ​ ​ 7 Table of Contents Ocular Therapeutix, Inc. Notes to the Condensed Consolidated Financial Statements (Amounts in thousands, except share and per share data) (Unaudited) 1. Nature of the Business Ocular Therapeutix, Inc. (the “Company”) was incorporated on September 12, 2006 under the laws of the State of Delaware. The Company is a biopharmaceutical company focused on the formulation, development and commercialization of innovative therapies for diseases and conditions of the eye using its proprietary bioresorbable hydrogel-based formulation technology ELUTYX. The Company’s mission is to build an ophthalmology-focused biopharmaceutical company that capitalizes on the gaps that the Company believes increasingly exist in the ophthalmology sector between single-product companies and large, multi-product pharmaceutical companies. The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations, regulatory approval and compliance, reimbursement, uncertainty of market acceptance of products and the need to obtain additional financing. Recently approved products will require significant sales, marketing and distribution support up to and including upon their launch. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. The Company is currently commercializing DEXTENZA (dexamethasone insert) 0.4mg, an intracanalicular insert for the treatment of post-surgical ocular inflammation and pain and for the treatment of ocular itching associated with allergic conjunctivitis, in the United States. The Company’s most advanced product candidates are in either Phase 1 or Phase 2 of clinical stage development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval and adequate reimbursement or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapidly changing technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants. The Company may not be able to generate significant revenue from sales of any product for several years, if at all. Accordingly, the Company will need to obtain additional capital to finance its operations. The Company has incurred losses and negative cash flows from operations since its inception, and the Company expects to continue to generate operating losses and negative cash flows from operations in the foreseeable future. As of June 30, 2023, the Company had an accumulated deficit of $ 667,842 . As of June 30, 2023, the Company had existing cash and cash equivalents of $ 66,606 . Subsequent to this date, on August 2, 2023, the Company entered into a new credit facility for $ 82,474 , borrowed the full amount of $ 82,474 at closing, and received proceeds of $ 77,790 , after the application of a discount and fees (Note 16). In connection with entering the new credit facility, the Company repaid its existing credit facility in August 2023 (Note 16), resulting in cash outflows of $ 26,157 . Based on the Company’s current operating plan which includes estimates of anticipated cash inflows from product sales and cash outflows from operating expenses, and capital expenditures, the Company believes that its existing cash and cash equivalents as of June 30, 2023, plus the net cash received under the new credit facility after the repayment of the existing credit facility and reflecting a minimum liquidity covenant in the new credit facility, will enable it to fund its planned operating expenses, debt service obligations and capital expenditures at least through the next 12 months from the issuance date of these unaudited condensed consolidated financial statements. The future viability of the Company beyond that point is dependent on the Company’s ability to generate cash flows from the sale of DEXTENZA and raise additional capital to finance its operations. The Company will need to finance its operations through public or private securities offerings, debt financings, collaborations, strategic alliances, licensing agreements, royalty agreements, or marketing and distribution agreements. Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing on terms acceptable to the Company, if at all. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs for product candidates, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. 8 Table of Contents ​ On June 30, 2023, the Company entered into an amendment to the Company's lease for its 20,445 square feet of manufacturing space located at 36 Crosby Drive in Bedford, Massachusetts. Under the amendment, the term of the lease was extended through July 31, 2028. The Company had reflected the obligations under the lease extension in its consolidated financial statements for 2022 as set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023. ​ 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements are consistent with those described in Note 2 - Summary of Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on March 6, 2023. Use of Estimates The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of these unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to, the measurement and recognition of reserves for variable consideration related to product sales, revenue recognition related to a collaboration agreement that contains multiple promises, the fair value of derivatives, stock-based compensation, and realizability of net deferred tax assets. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates. Unaudited Interim Financial Information The balance sheet at December 31, 2022 was derived from audited consolidated financial statements but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 have been prepared by the Company, pursuant to the rules and regulations of the SEC for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of June 30, 2023 and results of operations and cash flows for the three and six months ended June 30, 2023 and 2022 have been made. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2023. Recently Issued Accounting Pronouncements From time to time, new accounting pronouncements are issued by the FASB and adopted by us as of the specified effective date. The Company believes that recently issued accounting pronouncements that are not yet effective will not have a material impact on our consolidated financial statements and disclosures. ​ 3. Licensing Agreements and Deferred Revenue Incept License Agreement (in-licensing) On September 13, 2018, the Company entered into a second amended and restated license agreement with Incept, LLC (“Incept”) to use and develop certain intellectual property (the “Incept License”). Under the Incept License, as 9 Table of Contents amended and restated, the Company was granted a worldwide, perpetual, exclusive license to use specific Incept technology to develop and commercialize products that are delivered to or around the human eye for diagnostic, therapeutic or prophylactic purposes relating to ophthalmic diseases or conditions. The Company is obligated to pay low single-digit royalties on net sales of commercial products developed using the licensed technology, commencing with the date of the first commercial sale of such products and until the expiration of the last to expire of the patents covered by the license. The terms and conditions of the Incept License are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023. Royalties paid under this agreement related to product sales were $ 396 and $ 813 for the three and six months ended June 30, 2023, respectively, and $ 375 and $ 744 for the three and six months ended June 30, 2022, respectively. Royalties have been charged to cost of product revenue. AffaMed License Agreement (out-licensing) On October 29, 2020, the Company entered into license agreement (“License Agreement”) with AffaMed Therapeutic Limited (“AffaMed”) for the development and commercialization of the Company’s DEXTENZA product regarding ocular inflammation and pain following cataract surgery and allergic conjunctivitis and for the Company’s OTX-TIC product candidate regarding open-angle glaucoma or ocular hypertension, in each case in mainland China, Taiwan, Hong Kong, Macau, South Korea, and the countries of the Association of Southeast Asian Nations. The Company retains development and commercialization rights for the AffaMed Licensed Products in the rest of the world. The terms and conditions of the License Agreement are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023. In June 2023, the Company received a milestone payment of $ 1,000 from AffaMed in connection with AffaMed receiving approval of its Clinical Trial Application to initiate a Phase 3 registrational study in China to investigate the efficacy and safety of DEXTENZA in subjects following ophthalmic surgery by China’s National Medical Products Administration. The Company has allocated the amount to the DEXTENZA Field performance obligation as an addition to deferred revenue. In March 2022, the Company invoiced AffaMed $ 2,000 for a clinical trial support payment in connection with the initiation by the Company of the OTX-TIC Phase 2 clinical trial and allocated the amount to the Phase 2 Clinical Trial of OTX-TIC performance obligation as an addition to deferred revenue. Payment was received by the Company during the three months ended June 30, 2022. The Company recognized collaboration revenue related to the Phase 2 Clinical Trial of OTX-TIC performance obligation of $ 157 and $ 318 for the three and six months ended June 30, 2023, respectively, and $ 122 and $ 811 for the three and six months ended June 30, 2022, respectively. As of June 30, 2023, the aggregate amount of the transaction price allocated to the partially unsatisfied Phase 2 Clinical Trial of OTX-TIC performance obligation was $ 645 . This amount is expected to be recognized as this performance obligation is satisfied through June 2025. Deferred revenue activity for the three and six months ended June 30, 2023 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred Revenue Deferred revenue at December 31, 2022 ​ $ 13,963 Additions ​ ​ 1,000 Amounts recognized into revenue ​ ​ ( 318 ) Deferred revenue at June 30, 2023 ​ $ 14,645 ​ ​ ​ ​ ​ ​ 10 Table of Contents 4. Cash Equivalents and Restricted Cash As of June 30, 2023 and December 31, 2022, the Company held restricted cash of $ 1,764 , respectively, on its unaudited condensed consolidated balance sheets. The Company held restricted cash as security deposits for its real estate leases. The Company’s unaudited condensed consolidated statements of cash flows include restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on such statements. A reconciliation of the cash, cash equivalents, and restricted cash reported within the balance sheets that sum to the total of the same amounts shown in the unaudited condensed consolidated statement of cash flows is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ June 30, ​ 2023 2022 Cash and cash equivalents ​ $ 66,606 ​ $ 134,539 Restricted cash ​ ​ 1,764 ​ ​ 1,764 Total cash, cash equivalents and restricted cash ​ $ 68,370 ​ $ 136,303 ​ ​ ​ ​ ​ ​ ​ ​ ​ 5. Inventory Inventory consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, ​ ​ 2023 2022 Raw materials ​ $ 341 ​ $ 309 ​ Work-in-process ​ ​ 682 ​ ​ 899 ​ Finished goods ​ 1,181 ​ 766 ​ ​ ​ $ 2,204 ​ $ 1,974 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6. Expenses Accrued expenses and other current liabilities consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, ​ 2023 2022 Accrued payroll and related expenses ​ $ 6,236 ​ $ 7,509 Accrued rebates and programs ​ ​ 4,513 ​ ​ 3,560 Accrued professional fees ​ 1,387 ​ 1,228 Accrued research and development expenses ​ 1,523 ​ 1,816 Accrued interest payable on Convertible Notes ​ 9,752 ​ 8,756 Accrued other ​ 1,187 ​ 1,228 ​ ​ $ 24,598 ​ $ 24,097 ​ ​ 7. Financial Liabilities Convertible Notes On March 1, 2019, the Company issued $ 37,500 of convertible notes, which accrue interest at an annual rate of 6 % of their outstanding principal amount, which is payable, along with the principal amount at maturity, on March 1, 2026, unless earlier converted, repurchased or redeemed (the “Convertible Notes”). The Company presents accrued interest in accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheets because the Convertible Notes are currently convertible and the interest is payable in cash. The effective annual interest rate for the Convertible Notes was 14.8 % through June 30, 2023. 11 Table of Contents The terms and conditions of the Convertible Notes were amended on August 2, 2023 (Note 16). The terms and conditions of the Convertible Notes prior to the amendment are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023. The Company determined that the embedded conversion option is required to be separated from the Convertible Notes and accounted for as a freestanding derivative instrument subject to derivative accounting. The allocation of proceeds to the conversion option results in a discount on the Convertible Notes. The Company is amortizing the discount to interest expense over the term of the Convertible Notes using the effective interest method. A summary of the Convertible Notes at June 30, 2023 and December 31, 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, ​ 2023 2022 Convertible Notes ​ $ 37,500 ​ $ 37,500 Less: unamortized discount ​ ​ ( 7,519 ) ​ ​ ( 8,751 ) Total ​ $ 29,981 ​ $ 28,749 ​ Notes Payable The Company entered into a credit and security agreement in 2014 (as amended to date, the “MidCap Credit Agreement”) establishing a credit facility (the “MidCap Credit Facility”). The terms and conditions of the MidCap Credit Agreement and the MidCap Credit Facility are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023, except with respect to Amendments No. 1 and 2 to the MidCap Credit Agreement as described below. The MidCap Credit Facility was paid off in full in August 2023 (Note 16). Under the MidCap Credit Facility, the Company had a total borrowing capacity of $ 25,000 , which was fully drawn down as of June 30, 2023. The carrying value of the Company’s variable interest rate notes payable under the MidCap Credit Facility are recorded at amortized cost, which approximates fair value due to their short-term nature. On March 12, 2023, the Company requested, and received, a protective advance of $ 2,000 under the MidCap Credit Agreement as a short-term bridge loan in response to the closure of Silicon Valley Bank by the California Department of Financial Protection and Innovation. This protective advance was deemed a credit extension. The Company repaid the full principal amount of $ 2,000 in March 2023. On March 31, 2023, the Company entered into Amendment No. 1 to the MidCap Credit Agreement (“Amendment No. 1”) to replace the LIBOR-based interest rate provisions of the MidCap Credit Agreement with interest rate provisions based on the Secured Overnight Financing Rate (“SOFR”), establish a benchmark replacement mechanism and make additional administrative updates. The Company accounted for Amendment No. 1 as a modification in accordance with the guidance in ASC 470-50 Debt . Application of the modification accounting guidance did not have a material effect on the carrying amount of the long-term notes payable. On May 4, 2023, the Company entered into Amendment No. 2 to the MidCap Credit Agreement (“Amendment No. 2”). Amendment No. 2 provided that the Company may maintain up to 50 % of its consolidated cash and cash equivalents with banks or financial institutions other than Silicon Valley Bank and made additional administrative updates. 12 Table of Contents Borrowings outstanding are as follows : ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, December 31, ​ 2023 2022 Borrowings outstanding ​ $ 25,000 ​ $ 25,000 Accrued exit fee ​ ​ 448 ​ ​ 335 Unamortized discount ​ ​ ( 62 ) ​ ​ ( 78 ) ​ ​ ​ 25,386 ​ ​ 25,257 Less: current portion ​ ​ ( 2,083 ) ​ ​ — Long-term notes payable ​ $ 23,303 ​ $ 25,257 ​ As of June 30, 2023, the annual requirement for the repayment of principal for the MidCap Credit Facility, inclusive of the final payment of $ 875 due at expiration, was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ending December 31, Principal Final Payment Total 2024 ​ ​ 8,333 ​ ​ — ​ ​ 8,333 2025 ​ ​ 16,667 ​ ​ 875 ​ ​ 17,542 ​ ​ $ 25,000 ​ $ 875 ​ $ 25,875 ​ ​ 13 Table of Contents 8. Derivative Liability The Convertible Notes (Note 7) contain an embedded conversion option that meets the criteria to be bifurcated and accounted for separately from the Convertible Notes (the "Derivative Liability"). The Derivative Liability was recorded at fair value upon the issuance of the Convertible Notes and is subsequently remeasured to fair value at each reporting period. The Convertible Notes were initially valued and are remeasured using a "with-and-without" method. The "with-and-without" methodology involves valuing the whole instrument on an as-is basis with the embedded conversion option and then valuing the Convertible Notes without the embedded conversion option. The difference between the entire instrument with the embedded conversion option compared to the instrument without the embedded conversion option is the fair value of the derivative, recorded as the Derivative Liability. Refer to Note 9 for details regarding the determination of fair value. ​ ​ 9. Risks and Fair Value Concentration of Credit Risk and of Significant Suppliers and Customers Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company has its cash and cash equivalents balances at two accredited financial institutions, in amounts that exceed federally insured limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The Company is dependent on a small number of third-party manufacturers to supply products for research and development activities in its preclinical and clinical programs and for sales of its products. The Company’s development programs as well as revenue from future product sales could be adversely affected by a significant interruption in the supply of any of the components of these products. For the three and six months ended June 30, 2023, three specialty distributor customers accounted for 58 %, 21 % and 10 %, and 55 %, 23 %, and 11 %, respectively, of the Company’s gross product revenue, and at June 30, 2023, three specialty distributor customers accounted for 59 %, 22 %, and 10 % of the Company’s total accounts receivable. No other customer accounted for more than 10% of total revenue for the three and six months ended June 30, 2023, or accounts receivable at June 30, 2023. For the three and six months ended June 30, 2022, four specialty distributor customers accounted for 41 %, 26 %, 17 %, and 10 %, and three specialty distributors accounted for 41 %, 25 % and 20 %, respectively, of the Company’s gross product revenue. At December 31, 2022, three specialty distributor customers accounted for 52 %, 24 %, and 15 % of the Company’s total accounts receivable. No other customer accounted for more than 10% of total revenue for the three and six months ended June 30, 2022, or accounts receivable at December 31, 2022. Fair Value of Financial Assets and Liabilities The following tables present information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 and indicate the level of the fair value hierarchy utilized to determine such fair value: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements as of ​ ​ June 30, 2023 Using: ​ Level 1 Level 2 Level 3 Total Assets: ​ ​ ​ ​ Cash equivalents: ​ ​ ​ ​ Money market funds ​ $ 56,550 ​ $ — ​ $ — ​ $ 56,550 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liability: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative liability ​ $ — ​ $ — ​ $ 11,783 ​ $ 11,783 ​ 14 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements as of ​ ​ December 31, 2022 Using: ​ Level 1 Level 2 Level 3 Total Assets: ​ ​ ​ ​ Cash equivalents: ​ ​ ​ ​ Money market funds ​ $ 30,188 ​ $ — ​ $ — ​ $ 30,188 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liability: ​ ​ ​ ​ Derivative liability ​ $ — ​ $ — ​ $ 6,351 ​ $ 6,351 ​ At June 30, 2023, the Convertible Notes, net of the Derivative Liability, were carried at amortized cost totaling $ 39,733 , comprised of the $ 29,981 non-current liability (Note 7) and $ 9,752 accrued interest (Note 6). At December 31, 2022, the Convertible Notes, net of the Derivative Liability, were carried at amortized cost totaling $ 37,505 , comprised of the $ 28,749 non-current liability (Note 7) and $ 8,756 accrued interest (Note 6). The estimated fair value of the Convertible Notes, without the Derivative Liability, was $ 36,816 and $ 33,177 at June 30, 2023 and December 31, 2022, respectively. The fair value of the Convertible Notes with and without the conversion option is estimated using a binomial lattice approach. The use of this approach requires the use of Level 3 unobservable inputs. The main input when determining the fair value of the Convertible Notes is the bond yield that pertains to the host instrument without the conversion option. The significant assumption used in determining the bond yield is the market yield movements of a comparable instrument issued as of the valuation date, which is assessed and updated each period. The main input when determining the fair value for disclosure purposes is the bond yield which is updated each period to reflect the yield of a comparable instrument issued as of the valuation date. The estimated fair value presented is not necessarily indicative of an amount that could be realized in a current market exchange. The use of alternative inputs and estimation methodologies could have a material effect on these estimates of fair value. The main inputs to valuing the Convertible Notes with the conversion option are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ ​ ​ June 30, ​ December 31, ​ ​ ​ 2023 ​ 2022 ​ Company's stock price ​ $ 5.16 ​ $ 2.81 ​ Volatility ​ ​ 78.9 % ​ 93.8 % Bond yield ​ ​ 14.8 % ​ 16.2 % ​ A roll-forward of the derivative liability is as follows: ​ ​ ​ ​ ​ ​ ​ As of Balance at December 31, 2022 ​ $ 6,351 Change in fair value ​ ​ 5,432 Balance at June 30, 2023 ​ $ 11,783 ​ ​ 10. Equity On August 9, 2021, the Company and Jefferies LLC (“Jefferies”) entered into an Open Market Sale Agreement (the “2021 Sales Agreement”) under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ 100,000 from time to time through Jefferies, acting as agent. During the three and six months ended June 30, 2023, the Company sold 1,370,208 shares of common stock under the 2021 Sales Agreement, resulting in gross proceeds to the Company of $ 9,162 , and net proceeds, after accounting for issuance costs, of $ 8,824 . The Company did no t offer or sell shares of its common stock under the 2021 Sales Agreement during the three and six months ended June 30, 2022. ​ 15 Table of Contents 11. Stock-Based Awards For the three and six months ended June 30, 2023, the Company had three stock-based compensation plans under which it was able to grant stock-based awards, the 2021 Stock Incentive Plan, as amended (the “2021 Plan”), the 2019 Inducement Stock Incentive Plan, as amended (the “2019 Inducement Plan”), and the 2014 Employee Stock Purchase Plan (the “ESPP”), collectively the “Stock Plans”. The terms and conditions of the Stock Plans are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023. During the three and six months ended June 30, 2023, the Company granted options to purchase 249,600 and 3,240,741 shares of common stock, respectively at a weighted exercise price of $ 5.46 and $ 4.01 per share, respectively, all under the 2021 Plan. During the three and six months ended June 30, 2023, the Company granted 83,198 and 1,030,831 restricted stock units, or RSUs, respectively, all under the 2021 Plan. Each RSU is equivalent to one share of common stock upon vesting. During the three and six months ended June 30, 2023, a total of 428,860 and 560,207 , respectively, stock options and RSUs expired or were forfeited. At the Company’s Annual Meeting of Stockholders held on June 14, 2023, the Company’s stockholders approved an amendment of the Company’s 2021 Plan which increased the number of shares of common stock of the Company issuable under the 2021 Plan by 3,900,000 shares. As of June 30, 2023, 6,051,809 , 545,375 , and 513,069 shares of common stock remained available for issuance under the 2021 Plan, the 2019 Inducement Plan, and the ESPP, respectively. The Company recorded stock-based compensation expense related to stock options and RSUs in the following expense categories of its unaudited condensed consolidated statements of operations and comprehensive loss: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, ​ ​ 2023 2022 2023 2022 Research and development ​ $ 1,133 ​ $ 1,036 ​ $ 2,274 ​ $ 2,098 ​ Selling and marketing ​ 970 ​ 1,191 ​ 2,014 ​ 2,329 ​ General and administrative ​ 2,310 ​ 2,054 ​ 4,697 ​ 4,063 ​ ​ ​ $ 4,413 ​ $ 4,281 ​ $ 8,985 ​ $ 8,490 ​ ​ As of June 30, 2023, the Company had an aggregate of $ 23,528 of unrecognized stock-based compensation cost, which is expected to be recognized over a weighted average period of 2.32 years. ​ 12. Income Taxes The Company did not provide for any income taxes in its unaudited condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023 and 2022, respectively. The Company has provided a valuation allowance for the full amount of its net deferred tax assets because, at June 30, 2023 and December 31, 2022, it was more likely than not that any future benefit from deductible temporary differences and net operating loss and tax credit carryforwards would not be realized. ​ 16 Table of Contents 13. Net Loss Per Share Basic net loss per share was calculated as follows for the three and six months ended June 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended June 30, ​ Six Months Ended June 30, ​ 2023 ​ 2022 ​ 2023 ​ 2022 Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss attributable to common stockholders ​ $ ( 20,682 ) ​ $ ( 18,766 ) ​ $ ( 51,000 ) ​ $ ( 31,308 ) Denominator: ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding, basic ​ 78,047,705 ​ 76,764,296 ​ 77,718,823 ​ 76,755,028 Net loss per share - basic ​ $ ( 0.26 ) ​ $ ( 0.24 ) ​ $ ( 0.66 ) ​ $ ( 0.41 ) ​ For the three and six months ended June 30, 2023 there was no dilutive impact from potentially issuable common shares. Therefore, diluted net loss per share was the same as basic net loss per share. Diluted net loss per share was calculated as follows for the three and six months ended June 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended June 30, ​ Six Months Ended June 30, ​ 2022 ​ ​ 2022 Net loss attributable to common stockholders, basic ​ $ ( 18,766 ) ​ $ ( 31,308 ) Interest expense on Convertible Notes ​ 1,141 ​ 2,264 Change in fair value of derivative liability ​ ​ ( 2,773 ) ​ ​ ( 9,731 ) Net loss attributable to common stockholders, diluted ​ $ ( 20,398 ) ​ $ ( 38,775 ) ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding, basic ​ ​ 76,764,296 ​ ​ 76,755,028 Shares issuable upon conversion of Convertible Notes, as if converted ​ ​ 5,769,232 ​ ​ 5,769,232 Weighted average common shares outstanding, diluted ​ 82,533,528 ​ 82,524,260 ​ ​ ​ ​ ​ ​ ​ Net loss per share attributable to common stockholders, diluted ​ $ ( 0.25 ) ​ $ ( 0.47 ) ​ The Company excluded the following potentially issuable common shares, outstanding as of June 30, 2023 and 2022, from the computation of diluted net loss per share for the three and six months ended June 30, 2023 and 2022 because they had an anti-dilutive impact. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended June 30, Six Months Ended June 30, ​ 2023 2022 ​ 2023 2022 Options to purchase common stock ​ 16,333,870 ​ 13,892,884 ​ 16,333,870 ​ 13,892,884 Restricted stock units ​ 1,654,517 ​ 1,017,111 ​ 1,654,517 ​ 1,017,111 Shares issuable upon conversion of Convertible Notes, if converted ​ 5,769,232 ​ — ​ 5,769,232 ​ — ​ ​ 23,757,619 ​ 14,909,995 ​ 23,757,619 ​ 14,909,995 ​ ​ ​ 14. Commitments and Contingencies Indemnification Agreements In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend indemnified parties for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum 17 Table of Contents potential amount of future payments the Company could be required to make under these provisions is not determinable. To date, the Company has not incurred any material costs as a result of such indemnifications. ​ 15. Related Party Transactions The Company has engaged Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) to provide certain legal services to the Company. The Company's Chief Business Officer’s sister is a managing partner at WilmerHale, who has not participated in providing legal services to the Company. The Company incurred fees for legal services rendered by WilmerHale of approximately $ 239 and $ 633 for the three and six months ended June 30, 2023, respectively, and approximately $ 211 and $ 535 for the three and six months ended June 30, 2022, respectively. As of June 30, 2023 and December 31, 2022, there was $ 95 and $ 0 recorded in accounts payable for WilmerHale. As of June 30, 2023 and December 31, 2022, there was $ 122 and $ 24 recorded in accrued expenses for WilmerHale. ​ 16. Subsequent Events The Company sold an additional 144,718 shares under the 2021 Sales Agreement through August 4, 2023, resulting in gross proceeds to the Company of $ 734 , and net proceeds, after accounting for issuance costs, of $ 712 . ​ On August 2, 2023 (the “Closing Date”), the Company entered into a credit and security agreement (the “Barings Credit Agreement”) with Barings Finance LLC (“Barings”), as administrative agent, and the lenders party thereto, providing for a secured term loan facility for the Company (the “Barings Credit Facility”) in the aggregate principal amount of $ 82,474 (the “Total Credit Facility Amount). The Company borrowed the full amount of $ 82,474 at closing and received proceeds of $ 77,790 , after the application of a discount and fees. Indebtedness under the Barings Credit Facility matures on the earlier to occur of (i) the six-year anniversary of the Closing Date and (ii) the date that is 91 days prior to the maturity date for the Company’s Convertible Notes. Indebtedness under the Barings Credit Facility incurs interest at a SOFR-based rate, subject to a minimum 1.50 % floor, plus 6.75 %. The Company is obligated to make interest payments on its indebtedness under the Barings Credit Facility on a monthly basis, commencing on the Closing Date; to pay annual administration fees; and to pay, on the maturity date, any principal and accrued interest that remains outstanding as of such date. In addition, the Company is obligated to pay a fee in an amount equal to the Total Credit Facility Amount, which amount shall be reduced by the total amount of interest and principal prepayment fees paid under the Barings Credit Agreement (such fee, the “Royalty Fee”). The Company is required to pay the Royalty Fee in installments to Barings, for the benefit of the lenders, on a quarterly basis in an amount equal to three and one-half percent ( 3.5 % ) of the net sales of DEXTENZA occurring during such quarter, subject to the terms, conditions and limitations specified in the Barings Credit Agreement, until the Royalty Fee is paid in full. The Royalty Fee is due and payable upon a change of control of the Company. In the event the Company completes a change of control transaction on or prior to the twelve-month anniversary of the Closing Date, the Royalty Fee is subject to a reduction to an amount that is equal to (i) 20 % of the Total Credit Facility Amount, in the event that a signed letter of intent evidencing such change of control transaction was entered into by the Company on or prior to the date that is six months after the Closing Date and (ii) 30 % of the Total Credit Facility Amount, in the event that a signed letter of intent evidencing such change of control transaction was entered into by the Company after the date that is six months, but before the date that is twelve months, after the Closing Date. The Company may, at its option, prepay any or all of the Royalty Fee at any time without penalty. In connection with the Barings Credit Agreement, the Company granted the lenders thereto a first-priority security interest in all assets of the Company, including its intellectual property, subject to certain agreed-upon exceptions. The Barings Credit Agreement includes negative covenants restricting the Company from making payments to the holders of the Convertible Notes except in connection with a proposed conversion to equity and with respect to certain permitted expenses and requiring the Company to maintain a minimum liquidity amount of $ 20,000 . The Barings Credit Agreement also includes customary affirmative and negative covenants. ​ Concurrently with entering into the Barings Credit Agreement, on August 2, 2023, the Company and the holders of the Convertible Notes (Note 7) extended the maturity of the Convertible Notes, which would otherwise have matured on March 1, 2026, to a date 91 days following the maturity of the indebtedness under the Barings Credit Facility. ​ An estimate of the impact of entering into the Barings Credit Agreement and extending the maturity of the Convertible Notes on the Company’s consolidated financial statements, including the impact on the Derivative Liability 18 Table of Contents (Note 8), cannot be made at this time, as the Company continues to determine the accounting for these transactions. The Company expects to finalize its accounting for these transactions during the third quarter of 2023. ​ In August 2023, in connection with the Company’s establishment of the Barings Credit Facility, the Company paid an aggregate of $ 26,157 to MidCap Financial Trust and the other lenders party to the MidCap Credit Agreement (Note 7), comprised of $ 25,017 in principal and interest accrued thereunder and $ 1,140 in exit and prepayment fees, in satisfaction of the Company’s obligations under the MidCap Credit Agreement. Upon the payment, all liens and security interests securing the indebtedness under the MidCap Credit Agreement were released. The prepayment of the MidCap Credit Facility has resulted in incremental expenses, including accrued interest, of $ 771 , which will be charged to interest expense on the consolidated statements of operations and comprehensive loss for the third quarter of 2023. ​ ​ ​ ​