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Item 1A. Risk Factors

2024-03-11 compared with 2023-03-06 · 246 added, 166 removed, 799 unchanged (34% of the section changed)

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Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.

Please see page 2 of this Annual Report on Form 10-K for a discussion of some of the forward-looking statements that are qualified by these risk factors.

Please see the section of this Annual Report on Form 10-K captioned “Forward-Looking Statements” for a discussion of some of the forward-looking statements that are qualified by these risk factors.

If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.

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We have a history of incurring significant losses.

Our net loss was $71.0 million for the year ended December 31, 2022, primarily due to a loss from operations of $78.7 million offset by a change in fair value of a derivative liability of $13.8 million.

Our net loss was $6.6 million for the year ended December 31, 2021, primarily due to a loss from operations of $78.0 million and a change in fair value of a derivative liability of $78.1 million.

Our net losses were $80.7 million and $71.0 million for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, we had an accumulated deficit of $697.6 million.

We have financed our operations primarily through sales of our products, private placements of our preferred stock, public offerings of our common stock, the private placement of convertible notes in the aggregate principal amount of our $37.5 million, or the Convertible Notes, and borrowings under credit facilities.

We have financed our operations primarily through private placements of our preferred stock, public offerings and private placements of our common stock, borrowings under our credit facilities, including $82.5 million under a credit and security agreement, or the Barings Credit Agreement, with Barings Finance LLC, or Barings, as administrative agent, and the lenders party thereto, which we refer to as the Barings Credit Facility, the private placement of convertible notes in the aggregate principal amount of our $37.5 million, or the Convertible Notes, and sales of our products.

We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and clinical trials, and the commercialization of DEXTENZA.

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We anticipate we will incur substantial expenses if and as we:

● continue our ongoing clinical trials, including our pivotal Phase 3 clinical trial of AXPAXLI, which we refer to as the SOL-1 trial, for the treatment of wet age-related macular degeneration, or wet AMD;

the HELIOS trial of AXPAXLI for the treatment of non-proliferative diabetic retinopathy, or NPDR;

our Phase 2 clinical trial of PAXTRAVA for the reduction of IOP in patients with primary open-angle glaucoma, or OAG, or ocular hypertension, or OHT;

and our Phase 2 clinical trial of OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease;

● continue to monitor subjects according to the applicable clinical trial protocols in our clinical trials that have been completed, including our clinical trial to evaluate DEXTENZA in pediatric subjects following cataract surgery;

● determine to initiate new clinical trials to evaluate our product candidates, including our planned second pivotal Phase 3 clinical trial of AXPAXLI for the treatment of wet AMD, which we refer to as the SOL-2 trial;

our planned pivotal Phase 3 clinical trial of AXPAXLI for the treatment of NPDR;

and, subject to our evaluation of strategic alternatives, possible pivotal clinical trials of PAXTRAVA for the reduction of IOP in patients with primary OAG or OHT;

● continue to commercialize DEXTENZA in the United States;

● continue to develop and expand our sales, marketing and distribution capabilities for DEXTENZA and any other products or product candidates we intend to commercialize;

● continue ongoing clinical trials for OTX-TKI (in both Australia and the United States) for the treatment of wet AMD and diabetic retinopathy and OTX-TIC for the treatment of open-angle glaucoma or ocular hypertension;

● determine to initiate new clinical trials to evaluate our product candidates, including OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease;

● conduct or support research and development activities on, and seek regulatory approvals for, DEXTENZA and OTX-TIC in specified Asian markets pursuant to our license agreement and collaboration with AffaMed Therapeutics Limited, or AffaMed;

● conduct or support research and development activities on, and seek regulatory approvals for, DEXTENZA and PAXTRAVA in specified Asian markets pursuant to our license agreement and collaboration with AffaMed Therapeutics Limited, or AffaMed;

● continue the research and development of our other product candidates;

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● expand our operational, financial, administrative and management systems and personnel, including personnel to support our clinical development, manufacturing and commercialization efforts;

● defend ourselves against legal proceedings;

● defend ourselves against legal proceedings, if any;

● make investments to improve our defenses against cybersecurity and establish and maintain cybersecurity insurance;

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● continuing to commercialize DEXTENZA in the United States, including by further developing our manufacturing, marketing, sales force, and distribution capabilities;

● completing clinical development of our product candidates, including OTX-TKI, OTX-TIC, OTX-DED, and OTX-CSI;

● completing clinical development of our product candidates, including AXPAXLI, PAXTRAVA, OTX-DED, and OTX-CSI;

● obtaining marketing approval for these product candidates;

● manufacturing, marketing, selling and distributing any other products for which we obtain marketing approval;

● achieving an adequate level of market acceptance of and obtaining and maintaining coverage and adequate reimbursement from CMS and other third-party payors for our products;

● achieving an adequate level of market acceptance of and obtaining and maintaining coverage and adequate reimbursement from Centers for Medicare and Medicaid Services, or CMS, and other third-party payors for our products;

● protecting our rights to our intellectual property portfolio.

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If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or commercialization efforts.

We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we continue to commercialize DEXTENZA for the treatment of ocular inflammation and pain following ophthalmic surgery and for the treatment of ocular itching associated with allergic conjunctivitis, and advance OTX-TKI, OTX-TIC, OTX-DED and OTX-CSI through clinical development.

We expect to devote substantial financial resources to our ongoing and planned activities, particularly if and as we advance AXPAXLI, PAXTRAVA, OTX-DED and OTX-CSI through clinical development, and continue to commercialize DEXTENZA for the treatment of ocular inflammation and pain following ophthalmic surgery and for the treatment of ocular itching associated with allergic conjunctivitis.

We expect to devote substantial financial resources as we conduct late-stage clinical trials for our product candidates, seek marketing approval for any such product candidate for which we obtain favorable pivotal clinical results, and commercialize any products for which we receive marketing approval.

In addition, we plan to devote significant financial resources to conduct research and development of our other product candidates.

In addition, we plan to devote significant financial resources to conduct research and development of our

other product candidates.

Accordingly, we will need to obtain substantial additional funding to fully support our continuing and planned operations.

If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or commercialization efforts.

As of December 31, 2022, we had cash and cash equivalents of $102.3 million, outstanding debt of $25.3 million, net of unamortized discount, and $37.5 million aggregate principal amount of Convertible Notes plus accrued interest of $8.8 million.

We believe that our existing cash and cash equivalents will enable us to fund our planned operating expenses, debt service obligations and capital expenditure requirements, excluding our planned pivotal clinical trials for OTX-TKI, into the middle of 2024.

This estimate is based on our current operating plan which includes estimates of anticipated cash inflows from product sales and cash outflows from operating expenses but excludes expenses related to our planned pivotal clinical trials for OTX-TKI as we do not intend to initiate such trials without receipt of additional funding, which could be provided through a strategic collaboration.

T hese estimates are subject to various assumptions including those related the commercialization of DEXTENZA, the pace of our research and clinical development programs and other aspects of our business.

Our assumptions may prove to be wrong, and we could use our capital resources sooner than we currently expect and would therefore need to raise additional capital sooner or adjust our plans accordingly.

As of December 31, 2023, we had cash and cash equivalents of $195.8 million, outstanding debt with a principal amount of $82.5 million under the Barings Credit Facility, and $37.5 million aggregate principal amount of Convertible Notes plus accrued interest of $10.9 million.

Based on our current operating plan, which includes estimates of anticipated cash inflows from DEXTENZA product sales and cash outflows from operating expenses and capital expenditures and reflects our observance of the minimum liquidity covenant of $20.0 million under the Barings Credit Agreement, we believe that our existing cash and cash equivalents as of December 31, 2023, plus the cash received from a private placement of our common stock in February 2024 of $325.0 million before deducting placement agent fees and other offering expenses, will enable us to fund our planned operating expenses, debt service obligations and capital expenditure requirements at least into 2028.

These estimates are subject to various assumptions, including assumptions as to the revenues and expenses associated with the commercialization of DEXTENZA, the pace of our research and clinical development programs, the timing of commencement of dosing and enrollment of our clinical trials, and other aspects of our business.

We have based our estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

Our future capital requirements will depend on many factors, including:

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● the costs of sales, marketing, distribution and other commercialization efforts with respect to DEXTENZA and any additional products for which we obtain marketing approval in the future, including costs increases due to inflation;

● the progress, costs and outcome of our ongoing and planned clinical trials of our product candidates, in particular OTX-TKI for the treatment of wet AMD and diabetic retinopathy and OTX-TIC for the treatment of open-angle glaucoma or ocular hypertension;

● the progress, costs and outcome of our ongoing and planned clinical trials of our product candidates, in particular AXPAXLI for the treatment of wet AMD and NPDR, and, subject to our evaluation of strategic alternatives, PAXTRAVA for the treatment of OAG or OHT;

● the scope, progress, costs and outcome of preclinical development and clinical trials of our other product candidates;

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We do not have any committed external source of funds, although our license agreement with AffaMed provides for AffaMed’s reimbursement of certain clinical expenses incurred by us in connection with our collaboration and for our potential receipt of development and sales milestone payments and royalty payments.

To the extent that we raise additional capital through the sale of equity, preferred equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights as holders of our common stock.

To the extent that we raise additional capital through the sale of equity, preferred equity or convertible debt securities, our securityholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing securityholders’ rights as holders or beneficial owners of our common stock.

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

Our pledge of our assets as collateral to secure our obligations under our Credit Facility pursuant to which we have a total borrowing capacity of $25.0 million, which has been fully drawn down, may limit our ability to obtain additional debt financing.

Our pledge of our assets as collateral to secure our obligations under the Barings Credit Facility pursuant to which we have a total borrowing capacity of $82.5 million, which has been fully drawn down, may limit our ability to obtain additional debt or other financing.

If we raise additional funds through collaborations, strategic alliances, licensing arrangements, royalty agreements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, products or product candidates or grant licenses on terms that may not be favorable to us.

grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

Our substantial indebtedness may limit cash flow available to invest in the ongoing needs of our business or otherwise affect our operations.

Under our credit facility, or the Credit Facility, we have $25.0 million, net of unamortized discount, of outstanding principal indebtedness.

Under the accompanying credit and security agreement, as amended and/or restated to date, which we refer to as the Credit Agreement, we are permitted to make interest-only payments through April 2024, at which time we will be required to make, in addition to the monthly interest payments, principal payments on the term loans in accordance with the Credit Agreement.

Our obligations under the Credit Agreement are secured by all of our assets, including our intellectual property.

The Credit Agreement also includes customary affirmative and negative covenants, including limitations on dispositions, mergers or acquisitions;

incurring indebtedness, liens or encumbrances;

paying dividends;

making certain investments;

and engaging in certain other business transactions.

On August 2, 2023, we entered into the Barings Credit Agreement providing for the Barings Credit Facility in the aggregate principal amount of $82.5 million.

Under the Barings Credit Facility we have $82.5 million, net of unamortized discount and fees, of outstanding principal indebtedness.

Under the Barings Credit Agreement, we are permitted to make payments of interest and fees only through August 2029, at which time we will be required to repay the full principal amount in addition to any outstanding interest and fees.

In addition, we are obligated to pay a fee, which we refer to as the Royalty Fee, in an amount equal to $82.5 million, reduced by the total amount of interest and principal prepayment fees paid by us and subject to further potential reductions as specified in the Barings Credit Agreement.

We are required to pay the Royalty Fee in installments to Barings, for the benefit of the lenders, on a quarterly basis in an amount equal to three and one-half percent (3.5%) of the net sales of DEXTENZA occurring during such quarter, subject to the terms, conditions and limitations specified in the Barings Credit Agreement, until the Royalty Fee is paid in full.

The Royalty Fee is due and payable upon a change of control of the company.

The Royalty Fee may also be reduced if a change of control or a sale of all or substantially all of our assets occurs within the first twelve months of the term of the Barings Credit Agreement.

Our obligations under the Barings Credit Agreement are secured by all of our assets, including our intellectual property.

The Barings Credit Facility includes negative covenants restricting us from making payments to the holders of our outstanding Convertible Notes, except in connection with a proposed conversion to equity and with respect to certain permitted expenses and requiring us to maintain a minimum liquidity amount of $20.0 million.

The Barings Credit Agreement also includes customary affirmative and negative covenants.

In March 2019, we issued $37.5 million aggregate principal amount of issued and outstanding Convertible Notes.

The Convertible Notes mature on March 1, 2026 and interest on the Convertible Notes is payable at maturity or if earlier converted, repurchased or redeemed pursuant to their terms.

We could in the future incur additional indebtedness beyond such amounts, including by potentially amending our Credit Agreement.

The Convertible Notes mature on a date 91 days following the maturity of the indebtedness under the Barings Credit

Facility, and interest on the Convertible Notes is payable at maturity or if earlier converted, repurchased or redeemed pursuant to their terms.

We could in the future incur additional indebtedness beyond such amounts, including by potentially amending the Barings Credit Agreement.

Our substantial debt combined with our other financial obligations and contractual commitments could have significant adverse consequences, including:

● requiring us to dedicate a substantial portion of cash and cash equivalents and marketable securities to the payment of interest on, and principal of, our debt, which would reduce the amounts available to fund operating expenditures, including working capital, and capital expenditures and other general corporate purposes;

● requiring us to dedicate a substantial portion of cash and cash equivalents and marketable securities to the payment of interest on, and principal of, our debt and related fees such as the Royalty Fee, which collectively reduce the amounts available to fund operating expenditures, including working capital, and capital expenditures and other general corporate purposes and may also have the effect of delaying, deferring or preventing a change of control;

● obligating us to additional negative covenants further restricting our activities;

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Funds from external sources may not be available on acceptable terms, if at all.

A failure to comply with conditions of our Credit Agreement or the Convertible Notes could result in an event of default under those instruments.

The Credit Agreement and Convertible Notes also have cross-default provisions, pursuant to which a default under one instrument could cause a default in others.

In an event of default, including upon the occurrence of an event that would reasonably be expected to have a material adverse effect on our business or operations, the amounts due under our Credit Agreement or the Convertible Notes could accelerate.

A failure to comply with conditions of our Barings Credit Agreement or the Convertible Notes could result in an event of default under those instruments.

The Barings Credit Agreement and Convertible Notes also have cross-default provisions, pursuant to which a default under one instrument could cause a default in others.

In an event of default, including upon the occurrence of an event that would reasonably be expected to have a material adverse effect on our business or operations, the amounts due under our Barings Credit Agreement or the Convertible Notes could accelerate.

As a result, we may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness or to make any accelerated payments, and the lenders could seek to enforce security interests in the collateral securing such indebtedness.

The elimination of LIBOR could adversely affect our business, results of operations or financial condition.

In July 2017, the head of the United Kingdom Financial Conduct Authority, or FCA, announced plans to phase out the use of LIBOR by the end of 2021.

In November 2020, the International Exchange Benchmark Administration, the administrator of LIBOR, announced its decision to consult on ceasing the publication of rates for certain short-term LIBOR tenors effective December 31, 2021, and for the remaining tenors effective June 30, 2023.

Financial regulatory authorities including the U.S.

Federal Reserve and the FCA expressed support for announcement.

Although the impact is uncertain at this time, the elimination of LIBOR could have an adverse impact on our business, results of operations, or financial condition.

We may incur significant expenses to amend our LIBOR-indexed loans and other applicable

financial or contractual obligations, including our Credit Facility, to a new reference rate, which may differ significantly from LIBOR.

Accordingly, the use of an alternative rate could result in increased costs, including increased interest expense on our credit facilities, and increased borrowing and hedging costs in the future.

At this time, no consensus exists as to what rate or rates may become acceptable alternatives to LIBOR and we are unable to predict the effect of any such alternatives on our business, results of operations or financial condition.

We hold our cash and cash equivalents that we use to fund our operating expenses, debt service obligations, and capital expenditure requirements in deposit accounts that could be adversely affected if the financial institutions holding such funds fail.

We hold our cash and cash equivalents that we use to fund our operating expenses, debt service obligations, and capital expenditure requirements in deposit accounts at two financial institutions.

The balances held in these accounts typically exceeds the standard deposit insurance limit of the Federal Deposit Insurance Corporation, or FDIC.

If a financial institution in which we hold such funds fails or is subject to significant adverse conditions in the financial or credit markets, we could be subject to a risk of loss of all or a portion of our uninsured funds or be subject to a delay in accessing all or a portion of such funds.

Any such loss or lack of access to these funds could adversely impact our short-term liquidity and ability to meet our operating expense, debt service, and capital expenditure obligations.

For example, on March 10, 2023, Silicon Valley Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, and the FDIC was appointed as receiver.

During this time, deposits held at SVB were temporarily inaccessible to SVB’s customers.

At the time SVB was closed by its regulators, we maintained a significant portion of our cash and cash equivalents in deposit accounts with SVB.

Our cash and cash equivalents remain concentrated in a small number of financial institutions.

If any of the financial institutions in which we hold cash or cash equivalents were to fail in the future, we cannot provide any assurances that any governmental agencies would take action to protect or provide access to our uninsured deposits, or a third party would assume the failing financial institution’s obligations, in a similar manner as occurred in connection with the closure, receivership, and sale of SVB, and we may lose or be unable to access some or all of the uninsured funds we are holding at such financial institution.

We also maintain investment accounts with multiple financial institutions.

If our access to our cash and cash equivalents in our deposit accounts is impaired, we may not be able to open new operating accounts or to sell investments or transfer funds from our investment accounts to new operating accounts on a timely basis sufficient to meet our operating expense, debt service, and capital expenditure obligations.

We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.

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

Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans .

Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, including our lead product candidate AXPAXLI, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome.

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Some of our completed studies were conducted with small patient populations, making it difficult to predict whether the favorable results that we observed in such studies will be repeated in larger and more advanced clinical trials.

Some of our clinical trials also were conducted with different formulations than those that we are currently evaluating.

For example, we are using a single optimized implant of AXPAXLI with a drug load of 450 µg of a more soluble form of axitinib in our SOL-1 trial and intend to use the same formulation in future clinical trials of AXPAXLI including our planned SOL-2 trial.

As we have not evaluated this formulation in earlier trials, it may not demonstrate the efficacy or safety profile that we anticipate.

Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

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Subject to a waiting period of 30 days, we could choose to initiate our pivotal clinical trials in the United States without waiting for any additional period for comments from the FDA.

Although the FDA may provide comments or clear our clinical trial protocols, final determinations for marketing application approval are made after a complete review of a marketing application and are based on the entirety of the data in the new drug application.

Furthermore, we are conducting our SOL-1 trial of AXPAXLI under a Special Protocol Assessment, or SPA, agreed to by the FDA.

An SPA agreement indicates concurrence by the FDA with the adequacy and acceptability of specific critical elements of the overall protocol design for a clinical trial intended to support a future marketing application, but it does not indicate FDA concurrence on every protocol detail.

Moreover, the FDA

retains significant discretion in interpreting the terms of an SPA agreement and the data and results from any trial that is the subject of an SPA agreement.

An SPA agreement does not ensure the receipt of marketing approval by the FDA or other regulatory authorities or that the approval process will be faster than conventional procedures.

We have devoted a significant portion of our financial resources and business efforts to the development of DEXTENZA and our product candidates.

We are currently investing substantial resources to advance the development of OTX-TKI for the treatment of wet AMD and diabetic retinopathy, OTX-TIC for the treatment of open-angle glaucoma or ocular hypertension, OTX-CSI for the chronic treatment of dry eye disease, and OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease.

We currently have several ongoing clinical trials, including our Phase 1 clinical trials of OTX-TKI in Australia and the United States and our Phase 2 clinical trial of OTX-TIC.

We are currently investing substantial resources to advance the development of AXPAXLI for the treatment of wet AMD and NPDR, PAXTRAVA for the treatment of OAG or OHT, OTX-CSI for the chronic treatment of dry eye disease, and OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease.

We currently have several ongoing clinical trials, including our SOL-1 trial, the HELIOS trial, and our Phase 2 clinical trial of PAXTRAVA.

We also continue to wind down our post-trial monitoring and surveillance obligations in our Phase 1 clinical trials of AXPAXLI in wet AMD in Australia and the United States and our Phase 3 clinical trial of DEXTENZA in pediatric subjects following cataract surgery.

We have, however, experienced the uncertainty of clinical trials in our own development programs.

In our Phase 2 clinical trial for OTX-CSI for the treatment of dry eye disease, for example, OTX-CSI did not meet the primary endpoint

of the clinical trial.

In our Phase 2 clinical trial for OTX-CSI for the treatment of dry eye disease, for example, OTX-CSI did not meet the primary endpoint of the clinical trial.

The trial was designed to evaluate safety, tolerability, durability, and efficacy of two different formulations of OTX-CSI by measuring signs and symptoms of dry eye disease in 140 subjects treated in both eyes over approximately 16 weeks (a 12-week study period, with an additional 4-week safety follow-up).

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● the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate.

From time to time, we may decide to conduct clinical trials to assess subjects’ clinical response to treatment and choose not to power such trials to measure the applicable efficacy endpoints with statistical significance, as we did in our Phase 2 clinical trials of our former product candidate OTX-TP for the treatment of open-angle glaucoma or ocular hypertension.

In addition, post-hoc analyses such as those that we performed on certain results of Phase 2 clinical trials of OTX-TP may not be predictive of success in future clinical trials, including as a result of differences in trial design.

Post-hoc analyses performed using an unlocked clinical trial database can also result in the introduction of bias and are given less weight by regulatory authorities than pre-specified analyses.

The FDA may also require that NDA submissions for our product candidates include pediatric data.

The FDA may also require that New Drug Application, or NDA, submissions for our product candidates include pediatric data.

Under the Pediatric Research Equity Act, or PREA, an NDA, a biological licensing application, or BLA, or supplement to an NDA or BLA for certain drugs and biological products must contain data to assess the safety and effectiveness of the drug or biological product in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective, unless the sponsor receives a deferral or waiver from the FDA.

The applicable legislation in the European Union also requires sponsors to either conduct clinical trials in a pediatric population in accordance with a Pediatric Investigation Plan approved by the Pediatric Committee of the European Medicines Agency, or EMA, or to obtain a waiver or deferral from the conduct of these studies by this Committee.

For any of our product candidates for which we are seeking regulatory approval in the United States or the European Union, we cannot guarantee that we will be able to obtain a waiver or alternatively complete any required studies and other requirements in a timely manner, or at all, which could result in associated reputational harm and subject us to enforcement action.

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, such as the FDA’s requirement that we provide pediatric data for DEXTENZA for the treatment of post-surgical ocular inflammation and pain following cataract surgery prior and for the treatment of ocular itching associated with allergic conjunctivitis in connection with the approval of our NDA for DEXTENZA for those indications, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not favorable or are only modestly favorable or if there are safety concerns, we may:

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We may not be able to initiate or continue clinical trials for our product candidates, or other product candidates that we might develop if we are unable to locate and enroll a sufficient number of eligible subjects to participate in these trials as required by the FDA, the EMA or similar regulatory authorities outside the United States.

Although there is a significant prevalence of disease in the areas of ophthalmology in which we are focused, we may nonetheless experience unanticipated difficulty with subject enrollment.

For example, in the third quarter of 2017, we initiated a Phase 1 clinical trial of OTX-TIC outside the United States.

Although there is a significant prevalence of disease in the areas of ophthalmology in which we are focused, we may nonetheless experience

unanticipated difficulty with subject enrollment.

For example, in the third quarter of 2017, we initiated a Phase 1 clinical trial of PAXTRAVA outside the United States.

After several months, after not enrolling any subjects, we closed this trial in the second quarter of 2018.

Additionally, we intended to initiate our ongoing Phase 1 clinical trial of OTX-TKI outside the United States in 2018, but delays in enrollment prevented us from dosing subjects until the first quarter of 2019.

Additionally, we intended to initiate our Phase 1 clinical trial of AXPAXLI outside the United States in 2018, but delays in enrollment prevented us from dosing subjects until the first quarter of 2019.

A variety of factors affect subject enrollment, including:

● the prevalence and severity of the ophthalmic disease or condition under investigation;

● the eligibility criteria for the study in question;

● the design and eligibility criteria for the study in question;

● the perceived risks and benefits of the product candidate under study;

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Delays can be more pronounced with later-stage clinical trials because they tend to be larger than early-stage trials.

For example, enrollment in our ongoing Phase 3 clinical trial to evaluate DEXTENZA in pediatric subjects following cataract surgery, to fulfill FDA post-approval regulatory requirements, is proceeding slowly due to the relative scarcity of pediatric cataract surgical subjects.

For example, enrollment in our Phase 3 clinical trial to evaluate DEXTENZA in pediatric subjects following cataract surgery, to fulfill FDA post-approval regulatory requirements, proceeded more slowly than we had anticipated due to the relative scarcity of pediatric cataract surgical subjects.

In addition, we may experience delays in enrollment due to the design of our trials.

For example, to qualify for enrollment in the SOL-1 trial, participants receive two aflibercept injections in the screening period and would need to gain at least 10 ETDRS letters from the initial screening visit to Day 1 or achieve a visual acuity of approximately 20/20 or better at Day 1, in addition to satisfying other criteria.

Enrollment delays may also arise in our SOL-1 trial due to a reluctance of physicians to enroll subjects in the trial given the novel design being used.

Our inability to enroll a sufficient number of subjects in any of our clinical trials would result in significant delays, could require us to abandon one or more clinical trials altogether and could delay or prevent our receipt of necessary regulatory approvals.

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In addition, adverse events which had initially been considered unrelated to the study treatment may later be found to be caused by the study treatment.

We may not be successful in our efforts to develop additional products and product candidates based on our bioresorbable hydrogel technology platform.

We are currently directing most of our development efforts towards applying our proprietary, bioresorbable hydrogel technology platform to products and product candidates that are designed to provide local programmed-release hydrogel-based therapeutic agents to the eye using active pharmaceutical ingredients that are currently used in FDA-approved ophthalmic drugs.

We have a number of product candidates at various stages of development based on our bioresorbable hydrogel technology platform and are exploring the potential use of our platform for other ophthalmic diseases and conditions.

We may not be successful in our efforts to develop additional products and product candidates based on our bioresorbable hydrogel-based formulation technology ELUTYX.

We are currently directing most of our development efforts towards applying our proprietary, bioresorbable hydrogel-based formulation technology ELUTYX to products and product candidates that are designed to provide local programmed-release hydrogel-based therapeutic agents to the eye using active pharmaceutical ingredients that are currently used in FDA-approved ophthalmic drugs.

We have a number of product candidates at various stages of development based on ELUTYX and are exploring the potential use of ELUTYX for other ophthalmic diseases and conditions.

These product candidates include intracanalicular inserts eluting drug product to the ocular surface;

hydrogel drug delivery implants designed to release therapeutic antibodies and small molecules such as TKIs to modulate the biological activity of VEGF over a sustained period following administration by an intravitreal injection for the treatment of diseases and conditions of the back of the eye, including wet AMD;

and hydrogel drug delivery implants designed to release drug product into the anterior chamber of the eye via an intracameral injection for the treatment of diseases and conditions of the front of the eye.

Our product candidates and any other product candidates that we may develop based on our platform may not be suitable for continued preclinical or clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance.

If we do not successfully develop and commercialize products and product candidates that are based on our platform, we will not be able to obtain substantial product revenues in future periods.

Our product candidates and any other product candidates that we may develop based on ELUTYX may not be suitable for continued preclinical or clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance.

If we do not successfully develop and commercialize products and product candidates that are based on ELUTYX, we will not be able to obtain substantial product revenues in future periods.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

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As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential.

In addition, if we

do not accurately evaluate the commercial potential of a target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

We are currently prioritizing the continued commercialization of DEXTENZA, the advancement through Phase 1 clinical development of OTX-TKI for the treatment of wet AMD and diabetic retinopathy, and the advancement through Phase 2 clinical development of OTX-TIC for the treatment of open-angle glaucoma or ocular hypertension and are assessing the further development of OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease and OTX-CSI for the chronic treatment of dry eye disease .

In addition, if we do not accurately evaluate the commercial potential of a target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

We are currently prioritizing the advancement of AXPAXLI through Phase 3 clinical development for the treatment of wet AMD and the advancement of AXPAXLI through Phase 1 clinical development for the treatment of NPDR.

We are also focused on the advancement through Phase 2 clinical development of PAXTRAVA for the treatment of OAG or OHT, and the continued commercialization of DEXTENZA, and are assessing the further development of OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease and OTX-CSI for the chronic treatment of dry eye disease.

Although we believe our prioritization of resources is currently the best use of our resources, we may not be correct.

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We have conducted, and may in the future choose to conduct, one or more of our clinical trials outside the United States.

We have often conducted our initial and earlier-stage clinical trials for our product candidates outside the United States.

We are currently conducting a Phase 1 clinical trial for our product candidate OTX-TKI for the treatment of wet AMD in Australia.

We generally plan to conduct our later stage and pivotal clinical trials of our product candidates in the United States.

We are currently conducting the SOL-1 trial both inside and outside of the United States, with planned sites in Argentina and other countries.

We have often conducted our initial and earlier-stage clinical trials for our product candidates outside the United States, including our Phase 1 clinical trial for our product candidate AXPAXLI for the treatment of wet AMD in Australia.

Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of this data is subject to conditions imposed by the FDA.

For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with ethical principles.

The trial population must also adequately represent the U.S.

The trial population must also adequately

represent the U.S.

population, and the data must be applicable to the U.S.

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In certain cases, such as in our ongoing collaboration with AffaMed, many of these factors may be or are beyond our control, including clinical development and sales, marketing and distribution efforts.

If we or our collaborators do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our products and product candidates, which would materially harm our business.

Even though DEXTENZA and ReSure Sealant have received marketing approval from the FDA and even if any of our product candidates receives marketing approval, any of these products may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, and the market opportunity for these products may be smaller than we estimate.

If we or our collaborators do

not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our products and product candidates, which would materially harm our business.

Even though DEXTENZA has received marketing approval from the FDA and even if any of our product candidates receives marketing approval, these products may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, and the market opportunity for these products may be smaller than we estimate.

DEXTENZA, ReSure Sealant or any of our product candidates that receives marketing approval may fail to gain market acceptance by physicians, patients, third-party payors and others in the medical community.

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We have built our own highly targeted, key account sales force for DEXTENZA that has focused primarily on ambulatory surgical centers, or ASCs, responsible for the largest volumes of cataract surgery.

In connection with our commercial launch of DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis, we launched a separate sales force focused on ophthalmologists’ offices.

We believe that certain other of our product candidates, if they are successfully developed and obtain marketing approval, would also be primarily used in the office setting.

We believe that certain of our product candidates, if they are successfully developed and obtain marketing approval, would be used in ophthalmologists’ offices, similar to DEXTENZA for the treatment of allergic conjunctivitis.

We believe the office setting offers a unique set of potential challenges.

If we are unsuccessful in adapting our marketing efforts to include the office setting, our ability to commercialize DEXTENZA to its fullest potential or any future product candidates used in the office setting would be adversely affected.

If we do not succeed in adapting our marketing efforts to include the office setting, our ability to commercialize DEXTENZA to its fullest potential or any future product candidates used in the office setting would be adversely affected.

Because we have not historically evaluated whether to seek regulatory approval for any of our products or product candidates outside of the United States, pending potential receipt of regulatory approval for the applicable product candidate in the United States, at this time we cannot be certain when, if ever, we will recognize revenue from commercialization of our products or product candidates in any international markets.

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These may include independent distributors, pharmaceutical companies or our own direct sales organization.

For example, we intend to rely on AffaMed to commercialize DEXTENZA and OTX-TIC, if approved for marketing, in specified jurisdictions in Asia in connection with our collaboration agreement with AffaMed.

For example, we intend to rely on AffaMed to commercialize DEXTENZA and PAXTRAVA, if approved for marketing, in specified jurisdictions in Asia in connection with our collaboration agreement with AffaMed.

There are risks involved with both establishing our own sales, marketing and distribution capabilities and with entering into arrangements with third parties to perform these services.

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Our product revenues and our profitability, if any, under third-party collaboration, distribution or other marketing arrangements may also be lower than if we were to sell, market and distribute a product ourselves.

On the other hand, recruiting and training a sales force is expensive and time-consuming and could delay any

product launch.

On the other hand, recruiting and training a sales force is expensive and time-consuming and could delay any product launch.

If the commercial launch of any product or product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses.

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Cequa for increasing tear production, marketed by Sun Ophthalmics in the United States;

lifitegrast, for the treatment

of the signs and symptoms of dry eye disease, marketed by Novartis under the brand name Xiidra®;

lifitegrast, for the treatment of the signs and symptoms of dry eye disease, marketed by Bausch & Lomb (previously marketed by Novartis) under the brand name Xiidra®;

and off-label use of corticosteroids.

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DEXTENZA is currently considered a post-surgical product, in the same fashion as eye drops.

However, if DEXTENZA were instead categorized as an intra-operative product, it would not be subject to separate reimbursement in ASCs and hospital out-patient departments, or HOPDs, which could likewise limit its market acceptance.

DEXTENZA were instead categorized as an intra-operative product, it would not be subject to separate reimbursement in ASCs and hospital out-patient departments, or HOPDs, which could likewise limit its market acceptance.

A specific and permanent J-Code for ophthalmic inserts containing dexamethasone including DEXTENZA is in effect, and DEXTENZA currently benefits from separate payment in the ASC setting because it meets the criteria set forth for non-opioid pain management drugs as a surgical supply provision.

CMS evaluates the eligibility of products such as DEXTENZA for separate payment annually, and there can be no assurance that CMS will not change the criteria applicable to non-opioid pain management drugs for 2024 or beyond.

If DEXTENZA is no longer eligible for reimbursement separately from ophthalmic surgery, due to the loss of pass-through status or otherwise, our net product revenues, which currently consist primarily of DEXTENZA sales in reliance on separate reimbursement through pass-through status, would decline significantly, and our ability to generate revenues from future sales of DEXTENZA to ASCs and HOPDs for the treatment of post-surgical ocular inflammation and pain would be adversely affected.

If DEXTENZA is no longer eligible for reimbursement separately from ophthalmic surgery in the ASC setting, due to the loss of pass-through status or otherwise, our net product revenues, which currently consist primarily of DEXTENZA sales in reliance on separate reimbursement through pass-through status, would decline significantly, and our ability to generate revenues from future sales of DEXTENZA for the treatment of post-surgical ocular inflammation and pain would be adversely affected.

CMS has also established the fixed reimbursement amount for Category I Current Procedural Terminology, or CPT, code 68841, the procedure code for the insertion of DEXTENZA.

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In each of July 2016 and July 2017, we also received a Complete Response Letter, or CRL, from the FDA regarding our NDA for DEXTENZA pertaining to, among other things, the deficiencies in manufacturing processes, controls, and analytical testing identified during pre-NDA approval inspections of our manufacturing facility documented on Form 483s.

In January and February 2021, the FDA requested information and records from us relating to our DEXTENZA commercial manufacturing operations and quality systems pursuant to Form 4003 in advance or in lieu of a drug inspection, which we provided.

We may be subject to similar inspections, audits and other requirements in connection with subsequent applications for other product candidates or in connection with periodic, routine surveillance for products for which we have received marketing authorization.

We may be subject to similar inspections, audits

and other requirements in connection with subsequent applications for other product candidates or in connection with periodic, routine surveillance for products for which we have received marketing authorization.

The FDA or similar foreign regulatory authorities at any time also may implement new standards, or change their interpretation and enforcement of existing standards, for the manufacture, packaging or testing of our products.

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We currently rely on third parties for some aspects of the production of DEXTENZA and our product candidates for commercialization and preclinical testing and clinical trials.

While we expect that our existing manufacturing facility, or additional facilities that we might be able to build, will be sufficient to meet our requirements for manufacturing DEXTENZA and any of our product candidates for which we obtain marketing approval, we may in the future need to rely on third-party manufacturers for some aspects of the manufacture of our products or product candidates.

We also depend on single-source suppliers for certain materials used in the manufacturing of our products and product candidates, including our supply of PEG, the molecule that forms the basis of our hydrogels, and other raw materials of our products and product candidates and for sterilization of the finished product.

While we expect that our existing manufacturing facility, or additional facilities that we might build, will be sufficient to meet our requirements for manufacturing DEXTENZA and any of our product candidates for which we obtain marketing approval, we may in the future need to rely on third-party manufacturers for some aspects of the manufacture of our products or product candidates.

We do not have any long-term supply agreements in place for the clinical or commercial supply of any drug substances or raw materials for DEXTENZA or any of our product candidates.

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For example, we depend on a sole source supplier for the supply of our PEG.

This sole source supplier may be unwilling or unable to supply PEG to us reliably, continuously and at the

levels we anticipate or are required by the market.

This sole source supplier may be unwilling or unable to supply PEG to us reliably, continuously and at the levels we anticipate or are required by the market.

Although we believe that there are a number of potential long-term replacements to our suppliers, including our PEG supplier, we may incur added costs and delays in identifying and qualifying any such replacements.

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We have entered into collaborations with third parties to develop certain product candidates, and in the future we may enter into additional collaborations for the development or commercialization of our product candidates.

We may also enter into collaboration, distribution or marketing arrangements for the commercialization of DEXTENZA, ReSure Sealant, or any product candidates for which we obtain marketing approval outside of the United States.

We may also enter into collaboration, distribution or marketing arrangements for the commercialization of DEXTENZA, ReSure Sealant, or any product candidates for which we obtain marketing approval.

If our collaborations are not successful, we may not be able to capitalize on the market potential of these products or product candidates.

We have in the past entered into collaboration agreements with third parties, including our collaborations with AffaMed, and expect to utilize a variety of types of collaboration, distribution and other marketing arrangements with third parties to commercialize DEXTENZA, ReSure Sealant, or any of our product candidates for which we obtain marketing approval in markets outside the United States.

We have in the past entered into collaboration agreements with third parties, including our collaboration with AffaMed, and expect to utilize a variety of types of collaboration, distribution and other marketing arrangements with third parties to commercialize DEXTENZA, or any of our product candidates for which we obtain marketing approval in markets outside the United States.

We also may enter into arrangements with third parties to perform these services in the United States if we do not establish our own sales, marketing and distribution capabilities in the United States for such products or if we determine that such third-party arrangements are otherwise beneficial.

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

We also may seek additional third-party collaborators for development and commercialization of product candidates, including PAXTRAVA and AXPAXLI.

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

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● collaborators may not perform their obligations as expected;

programs based on results of clinical trials or other studies, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;

● collaborators may not pursue development and commercialization of our products or product candidates that receive marketing approval or may elect not to continue or renew development or commercialization programs based on results of clinical trials or other studies, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;

● collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

● collaborators could be subject to bankruptcy proceedings or other similar arrangements which may result in us having to return funds that we previously received, or in collaborators selling or transferring product licenses to other parties;

● collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

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If any collaborations that we enter into do not result in the successful development and commercialization of products or if one of our collaborators terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration.

If we do not receive the funding we expect under these agreements, our development of our products or product candidates could be delayed and we may need additional resources to develop our products or product candidates.

If we do not receive the funding we expect under these agreements, or if we are required to return previously received funds, or if product licenses are sold or transferred to another party as a result of a collaborators’ bankruptcy, our development of our products or product candidates could be delayed and we may need additional resources to develop our products or product candidates.

For example, our former collaborator Regeneron terminated our collaboration in August 2021.

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If we are not able to establish additional collaborations, we may have to alter our development and commercialization plans and our business could be adversely affected.

In October 2020, we entered into a collaboration with AffaMed for the development and commercialization of DEXTENZA regarding ocular inflammation and pain following cataract surgery and ocular itching associated with allergic conjunctivitis and for OTX-TIC regarding open-angle glaucoma and ocular hypertension in specified territories in Asia.

In October 2020, we entered into a collaboration with AffaMed for the development and commercialization of DEXTENZA regarding ocular inflammation and pain following cataract surgery and ocular itching associated with allergic conjunctivitis and for PAXTRAVA regarding OAG and OHT in specified territories in Asia.

For some of our product candidates, we may decide to collaborate with pharmaceutical, biotechnology and medical device companies for the development and commercialization of one or more of our product candidates.

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

Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to subjects, the potential of competing products, and industry and market conditions generally.

product candidate to subjects, the potential of competing products, and industry and market conditions generally.

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

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Our employees have administered and managed most of our clinical development work to date.

However, we also utilize third parties, such as CROs, to conduct clinical trials of certain of our product candidates, including OTX-TKI for the treatment of wet AMD and OTX-TIC for the treatment of open-angle glaucoma or ocular hypertension, and we may continue to do so.

However, we also utilize third parties, such as CROs, to conduct clinical trials of certain of our product candidates, including AXPAXLI for the treatment of wet AMD and NPDR and PAXTRAVA for the treatment of OAG or OHT, and we may continue to do so.

If we deem necessary, we may engage additional third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators, to conduct or assist in our clinical trials or other clinical development work.

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Our reliance on third parties for research and development activities reduces our control over these activities but does not relieve us of our responsibilities.

For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial.

For example, we remain responsible for ensuring that each of our clinical trials, including the SOL-1 trial and the HELIOS trial, is conducted in accordance with the general investigational plan and protocols for the trial.

Moreover, the FDA requires us to comply with standards, commonly referred to as good clinical practices for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected, even if a third party is administering certain activities.

For example, in May 2020, we disclosed the receipt of interim data regarding our ongoing Phase 1 clinical trial of OTX-TKI, in Australia, for the treatment of wet AMD and other retinal diseases.

For example, in May 2020, we disclosed the receipt of interim data regarding our Phase 1 clinical trial of AXPAXLI, in Australia, for the treatment of wet AMD and other retinal diseases.

We discovered, however, that our disclosures did not include complete information when we became aware in July 2020 that a clinical trial site had not entered certain data concerning these subjects into the clinical trial database in a timely manner.

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Given the amount of time required for the development, testing and regulatory review of new product candidates, we may have a reduced patent exclusivity period upon approval.

The patent prosecution process is expensive and time-consuming, and we may not have filed or prosecuted and may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

in a timely manner.

It is also possible that we have failed, or may in the future fail, to identify patentable aspects of our research and development efforts before it is too late to obtain patent protection.

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The Leahy-Smith America Invents Act, or the Leahy-Smith Act, includes a number of significant changes to United States patent law.

These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation.

These include provisions that affect the

way patent applications are prosecuted and may also affect patent litigation.

The USPTO developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013.

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The Hatch-Waxman Act allows a maximum of one patent to be extended per FDA-approved product.

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

Patent term extension also may be available in certain foreign countries upon

regulatory approval of our product candidates.

Nevertheless, we may not be granted patent term extension either in the United States or in any foreign country because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements.

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Moreover, we may become party to future adversarial proceedings or litigation regarding our patent portfolio or the patents of third parties.

Such proceedings could also

include contested post-grant proceedings such as oppositions, inter partes review, reexamination, interference or derivation proceedings before the USPTO or foreign patent offices.

Such proceedings could also include contested post-grant proceedings such as oppositions, inter partes review, reexamination, interference or derivation proceedings before the USPTO or foreign patent offices.

The legal threshold for initiating litigation or contested proceedings is low, so that even lawsuits or proceedings with a low probability of success might be initiated and require significant resources to defend.

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We also may enter into additional licensing and funding arrangements with third parties that may impose diligence, development and commercialization timelines and milestone payment, royalty, insurance and other obligations on us.

manufacture or market any product that is covered by these agreements or may face other penalties under the agreements.

If we fail to comply with our obligations under current or future license and collaboration agreements, our counterparties may have the right to terminate these agreements, in which event we might not be able to manufacture or market any product that is covered by these agreements or may face other penalties under the agreements.

Such an occurrence could diminish the value of our product.

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As a result, termination of our agreement with Incept, based on our failure to comply with this or any other obligation under the agreement, would cause us to lose a significant portion of our rights to important intellectual property or technology upon which our business depends.

Additionally, the field limit of the license and the requirement that we assign to Incept our rights in certain patent applications may restrict our ability to use certain of our licensed rights to expand our business outside of the specified fields.

Additionally, the field limit of the license and the requirement that we assign to Incept our rights in

certain patent applications may restrict our ability to use certain of our licensed rights to expand our business outside of the specified fields.

If we determine to pursue a strategy of expanding the use of the hydrogel technology outside of the specified fields, we would need to negotiate and enter into an amendment to our existing license agreement with Incept or a new license agreement with Incept covering one or more additional such fields of use or utilize technologies that do not infringe on such licensed rights.

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If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

If the FDA or comparable foreign regulatory authorities approve generic versions of our current commercial product or any of our future drug products that receive marketing approval through the NDA pathway, or such authorities do not grant such future products appropriate periods of data exclusivity before approving generic versions of our products, our sales could be adversely affected.

Once an NDA is approved, the product covered thereby becomes a “reference-listed drug” in the FDA’s publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” commonly known as the Orange Book.

Manufacturers may seek approval of generic versions of reference-listed drugs through submission of abbreviated new drug applications, or ANDAs, in the United States.

In support of an ANDA, a generic manufacturer need not conduct clinical trials to assess safety and efficacy.

Rather, the applicant generally must show that its product has the same active ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as the reference-listed drug and that the generic version is bioequivalent to the reference-listed drug, meaning it is absorbed in the body at the same rate and to the same extent.

Generic products may be significantly less costly to bring to market than the reference-listed drug and companies that produce generic products are generally able to offer them at lower prices.

Thus, following the introduction of a generic drug, a significant percentage of the sales of any branded product or reference-listed drug is typically lost to the generic product.

The FDA may not approve an ANDA for a generic product until any applicable period of non-patent exclusivity for the reference-listed drug has expired.

The Federal Food, Drug, and Cosmetic Act, or FDCA, provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity, or NCE.

For the purposes of this provision, an NCE is a drug that contains an active moiety that has previously been approved by the FDA in any other NDA.

This interpretation was confirmed with enactment of the Ensuring Innovation Act in April 2021.

An active moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug substance.

Specifically, in cases where such exclusivity has been granted, an ANDA may not be submitted to the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification that a patent covering the reference-listed drug is either invalid or will not be infringed by the generic product, in which case the applicant may submit its application four years following approval of the reference-listed drug.

The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical trials, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application.

Generic drug manufacturers may seek to launch generic products following the expiration of any applicable exclusivity period we obtain if our product candidates are approved, even if we still have patent protection for such product candidates.

Competition that any such product candidates of ours may face from generic versions of such products could materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we may make in those product candidates.

Risks Related to Regulatory Approval and Marketing of Our Product Candidates and Other Legal Compliance Matters

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Further, we have only received approval to market DEXTENZA for the treatment of ocular inflammation and pain following ophthalmic surgery and ocular itching associated with allergic conjunctivitis.

If we are unable to obtain a CE Certificate of Conformity for any of our products or product candidates for which we seek European regulatory approval, we will be prohibited from commercializing such product or products in the European Union and other places which require the CE Certificate of Conformity.

which require the CE Certificate of Conformity.

In such a case, the potential market to commercialize our products may be significantly smaller than we currently estimate.

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We may be subject to similar inspections in the future for any of our products and product candidates.

Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the

approval or rejection of an application.

The FDA, the EMA and regulatory authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical or other studies.

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Any marketing approval we or any current or future collaborator of ours ultimately obtains may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

For example, in December 2022, with the passage of Food and Drug Omnibus Reform Act, or FDORA, Congress required sponsors to develop and submit a diversity action plan for each Phase 3 clinical trial or any other “pivotal study” of a new drug or biological product.

These plans are meant to encourage the enrollment of more diverse patient populations in late-stage clinical trials of FDA-regulated products.

Actions plans must include the sponsor’s goals for enrollment, the underlying rationale for those goals, and an explanation of how the sponsor intends to meet them.

In addition to these requirements, the legislation directs the FDA to issue new guidance on diversity action plans.

Similarly, the regulatory landscape related to clinical trials in the EU recently evolved.

The EU Clinical Trials Regulation, or CTR, which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022.

While the Clinical Trials Directive required a separate clinical trial application, or CTA, to be submitted in each member state, to both the competent national health authority and an independent ethics committee, the CTR introduces a centralized process and only requires the submission of a single application to all member states concerned.

The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each member state, leading to a single decision per member state.

The assessment procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each member state with respect to specific requirements related to its own territory, including ethics rules.

Each member state’s decision is communicated to the sponsor via the centralized EU portal.

Once the CTA is approved, clinical study development may proceed.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies governing clinical trials, our development plans might be adversely impacted.

Finally, disruptions at the FDA and other agencies may prolong the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

For example, over the last several years, the U.S.

government has shut down several times and certain regulatory authorities, such as the FDA, have had to furlough critical employees and stop critical activities.

If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Accordingly, if we or any current or future collaborator of ours experiences delays in obtaining approval or if we or they fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenues will be materially impaired.

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Once marketing approval has been granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation.

We, and any current or future collaborators, must therefore comply with requirements concerning advertising and promotion for any of our products for which we or our collaborators obtain marketing approval.

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

Thus, if any of our product candidates receives marketing approval, the accompanying label may limit the approved use of our product, which could limit sales of the product.

The FDA required two post-approval studies as a condition for approval of our premarket approval application for ReSure Sealant, the last of which the FDA confirmed was complete in April 2021.

The studies were expensive, required extensive communication and coordination with the FDA, and took more than five years to complete.

The FDA is currently requiring us to conduct a clinical trial of DEXTENZA for the treatment of post-surgical ocular inflammation and pain and for the treatment of ocular itching associated with allergic conjunctivitis in pediatric populations in accordance with the Pediatric Research Equity Act of 2003.

In addition, manufacturers of approved products and those manufacturers’ facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs applicable to drug and biologic manufacturers or quality assurance standards applicable to medical device manufacturers, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements.

Manufacturers of approved products and those manufacturers’ facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs applicable to drug and biologic manufacturers or quality assurance standards applicable to medical device manufacturers, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements.

We, any contract manufacturers we may engage in the future, our current or future collaborators and their contract manufacturers will also be subject to other regulatory requirements, including submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements regarding the distribution of samples to physicians, recordkeeping, and costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product such as the requirement to implement a risk evaluation and mitigation strategy.

Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and efficacy of the product candidate.

For example, the FDA required two post-approval studies as a condition for approval of our premarket approval application for ReSure Sealant, the last of which the FDA confirmed was complete in April 2021.

The studies were expensive, required extensive communication and coordination with the FDA, and took more than five years to complete.

The FDA also has required us to conduct a clinical trial of DEXTENZA for the treatment of

post-surgical ocular inflammation and pain and for the treatment of ocular itching associated with allergic conjunctivitis in pediatric populations in accordance with the Pediatric Research Equity Act of 2003.

Certain endpoint data we hope to include in any approved product labeling also may not make it into such labeling, including exploratory or secondary endpoint data such as patient-reported outcome measures.

The FDA may also require a Risk Evaluation and Mitigation Strategy, or REMS, program as a condition of approval of our product candidates, which could entail requirements for long-term patient follow-up, a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.

In addition, if the FDA, EMA or a comparable non-U.S.

regulatory authority approves our product candidates, we will have to comply with requirements including submissions of safety and other post-marketing information and reports and registration.

The FDA may impose consent decrees or withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.

Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information, imposition of post-marketing studies or clinical trials to assess new safety risks or imposition of distribution restrictions or other restrictions under a REMS program.

Other potential consequences include, among other things:

● restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market or voluntary or mandatory product recalls;

● fines, warning letters or holds on clinical trials;

● refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals;

● product seizure or detention or refusal to permit the import or export of our product candidates;

● injunctions or the imposition of civil or criminal penalties.

In addition, we are, or may become, subject to various U.S.

federal, state, and local laws, regulations, and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals, and the use and disposal of hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research work.

If we fail to comply with the laws and regulations pertaining to our business, we may be subject to sanctions, including the temporary or permanent suspension of operations, product recalls, marketing restrictions, and civil and criminal penalties.

Finally, our ability to develop and market new drug products may be impacted by ongoing litigation challenging the FDA’s approval of mifepristone.

Specifically, on April 7, 2023, the U.S.

District Court for the Northern District of Texas stayed the approval by the FDA of mifepristone, a drug product which was originally approved in 2000 and whose distribution is governed by various conditions adopted under a REMS.

In reaching that decision, the District Court made a number of findings that may negatively impact the development, approval and distribution of drug products in the United States.

Further, the District Court read the standing requirements governing litigation in federal court as permitting a plaintiff to bring a lawsuit against the FDA in connection with its decision to approve an NDA or establish requirements under a REMS based on a showing that the plaintiff or its members would be harmed to the extent that FDA’s drug approval decision effectively compelled the plaintiffs to provide care for patients suffering adverse events caused by a given drug.

On April 12, 2023, the District Court decision was stayed, in part, by the U.S.

Court of Appeals for the Fifth Circuit.

The Court of Appeals for the Fifth Circuit held oral argument in the case on May 17, 2023 and, on August 16, 2023, issued its decision.

The Court of Appeals for the Fifth Circuit held that plaintiffs were likely to prevail in their claim that changes allowing for expanded access of mifepristone that FDA authorized in 2016 and 2021 were arbitrary and capricious.

On September 8, 2023, the U.S.

Department of Justice and a manufacturer of mifepristone filed petitions for a writ of certiorari, requesting that asked the Supreme Court to review the decision of the Court of Appeals for the Fifth Circuit.

On December 13, 2023, the Supreme Court granted these petitions for writ of certiorari for the decision.

Accordingly, in connection with our currently approved products and assuming we, or any current or future collaborators, receive marketing approval for one or more of our product candidates, we, and any current or future collaborators, and our and their contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control.

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The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is also prohibited in other jurisdictions.

The provision of benefits or advantages to physicians is governed by the national anti-bribery laws of European Union Member States and the U.K.

Bribery Act 2010.

The provision of benefits or advantages to physicians is governed by the national anti-bribery laws of European Union Member States and the UK Bribery Act 2010.

Payments made to physicians in certain European Union Member States must be publicly disclosed and often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization and/or the regulatory authorities of the individual European Union Member States.

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For example, with enactment of the 2017 Tax Act, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019.

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

District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA and therefore because the mandate was repealed as part of the 2017 Tax Act, the remaining provisions of the ACA are invalid as well.

Supreme Court heard this case on November 10, 2020 and on June 17, 2021, dismissed this action after finding that the plaintiffs did not have standing to challenge the constitutionality of the ACA.

Further, on June 17, 2021,the U.S.

Supreme Court dismissed an action to challenge the constitutionality of the ACA after finding that the plaintiffs did not have standing to bring the legal action.

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

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We expect that these healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product and/or the level of reimbursement physicians receive for administering any approved product we might bring to market.

Reductions in reimbursement levels may negatively impact the prices we receive or the frequency with which our

products are prescribed or administered.

Reductions in reimbursement levels may negatively impact the prices we receive or the frequency with which our products are prescribed or administered.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

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In 2020, President Trump issued several Executive Orders intended to lower the costs of prescription products and certain provisions in these orders have been incorporated into regulations.

These regulations include an interim final rule implementing a most-favored-nation model for prices that would tie Medicare Part B payments for certain physician-administered pharmaceuticals to the lowest price paid in other economically advanced countries, effective January 1, 2021.

These regulations include an interim final rule implementing a most-favored-nation model

for prices that would tie Medicare Part B payments for certain physician-administered pharmaceuticals to the lowest price paid in other economically advanced countries, effective January 1, 2021.

That rule, however, has been subject to a nationwide preliminary injunction and, on December 29, 2021, CMS issued a final rule to rescind it.

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In addition, in October 2020, the Department of Health and Human Services, or HHS, and the FDA published a final rule allowing states and other entities to develop a Section 804 Importation Program, or SIP, to import certain prescription drugs from Canada into the United States.

The final rule is currently the subject of ongoing litigation, but at least six states (Vermont, Colorado, Florida, Maine, New Mexico, and New Hampshire) have passed laws allowing for the importation of drugs from Canada with the intent of developing SIPs for review and approval by the FDA.

Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, or PBMs, unless the price reduction is required by law.

The final rule would eliminate the current safe harbor for Medicare drug rebates and create new safe harbors for beneficiary point-of-sale discounts and PBM service fees.

It originally was set to go into effect on January 1, 2022, but with passage of the Inflation Reduction Act has been delayed by Congress to January 1, 2032.

Nine states (Colorado, Florida, Maine, New Hampshire, New Mexico, North Dakota, Texas, Vermont and Wisconsin) have passed laws allowing for the importation of drugs from Canada.

Certain of these states have submitted Section 804 Importation Program proposals and are awaiting FDA approval.

On January 5, 2023, the FDA approved Florida’s plan for Canadian drug importation.

The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.

Pursuant to court order, the removal and addition of the aforementioned safe harbors were delayed and recent legislation imposed a moratorium on implementation of the rule until January 1, 2026.

On July 9, 2021, President Biden signed Executive Order 14063, which focuses on, among other things, the price of pharmaceuticals.

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and (c) foster scientific innovation to promote better healthcare and improve health by supporting public and private research and making sure that market incentives promote discovery of valuable and accessible new treatments.

More recently, on August 16, 2022, the IRA was signed into law by President Biden.

More recently, on August 16, 2022, the Inflation Reduction Act, or IRA, was signed into law by President Biden.

The new legislation has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or enrolled in Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug coverage.

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The IRA permits the Secretary of the HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years.

Specifically, with respect to price negotiations, Congress authorized Medicare to negotiate lower prices for certain costly single-source drug and biologic products that do not have competing generics or biosimilars and are reimbursed

under Medicare Part B and Part D.

CMS may negotiate prices for ten high-cost drugs paid for by Medicare Part D starting in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and beyond.

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Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law or for taking price increases that exceed inflation.

The legislation also requires manufacturers to pay rebates for drugs in Medicare Part D whose price increases exceed inflation.

The legislation also requires manufacturers to pay

rebates for drugs in Medicare Part D whose price increases exceed inflation.

The new law also caps Medicare out-of-pocket drug costs at an estimated $4,000 a year in 2024 and, thereafter beginning in 2025, at $2,000 a year.

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Among other things, the IRA contains many provisions aimed at reducing this financial burden on individuals by reducing the co-insurance and co-payment costs, expanding eligibility for lower income subsidy plans, and price caps on annual out-of-pocket expenses, each of which could have potential pricing and reporting implications.

On June 6, 2023, Merck & Co.

filed a lawsuit against the HHS and CMS asserting that, among other things, the IRA’s Drug Price Negotiation Program for Medicare constitutes an uncompensated taking in violation of the Fifth Amendment of the Constitution.

Subsequently, a number of other parties, including the U.S.

Chamber of Commerce, Bristol Myers Squibb Company, the PhRMA, Astellas, Novo Nordisk, Janssen Pharmaceuticals, Novartis, AstraZeneca and Boehringer Ingelheim, also filed lawsuits in various courts with similar constitutional claims against the HHS and CMS.

We expect that litigation involving these and other provisions of the IRA will continue, with unpredictable and uncertain results.

Accordingly, while it is currently unclear how the IRA will be effectuated, we cannot predict with certainty what impact any federal or state health reforms will have on us, but such changes could impose new or more stringent regulatory requirements on our activities or result in reduced reimbursement for our products, any of which could adversely affect our business, results of operations and financial condition.

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The regulations governing the calculations, price reporting and payment obligations are complex and subject to interpretation by various government and regulatory authorities, as well as the courts.

Reasonable assumptions have been made where there is

lack of regulations or clear guidance and such assumptions involve subjective decisions and estimates.

Reasonable assumptions have been made where there is lack of regulations or clear guidance and such assumptions involve subjective decisions and estimates.

Pharmaceutical companies are required to report any revisions to calculations, price reporting and payment obligations previously reported or paid.

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We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market.

Further, we could face heightened risks with respect to obtaining marketing authorization in the United Kingdom as a result of the withdrawal of the United Kingdom from the European Union, commonly referred to as Brexit.

The United Kingdom is no longer part of the European Single Market and European Union Customs Union.

As of January 1, 2021, the Medicines and Healthcare products Regulatory Agency, or MHRA, became responsible for supervising

medicines and medical devices in Great Britain, comprising England, Scotland and Wales under domestic law, whereas under the terms of the Northern Ireland Protocol, Northern Ireland is currently subject to European Union rules.

The United Kingdom and European Union have however agreed to the Windsor Framework which fundamentally changes the existing system under the Northern Ireland Protocol, including with respect to the regulation of medicinal products in the United Kingdom.

Once implemented, the changes introduced by the Windsor Framework will see the MHRA be responsible for approving all medicinal products destined for the United Kingdom market (i.e., Great Britain and Northern Ireland), and the EMA will no longer have any role in approving medicinal products destined for Northern Ireland.

In addition, foreign regulatory authorities may change their approval policies and new regulations may be enacted.

For instance, the European Union pharmaceutical legislation is currently undergoing a complete review process, in the context of the Pharmaceutical Strategy for Europe initiative, launched by the European Commission in November 2020.

The European Commission’s proposal for revision of several legislative instruments related to medicinal products (potentially reducing the duration of regulatory data protection, revising the eligibility for expedited pathways, etc.) was published on April 26, 2023.

The proposed revisions remain to be agreed and adopted by the European Parliament and European Council and the proposals may therefore be substantially revised before adoption, which is not anticipated before early 2026.

The revisions may however have a significant impact on the pharmaceutical industry and our business in the long term.

We expect that we will also be subject to additional risks in commercializing any of our product candidates that receive marketing approval outside the United States, including tariffs, trade barriers and regulatory requirements;

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In addition, the GDPR provides that European Union member states may make their own further laws and regulations limiting the processing of personal data, including genetic, biometric or health data.

Similar laws and regulations have been approved, or are expected to be approved, in several jurisdictions beyond the European Union including the U.K.

Data Protection Act 2018.

Similar laws and regulations have been approved, or are expected to be approved, in several jurisdictions beyond the European Union including the UK Data Protection Act 2018.

Similar actions are either in place or under way in the United States.

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Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our reputation and our business.

and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that process or transfer personal data collected in applicable jurisdictions.

Given the breadth and depth of changes in data protection obligations, preparing for and complying with these requirements is rigorous and time intensive and requires significant resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that process or transfer personal data collected in applicable jurisdictions.

These changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information from our clinical trials, could require us to change our business practices and put in place additional compliance mechanisms, may interrupt or delay our development, regulatory and commercialization activities and increase our cost of doing business, and could lead to government enforcement actions, private litigation and significant fines and penalties against us and could have a material adverse effect on our business, financial condition or results of operations.

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

Our computer systems and those of our current and any future collaborators, contractors or consultants are vulnerable to damage including from computer viruses, unauthorized access, and telecommunication and electrical failures.

If a material system failure, accident or security breach were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations.

For example, the loss of clinical trial data from clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed and the development and commercialization of our products and product candidates could be delayed.

Our internal information technology systems, or those of our vendors, collaborators, contractors, consultants, or other third parties may fail or suffer security breaches, which could result in a material disruption of our product development programs, compromise sensitive information related to our business or prevent us from accessing critical information, trigger contractual and legal obligations, potentially exposing us to liability, reputational harm or otherwise adversely affecting our business and financial results.

We are dependent upon information technology systems, infrastructure and data to operate our business.

In the ordinary course of business, we collect, store and transmit large amounts of confidential information, including personal information and information relating to intellectual property, on internal and external information systems and through the information systems of our vendors, collaborators, contractors, consultants, or other third parties.

It is critical that we, our vendors, collaborators, contractors, consultants, or other third parties, do so in a secure manner to maintain the availability, security, confidentiality, privacy and integrity of such confidential information.

Despite the implementation of security measures, our internal information technology systems and those of third parties are vulnerable to damage from computer viruses, malware, computer hackers, malicious code, employee error, theft or misuse, denial-of-service attacks, sophisticated nation-state supported actors, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

Such systems are also vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees, our collaborators, contractors, consultants, vendors, and other third parties, or from cyberattacks by malicious third parties over the Internet or through other mechanisms.

Cyberattacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect.

Cyberattacks could include the deployment of harmful malware, ransomware, denial of service attacks, unauthorized access to or deletion of files, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information.

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

We may not be able to anticipate all types of security threats, and we may not be able to implement preventive measures effective against all such security threats.

The techniques used by cyber criminals change frequently, may not be recognized until launched, and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments or agencies.

We cannot guarantee that the measures we have taken to date, and actions we may take in the future, will be sufficient to prevent any future breaches.

While we have not experienced any such material system failure, accident, cyberattack or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs, clinical trials and business operations, whether due to a loss of our trade secrets or other proprietary or confidential information or other similar disruptions, in addition to possibly requiring substantial expenditures of resources to remedy.

For example, the loss of clinical trial data from clinical trials could result in delays or termination of our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

In addition, as risks with respect to our information systems continue to evolve, we will incur additional costs to maintain the security of our information systems and comply with evolving laws and regulations pertaining to cybersecurity and related areas.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our or our vendors’, collaborators’ or other contractors’ or consultants’ data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, including litigation exposure, penalties and fines, we could become the subject of regulatory action or investigation, enrollment in our clinical trials could be negatively affected, our competitive position and reputation could be harmed and the further development and commercialization of our product candidates could be delayed.

As a result of such an event, we may be in breach of our contractual obligations.

Furthermore, any such event that leads to unauthorized access, use, or disclosure of personal information, including personal information regarding our customers or employees, could harm our reputation, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information, which could result in significant legal and financial exposure and reputational damages.

Any of the above could have a material adverse effect on our business, financial condition, results of operations or prospects.

The financial exposure from the events referenced above could either not be insured against or not be fully covered through any insurance that we maintain and could have a material adverse effect on our business, financial condition, results of operations or prospects.

In addition, we cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim.

There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages as a result of the events referenced above.

Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling certain products outside of the United States and require us to develop and implement costly compliance programs.

As we expand our operations outside of the United States, such as we have begun to do with our collaboration with AffaMed, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate.

If we expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate.

The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S.

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The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting.

The Securities and Exchange Commission also may suspend or bar issuers from trading securities on U.S.

The Securities and Exchange

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

exchanges for violations of the FCPA’s accounting provisions.

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Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We remain highly dependent on the research and development, clinical and business development expertise of our principal members of our management, scientific and clinical team, including Antony Mattessich, our President and Chief Executive Officer.

We remain highly dependent on the research and development, clinical and business development expertise of our principal members of our management, scientific and clinical team, including Pravin Dugel, M.D., our Executive Chairman, and Antony Mattessich, our President and Chief Executive Officer.

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

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As a result, capital appreciation, if any, of our common stock will be our stockholders’ sole source of gain for the foreseeable future.

Unresolved Staff Comments

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.

What changed 10-K

Item 1A. Risk Factors