Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 3, 2025. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties and should be read together with the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2024 for a discussion of important factors that could cause actual results to differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.
Overview
Our Company
We are a fully-integrated biopharmaceutical company committed to redefining the retina experience. AXPAXLI (also known as OTX-TKI), our investigational product candidate for retinal disease, is an axitinib intravitreal hydrogel based on our ELUTYX proprietary bioresorbable hydrogel-based formulation technology. AXPAXLI is currently in two repeat-dosing Phase 3 clinical trials for the treatment of wet age-related macular degeneration, or wet AMD, which we refer to as the SOL-1 and the SOL-R trials. We have also completed a Phase 1 clinical trial of AXPAXLI for the treatment of non-proliferative diabetic retinopathy, or NPDR, which we refer to as the HELIOS trial. We are currently planning our next steps for AXPAXLI for the treatment of NPDR and diabetic macular edema, or DME.
We also leverage the ELUTYX technology in our commercial product DEXTENZA, a corticosteroid approved by the U.S. Food and Drug Administration, or FDA, for the treatment of ocular inflammation and pain following ophthalmic surgery in adults and pediatric patients and for the treatment of ocular itching associated with allergic conjunctivitis in adults and pediatric patients aged two years or older, and in our investigational product candidate PAXTRAVA (also known as OTX-TIC), which is a travoprost intracameral injection that is currently in a Phase 2 clinical trial for the treatment of open-angle glaucoma, or OAG, or ocular hypertension, or OHT.
Key Business and Financial Developments
AXPAXLI for wet AMD
The SOL-1 trial
We are currently conducting the SOL-1 trial, a repeat-dosing registrational Phase 3 clinical trial for the treatment of wet AMD. The SOL-1 trial is designed as a prospective, multi-center, randomized, parallel-group trial that involves more than 100 trial sites located in the United States and Argentina. The SOL-1 trial is designed as a superiority trial comparing a single optimized dose of AXPAXLI with a drug load of 450 µg of axitinib to a single injection of aflibercept 2 mg and assessing the safety and efficacy of AXPAXLI in subjects with wet AMD. The primary endpoint is the proportion of subjects who maintain visual acuity, defined as a Best Corrected Visual Acuity, or BCVA, loss of fewer than 15 letters on the Early Treatment of Diabetic Retinopathy Study, or ETDRS, letters chart from baseline at Week 36. This superiority trial has an 8-week loading segment with two monthly aflibercept 2 mg intravitreal injections prior to randomization, thereafter a 52-week treatment segment followed by a 52-week safety segment with re-dosing at Weeks 52 and 76. We believe the inclusion of re-dosing in the design of the SOL-1 trial enhances the potential of the trial to support a 6 - 12 month dosing label for AXPAXLI for the treatment of wet AMD and also should provide insights into the long-term durability of AXPAXLI.
The SOL-1 trial completed the randomization of 344 subjects with a diagnosis of active macular choroidal neovascularization at screening in December 2024. Under the study protocol, after initial screening, every enrolled subject received two aflibercept 2 mg loading doses between the screening visit and Day 1: one at Week -8 and another at Week -4. Subjects reaching approximately 20/20 Snellen equivalent vision or experiencing an improvement of at least 10 ETDRS letters after these injections, in addition to satisfying other criteria, were randomized in the trial at Day 1 to receive either one dose of AXPAXLI 450 µg in the investigational arm or one injection of aflibercept 2 mg in the control arm. At Week 52 and at Week 76, all subjects that were randomized in the trial at Day 1, including subjects who
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previously received supplemental anti-VEGF treatment, are re-dosed with their respective initial treatment of a single dose of AXPAXLI 450 µg in the investigational arm or a single injection of aflibercept 2 mg in the control arm and followed for safety until Week 104. Throughout the trial, subjects are assessed monthly and remain masked to treatment assignment.
We are conducting the SOL-1 trial in accordance with a Special Protocol Assessment, or SPA, agreement, as modified, with the FDA. In January 2025, we submitted a proposed SPA agreement modification to the FDA to add a repeat dose of AXPAXLI 450 µg at Week 52 and at Week 76, in each case, after all pre-defined efficacy endpoint assessments, to generate the required safety data for subjects re-dosed with AXPAXLI through Week 104, to support repeat dosing. We received an agreement letter regarding the SPA agreement modification from the FDA in February 2025.
Retention in the SOL-1 trial remains exceptional and the vast majority of rescues, evaluated on a masked basis, continue to be per protocol. We expect topline results for SOL-1 to be available in the first quarter of 2026.
The SOL-R trial
In June 2024, we initiated the SOL-R trial, a repeat-dosing registrational Phase 3 clinical trial for the treatment of wet AMD. The SOL-R trial is designed as a multi-center, double-masked, randomized (2:2:1), three-arm trial that includes sites located in the U.S. and the rest of the world. The trial is intended to randomize approximately 555 subjects that are either treatment naïve or have been diagnosed with wet AMD in the study eye within about four months prior to enrollment. This non-inferiority trial reflects a patient enrichment strategy over the six months prior to randomization that includes three screening doses of any anti-VEGF therapy, excluding brolucizumab-dbll, and monitoring to exclude those subjects with significant retinal fluid fluctuations. Subjects that continue to meet eligibility will enter a run-in period and receive two loading doses of aflibercept 2 mg prior to Day 1. In the first arm, subjects will receive a 450 µg dose of AXPAXLI at Day 1 and be re-dosed at Weeks 24, 48, and every 24 weeks through the end of year 2. In the second arm, subjects will receive aflibercept 2 mg on-label every 8 weeks. In the third arm, subjects will receive an 8 mg dose of aflibercept (Eylea HD) at Day 1 and will be re-dosed at Weeks 24, 48, and every 24 weeks, corresponding with the AXPAXLI dosing regimen in the first arm to serve as adequate masking pursuant to current FDA guidance. Subjects will be followed for safety until Week 104. Throughout the trial, subjects are assessed monthly. The primary endpoint is non-inferiority in mean change in BCVA from baseline between the AXPAXLI and on-label aflibercept 2 mg arms at Week 56. As per the protocol agreed to by the FDA, the non-inferiority margin for the lower bound is -4.5 letters of mean BCVA when compared to aflibercept 2 mg dosed every eight weeks. The first subject was enrolled in the SOL-R trial in July 2024.
In a written Type C response received in August 2024, and a subsequent written response received in December 2024, the FDA agreed that the SOL-R repeat dosing wet AMD trial, with a primary endpoint at Week 56, should be appropriate as an adequate and well-controlled trial in support of a potential new drug application, or NDA, and product label for AXPAXLI for the treatment of wet AMD. The FDA also noted that the use of one superiority trial and one non-inferiority trial is generally acceptable as the basis of an eventual NDA in wet AMD.
On January 14, 2025, we announced that, as of January 10, 2025, we had enrolled 311 subjects across various stages of loading and randomization in the SOL-R trial. Enrollment continues to be strong following the recent reduction of target randomization from 825 to approximately 555 subjects.
If we were to obtain favorable results from the SOL-1 trial and the SOL-R trial, we plan to submit an NDA with the FDA for marketing approval of AXPAXLI for the treatment of wet AMD.
AXPAXLI for NPDR and DME
We have completed the HELIOS trial of AXPAXLI for the treatment of NPDR. In late March 2025, the FDA provided positive written feedback on the design of a potential registrational clinical trial for AXPAXLI for the treatment of NPDR. We are actively planning our next steps in the development of AXPAXLI for NPDR and DME and expect to provide further details at a later date.
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PAXTRAVA for OAG or OHT
We are conducting a pilot repeat-dose sub-study in the Phase 2 clinical trial to evaluate the safety of a repeat, sustained release dose of PAXTRAVA 26 μg in a small subset of subjects with OAG or OHT. Once we have completed the pilot repeat-dose sub-study, we plan to evaluate whether an end-of-Phase 2 meeting with the FDA is appropriate for determining our next steps for PAXTRAVA for the treatment of OAG or OHT.
Commercial
Our net product revenue is generated from the sale of DEXTENZA to specialty distributors, or SDs, for resale to certain ambulatory surgery centers, or ASCs, certain hospital outpatient departments, or HOPDs, and certain physicians’ offices, and from the direct sale by us to ASCs and physicians’ offices. Our net product revenue was $10.6 million for the three months ended March 31, 2025, reflecting a decrease of $4.1 million or 27.7% over the three months ended March 31, 2024. We believe that the decrease in net revenue is primarily attributable to the impact of our pricing strategy on distributor stocking patterns and buying patterns by ASCs, HOPDs and physicians’ offices, as well as the recent inclusion of DEXTENZA into the cost performance category of the Centers for Medicare & Medicaid Services’ Merit-based Incentive Payment System, or MIPS, for 2025. We anticipate that net revenue on a quarterly basis should increase for the remainder of 2025, driven primarily by expected increases in the number of units sold. This potential increase is based on our expectations that clinicians should adjust to the impact of MIPS, and our plans to increase sales efforts directed towards HOPDs, which receive separate payment for DEXTENZA in 2025 after being ineligible for separate payments in 2024.
In-Market Sales, defined as unit sales from the SDs to ASCs, HOPDs, and physicians’ offices, and unit sales made directly by us to ASCs and physicians’ offices, were approximately 40,000 units in the three months ended March 31, 2025, a small decrease of approximately 1,000 units compared to the three months ended March 31, 2024. Differences between DEXTENZA’s net product revenue as recognized in our unaudited condensed consolidated financial statements and In-Market Sales figures are attributable to distributor stocking patterns.
In June 2024, we submitted the data for our clinical trial to evaluate DEXTENZA in pediatric subjects following cataract surgery to the FDA to fulfill a post-approval requirement of the FDA in connection with the FDA’s prior approval of DEXTENZA for the treatment of inflammation and pain following ophthalmic surgery in adults. We received approval of the supplemental NDA for DEXTENZA on April 7, 2025. Therefore, DEXTENZA is now also approved for use in pediatric patients for the treatment of ocular inflammation and pain following ophthalmic surgery, and in pediatric patients aged 2 years and older for the treatment of ocular itching associated with allergic conjunctivitis. The approval of this supplemental NDA provides for pediatric label expansion. We do not expect to generate significant revenue from the use of DEXTENZA in pediatric patients.
Other Developments
The new U.S. administration has announced or imposed a series of tariffs on U.S. trading partners. In response, several countries have threatened or imposed retaliatory measures. At this time, we do not anticipate the tariffs and changes in trade policies in place as of the filing of this Quarterly Report on Form 10-Q to have a significant adverse effect on our business or operations.
Following recent changes more broadly within the FDA, we have not noticed any disruption in the cadence and nature of our dialogue with the FDA to date and continue to maintain productive interactions.
Components of our Financial Performance
Revenue
We record DEXTENZA product sales net of estimated chargebacks, rebates, distribution fees and product returns. These deductions are generally referred to as gross-to-net deductions.
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Operating Expenses
Cost of Product Revenue
Cost of product revenue consists of costs of DEXTENZA product revenue, which include:
● Direct materials costs;
● Royalties;
● Direct labor, which includes employee-related expenses, including salaries, related benefits and payroll taxes, and stock-based compensation expense for employees engaged in the production process;
● Manufacturing overhead costs, which includes rent, depreciation, and indirect labor costs associated with the production process;
● Transportation costs; and
● Cost of scrap material.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:
● expenses incurred in connection with the clinical trials of our product candidates, including with the investigative sites that conduct our clinical trials and under agreements with contract research organizations, or CROs;
● employee-related expenses, including salaries, related benefits and payroll taxes, travel and stock-based compensation expense for employees engaged in research and development, clinical and regulatory and other related functions;
● expenses relating to regulatory activities, including filing fees paid to the FDA for our submissions for product approvals;
● expenses associated with developing our pre-commercial manufacturing capabilities and manufacturing clinical study materials;
● ongoing research and development activities relating to our core bioresorbable hydrogel technology and improvements to this technology;
● facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies;
● costs relating to the supply and manufacturing of product inventory, prior to approval by the FDA or other regulatory agencies of our products; and
● expenses associated with preclinical development activities.
We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our clinical investigative sites.
Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our
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clinical trials and regulatory fees. We do not allocate employee and contractor-related costs, costs associated with our proprietary bioresorbable hydrogel-based formulation technology ELUTYX, costs related to manufacturing or purchasing clinical trial materials, and facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified. We use internal resources in combination with third-party CROs, including clinical monitors and clinical research associates, to manage our clinical trials, monitor patient enrollment and perform data analysis for many of our clinical trials. These employees work across multiple development programs and, therefore, we do not track their costs by program.
The successful development and commercialization of our products or product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:
● the scope, progress, outcome and costs of our clinical trials and other research and development activities;
● the timing, receipt and terms of any marketing approvals;
● the efficacy and potential advantages of our products or product candidates compared to alternative treatments, including any standard of care;
● the market acceptance of our products or product candidates; and
● significant and changing government regulation.
Any changes in the outcome of any of these variables with respect to the development of our product candidates in clinical and preclinical development could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate. We anticipate that our research and development expenses will increase in the future as we support our continued development of our product candidates.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in selling and marketing functions as well as consulting, advertising and promotion costs.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance, information technology, human resources and administrative functions. General and administrative expenses also include insurance, facility-related costs and professional fees for legal, patent, consulting and accounting and audit services.
Other Income (Expense)
Interest Income. We earn interest income primarily from investments of our cash and cash equivalents in money market funds.
Interest Expense . Interest expense is incurred on our debt. In August 2023, we entered into a credit and security agreement, or the Barings Credit Agreement, with Barings Finance LLC, or Barings, as administrative agent, and the lenders party thereto, providing for a secured term loan facility, or the Barings Credit Facility, in the aggregate principal amount of $82.5 million. For the three months ended March 31, 2025, our interest-bearing debt included the Barings Credit Facility ($82.5 million outstanding principal). For the three months ended March 31, 2024, our interest-bearing debt included the Barings Credit Facility ($82.5 million outstanding principal) and our $37.5 million unsecured senior
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subordinated convertible notes, or the Convertible Notes ($37.5 million outstanding principal through March 28, 2024, no outstanding principal thereafter).
Change in Fair Value of Derivative Liabilities. In August 2023, in connection with entering into the Barings Credit Agreement, we identified an embedded derivative liability, which we were required to measure at fair value at inception and then are required to measure at the end of each reporting period until the embedded derivative is settled. In 2019, in connection with the issuance of our Convertible Notes, we identified an embedded derivative liability, which we were required to measure at fair value at inception and then at the end of each reporting period until the embedded derivative was settled. The settlement of the derivative liability related to the Convertible Notes occurred on March 28, 2024. The changes in fair value of these derivative liabilities are recorded through the condensed consolidated statements of operations and comprehensive loss and are presented under the caption “change in fair value of derivative liabilities”.
Loss on Extinguishment of Debt . In March 2024, the holder of the Convertible Notes converted the Convertible Notes. In connection with the conversion, our obligations under the Convertible Notes extinguished, resulting in a loss on extinguishment.
Results of Operations
Comparison of the Three Months Ended March 31, 2025 and 2024
The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024:
Three Months Ended
March 31,
Increase
2025
2024
(Decrease)
(in thousands)
Revenue:
Product revenue, net
$
10,634
$
14,715
$
(4,081)
Collaboration revenue
64
59
5
Total revenue, net
10,698
14,774
(4,076)
Costs and operating expenses:
Cost of product revenue
1,262
1,326
(64)
Research and development
42,857
20,735
22,122
Selling and marketing
14,148
10,183
3,965
General and administrative
16,348
14,147
2,201
Total costs and operating expenses
74,615
46,391
28,224
Loss from operations
(63,917)
(31,617)
(32,300)
Other income (expense):
Interest income
3,826
3,922
(96)
Interest expense
(2,984)
(4,051)
1,067
Change in fair value of derivative liabilities
(978)
(5,152)
4,174
Loss on extinguishment of debt
—
(27,950)
27,950
Total other expense, net
(136)
(33,231)
33,095
Net loss
$
(64,053)
$
(64,848)
$
795
Product Revenue, net
Our product revenue, net was $10.6 million and $14.7 million for the three months ended March 31, 2025 and 2024, respectively, reflecting a decrease of $4.1 million year-over-year. All of our product revenue, net, was attributable to sales of DEXTENZA.
Our total gross-to-net provisions, or GTN Provisions, for the three months ended March 31, 2025 and 2024 were 49.4% and 36.1%, respectively, of gross DEXTENZA product sales. Effective April 1, 2025, we increased the wholesale acquisition cost, or WAC, and we concurrently increased the off-invoice discount, or OID, for DEXTENZA as part of our overall pricing strategy. The OID amounts are generally determined at the time of resale by SDs or direct sales to ASCs or physicians’ offices by us. We are required to estimate the expected GTN Provisions when we sell DEXTENZA to SDs, ASCs and physicians’ offices and accrue for them at that time. The total GTN
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Provisions for the three months ended March 31, 2025 therefore include timing effects related to the increased WAC and OID, as units that we sold to SDs under the pre-April 2025 WAC and OID will be subject to the increased WAC and OID to the extent that such units are subsequently sold as In-Market Sales. The GTN Provisions relative to gross DEXTENZA product sales increased as a result of these changes and are expected to increase with any additional anticipated OID increases. We expect that GTN Provisions relative to gross DEXTENZA product sales will remain at this increased level, or might increase further, for the remainder of 2025 and beyond.
Collaboration Revenue
During the three months ended March 31, 2025, we recognized $0.1 million of collaboration revenue related to the performance obligation under our license agreement with AffaMed to conduct a Phase 2 clinical trial of PAXTRAVA, compared to $0.1 million in the three months ended March 31, 2024. We recognize collaboration revenue based on a cost-to-cost method.
Research and Development Expenses
Three Months Ended
March 31,
Increase
2025
2024
(Decrease)
(in thousands)
Direct research and development expenses by program:
AXPAXLI for wet AMD
$
24,455
$
5,493
$
18,962
AXPAXLI for NPDR
192
832
(640)
PAXTRAVA for OAG or OHT
168
993
(825)
DEXTENZA for post-surgical ocular inflammation and pain
714
593
121
OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease
5
265
(260)
Preclinical programs
2
532
(530)
Unallocated expenses:
Personnel costs
12,001
8,359
3,642
All other costs
5,320
3,668
1,652
Total research and development expenses
$
42,857
$
20,735
$
22,122
Research and development expenses were $42.9 million and $20.7 million for the three months ended March 31, 2025 and 2024, respectively, reflecting an increase of $22.1 million year-over-year.
Within research and development expenses, expenses for clinical programs increased $17.4 million, unallocated expenses increased $5.3 million, and expenses for preclinical programs decreased $0.5 million.
For the three months ended March 31, 2025, we incurred $25.5 million in direct research and development expenses for our products and product candidates compared to $8.7 million for the three months ended March 31, 2024. The increase of $16.8 million is related to timing and conduct of our various clinical trials for our product candidates, including the progression of the SOL-1 trial, the initiation and progression of the SOL-R trial, and the completion of the HELIOS trial.
We expect that direct research and development expenses for our products and product candidates will continue to increase significantly for the remainder of 2025 and beyond as we progress with the SOL-1 and the SOL-R trials; complete our other ongoing clinical trials; and initiate any other clinical trials of our product candidates that we might determine in the future to conduct. We expect that personnel costs will continue to increase for the remainder of 2025 and beyond.
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Selling and Marketing Expenses
Three Months Ended
March 31,
Increase
2025
2024
(Decrease)
(in thousands)
Personnel-related (including stock-based compensation)
$
8,734
$
7,353
$
1,381
Professional fees
3,852
1,563
2,289
Facility-related and other
1,562
1,267
295
Total selling and marketing expenses
$
14,148
$
10,183
$
3,965
Selling and marketing expenses were $14.1 million and $10.2 million for the three months ended March 31, 2025 and 2024, respectively, reflecting an increase of $4.0 million year-over-year.
The increase was primarily due to an increase in professional fees of $2.3 million; an increase in personnel-related costs, including stock-based compensation, of $1.4 million; and an increase in facility-related and other costs of $0.3 million.
We expect our selling and marketing expenses to increase for the remainder of 2025 and beyond as we continue to support the commercialization of DEXTENZA and as we initiate marketing-related precommercial activities for AXPAXLI.
General and Administrative Expenses
Three Months Ended
March 31,
Increase
2025
2024
(Decrease)
(in thousands)
Personnel-related (including stock-based compensation)
$
11,007
$
9,757
$
1,250
Professional fees
3,600
3,818
(218)
Facility-related and other
1,741
572
1,169
Total general and administrative expenses
$
16,348
$
14,147
$
2,201
General and administrative expenses were $16.3 million and $14.1 million for the three months ended March 31, 2025 and 2024, respectively, reflecting an increase of $2.2 million year-over-year.
The increase was primarily due to an increase in personnel-related costs, including stock-based compensation, of $1.3 million and an increase of $1.2 million in facility-related and other costs, partially offset by a decrease of $0.2 million in professional fees.
We anticipate that our general and administrative expenses will increase for the remainder of 2025 and beyond, as we continue to further strengthen our leadership team and other certain functions that support our clinical trials of AXPAXLI, including the SOL-1 trial and the SOL-R trial, and our business in general.
Other Income (Expense), Net
Interest Income . Interest income was $3.8 million and $3.9 million for the three months ended March 31, 2025 and 2024, respectively, reflecting a decrease of $0.1 million year-over-year.
Interest Expense . Interest expense was $3.0 million and $4.1 million for the three months ended March 31, 2025 and 2024, respectively, reflecting a decrease of $1.1 million year-over-year. The decrease is primarily due to lower average balances of debt outstanding as a result of the conversion of the Convertible Notes in March 2024.
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Change in Fair Value of Derivative Liabilities. We recognized a net loss from the change in fair values of our derivative liabilities of $1.0 million and $5.2 million for the three months ended March 31, 2025 and 2024, respectively. The net loss for the three months ended March 31, 2025 is comprised of a loss of $0.6 million from the change in the fair value of the derivative liability related to the Barings Credit Agreement, and an expense of $0.4 million related to royalty fees under the Barings Credit Agreement that we paid or accrued. The net loss for the three months ended March 31, 2024 is comprised of a loss of $7.2 million from the change in the fair value of the derivative liability related to the Barings Credit Agreement, and $0.5 million related to royalty fees under the Barings Credit Agreement that we paid or accrued, partially offset by a gain of $2.6 million from the change in the fair value of the derivative liability related to a conversion option embedded in the Convertible Notes. We cannot predict how the fair value of the derivative liability related to the Barings Credit Agreement will change in the remainder of 2025 and beyond.
Loss on Extinguishment of Debt . We recognized a non-cash loss on extinguishment of debt of $28.0 million for the three months ended March 31, 2024, resulting from the conversion of the Convertible Notes in March 2024.
Liquidity and Capital Resources
Sources of Liquidity
We have financed our operations primarily through private placements of our preferred stock, public offerings and private placements of our common stock and pre-funded warrants to purchase our common stock, borrowings under credit facilities, private placements of our convertible notes, and sales of our products.
As of March 31, 2025, we had cash and cash equivalents of $349.7 million, and outstanding notes payable with a principal amount of $82.5 million par value under the Barings Credit Facility.
In February 2024, we sold 32,413,560 shares of our common stock at $7.52 per share and, in lieu of common stock to certain investors, pre-funded warrants to purchase up to an aggregate of 10,805,957 shares of our common stock at a price of $7.519 per pre-funded warrant for total net proceeds of approximately $316.4 million, after deducting placement agent fees and other offering expenses, in a private placement. Each pre-funded warrant has an exercise price of $0.001 per share, is currently exercisable and will remain exercisable until exercised in full.
On December 18, 2023, we sold 35,420,000 shares of our common stock in an underwritten public offering at a public offering price of $3.25 per share. The total net proceeds of the public offering to us were approximately $107.7 million, after deducting underwriting discounts and commissions and other offering expenses payable by us.
In August 2023, we borrowed $82.5 million under the Barings Credit Facility and received proceeds of $77.3 million, after the application of an original issue discount and fees.
In August 2021, we entered into an Open Market Sale Agreement, or the 2021 Sales Agreement, with Jefferies LLC, or Jefferies, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time through Jefferies, acting as agent. In November 2023, we filed a prospectus in connection with the 2021 Sales Agreement for the issuance and sale of common stock having an aggregate offering price of up to $100.0 million thereunder, or the Sales Agreement Prospectus. We have not offered or sold shares under the 2021 Sales Agreement since the filing of the Sales Agreement Prospectus. During the year ended December 31, 2023, we sold 1,514,926 shares of common stock under the 2021 Sales Agreement, resulting in net proceeds to us, after accounting for issuance costs, of $9.5 million.
Funding Requirements
We have a history of incurring significant operating losses. Our net losses were $64.1 million for the three months ended March 31, 2025, and $193.5 million, $80.7 million, and $71.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of March 31, 2025, we had an accumulated deficit of $955.1 million.
We expect to continue to incur losses in connection with our ongoing activities, particularly as we advance the clinical trials of our product candidates in development, specifically the SOL-1 trial and the SOL-R trial, and as we support the commercialization of DEXTENZA and the potential commercialization of our product candidates, subject to receiving FDA approval.
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We anticipate we will incur substantial expenses if and as we:
● continue our ongoing clinical trials, including the SOL-1 and the SOL-R trials, our two registrational Phase 3 clinical trials of AXPAXLI for the treatment of wet AMD;
● initiate any additional clinical trials we might determine in the future to conduct for our product candidates, including any clinical trials that we might conduct for AXPAXLI for the treatment of NPDR and DME;
● scale up our manufacturing processes and capabilities to support sales of commercial products, clinical trials of our product candidates, including AXPAXLI, and commercialization of any of our product candidates for which we obtain marketing approval, and expand our facilities to accommodate this scale up and any corresponding growth in personnel;
● scale up our sales, marketing and distribution capabilities to prepare for commercialization of any product candidates for which we intend to obtain marketing approval;
● seek marketing approvals for any of our product candidates that successfully complete clinical development;
● continue to monitor subjects according to the applicable clinical trial protocols, or prepare submission documentation such as clinical study reports, for our clinical trials that have been completed;
● continue to commercialize DEXTENZA in the United States;
● maintain, expand and protect our intellectual property portfolio;
● expand our operational, quality assurance, financial, administrative and management systems and personnel, including personnel to support our clinical development, manufacturing and commercialization efforts;
● defend ourselves against legal proceedings, if any;
● make investments to improve our defenses against cybersecurity threats and establish and maintain cybersecurity insurance;
● increase our product liability and clinical trial insurance coverage as we expand our clinical trials and commercialization efforts; and
● continue to operate as a public company.
The amount and timing of these expenses determines our future capital requirements.
Based on our current operating plan, which includes estimates of anticipated cash inflows from DEXTENZA product sales and cash outflows from operating expenses and capital expenditures and reflects our observance of the minimum liquidity covenant of $20.0 million under the Barings Credit Agreement, we believe that our existing cash and cash equivalents as of March 31, 2025 will enable us to fund our planned operating expenses, debt service obligations and capital expenditure requirements into 2028. Our planned operating expenses do not include the expenses necessary to conduct a clinical trial of AXPAXLI for NPDR and DME, or to build out our manufacturing capabilities beyond the buildout of our existing manufacturing facilities. We have based our estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.
Our future capital requirements will depend on many factors, including:
● the progress, costs and outcome of our ongoing clinical trials of AXPAXLI for the treatment of wet AMD;
● the timing, scope, progress, costs and outcome of a potential registrational clinical program of AXPAXLI for the treatment of NPDR and DME;
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● the costs, timing and outcome of regulatory review of AXPAXLI or our other product candidates by the FDA, the European Medicines Agency, or EMA, or other regulatory authorities;
● the scope, progress, costs and outcome of preclinical development and any additional clinical trials we might determine in the future to conduct for our other product candidates, including PAXTRAVA for the reduction of intraocular pressure, or IOP, in patients with OAG or OHT;
● the level of product sales from DEXTENZA and any additional products for which we obtain marketing approval in the future and the level of third-party reimbursement of such products;
● the costs of sales, marketing, distribution and other commercialization efforts with respect to DEXTENZA and any of our product candidates for which we obtain marketing approval in the future, including cost increases due to inflation;
● the costs of scaling up our manufacturing processes and capabilities to support sales of commercial products, clinical trials of our product candidates, including AXPAXLI, and commercialization of any of our product candidates for which we may obtain marketing approval, including AXPAXLI, and of expanding our facilities to accommodate this scale up and any corresponding growth in personnel;
● the extent of our debt service obligations and our ability, if desired, to refinance any of our existing debt on terms that are more favorable to us;
● the amounts we are entitled to receive, if any, as reimbursements for clinical trial expenditures, development, regulatory, and sales milestone payments, and royalty payments under our license agreement with AffaMed;
● the extent to which we choose to establish additional collaboration, distribution or other marketing arrangements for our products and product candidates;
● the costs and outcomes of any legal actions and proceedings;
● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and
● the extent to which we acquire or invest in other businesses, products and technologies.
Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, royalty agreements, and marketing and distribution arrangements. We do not have any committed external source of funds, although our license agreement with AffaMed provides for AffaMed’s reimbursement of certain clinical expenses incurred by us in connection with our collaboration and for our potential receipt of development and sales milestone payments and royalty payments. To the extent that we raise additional capital through the sale of equity, preferred equity or convertible debt securities, our securityholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing securityholders’ rights as holders or beneficial owners of our common stock. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. The covenants under the Barings Credit Facility and our pledge of our assets as collateral to secure our obligations under the Barings Credit Facility pursuant to which we have a total borrowing capacity of $82.5 million, which has been fully drawn down, may limit our ability to obtain additional debt or other financing. If we raise additional funds through collaborations, strategic alliances, licensing arrangements, royalty agreements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, products or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
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Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
Three Months Ended
March 31,
2025
2024
Cash used in operating activities
$
(44,671)
$
(33,887)
Cash used in investing activities
(1,933)
(255)
Cash provided by financing activities
4,183
321,223
Net increase in cash and cash equivalents
$
(42,421)
$
287,081
Operating activities . Net cash used in operating activities was $44.7 million for the three months ended March 31, 2025, primarily resulting from our net loss of $64.1 million, partially offset by non-cash adjustments of $13.9 million and net favorable changes in operating assets and liabilities of $5.5 million. Our net loss was primarily attributed to operating expenses of $74.6 million, which we incurred primarily for research and development activities, selling and marketing activities, and general and administrative activities, partially offset by $10.7 million of revenue. Non-cash adjustments primarily include stock-based compensation expense of $10.5 million, non-cash interest expense of $1.4 million, depreciation and amortization expense of $1.0 million, and a net non-cash loss related to changes in the fair value of our derivative liability of $1.0 million. Net cash provided by net favorable changes in our operating assets and liabilities during the three months ended March 31, 2025 consisted primarily of decreases of accounts receivable of $7.2 million, resulting primarily from decreased sales of DEXTENZA, and decreases of prepaid expenses and other current assets of $3.9 million, resulting predominantly from our clinical development activities, partially offset by decreases in accrued expenses of $5.1 million, resulting predominantly from our clinical development activities, and other changes, net, of $0.4 million.
Net cash used in operating activities was $33.9 million for the three months ended March 31, 2024, primarily resulting from our net loss of $64.8 million and net unfavorable changes in operating assets and liabilities of $13.0 million, partially offset by non-cash adjustments of $44.0 million. Our net loss was primarily attributed to operating expenses of $46.4 million, which we incurred primarily for research and development activities, selling and marketing activities, and general and administrative activities, and net non-operating expenses of $33.2 million, resulting predominantly from the loss on debt extinguishment, partially offset by $14.8 million of revenue. Non-cash adjustments primarily include a loss on extinguishment of debt of $28.0 million, stock-based compensation expense of $8.0 million, a non-cash loss related to changes in the fair value of our derivative liabilities of $5.2 million, non-cash interest expense of $2.0 million, and depreciation and amortization expense of $0.9 million. Net cash used by net unfavorable changes in our operating assets and liabilities during the three months ended March 31, 2024 consisted primarily of decreases of accrued expenses of $14.0 million, partially offset by other changes, net, of $1.0 million.
Investing activities . Net cash used in investing activities was $1.9 million for the three months ended March 31, 2025, consisting of cash used to purchase property and equipment and leasehold improvements. Net cash used in investing activities was $0.3 million for the three months ended March 31, 2024, consisting of cash used to purchase property and equipment, primarily consisting of leasehold improvements.
Financing activities . Net cash provided by financing activities for the three months ended March 31, 2025 was $4.2 million and consisted of proceeds from the exercise of stock options. Net cash provided by financing activities for the three months ended March 31, 2024 was $321.2 million and consisted of total net proceeds from the issuance of common stock and pre-funded warrants in a private placement of approximately $316.4 million, and proceeds from the exercise of stock options of $4.9 million.
Contractual Obligations and Commitments
Less Than
1 to 3
3 to 5
More than
Total
1 Year
Years
Years
5 Years
(in thousands)
Operating lease commitments
$
8,534
$
3,135
4,974
425
—
Barings Credit Agreement
82,474
—
—
82,474
—
Total
$
91,008
$
3,135
$
4,974
$
82,899
$
—
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The table above includes our enforceable and legally binding obligations and future commitments at March 31, 2025, as well as obligations related to contracts that we are likely to continue, regardless of the fact that they may be cancelable at March 31, 2025. Some of the figures that we include in this table are based on management’s estimates and assumptions about these obligations, including their duration, and other factors. Because these estimates and assumptions are necessarily subjective, the amounts we will actually pay in future periods may vary from those reflected in the table.
We enter into contracts in the normal course of business to assist in the performance of our research and development activities, including agreements with clinical research organizations regarding the SOL-1 trial and the SOL-R trial, and other services and products for operating purposes. These contracts generally provide for termination on notice and therefore are cancelable contracts which are not included in contractual obligations and commitments.
Operating lease commitments represent payments due under our leases of office, laboratory and manufacturing space in Bedford, Massachusetts that expire in July 2027 and July 2028, and leases of equipment that expire between 2026 and 2028.
The commitments under the Barings Credit Agreement represent repayment of principal only. Future payments of interest under the Barings Credit Agreement depend on the level of the Secured Overnight Financing Rate, or SOFR, and future payments of royalty fees depend on our future revenue from DEXTENZA, both of which cannot be estimated at this time.
We have in-licensed a significant portion of our intellectual property from Incept, an intellectual property holding company, under an amended and restated license agreement, or the License Agreement, that we entered into with Incept in January 2012, which was most recently amended in September 2018. We are obligated to pay Incept a royalty equal to a low-single-digit percentage of net sales made by us or our affiliates of any products , devices, materials, or components thereof, or the Licensed Products, including or covered by Original IP (as defined in the License Agreement), excluding the Shape-Changing IP (as defined in the License Agreement), in the Ophthalmic Field of Use (as defined in the License Agreement). We are obligated to pay Incept a royalty equal to a mid-single-digit percentage of net sales made by us or our affiliates of any Licensed Products including or covered by Original IP, excluding the Shape-Changing IP, in the Additional Field of Use (as defined in the License Agreement). We are obligated to pay Incept a royalty equal to a low-single-digit percentage of net sales made by us or our affiliates of any Licensed Products including or covered by Incept IP (as defined in the License Agreement) or Joint IP (as defined in the License Agreement) in the field of drug delivery. Any sublicensee of ours also will be obligated to pay Incept a royalty on net sales of Licensed Products made by it and will be bound by the terms of the agreement to the same extent as we are. We are obligated to reimburse Incept for our share of the reasonable fees and costs incurred by Incept in connection with the prosecution of the patent applications licensed to us under the agreement. Our share of these fees and costs is equal to the total amount of such fees and costs divided by the total number of Incept’s exclusive licensees of the patent application. We have not included in the table above any payments to Incept under this license agreement as the amount, timing and likelihood of such payments are not known.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission, such relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.
Critical Accounting Policies and Significant Judgments and Estimates
Our unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America.
We define our critical accounting policies as those accounting policies that require us to make subjective estimates and judgments about matters that are uncertain and have had or are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those policies. Our critical accounting policies, which relate to revenue recognition and our derivative liabilities, are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting
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Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 3, 2025.
The preparation of our unaudited condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, accrued research and development expenses and stock-based compensation. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Recently Issued Accounting Pronouncements
Information regarding new accounting pronouncements is included in Note 2 – Summary of Significant Accounting Policies to the current period’s unaudited condensed consolidated financial statements.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.