What changed in this filing

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Item 1A. Risk Factors

2021-03-01 compared with 2020-03-02 · 108 added, 119 removed, 257 unchanged (47% of the section changed)

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Our ability to achieve profitability is highly dependent on the commercial success of OMIDRIA, and to the extent OMIDRIA is not successful, our business, financial condition and results of operations may be materially adversely affected and the price of our common stock may decline.

OMIDRIA is our only product that has been approved by the Food and Drug Administration (“FDA”), for commercial sale in the U.S.

OMIDRIA is currently our only product that has been approved by FDA for commercial sale in the U.S.

For the three and 12 months ended December 31, 2020, we recorded net sales of OMIDRIA of $10.6 million and $73.8 million, respectively.

Revenues from sales of OMIDRIA have not been sufficient to fund our operations fully in prior periods and we cannot provide assurance that revenues from OMIDRIA sales will be sufficient to fund our operations fully in the future.

We will need to generate substantially more product revenue from OMIDRIA to achieve and sustain profitability.

We will need to generate substantially more product revenue from OMIDRIA or generate other revenue such as through sales of future approved products to achieve and sustain profitability.

We may be unable to sustain or increase revenues generated from OMIDRIA product sales for a number of reasons, including:

● the scheduled expiration of pass-through reimbursement on September 30, 2020 and uncertainty regarding the extent of coverage and reimbursement for OMIDRIA when used in Medicare patients after September 30, 2020;

● reduced volume of ophthalmic surgical procedures and corresponding reduction in demand for OMIDRIA as a result of the COVID-19 pandemic;

● whether CMS will maintain its current payment policies, which can be revised through annual rulemaking and associated comment periods, and continue to pay separately under Medicare Part B for non-opioid pain management drugs like OMIDRIA when used during surgery in the ASC setting;

● pricing, coverage and reimbursement policies of government and private payers such as Medicare, Medicaid, the U.S.

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● a lack of acceptance by physicians, patients and other members of the healthcare community;

● interruptions in supply of OMIDRIA from our contract manufacturing partners;

● the availability, relative price and efficacy of the product as compared to alternative treatment options or branded, compounded or generic competing products;

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● changed or increased regulatory restrictions in the U.S., EU and/or other foreign territories.

If legislative and/or administrative means to extend separate payment for OMIDRIA are not successful, we would need to pursue an alternative sales strategy, and our revenues and financial condition could be adversely and significantly affected.

Pass-through reimbursement status allows for separate payment (i.e., outside the packaged payment rate for the surgical procedure) under Medicare Part B.

Under the Consolidated Appropriations Act of 2018 (the “2018 Appropriations Act”), Congress extended pass-through reimbursement status for a small number of drugs, including OMIDRIA, used during procedures performed on Medicare Part B fee-for-service patients for an additional two years, running from October 1, 2018 through September 30, 2020.

We continue to seek permanent separate or similar reimbursement for OMIDRIA.

However, this requires action from legislative and/or administrative authorities and we cannot guarantee that any such action will be taken or, if taken, when such action will be effective.

On November 1, 2019, i n its 2020 OPPS final rule, CMS declined to grant separate payment to OMIDRIA beyond the current expiration of its pass-through status on September 30, 2020.

CMS also noted in the 2020 final rule that it would continue to analyze evidence and monitor utilization of OMIDRIA .

Accordingly, we can provide no assurances that separate reimbursement for OMIDRIA will continue to be available on or after September 30, 2020, or if available, that the reimbursement rate will be adequate.

If the future reimbursement status of OMIDRIA continues to be uncertain as the scheduled date for expiration of pass-through status approaches, then demand for OMIDRIA from ambulatory surgery centers (“ASCs”) and hospitals may be reduced substantially.

In such event, sales to our wholesalers may decrease correspondingly, as they adjust on-hand inventory in anticipation of reduced demand from end users.

If we are unable to obtain permanent separate or similar reimbursement for OMIDRIA, we expect to pursue an alternative sales strategy.

We may face difficulties or delays in implementing an alternative sales strategy and, even if successfully implemented, we cannot predict how quickly, or if, our customers would increase their OMIDRIA utilization, and the net revenues we receive for OMIDRIA could be reduced, potentially by a significant amount.

A reduction in OMIDRIA revenues for this or any other reason may also impair our ability to borrow under our line of credit facility with Silicon Valley Bank (“SVB”).

Any of these risks, if realized, would adversely affect our ability to generate revenue and attain profitability, and there would be a material adverse effect on our business, financial condition, results of operations and growth prospects and the trading price of our stock could decline.

Clinical trials evaluating narsoplimab for treatment of COVID-19 may be unsuccessful and, even if successful, we may be unable to manufacture narsoplimab in quantities adequate to meet demand.

Narsoplimab has been used to treat approximately 20 critically ill COVID-19 patients under our compassionate use program with highly positive results.

However, we cannot provide assurance that the results observed in the compassionate use program will be observed in any future study of narsoplimab for this indication, including the I-SPY COVID-19 trial, or that we will receive regulatory authorization or approval for narsoplimab in the treatment of COVID-19 patients.

Narsoplimab or any other therapeutic candidate that we may develop to treat COVID-19 will be subject to risks in addition to those normally associated with pharmaceutical research, development, and commercialization, such as higher risk of technical failure, lower and transient opportunities for revenue, higher manufacturing costs, product safety or efficacy risks related to an expedited research and development timeline, and novel liability theories.

FDA or other regulatory bodies may require that we conduct a large-scale trial of narsoplimab in COVID-19 patients, in addition to the I-SPY COVID-19 trial to grant any approval or authorization.

These risks may affect our ability to develop or commercialize a therapeutic for COVID-19 or any other current or future indication.

Additionally, contract manufacturing capacity and supplies of raw materials necessary for the production of narsoplimab are limited and we may be unable to secure the large-scale manufacturing capacity from third parties necessary to manufacture narsoplimab in sufficient quantities to enable broader availability of narsoplimab for COVID-19 patients.

In addition, widespread vaccination and/or the availability of alternative therapies for COVID-19 could lead to the diversion of governmental and other potential sources of funding or other manufacturing assistance away from us and toward COVID-19 vaccines or other therapeutics and/or limit the commercial viability of narsoplimab for the treatment of COVID-19.

The spread of COVID-19 and efforts to reduce its transmission may negatively impact our business, operations and financial results.

The COVID-19 pandemic has significantly affected the global economy and has adversely affected our sales of OMIDRIA due to a reduction in the overall volume of cataract surgery and intraocular lens replacement procedures.

Although cataract surgeries have resumed to varying degrees in locations throughout the country, if the number of cataract procedures once again becomes meaningfully limited, either by necessity for time-consuming safety protocols, reduction in patient demand, or the imposition of prohibitions on elective surgeries in some localities, then we would expect there to be a corresponding reduction in demand for OMIDRIA.

We may also experience disruptions to our operations due to COVID-19, such as delays or disruptions with respect to manufacturing of clinical or commercial drug substance or drug product and delays in our clinical trials or in the submission or review of regulatory applications.

Such delays or disruptions could negatively affect our commercial operations, clinical programs, and research and development.

The health of our employees, contractors and other persons on whom we rely may be adversely affected by COVID-19.

Although we are taking precautionary measures intended to help minimize the risk of the virus to our employees, these measures may be ineffective or may otherwise adversely

affect our productivity.

In addition, the conditions created by the pandemic may intensify other risks inherent in our business.

Due to the unknown magnitude, duration and outcome of the COVID-19 pandemic, it is not possible to estimate precisely its impact on our business, operations or financial results;

however, the impact could be material.

To the extent COVID-19 adversely affects our business, financial condition, and results of operations and global economic conditions more generally, it may also have the effect of heightening many of the other risk factors set forth herein..

If OMIDRIA or any other product that we develop and commercialize does not receive adequate coverage or reimbursement from governments and/or private payers, or if we do not establish and maintain market-acceptable pricing for OMIDRIA or those potential other commercialized products, our prospects for revenue and profitability would suffer.

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and in other countries.

Any product that we bring to market may not be considered cost-effective and/or the amount reimbursed for any product may be insufficient to allow us to sell the product profitably.

Obtaining coverage and adequate reimbursement for any product from each government or third-party payer can be a time-consuming and costly process that may require expansion of staff and/or increased use of third parties and could require us to provide additional supporting scientific, clinical and cost-effectiveness data for the use of our approved products to each payer.

We can provide no assurances at this time regarding the cost-effectiveness of OMIDRIA or any of our product candidates.

Further, we can provide no assurance that the amounts, if any, reimbursed to surgical facilities for utilization of any of our surgery-related products, including OMIDRIA or any of our product candidates, or to surgeons for the administration and delivery of these products or product candidates will be considered adequate to justify the use of these products or product candidates.

The Trump administration has proposed increasing CMS’ power to negotiate with drug makers and possibly set reimbursement based on an index of international prices, and a proposed rule by CMS would, if implemented, empower Part D sponsors and Medicare Advantage plan to use prior authorization and step therapy more aggressively, each of which could adversely impact pricing of our products, including OMIDRIA.

We also can provide no assurance that Merit-Based Incentive Payment System payment adjustments for eligible professionals under the Medicare Access and CHIP Reauthorization Act of 2015 will not adversely impact OMIDRIA sales revenue.

Pass-through reimbursement, which allows for separate payment (i.e., outside the packaged payment rate for the surgical procedure) under Medicare Part B, expired for OMIDRIA on October 1, 2020.

In December 2020, CMS confirmed that OMIDRIA qualifies for separate payment when used on Medicare Part B patients in the ASC setting under CMS’ policy for non-opioid pain management surgical drugs.

CMS made separate payment for OMIDRIA effective retroactively as of October 1, 2020.

CMS’ current non-opioid separate payment policy and, as a result, separate payment for OMIDRIA thereunder, like other CMS policies in the OPPS and ASC systems, can be changed by CMS through its OPPS/ASC annual rulemaking and comment process.

We believe that CMS will continue its separate payment policy for non-opioid pain management surgical drugs, which has been in effect since 2019, and that OMIDRIA will continue to be separately reimbursed when used in the ASC setting.

However, we can provide no guarantee that CMS will continue its separate payment policy in future years.

If the future reimbursement status of OMIDRIA continues to be uncertain, then demand for OMIDRIA from ASCs and hospitals may be reduced substantially.

In such event, sales to our wholesalers may decrease correspondingly, as they adjust on-hand inventory in anticipation of reduced demand from end users.

There may be significant delays in obtaining coverage or reimbursement for newly approved products, and we may not be able to provide data sufficient to be granted adequate coverage or reimbursement.

Even when a payer determines that a product is eligible for reimbursement, coverage may be limited to the uses of a product that are either approved by the FDA (or, in other countries, the relevant country’s regulatory agency) and/or appear in a recognized drug compendium, or other conditions may apply.

Even when a payer determines that a product is eligible for reimbursement, coverage may be limited to the uses of a product that are either approved by FDA (or, in other countries, the relevant country’s regulatory agency) and/or appear in a recognized drug compendium, or other conditions may apply.

Moreover, eligibility for coverage does not mean that any product will be reimbursed at a rate that allows us to make a profit in all cases or at a rate that covers our costs, including research, development, manufacturing, sales and distribution.

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In some countries, including those in the EU, our products may be subject to government price controls.

Pricing negotiations with governmental authorities can take a considerable amount of time and

expenditure of resources after the receipt of marketing approval for a product.

Pricing negotiations with governmental authorities can take a considerable amount of time and expenditure of resources after the receipt of marketing approval for a product.

We provide no assurances that the price of any product in one or more of these countries or regions will allow us to make a profit or cover our costs, including research, development, manufacturing, sales and distribution, and as a result we may decide to delay, potentially indefinitely, initiating sales in the particular country or region.

If the reimbursement or pricing that we are able to obtain and maintain for any product that we develop and commercialize, including OMIDRIA, is inadequate, is significantly delayed or is subject to overly restrictive conditions, our ability to generate revenue, attain profitability and/or commercialize our product candidates may be impaired and there could be a material adverse effect on our business, financial condition, results of operations and growth prospects and the trading price of our stock could decline.

Failure to obtain and maintain regulatory approval in the U.S.

or in foreign jurisdictions would prevent us from marketing our current and future products.

Our BLA for narsoplimab for the treatment of HSCT-TMA is under priority review by FDA.

The regulatory process is subject to substantial agency discretion and risks, including those described herein and elsewhere in these “Risk Factors.” FDA may require additional data regarding narsoplimab or HSCT-TMA for any reason, which could delay or require a resubmission our BLA, or FDA may approve narsoplimab for a much narrower indication or patient population than we have requested and/or with significant restrictions on distribution or use, including through a REMS.

Ultimately, we cannot guarantee that FDA will ever approve narsoplimab for the treatment of HSCT-TMA or any other indication.

We also intend to have OMIDRIA and our current and future product candidates, if approved, marketed outside the U.S.

In order to market our products in non-U.S.

jurisdictions, we or our partners must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements.

The regulatory approval procedure varies among countries and can involve additional testing and data review.

The requirements governing marketing authorization, the conduct of clinical trials, pricing and reimbursement vary from country to country.

Approval by FDA does not ensure approval by the EMA, and approval by one foreign regulatory authority does not ensure approval by regulatory agencies in other foreign countries or by FDA.

The time required to obtain regulatory approval outside the U.S.

and EU may differ from that required to obtain FDA or EU approval.

The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval discussed in these “Risk Factors” and we may not obtain foreign regulatory approvals on a timely basis, or at all.

In addition, even if we were able to obtain regulatory approval for a product in one or more foreign jurisdictions, we may need to complete additional requirements to maintain that approval and our ability to market the product in the applicable jurisdiction.

Our operating results are unpredictable and may fluctuate.

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● the timing, cost and level of investment in our research and development activities as well as expenditures we will or may incur to acquire or develop additional technologies, products and product candidates, or in preparation for potential commercialization of our product candidates.

In addition, the number of procedures in which OMIDRIA or any of our product candidates, if commercialized, would be used may be significantly less than the total number of such procedures performed or total possible market size.

These and other factors, including our limited history of product sales since the reinstatement of pass-through reimbursement for OMIDRIA, make it difficult for us to forecast and provide accurate guidance (including updates to prior guidance) related to our expected financial performance.

In addition, the number of procedures or cases in which OMIDRIA or any of our product candidates, if commercialized, would be used may be significantly less than the total number of such procedures performed or total possible market size.

These and other factors, including multiple changes in the reimbursement status for OMIDRIA since initially approved, make it difficult for us to forecast and provide accurate guidance (including updates to prior

guidance) related to our expected financial performance.

If our operating results are below the expectations of securities analysts or investors, the trading price of our stock could decline.

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● continue research and development in our programs;

● make principal, interest and fee payments as required under our 6.25% Convertible Senior Notes due 2023 (the “Convertible Notes”);

● make principal, interest and fee payments as required under our 6.25% Convertible Senior Notes due 2023 (the “2023 Notes”) and 5.25% Convertible Senior Notes due 2026 (the “2026 Notes” and together with the 2023 Notes, the “Convertible Notes”);

● commercialize and launch product candidates for which we may receive regulatory approval.

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Any of these actions could limit the amount of revenue we are able to generate and harm our business and prospects.

Management, as well as our independent registered public accounting firm, have concluded that a substantial doubt is deemed to exist concerning our ability to continue as a going concern.

As further discussed in Part II, Item 8, “Note 1--Organization and Basis of Presentation” to our Consolidated Financial Statements in this Annual Report on Form 10-K, substantial doubt is deemed to exist about the company’s ability to continue as a going concern through March 2, 2021.

Our financial statements do not include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Our ability to continue as a going concern will require us to generate positive cash flow from operations, obtain additional financing, enter into strategic alliances and/or sell assets.

Our limited cash resources and our potential inability to continue as a going concern may materially adversely affect our share price and our ability to raise new capital, enter into strategic alliances and/or make our scheduled debt payments on a timely basis or at all.

If we become unable to continue as a going concern, we may have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

We are subject to extensive government regulation and the failure to comply with these regulations may have a material adverse effect on our operations and business.

Both before and after approval of any product, we and our suppliers, contract manufacturers and clinical investigators are subject to extensive regulation by governmental authorities in the U.S.

and other countries, covering, among other things, testing, manufacturing, quality control, clinical trials, post-marketing studies, risk management plans, labeling, advertising, promotion, distribution, import and export, governmental pricing, price reporting and rebate requirements.

and other countries, covering, among other things, testing, manufacturing, quality control, clinical trials, post-marketing studies, reporting, risk management plans, labeling, advertising, promotion, distribution, import and export, governmental pricing, price reporting and rebate requirements.

Failure to comply with applicable requirements could result in one or more of the following actions:

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and disruptions to our business.

Further, government investigations into potential violations of these laws would require us to expend considerable resources and face adverse publicity and the potential disruption of our business even if we are ultimately found not to have committed a violation.

Further, government investigations into potential violations of these laws

would require us to expend considerable resources and face adverse publicity and the potential disruption of our business even if we are ultimately found not to have committed a violation.

Obtaining FDA approval of our product candidates requires substantial time, effort and financial resources and may be subject to both expected and unforeseen delays, and there can be no assurance that any approval will be granted on any of our product candidates on a timely basis, if at all.

Even if we discuss with, and obtain feedback from, the FDA regarding our proposed clinical trials, clinical data collection protocols and nonclinical studies before initiating those trials or studies, the FDA may decide that the design of our clinical trials or clinical data collection protocols as actually run, or our resulting data, are insufficient for approval of our product candidates and may require us to run additional preclinical, clinical or other studies or perform additional work related to chemistry, manufacturing and controls.

In addition, we, the FDA or an independent institutional review board or ethics committee may suspend or terminate human clinical trials at any time on various grounds, including a finding that the patients are or would be exposed to an unacceptable health risk or because of the way in which the investigators on whom we rely carry out the trials.

If we are required to conduct additional trials or to conduct other testing of our product candidates beyond that which we currently contemplate for regulatory approval, if we are unable to complete our clinical trials or other testing successfully, or if the results of these and other trials or tests fail to demonstrate efficacy or raise safety concerns, we may face substantial additional expenses, be delayed in obtaining marketing approval for our product candidates or may never obtain marketing approval.

Even if we discuss with, and obtain feedback from, FDA regarding our proposed clinical trials, clinical data collection protocols and nonclinical studies before initiating those trials or studies, FDA may decide that the design of our clinical trials or clinical data collection protocols as actually run, or our resulting data, are insufficient for approval of our product candidates and may require us to run additional preclinical, clinical or other studies or perform additional work related to chemistry, manufacturing and controls.

In addition, we, FDA or an independent institutional review board or ethics committee may suspend or terminate human clinical trials at any time on various grounds, including a finding that the patients are or would be exposed to an unacceptable health risk or because of the way in which the investigators on whom we rely carry out the trials.

We are subject to extensive government regulation of the testing of our investigational products, including the requirement that we conduct all of our clinical trials in accordance with FDA’s GCP requirements and similar requirements outside of the United States.

If we are unable to comply with these requirements, if we are required to conduct additional trials or to conduct other testing of our product candidates beyond that which we currently contemplate for regulatory approval, if we are unable to complete our clinical trials or other testing successfully, or if the results of these and other trials or tests fail to demonstrate efficacy or raise safety concerns, we may face substantial additional expenses, be delayed in obtaining marketing approval for our product candidates or may never obtain marketing approval.

We are also required to comply with extensive governmental regulatory requirements after a product has received marketing authorization.

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We are required to comply with other post-marketing requirements including current Good Manufacturing Practices, advertising and promotion restrictions, pharmacovigilance requirements including risk management activities, reporting and recordkeeping obligations, and other requirements.

As a result of any of these or other problems, a product’s regulatory approval could be withdrawn, which could harm our business and operating results.

As a result of any of these or other problems or failure to comply with our regulatory obligations, a product’s regulatory approval could be withdrawn, which could harm our business and operating results.

In addition, we must maintain an effective healthcare compliance program in order to comply with U.S.

and other laws applicable to marketed drug products and, in particular, laws (such as the Anti-Kickback Statute, the False Claims Act and the Sunshine Act) applicable when drug products are purchased or reimbursed by a federal or state healthcare program.

laws such as the Foreign Corrupt Practices Act prohibit the offering or payment of bribes or inducements to foreign public officials, including potentially physicians or other medical professionals who are employees of public health care entities in jurisdictions outside the U.S.

In addition, many countries have their own laws similar to the healthcare compliance laws that exist in the U.S.

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If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

There is uncertainty with respect to the impact that health care reform legislation may have on coverage and reimbursement for healthcare items and services covered by plans that are authorized by the 2010 Affordable Care Act (“ACA”).

President Trump and various members of Congress have expressed a desire to repeal all or portions of the ACA and, in December 2017, portions of the ACA dealing with the individual mandate insurance requirement were effectively repealed by the Tax Cuts and Jobs Act of 2017.

Congress and/or President Trump may seek to repeal other aspects of the ACA.

In December 2018, a federal district court judge in Texas found the ACA’s individual mandate to be unconstitutional and therefore the entire law to be invalid.

In December 2019, the Fifth Circuit affirmed the ruling regarding the individual mandate but remanded the case to the district court for additional analysis of the question of severability and whether portions of the law remain valid.

The case has been appealed to the Supreme Court and on March 2, 2020, the Supreme Court announced that it would hear oral argument during its next term.

President Trump, the Secretary of Health and Human Services, various members of Congress and CMS have made statements and/or

issued proposals regarding containment of drug prices through various means, including measures designed to enable CMS greater power to negotiate U.S.

drug pricing and/or set reimbursement based on an index of international drug prices, pricing transparency measures, and reforms that would empower Part D sponsors and Medicare Advantage plans to more aggressively use prior authorization and step therapy as a means to control prescription drug costs.

We cannot predict the ultimate content, timing or effect of any healthcare reform legislation, rulemaking or executive order, or the impact that the resulting changes may have on us.

There is uncertainty with respect to the impact that healthcare reform legislation and the policies of the Biden administration may have on coverage and reimbursement for healthcare items and services covered by plans that are authorized by the ACA.

We expect that the ACA, if it remains in effect, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and apply downward pressure on the price that we receive for any approved product.

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

Any reduction in reimbursement from Medicare or other government

programs may result in a similar reduction in payments from private payers.

If the ACA were to be invalidated by the Supreme Court or repealed, any resulting reduction in the percentage of the U.S.

population that has healthcare insurance could reduce the market for our products.

The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate sufficient revenue, attain and/or maintain profitability or commercialize our product candidates.

We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on OMIDRIA or the marketing approvals of our product candidates, if any, may be.

Failure to obtain and maintain regulatory approval in foreign jurisdictions would prevent us from marketing our products internationally.

We intend to have OMIDRIA and our product candidates, if approved, marketed outside the U.S.

In order to market our products in non-U.S.

jurisdictions, we or our partners must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements.

The regulatory approval procedure varies among countries and can involve additional testing and data review.

The requirements governing marketing authorization, the conduct of clinical trials, pricing and reimbursement vary from country to country.

Approval by the FDA does not ensure approval by the European Medicines Agency (“EMA”), and approval by one foreign regulatory authority does not ensure approval by regulatory agencies in other foreign countries or by the FDA.

The time required to obtain regulatory approval outside the U.S.

and EU may differ from that required to obtain FDA or EU approval.

We may face a variety of risks associated with international operations that, if realized, could materially adversely affect our business.

We may be subject to additional risks for OMIDRIA or any of our product candidates that are marketed outside the U.S., including:

● reduced protection for intellectual property rights;

● unexpected changes in tariffs, trade barriers and regulatory requirements, including those associated with the withdrawal of the United Kingdom from the EU;

● economic weakness, including inflation, or political instability in particular foreign economies and markets;

● foreign currency fluctuations and other obligations incident to doing business in another country;

● business interruptions resulting from geopolitical actions, including war and terrorism, adverse public health developments such as the outbreak of the COVID-19 coronavirus, or natural disasters including earthquakes, typhoons, floods and fires.

Any of these risks, if realized, could increase our operating expenses and reduce our revenues.

We have no internal capacity to manufacture commercial or clinical supplies of OMIDRIA or our product candidates and intend to rely solely on third-party manufacturers.

We have no internal capacity to manufacture commercial or clinical supplies of OMIDRIA or our product candidates and intend to continue to rely solely on third-party manufacturers.

If the contract manufacturers that we rely on experience difficulties manufacturing and supplying OMIDRIA or our product candidates, or fail FDA or other regulatory inspections, our clinical trials, regulatory submissions and ability to sell OMIDRIA or any other commercialized product and generate revenue may be significantly limited or delayed.

We rely and intend to continue to rely on third-party manufacturers to produce commercial quantities of OMIDRIA and clinical drug supplies of our product candidates that are needed for clinical trials and to support NDAs, BLAs, or similar applications to regulatory authorities seeking marketing approval for our product candidates, as well as to produce inventory of our product candidates in anticipation of potential commercialization.

We cannot provide any assurance that we will be able to enter into or maintain these types of arrangements on commercially reasonable terms, or at all.

If we or the manufacturer were to terminate one of these arrangements early, or the manufacturer was unable to supply product quantities sufficient to meet our requirements, we would be required to transfer manufacturing to an approved alternative facility and/or establish additional manufacturing and supply arrangements.

If we or one of our manufacturers were to terminate one of these arrangements early, or the manufacturer was unable to supply product quantities sufficient to meet our requirements, we would be required to transfer manufacturing to an approved alternative facility and/or establish additional manufacturing and supply arrangements.

We may also need to establish additional or replacement manufacturers, potentially with little or no notice, in the event that one of our manufacturers fails to comply with FDA and/or other pharmaceutical manufacturing regulatory requirements.

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There are only a limited number of manufacturers of biologic drug products and we may be unable to enter into agreements on commercially reasonable terms with a sufficient number of them to meet clinical or commercial demand, if at all.

The regulatory requirements for commercial supply are more stringent than for clinical supply and we cannot guarantee that a contract manufacturer producing drug product for clinical trials will be able to complete in a successful and timely manner the appropriate validation processes or obtain the necessary regulatory approvals for marketing approval and commercial supply in a timely manner or at all.

Our contract manufacturers may encounter difficulties with formulation, manufacturing, supply chain and/or release processes that could result in delays in clinical trials and/or regulatory submissions or that could impact adversely the commercialization of our products or product candidates, as well as in the initiation of enforcement actions by the FDA and other regulatory authorities.

The regulatory requirements for commercial supply are more stringent than for clinical supply and we cannot guarantee that a contract manufacturer producing drug product for clinical trials will be able to complete successfully the appropriate validation processes or obtain the necessary regulatory approvals for marketing approval and commercial supply in a timely manner or at all.

For example, our manufacturers are required to comply with FDA’s GMP requirements and are subject to periodic inspections by FDA.

If our manufacturers are unable to comply with FDA requirements, they may be unable to meet our supply needs.

These difficulties also could result in the recall or withdrawal of a product from the market or a failure to have adequate supplies to meet market demand.

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Ingredients, excipients, test kits and other materials necessary to manufacture OMIDRIA or our product candidates may not be available on commercially reasonable terms, or at all, which may adversely affect the sales of OMIDRIA or development and commercialization of our product candidates.

OMIDRIA and our product candidates for our clinical trials and, to the extent approved or commercialized, for commercial distribution.

We and our third-party manufacturers must obtain from third-party suppliers the APIs, excipients, and/or other raw materials plus primary and secondary packaging materials necessary for our contract manufacturers to produce OMIDRIA and our product candidates for our clinical trials and, to the extent approved or commercialized, for commercial distribution.

Although we have entered or intend to enter into agreements with third-party suppliers that will guarantee the availability and timely delivery of APIs, excipients, test kits and materials for OMIDRIA and our product candidates, we have not yet entered into agreements for the supply of all such ingredients, excipients, test kits or materials, and we may be unable to secure all such supply agreements or guarantees on commercially reasonable terms, if at all.

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Clinical trials and clinical data protocols can be delayed for a variety of reasons, including:

● discussions with the FDA, the EMA or other foreign authorities regarding the scope or design of our clinical trials or clinical data collection protocols;

● discussions with FDA, the EMA or other foreign authorities regarding the scope or design of our clinical trials or clinical data collection protocols;

● delays or the inability to obtain required approvals from institutional review boards, ethics committees or other responsible entities at clinical sites selected for participation in our clinical trials;

● delays in enrolling patients into clinical trials, collecting data from enrolled patients or collecting historical control data for any reason including disease severity, trial or data collection protocol design, study eligibility criteria, patient population size ( e.g.

, for orphan diseases or for some pediatric indications), proximity and/or availability of clinical trial sites for prospective patients, availability of competing therapies and clinical trials, regional differences in diagnosis and treatment, perceived risks and benefits of the product or product candidate, physician patient referral practices, disruptions due to external events, including an outbreak of pandemic or contagious disease such as the COVID-19 coronavirus, which as described above has caused an enrollment delay in the small cohort of our Phase 2 clinical trial of narsoplimab in patients with IgA nephropathy that is being conducted exclusively at sites in Hong Kong and focuses on subcutaneous dosing and associated biomarkers, or the ability to monitor patients adequately before and after treatment;

● lower than anticipated retention rates of patients in clinical trials;

● the need to repeat or conduct additional clinical trials as a result of inconclusive or negative results, failure to replicate positive early clinical data in subsequent clinical trials, failure to deliver an efficacious dose of a product candidate, poorly executed testing, a failure of a clinical site to adhere to the clinical protocol, an unacceptable study design or other problems;

● adverse findings in clinical or nonclinical studies related to the safety of our product candidates in humans;

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● the need to qualify new suppliers of product candidate materials for FDA and foreign regulatory approval;

● an unfavorable inspection or review by the FDA or other regulatory authority of a clinical trial site or records of any clinical investigation;

● an unfavorable inspection or review by FDA or other regulatory authority of a clinical trial site or records of any clinical investigation;

● the occurrence of unacceptable drug-related side effects or adverse events experienced by participants in our clinical trials;

● the suspension by a regulatory agency of a trial by imposing a clinical hold;

● the amendment of clinical trial or data collection protocols to reflect changes in regulatory requirements and guidance or other reasons as well as subsequent re-examination of amendments to clinical trial or data collection protocols by institutional review boards or ethics committees.

In addition, our clinical trial or development programs have been, and in the future may be, suspended or terminated by us, the FDA or other regulatory authorities, or institutional review boards or ethics committees due to a number of factors, including:

In addition, our clinical trial or development programs have been, and in the future may be, suspended or terminated by us, FDA or other regulatory authorities, or institutional review boards or ethics committees due to a number of factors, including:

● failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;

● inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;

● inspection of the clinical trial operations or trial sites by FDA or other regulatory authorities resulting in the imposition of a clinical hold;

● our failure to comply with our regulatory obligations as a sponsor of clinical research, such as adverse event reporting, control of study drug, adequate study monitoring, and other obligations;

● the failure to remove a clinical hold in a timely manner, if at all;

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Generic drug manufacturers could seek approval to market a generic version of our products or challenge our intellectual property rights with respect to our product candidates.

If we choose to go to court or take other action to enforce our intellectual property rights, we may become subject to claims that our underlying patents are invalid or should not be enforced against that third-party.

These lawsuits are expensive and would consume time and other resources even if we were successful in stopping the infringement of our patents.

In addition, a lawsuit could result in a finding that some or all of the claims of one or more of our relevant patents are invalid, unenforceable and/or not infringed, and could result in a generic version of any of our products being launched prior to the expiration of our related patents.

There is also the risk that, even if the validity of these patents is upheld, a court will refuse to stop the other party on the ground that such other party’s activities do not infringe our patents.

It may not be feasible to detect and undertake patent enforcement action to stop infringing activity by a number of individual entities, each on a small scale, such as compounding pharmacies.

Further, our industry has produced a large number of patents and it is not always clear which patents cover various types of products or methods of use.

A third party may claim that we or our contract manufacturers are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging in the alleged infringing activity, including making, using or selling our

products and product candidates.

These lawsuits are costly and could affect our results of operations and divert the attention of managerial and technical personnel.

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The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.

● we may not be able to generate sufficient data to support full patent applications that protect the entire breadth of developments in one or more of our programs or platforms;

● it is possible that one or more of our pending patent applications will not become an issued patent or, if issued, that the patent(s) will be sufficient to protect our technology, provide us with a basis for commercially viable products or provide us with any competitive advantages;

● if our pending applications issue as patents, they may be challenged by third parties as not infringed, invalid or unenforceable under U.S.

or foreign laws;

● if issued, the patents under which we hold rights may not be valid or enforceable.

In addition, to the extent that we are unable to obtain and maintain patent protection for one of our products or product candidates or in the event that such patent protection expires or is limited to method of use patent protection, it may no longer be cost-effective to extend our portfolio by pursuing additional development of a product or product candidate for follow-on indications.

effective to extend our portfolio by pursuing additional development of a product or product candidate for follow-on indications.

We also may rely on trade secrets to protect our technologies or products, especially where we do not believe patent protection is appropriate or obtainable.

However, trade secrets are difficult to protect.

Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisers may unintentionally or willfully disclose our information to competitors.

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Our indebtedness and liabilities could limit the cash flow available for our operations and expose us to risks that could adversely affect our business, financial condition and results of operations.

In November 2018 we issued $210.0 million aggregate principal amount of our Convertible Notes, and as of December 31, 2019 we had approximately $2.8 million of outstanding finance lease obligations.

As of December 31, 2020, we had issued $320.0 million total aggregate principal amount of our 2023 Notes and 2026 Notes, and we had approximately $1.8 million of outstanding finance lease obligations.

We may incur additional indebtedness to meet future financing needs.

Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things:

● increasing our vulnerability to adverse economic and industry conditions;

● limiting our ability to obtain additional financing;

Our existing and future indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things:

● requiring a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes;

● limiting our ability to obtain additional financing;

● limiting our flexibility to plan for, or react to, changes in our business;

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● placing us at a possible competitive disadvantage with competitors that are less leveraged than we are or have better access to capital;

● increasing our vulnerability to adverse economic and industry conditions.

Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness, including the Convertible Notes, depends on our future performance, which is subject to many factors, including, economic, financial, competitive and other circumstances beyond our control.

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Our competitors may develop products that are less expensive, safer or more effective, or which may otherwise diminish or eliminate the success of any products that we may commercialize.

We may not achieve commercial success if our competitors, many of whom have significantly more resources and experience than we, market products that are safer, more effective, less expensive or faster to reach the market than any

products that we may develop and commercialize.

Our competitors also may market a product that proves to be unsafe or ineffective, which may affect the market for our competing product, or future product, regardless of the safety or efficacy of our product.

The failure of OMIDRIA or any future product that we may market to compete effectively with products marketed by our competitors would impair our ability to generate revenue, which would have a material adverse effect on our future business, our financial condition and our results of operations.

The failure of OMIDRIA or any future product that we may market to compete effectively with

products marketed by our competitors would impair our ability to generate revenue, which would have a material adverse effect on our future business, our financial condition and our results of operations.

The loss of members of our management team could substantially disrupt our business operations.

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We rely on highly skilled personnel and, if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to maintain our operations or grow effectively.

Our performance is largely dependent on the talents and efforts of highly skilled individuals.

Our performance is largely dependent on the talents and efforts of highly skilled individuals, many of whom possess specialized expertise that may be difficult to replace.

Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization.

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We may encounter difficulties managing our growth, which could delay our business plans or adversely affect our results of operations.

To manage our future growth, we must continue to implement and improve our managerial, operational and financial systems and continue to recruit and train additional qualified personnel.

Due to our limited financial resources, we may not be able to manage effectively the expansion of our operations or recruit and train additional qualified personnel.

The physical expansion of our operations may lead to significant costs and may divert our management and business development resources.

To manage our future growth, we must continue to implement and improve our managerial, operational and financial systems and continue to recruit, train and retain qualified personnel.

We may not be able to implement necessary business processes and systems, recruit, train and retain additional qualified personnel and otherwise manage the growth of our enterprise due to factors such as limited financial resources and competition for qualified personnel within local, national and international markets.

The expansion of our operations may lead to significant costs and may divert our management and business development resources.

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

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Our credit facility contains restrictive covenants that may limit our operating flexibility.

In August 2019, we entered into a loan and security agreement with SVB, under which we may borrow up to the lesser of $50.0 million and 85.0% of our eligible accounts receivable, less certain reserves .

In August 2019, we entered into a loan and security agreement with Silicon Valley Bank (“SVB”), under which we may borrow up to the lesser of $50.0 million and 85.0% of our eligible accounts receivable, less certain reserves .

The credit facility contains restrictive covenants that limit our ability to transfer or dispose of assets, merge with other companies or consummate certain changes of control, acquire other companies, incur additional indebtedness and liens and enter into new businesses.

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In addition, product liability insurance for the biopharmaceutical industry is generally expensive to the extent it is available at all.

There can be no assurance that we will be able to obtain or maintain such insurance on acceptable terms or that we will be able to secure and maintain increased coverage for OMIDRIA or for our product candidates, if commercialization progresses, or that future claims against us will be covered by our product liability insurance.

Further, our product liability insurance coverage may not reimburse us or may be insufficient to reimburse us for any or all expenses or losses we may suffer.

Further, our product liability insurance coverage may not provide coverage for or may be insufficient to reimburse us for any or all expenses or losses we may suffer.

A successful claim against us with respect to uninsured liabilities or in excess of insurance coverage could have a material adverse effect on our business, financial condition and results of operations.

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If these third parties do not perform as contractually required or otherwise expected, or if we fail to adequately supervise or monitor these parties, we may not be able to obtain regulatory approval for or commercialize our product candidates.

We rely on third parties, such as CROs, medical and research institutions and clinical investigators, to conduct a portion of our preclinical research and assist us in conducting our clinical trials.

We rely on third parties, such as CROs, medical and research institutions and clinical investigators, to conduct a portion of our preclinical research, assist us in conducting our clinical trials or to conduct third party-sponsored clinical trials of our products and product candidates.

Nonetheless, we are responsible for confirming that our preclinical research and clinical trials are conducted in accordance with applicable regulations, the relevant trial protocol and within the context of approvals by an institutional review board or ethics committee, and we may not always be successful in ensuring such compliance.

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We are subject to a variety of federal, state and local regulations relating to the use, handling, storage and disposal of these materials.

Although we believe that our safety procedures for handling and disposing of these materials comply with applicable legal regulations, the risk of accidental contamination or injury from these materials cannot be

We generally contract with third parties for the disposal of such substances and store our low-level radioactive waste at our facility until the materials are no longer considered radioactive.

We generally contract with third parties for the disposal of such substances and store our low-level

radioactive waste at our facility until the materials are no longer considered radioactive.

We may be required to incur further costs to comply with current or future environmental and safety regulations.

In addition, although we carry insurance, in the event of accidental contamination or injury from these materials, we could be held liable for any damages that result and any such liability could exceed our insurance coverage and other resources.

General Risk Factors Related to our Business

Cyber-attacks or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption of our business operations.

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In addition, we may suffer reputational harm or face litigation or adverse regulatory action as a result of cyber-attacks or other data security breaches and may incur significant additional expense to implement further data protection measures.

Risks Related to Our Common Stock

Our stock price has been and may continue to be volatile, and the value of an investment in our common stock may decline.

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As of December 31, 2020, we also had approximately 4.1 million shares of common stock reserved for future issuance under our employee benefit plans that are not subject to outstanding options.

Further, to the extent we issue common stock upon conversion of the Convertible Notes, such conversion would dilute the ownership interests of existing stockholders despite the expected reduction of such dilution as a result of the capped call transaction that we entered into in connection with issuance of the Convertible Notes.

Further, to the extent we issue common stock upon conversion of the Convertible Notes, such conversion would dilute the ownership interests of existing stockholders despite the expected reduction of such dilution as a result of the capped call transactions that we entered into in connection with the original issuances of the Convertible Notes.

If the holders of outstanding options or warrants elect to exercise some or all of them, or if the shares subject to our employee benefit plans are issued and become eligible for sale in the public market, or we issue common stock upon conversion of the Convertible Notes, our shareholders would experience dilution and the market price of our common stock could decline.

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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