Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
OMEROS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(unaudited)
March 31,
December 31,
2021
2020
Assets
Current assets:
Cash and cash equivalents
$
9,028
$
10,501
Short-term investments
91,455
124,452
Receivables, net
24,826
3,841
Inventory
1,191
1,355
Prepaid expense and other assets
5,982
11,136
Total current assets
132,482
151,285
Property and equipment, net
2,173
2,551
Right of use assets
24,994
25,526
Restricted investments
1,054
1,055
Advanced payments, non-current
741
625
Total assets
$
161,444
$
181,042
Liabilities and shareholders’ deficit
Current liabilities:
Accounts payable
$
11,499
$
4,199
Accrued expenses
28,132
28,755
Current portion of lease liabilities
3,803
3,782
Total current liabilities
43,434
36,736
Lease liabilities, non-current
27,806
28,770
Unsecured convertible senior notes, net
312,159
236,288
Commitments and contingencies (Note 9)
Shareholders’ deficit:
Preferred stock, par value $ 0.01 per share, 20,000,000 shares authorized; none issued and outstanding at March 31, 2021 and December 31, 2020.
—
—
Common stock, par value $ 0.01 per share, 150,000,000 shares authorized at March 31, 2021 and December 31, 2020; 62,252,012 and 61,671,231 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively.
622
616
Additional paid-in capital
689,882
751,304
Accumulated deficit
( 912,459 )
( 872,672 )
Total shareholders’ deficit
( 221,955 )
( 120,752 )
Total liabilities and shareholders’ deficit
$
161,444
$
181,042
See accompanying Notes to Condensed Consolidated Financial Statements
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OMEROS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
(unaudited)
Three Months Ended
March 31,
2021
2020
Product sales , net
$
21,061
$
23,537
Costs and expenses:
Cost of product sales
263
267
Research and development
33,358
28,911
Selling, general and administrative
18,052
18,036
Total costs and expenses
51,673
47,214
Loss from operations
( 30,612 )
( 23,677 )
Interest expense
( 4,897 )
( 5,903 )
Other income
419
549
Net loss
$
( 35,090 )
$
( 29,031 )
Comprehensive loss
$
( 35,090 )
$
( 29,031 )
Basic and diluted net loss per share
$
( 0.57 )
$
( 0.53 )
Weighted-average shares used to compute basic and diluted net loss per share
61,928,511
54,299,813
See accompanying Notes to Condensed Consolidated Financial Statements
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OMEROS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Three Months Ended March 31,
2021
2020
Operating activities:
Net loss
$
( 35,090 )
$
( 29,031 )
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense
3,271
3,476
Non-cash interest expense
396
2,533
Depreciation and amortization
390
402
Changes in operating assets and liabilities:
Receivables
( 20,985 )
11,068
Inventory
164
( 64 )
Prepaid expenses and other assets
5,038
628
Accounts payable and accrued expenses
6,562
1,847
Net cash used in operating activities
( 40,254 )
( 9,141 )
Investing activities:
Purchases of property and equipment
( 12 )
( 66 )
Purchases of investments
( 3 )
( 3,176 )
Proceeds from the sale and maturities of investments
33,000
14,018
Net cash provided by investing activities
32,985
10,776
Financing activities:
Proceeds upon exercise of stock options and warrants
6,333
2,712
At the market offering costs
( 241 )
—
Payments on finance lease obligations
( 296 )
( 313 )
Net cash provided by financing activities
5,796
2,399
Net (decrease) increase in cash and cash equivalents
( 1,473 )
4,034
Cash and cash equivalents at beginning of period
10,501
3,084
Cash and cash equivalents at end of period
$
9,028
$
7,118
Supplemental cash flow information
Cash paid for interest
$
5,995
$
89
Property acquired under finance lease
$
—
$
22
See accompanying Notes to Condensed Consolidated Financial Statements
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OMEROS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1—Description of Business
Description of Business
We are a commercial-stage biopharmaceutical company committed to discovering, developing and commercializing small-molecule and protein therapeutics for large-market as well as orphan indications targeting inflammation, complement-mediated diseases, disorders of the central nervous system, addiction and immune-related diseases, including cancers. Our first drug product, OMIDRIA ® (phenylephrine and ketorolac intraocular solution) 1%/0.3% , is marketed in the United States (“U.S.”) for use during cataract surgery or intraocular lens replacement. In December 2020, the Centers for Medicare & Medicaid Services (“CMS”) confirmed that OMIDRIA qualifies for separate payment when used on Medicare Part B patients in ambulatory surgery centers (“ASCs”), effective retroactively as of October 1, 2020. OMIDRIA’s pass through status, which had allowed for separate payment when used on Medicare Part B patients in the ASC or hospital setting, had expired on October 1, 2020.
Our drug candidate narsoplimab is the subject of a biologics license application (“BLA”) under priority review by the U.S. Food and Drug Administration (“FDA”) for the treatment of hematopoietic stem cell transplant-associated thrombotic microangiopathy (“HSCT-TMA”). We also have multiple late-stage clinical development programs in our pipeline, which are focused on: complement-mediated disorders, including immunoglobulin A (“IgA”) nephropathy, atypical hemolytic uremic syndrome (“aHUS”) and COVID-19.
Basis of Presentation
Our condensed consolidated financial statements include the financial position and results of operations of Omeros Corporation (“Omeros”) and our wholly owned subsidiaries. All intercompany transactions have been eliminated, and we have determined we operate in one segment. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The information as of March 31,2021 and December 31, 2020 and for the three months ended March 31, 2021 and 2020 includes all adjustments, which include normal recurring adjustments, necessary to present fairly our interim financial information. The Condensed Consolidated Balance Sheet at December 31, 2020 has been derived from our audited financial statements but does not include all of the information and footnotes required by GAAP for audited annual financial information.
The accompanying unaudited condensed consolidated financial statements and related notes thereto should be read in conjunction with the audited consolidated financial statements and related notes thereto that are included in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 1, 2021.
Risks and Uncertainties
The COVID-19 pandemic and the responses to it by various governmental authorities, the medical community and others have had a significant impact on our business. It is not possible to estimate precisely the future impact of COVID-19 on our business, operations or financial results due to the unknown magnitude, duration and outcome of the pandemic.
We have filed with FDA our narsoplimab BLA for HSCT-TMA, which has been granted priority review with an FDA action date of July 17, 2021 under the Prescription Drug User Fee Act. We anticipate, but cannot guarantee, that narsoplimab will receive FDA approval and will launch in the U.S. in 2021. If approved, we cannot fully predict the timing or the magnitude of narsoplimab revenues, but we believe they will be significant. Our sales and marketing
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strategies for the launch of narsoplimab for HSCT-TMA include various milestones at which we commit to incremental spending, providing for flexibility in the timing of costs incurred should the approval of narsoplimab be delayed.
We plan to continue to fund our operations for the next twelve months with our cash and investments from sales of OMIDRIA and, if FDA approval is granted, from sales of narsoplimab for HSCT-TMA. In addition, we may utilize funds available under our line of credit, which allows us to borrow up to 85 % of our available accounts receivable borrowing base, less certain reserves, or $ 50.0 million, whichever is less. We also entered into a sales agreement to sell shares of our common stock, from time to time, up to an aggregate offering amount of $ 150.0 million through an “at the market” equity offering program. Should it be necessary or determined to be strategically advantageous, we could pursue debt financings as well as public and private offerings of our equity securities, similar to those we have previously completed, or other strategic transactions, which may include licensing a portion of our existing technology. Should it be necessary to manage our operating expenses, we would reduce our projected cash requirements by delaying clinical trials, reducing selected research and development efforts, or implementing other restructuring activities.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant items subject to such estimates include revenue recognition, stock-based compensation expense and accruals for clinical trials as well as manufacturing of drug product. We base our estimates on historical experience and on various other factors, including the impact of the COVID-19 pandemic, that we believe are reasonable under the circumstances; however, actual results could differ from these estimates.
Note 2—Significant Accounting Policies
Revenue Recognition
When we enter into a customer contract, we perform the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation.
We generally record revenue from product sales when the product is delivered to our wholesalers. Product sales are recorded net of wholesaler distribution fees and estimated chargebacks, rebates, returns and purchase-volume discounts. Accruals or allowances are established for these deductions in the same period when revenue is recognized, and actual amounts incurred are offset against the applicable accruals or allowances. We reflect each of these accruals or allowances as either a reduction in the related accounts receivable or as an accrued liability depending on how the amount is expected to be settled.
Inventory
Inventory is stated at the lower of cost or market determined on a specific identification basis in a manner that approximates the first-in, first-out (“FIFO”) method. Costs include amounts related to third-party manufacturing, transportation and internal labor and overhead. Capitalization of costs as inventory begins when regulatory approval of the product candidate is reasonably assured in the U.S. or the European Union (“EU”). We expense inventory costs related to product candidates as research and development expenses prior to receiving regulatory approval in the respective territory. Inventory is reduced to net realizable value for excess and obsolete inventories based on forecasted demand.
Right of Use Assets and Related Lease Liabilities
We record operating leases as right-of-use assets and recognize the related lease liabilities equal to the fair value of the lease payments using our incremental borrowing rate when the implicit rate in the lease agreement is not readily available. We recognize variable lease payments when incurred. Costs associated with operating lease assets are
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recognized on a straight-line basis within operating expenses over the term of the lease. We record finance leases as a component of property and equipment and amortize these assets within operating expenses on a straight-line basis to their residual values over the shorter of the term of the underlying lease or the estimated useful life of the equipment. The interest component of a finance lease is included in interest expense and recognized using the effective interest method over the lease term. We account for leases with initial terms of 12 months or less as operating expenses on a straight-line basis over the lease term.
Stock-Based Compensation
Stock-based compensation expense is recognized for all share-based payments based on estimated fair values as of the date of grant. The fair value of our stock options is calculated using the Black-Scholes option-pricing model, which requires judgmental assumptions around volatility, forfeiture rates and expected option term. Compensation expense is recognized over the optionees’ requisite service periods, which is generally the vesting period, using the straight-line method. Forfeiture expense is estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained upon an examination. A valuation allowance is established when it is more likely than not that the deferred tax assets will not be realized.
Recently Adopted Pronouncements
On January 1, 2021, we adopted Accounting Standard Update (“ ASU”) 2020-06, Debt—Debt with Conversion Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) on a modified retrospective basis. ASU 2020-06 removes the separate liability and equity accounting for our convertible senior notes. Consequently, we now account for our convertible senior notes wholly as debt. (See “Note 3 – Net Loss Per Share” and “Note 7 – Unsecured Convertible Senior Notes” for further information)
On January 1, 2021, we adopted ASU 2019-12, Income Taxes (Topic 740), which is intended to simplify various aspects of the income tax accounting guidance, including elimination of the exception to the incremental approach of intra-period tax allocation when there is a loss from continuing operations and income or gain from other items (for example, other comprehensive income). We adopted the standard on a prospective basis and the impact to our consolidated financial statements for the three months ended March 31,2021 was immaterial.
Note 3—Net Loss Per Share
Our potentially dilutive securities include potential common shares related to our stock options, warrant and unsecured convertible senior notes. Diluted earnings per share (“Diluted EPS”) considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. Shares issuable under the unsecured convertible notes are calculated using the if-converted method and are excluded from the below table as their impact is anti-dilutive. Diluted EPS excludes the impact of potential common shares related to our stock options in periods in which the option exercise price is greater than the average market price of our common stock for the period.
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Potentially dilutive securities excluded from Diluted EPS are as follows:
Three Months Ended
March 31,
2021
2020
Outstanding options to purchase common stock
3,453,133
1,659,029
Outstanding warrants to purchase common stock
—
10,901
Total potentially dilutive shares excluded from loss per share
3,453,133
1,669,930
Note 4—Certain Balance Sheet Accounts
Accounts Receivable, net
Accounts receivable, net consist of the following:
March 31,
December 31,
2021
2020
(In thousands)
Trade receivables, net
$
24,576
$
3,771
Sublease and other receivables
250
70
Total accounts receivables, net
$
24,826
$
3,841
Trade receivables net of product return and chargeback allowances were $ 1.5 million and $ 1.2 million as of March 31, 2021 and December 31, 2020, respectively.
Inventory
Inventory consists of the following:
March 31,
December 31,
2021
2020
(In thousands)
Raw materials
$
242
$
109
Work-in-progress
405
462
Finished goods
544
784
Total inventory
$
1,191
$
1,355
Property and Equipment, Net
Property and equipment, net consists of the following:
March 31,
December 31,
2021
2020
(In thousands)
Finance leases
$
5,690
$
5,690
Laboratory equipment
2,910
2,898
Computer equipment
985
985
Office equipment and furniture
625
625
Total cost
10,210
10,198
Less accumulated depreciation and amortization
( 8,037 )
( 7,647 )
Total property and equipment, net
$
2,173
$
2,551
For the three months ended March 31, 2021 and 2020, depreciation and amortization expenses were $ 0.4 million.
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Accrued Expenses
Accrued expenses consist of the following:
March 31,
December 31,
2021
2020
(In thousands)
Sales rebates, fees and discounts
$
6,871
$
3,326
Contract research and development
6,146
7,952
Consulting and professional fees
5,002
5,393
Interest payable
3,703
5,205
Employee compensation
3,665
3,948
Clinical trials
2,007
2,121
Other accrued expenses
738
810
Total accrued expenses
$
28,132
$
28,755
Note 5—Fair-Value Measurements
As of March 31, 2021, and December 31, 2020, all investments were classified as short-term and available-for-sale on the accompanying Condensed Consolidated Balance Sheets. Investment income, which was included as a component of other income, consists of interest earned.
On a recurring basis, we measure certain financial assets at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting standard establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required:
Level 1—Observable inputs for identical assets or liabilities, such as quoted prices in active markets;
Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable; and
Level 3—Unobservable inputs in which little or no market data exists, therefore they are developed using estimates and assumptions developed by us, which reflect those that a market participant would use.
Our fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis are as follows:
March 31, 2021
Level 1
Level 2
Level 3
Total
(In thousands)
Assets:
Money-market funds classified as non-current restricted investments
$
1,054
$
—
$
—
$
1,054
Money-market funds classified as short-term investments
91,455
—
—
91,455
Total
$
92,509
$
—
$
—
$
92,509
December 31, 2020
Level 1
Level 2
Level 3
Total
(In thousands)
Assets:
Money-market funds classified as non-current restricted investments
$
1,055
$
—
$
—
$
1,055
Money-market funds classified as short-term investments
124,452
—
—
124,452
Total
$
125,507
$
—
$
—
$
125,507
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Cash held in demand deposit accounts of $ 9.0 million and $ 10.5 million is excluded from our fair-value hierarchy disclosure as of March 31, 2021 and December 31, 2020, respectively. There were no unrealized gains or losses associated with our investments as of March 31, 2021 or December 31, 2020. The carrying amounts reported in the accompanying Condensed Consolidated Balance Sheets for receivables, accounts payable, other current monetary assets and liabilities approximate fair value.
See “Note7—Unsecured Convertible Senior Notes” for the carrying amount and estimated fair value of our outstanding convertible senior notes.
Note 6—Line of Credit
We have a Loan and Security Agreement with Silicon Valley Bank, which provides for a $ 50.0 million revolving line of credit facility (the “Line of Credit Agreement”). Under the Line of Credit Agreement, we may draw, on a revolving basis, up to the lesser of $ 50.0 million or 85.0 % of our eligible accounts receivable, less certain reserves. Interest on amounts outstanding is payable monthly at the greater of 5.5 % or the prime rate. The line of credit is secured by all our assets excluding intellectual property and development program inventories.
As of March 31, 2021 and December 31, 2020, no amounts were outstanding under the Line of Credit Agreement.
Note 7—Unsecured Convertible Senior Notes
On January 1, 2021, we early adopted ASU 2020-06 on a modified retrospective basis. ASU 2020-06 removes the separate liability and equity accounting for our outstanding convertible senior notes. Consequently, we now account for our convertible senior notes wholly as debt. Adoption of ASU 2020-06 resulted in a cumulative effect adjustment of $ 75.5 million to restore our unsecured convertible notes and additional paid-in capital to the balances without an equity allocation component. The carrying value of the notes are reflective of their face value less unamortized debt issuance costs. Interest expense recognized in future periods will be reduced as a result of accounting for the unsecured convertible notes wholly as a liability measured at amortized cost.
Unsecured convertible senior notes outstanding at March 31, 2021 and December 31, 2020 are as follows:
Balance as of March 31, 2021
2023 Notes
2026 Notes
Total
(In thousands)
Principal amount
$
95,000
$
225,030
$
320,030
Unamortized debt issuance costs
( 1,749 )
( 6,122 )
( 7,871 )
Total unsecured convertible senior notes, net
$
93,251
$
218,908
$
312,159
Fair value of outstanding unsecured convertible senior notes (1)
$
114,119
$
279,431
Amount by which the unsecured convertible senior notes if-converted value exceeds their principal amount
$
19,119
$
54,401
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Balance as of December 31, 2020
2023 Notes
2026 Notes
Total
(In thousands)
Principal amount
$
95,000
$
225,030
$
320,030
Unamortized discount
( 17,101 )
( 60,544 )
( 77,645 )
Unamortized issuance costs attributable to liability component
( 1,481 )
( 4,616 )
( 6,097 )
Total unsecured convertible senior notes, net
$
76,418
$
159,870
$
236,288
Fair value of outstanding unsecured convertible senior notes (1)
$
101,769
$
246,779
Amount by which the unsecured convertible senior notes if-converted value exceeds their principal amount
$
6,769
$
21,749
Equity component
$
25,854
$
63,544
Unamortized issuance costs
( 837 )
( 1,916 )
Net carrying amount of equity component (2)
$
25,017
$
61,628
(1) The fair value is classified as Level 3 due to the limited trading activity for the unsecured convertible senior notes.
(2) Included in the Condensed Consolidated Balance Sheet within additional paid-in capital at December 31, 2020. Upon early adoption of ASU 2020-06 on January 1, 2021, amounts were reclassified to unsecured convertible senior notes, net.
2023 Unsecured Convertible Senior Notes
On November 15, 2018, we issued $ 210.0 million in aggregate principal amount of our 6.25 % convertible senior notes (the “2023 Notes”). The 2023 Notes accrue interest at an annual rate of 6.25 % per annum, payable semi-annually in arrears on May 15 and November 15 of each year. The 2023 Notes mature on November 15, 2023 unless earlier purchased, redeemed or converted in accordance with their terms. On August 14, 2020, we issued the 5.25 % convertible senior notes (the “2026 Notes”) and used approximately $ 125.6 million of the net proceeds to repurchase $ 115.0 million principal amount of the 2023 Notes (see “2026 Unsecured Convertible Senior Notes” below).
The 2023 Notes are convertible into cash, shares of our common stock or a combination thereof, as we elect at our sole discretion. The initial conversion rate is 52.0183 shares of our common stock per $ 1,000 of note principal (equivalent to an initial conversion price of approximately $ 19.22 per share of common stock), subject to adjustment in certain circumstances. To reduce the dilutive impact or potential cash expenditure associated with the conversion of the 2023 Notes, we entered into a capped call transaction (the “2023 Capped Call”), which covers the number of shares of our common stock underlying the 2023 Notes when our common stock is trading between the initial conversion price of $ 19.22 per share and $ 28.84 per share. In connection with the partial repurchase of the 2023 Notes, we entered into a capped call termination contract to unwind a proportionate amount of the 2023 Capped Call. As of March 31, 2021, approximately 4.9 million shares remained outstanding on the 2023 Capped Call.
The following table sets forth total interest expense recognized in connection with the 2023 Notes:
Three Months Ended March 31,
2021
2020
(In thousands)
Contractual interest expense
$
1,484
$
3,281
Amortization of debt issuance costs
150
202
Amortization of debt discount
—
2,331
Total
$
1,634
$
5,814
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2026 Unsecured Convertible Senior Notes
The 2026 Notes are unsecured and accrue interest at an annual rate of 5.25 % per annum, payable semi-annually in arrears on February 15 and August 15 of each year. The 2026 Notes mature on February 15, 2026, unless earlier purchased, redeemed or converted in accordance with their terms.
The initial conversion rate is 54.0906 shares of our common stock per $ 1,000 of note principal (equivalent to an initial conversion price of approximately $ 18.4875 per share of common stock), which equals approximately 12.2 million shares issuable upon conversion, subject to adjustment in certain circumstances.
The 2026 Notes are convertible at the option of the holders on or after November 15, 2025 at any time prior to the close of business on February 12, 2026. Additionally, holders may convert their 2026 Notes at their option at specified times prior to the maturity date only if:
(1) during any calendar quarter, beginning after September 30, 2020, that the last reported sale price per share of our common stock exceeds 130 % of the conversion price of the 2026 Notes for each of at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
(2) during the five consecutive business days immediately after any five -consecutive-trading-day period (such five -consecutive-trading-day period, the “measurement period”) in which the trading price per $ 1,000 principal amount of 2026 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;
(3) there is an occurrence of one or more certain corporate events or distributions of our common stock; or
(4) we call the 2026 Notes for redemption.
At our sole discretion, we may elect to convert the 2026 Notes into cash, shares of our common stock or a combination thereof at maturity. Subject to the satisfaction of certain conditions, beginning August 15, 2023, we may redeem in whole or in part the 2026 Notes at our option at a cash redemption price equal to the principal amount of the 2026 Notes plus any accrued and unpaid interest.
In order to reduce the dilutive impact or potential cash expenditure associated with the conversion of the 2026 Notes, we entered into capped call transactions (the “2026 Capped Calls”). The 2026 Capped Calls will cover the number of shares of common stock underlying the 2026 Notes when our common stock is trading within the range of approximately $ 18.49 and $ 26.10 . However, should the market price of our common stock exceed the $ 26.10 cap, then the conversion of the 2026 Notes would have a dilutive impact or may require a cash expenditure to the extent the market price exceeds the cap price.
The following table sets forth interest expense recognized related to the 2026 Notes:
Three Months Ended
March 31, 2021
(In thousands)
Contractual interest expense
$
2,954
Amortization of debt issuance costs
246
Total
$
3,200
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Future minimum payments for the 2023 and 2026 Notes as of March 31, 2021 are as follows:
(In thousands)
2021
$
—
2022
—
2023
95,000
2024
—
2025
—
2026
225,030
Total future minimum payments under the convertible senior notes
$
320,030
Note 8—Leases
We have an operating lease for our office and laboratory facilities with an initial term that ends in 2027 with two options to extend the lease term by five years . We carry various finance leases for laboratory equipment.
Supplemental lease information is as follows:
Three Months Ended
2021
2020
(In thousands)
Lease cost
Operating lease cost
$
1,583
$
1,509
Finance lease cost:
Amortization
323
357
Interest
63
89
Variable lease cost
813
542
Sublease income
( 418 )
( 293 )
Net lease cost
$
2,364
$
2,204
Cash paid for amounts included in the measurement of lease liabilities is as follows:
Three Months Ended
2021
2020
(In thousands)
Cash payments for operating leases
$
3,381
$
2,136
Cash payments for financing leases
$
354
$
402
Note 9—Commitments and Contingencies
Contracts
We have various agreements with third parties that would collectively require payment of termination fees if we cancelled work as of March 31, 2021.
Development Milestones and Product Royalties
We have licensed a variety of intellectual property from third parties that we are currently developing or may develop in the future. These licenses may require milestone payments in connection with clinical development or commercial milestones as well as low single to low double-digit royalties on the net income or net sales of the product.
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For the three months ended March 31, 2021 and 2020, development milestone expenses were insignificant. We do not owe any royalties on OMIDRIA. Should narsoplimab be approved, we would owe milestone payments to development partners and be obligated to pay low single-digit royalties on net sales of the product.
Note 10—Shareholders’ Deficit
Common Stock and Warrants
On March 1, 2021, we entered into a sales agreement to sell shares of our common stock having an aggregate offering price of up to $ 150.0 million, from time to time, through an “at the market” equity offering program. As of March 31, 2021, we have not sold any shares under this program.
During the three months ended March 31, 2021, a cashless exercise was executed for 43,115 warrants, resulting in the issuance of 24,901 shares of our common stock. As of March 31, 2021, 200,000 warrants remained outstanding with an exercise price of $ 23.00 per share. The warrants expire on April 12, 2023.
Interim Condensed Consolidated Statements of Shareholders’ Deficit
The changes in interim balances of the components of our shareholders’ deficit are as follows:
Additional
Common
Paid-In
Accumulated
Stock
Capital
Deficit
Total
(In thousands)
Balance January 1, 2021
$
616
$
751,304
$
( 872,672 )
$
( 120,752 )
Exercise of stock options
6
6,327
—
6,333
At the market offering costs
—
( 241 )
—
( 241 )
Cumulative effect of adopting ASU 2020-06
—
( 70,779 )
( 4,697 )
( 75,476 )
Stock-based compensation expense
—
3,271
—
3,271
Net loss
—
—
( 35,090 )
( 35,090 )
Balance March 31, 2021
$
622
$
689,882
$
( 912,459 )
$
( 221,955 )
Additional
Common
Paid-In
Accumulated
Stock
Capital
Deficit
Total
(In thousands)
Balance January 1, 2020
$
542
$
625,048
$
( 734,611 )
$
( 109,021 )
Exercise of stock options
3
2,709
—
2,712
Stock-based compensation expense
—
3,476
—
3,476
Net loss
—
—
( 29,031 )
( 29,031 )
Balance March 31, 2020
$
545
$
631,233
$
( 763,642 )
$
( 131,864 )
Note 11—Stock-Based Compensation
Stock-based compensation expense is as follows:
Three Months Ended
March 31,
2021
2020
(In thousands)
Research and development
$
1,480
$
1,447
Selling, general and administrative
1,791
2,029
Total
$
3,271
$
3,476
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The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were applied to all stock option grants:
Three Months Ended
March 31, 2021
Estimated weighted-average fair value
$
13.15
Weighted-average assumptions:
Expected volatility
81
%
Expected life, in years
6.1
Risk-free interest rate
0.71
%
Expected dividend yield
—
%
Stock option activity for all stock plans and related information is as follows:
Weighted-
Average
Aggregate
Exercise
Remaining
Intrinsic
Options
Price per
Contractual Life
Value
Outstanding
Share
(In years)
(In thousands)
Balance at December 31, 2020
11,938,528
$
11.92
Granted
244,500
19.09
Exercised
( 555,880 )
11.39
Canceled
( 69,603 )
15.26
Balance at March 31, 2021
11,557,545
$
12.08
5.9
$
67,933
Vested and expected to vest at March 31, 2021
11,223,195
$
12.03
5.8
$
66,493
Exercisable at March 31, 2021
8,591,292
$
11.55
4.9
$
54,999
As of March 31, 2021, there were 3.0 million unvested options outstanding that will vest over a weighted-average period of 2.5 years and 3.9 million shares were available to grant. The total estimated compensation expense yet to be recognized on outstanding options is $ 22.7 million.
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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.