What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-09 compared with 2021-05-10 · 97 added, 100 removed, 216 unchanged (48% of the section changed)

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Impact of Global Pandemic

The COVID-19 pandemic and the responses to it by various governmental authorities, the medical community and others continue to have a significant impact on our business.

The COVID-19 pandemic had a significant impact on OMIDRIA revenues in 2020.

In March 2020, ambulatory surgery centers (“ASCs”) and hospitals using OMIDRIA postponed nearly all cataract surgery in response to recommendations from government and medical organizations.

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However, by the end of June 2020, the run rate of weekly OMIDRIA sales had recovered to levels approximating those seen prior to the pandemic.

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, especially in light of the severity and transmissibility of virus variants and possible local governmental responses across the U.S.

We are optimistic about the future of OMIDRIA as sales revenues continue to increase.

The pandemic has also resulted in delays or disruptions in our clinical and pre-clinical activities.

It is not possible to estimate precisely the future impact of the COVID-19 pandemic on our business, operations or financial results due to the unknown magnitude, duration and outcome of the pandemic, especially in light of the severity and transmissibility of virus variants and possible local governmental responses across the U.S.

Commercial Product - OMIDRIA ® (phenylephrine and ketorolac intraocular solution) 1%/0.3%

OMIDRIA is approved by FDA for use during cataract surgery or intraocular lens replacement to maintain pupil size by preventing intraoperative miosis (pupil constriction) and to reduce postoperative ocular pain.

Outside the U.S., we have received approval from the European Commission (“EC”) to market OMIDRIA in the European Economic Area (“EEA”) for use during cataract surgery and other IOL replacement procedures for maintenance of intraoperative mydriasis (pupil dilation), prevention of intraoperative miosis and reduction of acute postoperative ocular pain.

Outside the U.S., we maintain authorization from the European Commission (“EC”) to market OMIDRIA in the European Economic Area (“EEA”) for use during cataract surgery and other IOL replacement procedures for maintenance of intraoperative mydriasis (pupil dilation), prevention of intraoperative miosis and reduction of acute postoperative ocular pain.

Sales of OMIDRIA within the EEA or other international territories have not been significant.

OMIDRIA is a proprietary drug product containing two active pharmaceutical ingredients:

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Cataract and other lens replacement surgery involves replacement of the original lens of the eye with an artificial intraocular lens.

OMIDRIA is added to standard irrigation solution used during cataract and lens replacement surgery and is delivered intracamerally, or within the anterior chamber of the eye, to the site of the surgical trauma throughout the procedure.

OMIDRIA is added to standard irrigation solution used during cataract and lens replacement surgery and is delivered intracamerally, or within the

anterior chamber of the eye, to the site of the surgical trauma throughout the procedure.

Preventing pupil constriction is essential for these procedures and, if miosis occurs, the risk of damaging structures within the eye and other complications increases, as does the operating time required to perform the procedure.

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Pass-through reimbursement for OMIDRIA under Medicare Part B expired on October 1, 2020.

In December 2020, in its annual rule on Outpatient Prospective Payments System (“OPPS”) and ASC payments, CMS confirmed that OMIDRIA qualifies for separate payment when used on Medicare Part B patients in ASCs under CMS’ policy for non-opioid pain management surgical drugs.

We believe that CMS will not change its separate payment policy for non-opioid pain management surgical drugs, which has been in effect since 2019.

In December 2020, in its calendar year 2021 Outpatient Prospective Payments System (“OPPS”) and ASC Payments System final rule, CMS determined that, under its policy applicable to certain non-opioid pain management surgical drugs, OMIDRIA qualifies for separate payment when used on Medicare Part B patients in the ASC setting.

CMS’ policy of separately reimbursing non-opioid pain management surgical drugs was first adopted in 2019 and became applicable to OMIDRIA upon the expiration of the drug’s pass-through reimbursement on October 1, 2020.

CMS’ OPPS and ASC Payments Systems proposed rule for calendar year 2022 was released in July 2021 and reconfirmed this policy.

CMS is expected to adopt the final rule in late 2021.

Clinical Development Programs

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MASP-2 is the effector enzyme of the lectin pathway, and the current development focus for narsoplimab is diseases that are strongly associated with activation of the lectin pathway.

FDA is currently reviewing our BLA for narsoplimab in HSCT-TMA, and Phase 3 clinical programs are in process for narsoplimab in IgA nephropathy and aHUS.

Narsoplimab is also being evaluated for treatment of COVID-19 in a late-stage adaptive platform trial and has been administered under compassionate use to treat COVID-19 patients in Italy and in the U.S.

In October 2020, we reported final clinical data from our pivotal trial of narsoplimab in HSCT-TMA, a frequently lethal complication of HSCT.

In November 2020, we completed the rolling submission of our BLA for narsoplimab for the treatment of HSCT-TMA, and FDA accepted the BLA for filing in January 2021 under its Priority Review program.

On May 19, 2021, following our response to an information request, FDA informed us that it had extended its initial review period and that the new action date under the Prescription Drug User Fee Act (“PDUFA”) is October 17, 2021.

Phase 3 clinical programs are also ongoing for narsoplimab in IgA nephropathy and aHUS.

In addition, narsoplimab is being evaluated for treatment of COVID-19 in a nationwide, late-stage adaptive platform trial and has been administered under compassionate use to treat COVID-19 patients in Italy and in the U.S.

Narsoplimab has received multiple designations from FDA and from the EMA across three current indications.

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In the U.S., narsoplimab has received from the FDA (1) breakthrough therapy designation for the treatment of IgA nephropathy and (2) orphan drug designation in IgA nephropathy.

In Europe, narsoplimab has been granted designation as an orphan medicinal product for the treatment of primary IgA nephropathy.

In the EU, narsoplimab has been granted designation as an orphan medicinal product for the treatment of primary IgA nephropathy.

In the U.S., narsoplimab has received from the FDA (1) fast-track designation for the treatment of patients with aHUS and (2) orphan drug designation for the prevention (inhibition) of complement-mediated thrombotic microangiopathies.

In October 2020, we reported final clinical data from our pivotal trial of narsoplimab in HSCT-TMA, a frequently lethal complication of HSCT.

The single-arm, open-label trial included safety and efficacy endpoints that were assessed for (1) all 28 patients who received at least one dose of narsoplimab and (2) patients who received the protocol-specified dosing of at least four weeks of narsoplimab.

The primary efficacy endpoint in the trial was the proportion of patients who achieved designated “responder” status based on improvement in HSCT-TMA laboratory markers and clinical status.

This is referred to as the

“complete response rate.” The primary laboratory markers that were evaluated were platelet count and lactate dehydrogenase (“LDH”) levels, while improvement in clinical status was evaluated based on organ function and transfusions.

Each patient was required to show improvement in both laboratory markers and clinical status to be considered a responder.

All others were considered non-responders.

Among patients who received at least one dose of narsoplimab, the complete response rate was 61% (95% confidence interval [CI] 40.6 to 78.5;

p<0.0001), while the complete response rate among patients who received the protocol-specified narsoplimab treatment of at least four weeks of dosing was 74% (95% CI 51.6 to 89.8;

The response rates and their respective lower levels of the 95% confidence intervals are a multiple of the pre-specified efficacy threshold of 15%.

Secondary endpoints in the trial were survival rates and change from baseline in HSCT-TMA laboratory markers.

Among all treated patients, 68% survived for at least 100 days following HSCT-TMA diagnosis, while 83% of patients who received treatment for at least four weeks and 94% of the responders achieved this endpoint.

Median overall survival was 274 days among all patients and 361 days among patients who received the protocol-specified treatment of at least four weeks.

Median survival could not be estimated for responders because more than half of the responders were alive at last follow-up.

Results also included statistically significant improvements in platelet count, LDH and haptoglobin.

The treated population had multiple high-risk features that portend a poor outcome, including the persistence of HSCT-TMA despite modification of immunosuppression (which was a criterion for entry into the trial), graft-versus-host disease, significant infections, non-infectious pulmonary complications and neurological findings.

The most common adverse events observed in the trial were nausea, vomiting, diarrhea, hypokalemia, neutropenia and fever, which are all common in stem-cell transplant patients.

Six deaths occurred during the trial.

These were due to sepsis, progression of the underlying disease, and graft-versus-host disease with TMA.

All of these are common causes of death in this patient population.

In November 2020, we completed the rolling submission to FDA of our BLA for narsoplimab for the treatment of HSCT-TMA.

The BLA was accepted for filing by FDA and granted priority review, and we have responded to all information requests received to date.

The FDA action date under the Prescription Drug User Fee Act (“PDUFA”) is July 17, 2021.

In Europe, the EMA has confirmed narsoplimab’s eligibility for EMA’s centralized review of a single marketing authorization application (“MAA”) that, if approved, authorizes the product to be marketed in all EU member states and EEA countries.

In the EU, the EMA has confirmed narsoplimab’s eligibility for EMA’s centralized review of a single marketing authorization application (“MAA”) that, if approved, would authorize the product to be marketed in all EU member states and EEA countries.

We are targeting to complete our MAA submission in 2021.

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We believe that the trial design will allow assessment for either full or accelerated approval at 36 weeks based on proteinuria results either (1) across the general population of study patients or (2) in the high-proteinuria subset of patients.

The Phase 3 clinical program in patients with aHUS, in which patient enrollment is ongoing, consists of one Phase 3 clinical trial – a single-arm ( i.e.

The Phase 3 clinical program in patients with aHUS, in which patient recruitment is ongoing, consists of one Phase 3 clinical trial – a single-arm ( i.e.

, no control arm), open-label trial in patients with newly diagnosed or ongoing aHUS.

This trial is targeting approximately 40 patients for full approval in Europe and accelerated approval in the U.S.

with approximately 80 total patients required by FDA for full approval in the U.S.

includes multiple sites in the U.S., Asia and Europe, though enrollment has been slow in part due to prioritizing the use of resources within our narsoplimab programs on HSCT-TMA, COVID-19 and IgA nephropathy.

This trial is targeting approximately 40 patients for full approval in the EU and accelerated approval in the U.S.

and, as required by FDA, approximately 80 total patients for full approval in the U.S.

The trial includes multiple sites in the U.S., Asia and Europe, though enrollment has been slow in part due to prioritizing the use of resources within our narsoplimab programs on HSCT-TMA, COVID-19 and IgA nephropathy.

● MASP-2 - narsoplimab (OMS721) - COVID-19 .

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Narsoplimab was well tolerated and no adverse drug reactions were reported.

Two control groups with similar baseline characteristics were used for retrospective comparison and showed substantial mortality rates of 32% and 53%.

Two control groups with similar baseline characteristics were used for retrospective comparison and showed substantial

mortality rates of 32% and 53%.

A manuscript detailing the results of the initial cohort of Bergamo patients treated with narsoplimab was published in the peer-reviewed journal Immunobiology .

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None of them showed any clinical or laboratory evidence of long-term effects of COVID-19, such as cognitive impairment or cardiac, pulmonary or other organ disorder, commonly seen following resolution of initial COVID-19 symptoms.

Following treatment of the initial six patients under the compassionate use program in Italy, we continued compassionate-use treatment in the U.S.

and have provided treatment for an additional 10 critically ill COVID-19 patients in Italy.

Prior to receiving narsoplimab, all of the patients in this second cohort were severely ill, mechanically ventilated, had multiple comorbidities, and had failed other therapies, including anti-virals, targeted anti-inflammatory therapeutics, convalescent plasma and steroids.

Following treatment with narsoplimab, the laboratory improvements and clinical outcomes of these patients were similar to those seen in the initial cohort of Bergamo patients.

Endothelial damage and resultant thromboses are significant to the pathophysiology of COVID-19, and we believe these data illustrate the importance of inhibiting the lectin pathway to treat critically ill COVID-19 patients.

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We believe that the anticoagulant effects of narsoplimab may provide therapeutic benefits in both HSCT-TMA and COVID-19.

Following treatment of the initial six patients under the compassionate use program in Italy, we continued compassionate-use treatment in the U.S.

Following treatment with narsoplimab, the laboratory improvements and clinical outcomes of these patients are similar to those seen in the initial cohort of Bergamo patients.

Narsoplimab is also the only complement inhibitor included in the I-SPY COVID-19 platform trial sponsored by Quantum Leap Healthcare Collaborative, which is evaluating investigational therapies for the treatment of critically ill COVID-19 patients.

The trial utilizes Quantum Leap Healthcare Collaborative's adaptive platform

trial design, which is intended to increase trial efficiency by minimizing the number of participants and time required to evaluate potential treatments.

Discussions regarding the use of narsoplimab in COVID-19 with leaders across various government agencies, both in the U.S.

and internationally, continue to progress.

The trial utilizes Quantum Leap Healthcare Collaborative's adaptive platform trial design, which is intended to increase trial efficiency by minimizing the number of participants and time required to evaluate potential treatments.

Discussions are ongoing regarding the use of narsoplimab in COVID-19 with leaders across various government agencies, both in the U.S.

and internationally.

● MASP-3 - OMS906 - Alternative Pathway Disorders .

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In September 2020 we began enrollment and dosing in a placebo-controlled, double-blind, single-ascending-dose and multiple-ascending-dose Phase 1 clinical trial to evaluate the safety, tolerability, pharmacodynamics and pharmacokinetics of OMS906.

We have completed dosing all of the intravenous dosing cohorts and the first subcutaneous dosing cohort in the single-ascending dose study.

Initial data from the Phase 1 trial are expected in the second quarter of 2021.

We have completed dosing all of the intravenous dosing cohorts and three subcutaneous dosing cohort in the single-ascending dose study and reported preliminary data from the Phase 1 trial in June 2021.

● PDE7 - OMS527 .

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There was no apparent food effect on plasma exposure to OMS182399.

A manuscript detailing the mechanism of action of PDE7 inhibition in nicotine addiction was published in the peer-reviewed Journal of Neuroscience in July 2021.

Continued clinical development in our PDE7 program is subject to allocation of financial and other resources, which are currently prioritized for other programs.

A manuscript detailing the mechanism of action of PDE7 inhibition in nicotine addiction has been accepted for publication in the peer-reviewed Journal of Neuroscience .

Preclinical Development Programs and Platforms

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These discoveries include (1) identification of cancer-immunity pathways controlled by GPR174, (2) the identification of phosphatidylserine as a natural ligand for GPR174, (3) a collection of novel small-molecule inhibitors of GPR174 and (4) a synergistic enhancement of “tumor-fighting” cytokine production by T cells following the combined inhibition of both GPR174 and the adenosine pathway, another key metabolic pathway that regulates tumor immunity.

We are developing both small-molecule and antibody inhibitors of GPR174 with the objective of moving compounds into human trials and exploring several of our other GPCR targets as well.

We are developing both small-molecule and antibody inhibitors of GPR174 with the objective of moving compounds into human trials.

We are also exploring several of our other GPCR targets.

Financial Summary

We recognized net losses of $35.1 million and $29.0 million for the three months ended March 31, 2021 and 2020, respectively, and our OMIDRIA net revenues were $21.1 million and $23.5 million for the same periods.

As of March 31, 2021, we had $100.5 million in cash and cash equivalents and short-term investments available for general corporate use and $24.8 million in accounts receivable, net.

Fiscal quarters with significantly reduced cataract procedures due to COVID-19

We recognized net losses of $28.6 million and $33.3 million for the three months ended June 30, 2021 and 2020, respectively, and our OMIDRIA net revenues were $28.8 million and $13.5 million for the same periods.

As of June 30, 2021, we had $73.7 million in cash and cash equivalents and short-term investments available for general corporate use and $31.8 million in accounts receivable, net.

Fiscal quarters with significantly reduced cataract procedures due to the COVID-19 pandemic

Pass-through reimbursement expired on October 1, 2020.

In December 2020, separate payment was confirmed for OMIDRIA, effective retroactively as of October 1, 2020.

Pass-through reimbursement for OMIDRIA under Medicare Part B expired on October 1, 2020, which negatively affected our net revenues for September, the fourth quarter of 2020 and the first quarter of 2021.

In December 2020, CMS confirmed that OMIDRIA qualifies for separate payment when used on Medicare Part B patients in ASCs.

CMS’ current non-opioid separate payment policy can be changed by CMS through its OPPS/ASC annual rulemaking and

comment process.

We believe 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.

Pass-through reimbursement for OMIDRIA under Medicare Part B expired on October 1, 2020, which negatively affected our net revenues for the period September 2020 through the first quarter of 2021.

In December 2020, CMS determined that OMIDRIA qualifies for separate payment when used on Medicare Part B patients in ASCs under its policy of separately reimbursing non-opioid pain management surgical drugs.

CMS’ proposed rule on OPPS and ASC payments for calendar year 2022 was released in July 2021 and confirmed CMS’ intention to continue this policy.

CMS is expected to adopt the final rule in late 2021.

We expect our net losses will continue until such time as we derive sufficient revenues from sales of OMIDRIA and/or other sources, such as licensing, product sales and other revenues from our product candidates, that are sufficient to cover our operating expenses and debt service obligations.

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Three Months Ended

Six Months Ended

(In thousands)

Product sales, net

During the three months ended March 31, 2021, OMIDRIA net revenue was $21.1 million as compared to $23.5 million for the three months ended March 31, 2020.

The decrease in revenue during the three months ended March 31, 2021 compared to the same period in the prior year was due to the timing of ASCs’ ability to verify reimbursement status following the December confirmation by CMS of separate payment for OMIDRIA before resuming their OMIDRIA usage.

The lack of Medicare Part B reimbursement in the hospital setting during the quarter ended March 31, 2021 also contributed to the decrease in revenues.

The ongoing COVID-19 pandemic negatively affected the number of cataract procedures performed in the quarter ended March 31, 2020 and, to a lesser extent, the quarter ended March 31, 2021.

With separate payment for OMIDRIA established, we expect OMIDRIA revenues to increase during the second quarter.

During the three months and six months ended June 30, 2021, OMIDRIA net revenue was $28.8 million and $49.9 million as compared to $13.5 million and $37.1 million for the three months and six months ended June 30, 2020.

The increase in revenue during the three-months and six months ended June 30, 2021 compared to the same periods in the prior year was primarily due to the multi-month national and regional COVID-related hiatus in elective surgical

procedures, including cataract procedures, in the spring of 2020 followed by a progressive resumption in these procedures.

Gross-to-Net Deductions

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These deductions are generally referred to as gross-to-net deductions.

Our total gross-to-net provision for the three months ended March 31, 2021 was 31.5% of gross OMIDRIA product sales compared to 32.3% for the three months ended March 31, 2020.

The decrease in gross-to-net deductions as a percentage of sales in 2021 compared to 2020 is due to a reduction in sales returns during the first quarter of 2021 partially offset by an increase in our OMIDRIAssure ® patient assistance and reimbursement program.

A summary of our gross-to-net related accruals for the three months ended March 31, 2021 is as follows:

Our total gross-to-net provision for the three months ended June 30, 2021 was 28.8% of gross OMIDRIA product sales compared to 14.6% for the prior year period.

During the prior year’s quarter ended June 30, we reversed a product return reserve that had been recorded in the first quarter of 2020 when cataract and other elective surgical procedures were severely restricted due to COVID-19.

Without this reversal, gross-to-net between the comparative periods would have been very similar.

Our total gross-to-net provision for the six months ended June 30, 2021 was 29.9% of gross OMIDRIA product sales compared to 26.8% in the prior year period.

The increase was primarily due to an increase in chargebacks in the six months ended June 30, 2021.

A summary of our gross-to-net related accruals for the six months ended June 30, 2021 is as follows:

(In thousands)

Balance as of December 31, 2020

Balance as of March 31, 2021

Balance as of June 30, 2021

Chargebacks and Rebates

We record a provision for estimated chargebacks and rebates at the time we recognize OMIDRIA product sales revenue and reduce the accrual when payments are made or credits are granted.

Our chargebacks are related to a

pharmaceutical pricing agreement, a federal supply schedule agreement, a 340B prime vendor agreement, a Medicaid drug rebate agreement and an off-invoice discount to our ASC and hospital customers.

Our chargebacks are related to a pharmaceutical pricing agreement, a federal supply schedule agreement, a 340B prime vendor agreement, a Medicaid drug rebate agreement and an upfront discount to our ASC and hospital customers.

We also record a provision for our OMIDRIAssure patient assistance and reimbursement program and for rebates under our purchase volume-discount programs.

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direct external expenses, which include clinical research and development, preclinical research and development activities;

internal, overhead and other expenses;

internal, overhead and other

and stock-based compensation expense.

The following table illustrates our expenses associated with these activities:

Three Months Ended

Six Months Ended

(In thousands)

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Total research and development expenses

Total clinical research and development expenses increased $4.3 million for the three months ended March 31, 2021 compared to the same period in the prior year due to timing of narsoplimab drug manufacturing and medical affairs-related activities surrounding the commercial launch of narsoplimab.

During the first quarter of 2021, OMS906 clinical research and development expenses were $1.8 million, which also contributed to the increase in total clinical research and development expenses.

In the prior year quarter, OMS906 expenses of $2.3 million were included as preclinical research and development.

The decrease in preclinical research and development expenses for the three months ended March 31, 2021 compared to the same period in the prior year is primarily due to the migration of OMS906 from preclinical research and development to clinical research and development beginning in the third quarter of 2020 when OMS906 entered Phase 1 clinical trials.

Clinical research and development expenses increased $1.3 million and $5.8 million for the three and six months ended June 30, 2021 compared to the same periods in 2020.

In 2020, OMS906 expenses were included as preclinical research and development costs until the third quarter of 2020 when OMS906 entered Phase 1 clinical trials.

The $5.8 million increase for the six months ended June 30, 2021 is primarily due to higher narsoplimab manufacturing costs in preparation for the anticipated U.S.

marketing approval and commercial launch as well as OMS906 expenses having been included in preclinical research and development costs until the third quarter of 2020, after which those expenses were classified as clinical costs.

These increases were partially offset by decreased costs associated with manufacturing and preclinical toxicology safety studies for OMS527 during the six months ended June 30, 2021.

The $2.2 million and $1.3 million increases in our preclinical research and development expenses for the three and six months ended June 30, 2021 as compared to the same periods in 2020 reflect third-party manufacturing costs related to our OMS1029 program for cell line development and preclinical animal toxicology safety studies, partially offset by the migration of expenses related to our OMS906 program from preclinical research and development costs to clinical costs following the entry of OMS906 into Phase 1 clinical trials in the third quarter of 2020.

The increases in internal, overhead and other expenses are primarily due to additional employee-related costs and additional leased laboratory facilities to support our research and development activities.

We expect overall research and development costs in the second quarter of 2021 to be comparable to the quarter ended March 31, 2021.

We expect overall research and development costs in the third quarter of 2021 to increase over the second quarter of 2021 due to increased costs associated with the expected launch of narsoplimab as well as increased preclinical activities.

At this time, we are unable to estimate with certainty the longer-term costs we will incur in the continued development of our product candidates due to the inherently unpredictable nature of our preclinical and clinical development activities as well as to the potential impacts of the COVID-19 pandemic.

Clinical development timelines, the probability of success and development costs can differ materially as new data become available and as expectations change.

Clinical development timelines, the probability of success and development costs can differ materially from expectations as new data become available or unforeseen difficulties emerge.

Our future research and development expenses will depend, in part, on the preclinical or clinical success of each product candidate as well as on ongoing assessments of each program’s commercial potential.

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Three Months Ended

Six Months Ended

(In thousands)

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Total selling, general and administrative expenses

Total selling, general and administrative expenses did not increase significantly compared to the same period in the prior year.

We expect that our selling, general and administrative expenses will increase during the second quarter of 2021 due to increased pre-commercialization activities for narsoplimab.

Total selling, general and administrative expenses increased by $4.6 million for each of the three and six months ended June 30, 2021 compared to the prior year periods.

The increases were primarily due to increased marketing activities in preparation for the anticipated U.S.

commercial launch of narsoplimab and additional employee-related costs.

We expect that our selling, general and administrative expenses will increase during the third and fourth quarters of 2021 due to increased pre-commercialization and expected commercialization activities for narsoplimab.

Interest Expense

Three Months Ended

Six Months Ended

(In thousands)

Interest expense

Interest expense is comprised of contractual interest and amortization of debt issuance and debt discount related to our 2023 and 2026 Notes as well as to interest on our finance leases.

Interest expense decreased $1.0 million for the three months ended March 31, 2021 compared to the same period in the prior year due to the early adoption of ASU 2020-06, which eliminated the amortization of the non-cash debt discount on the 2023 and 2026 Notes.

Interest expense is comprised of contractual interest and amortization of debt issuance and debt discount related to our 2023 and 2026 Notes as well as interest on our finance leases.

Interest expense decreased $1.0 million for the three months ended June 30, 2021 compared to the same period in the prior year due to the January 1, 2021 adoption of ASU 2020-06, which eliminated the amortization of the non-cash debt discount on the 2023 and 2026 Notes.

This decrease was partially offset by the increase in interest related to our 2026 Notes, which were issued in August and September 2020 (for more information, see “Note 7—Unsecured Convertible Senior Notes”).

Financial Condition - Liquidity and Capital Resources

As of March 31, 2021, we had $100.5 million in cash, cash equivalents and short-term investments available for general corporate use held primarily in money-market accounts as compared to $135.0 million at December 31, 2020.

In addition, as of March 31, 2021, we had $24.8 million in accounts receivable, net.

As of June 30, 2021, we had $73.7 million in cash, cash equivalents and short-term investments available for general corporate use held primarily in money-market accounts as compared to $135.0 million at December 31, 2020.

In addition, as of June 30, 2021, we had $31.8 million in outstanding accounts receivable.

We have historically generated net losses and incurred negative cash flows from operations and debt service.

For the three months ended March 31, 2021,

we incurred a net loss of $35.1 million and incurred negative cash flows from operations of $40.3 million.

The net loss and the negative cash flows from operations in the quarter ended March 31, 2021 were significantly affected by (1) reduced OMIDRIA revenues following expiration of the drug’s pass-through status and the delayed posting by Medicare Administrative Contractors of CMS’ December 2020 determination that OMIDRIA be paid separately under Medicare Part B in the ASC setting, and (2) the COVID-19-related decrease in the number of cataract procedures performed nationally.

FDA accepted our BLA for narsoplimab in HSCT-TMA for priority review with a PDUFA action date of July 17, 2021.

We anticipate, but cannot guarantee, that narsoplimab will receive FDA approval and launch in the U.S.

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 strategies for the launch of narsoplimab for HSCT-TMA include various milestones at which we commit to incremental spending, such as for field sales hiring, providing for flexibility in the timing of costs incurred should the approval of narsoplimab be delayed.

For the three months ended June 30, 2021, we incurred a net loss of $28.6 million and, for the six months ended June 30, 2021, we incurred negative cash flows from operations of $67.8 million.

We are beginning to see normalization following a short period during which OMIDRIA revenues were significantly reduced after expiration of the drug’s pass-through status and as a result of delayed posting by Medicare Administrative Contractors of CMS’ December 2020 determination that OMIDRIA would be paid separately under Medicare Part B in the ASC setting.

The PDUFA action date for our BLA in HSCT-TMA is October 17, 2021.

We anticipate, but cannot guarantee, that narsoplimab will receive FDA approval and commercially launch in the U.S.in 2021.

Our sales and marketing strategies for the launch of narsoplimab for HSCT-TMA include various milestones at which we commit to incremental

spending, such as for field sales hiring, providing for flexibility in the timing of costs incurred should the approval of narsoplimab be delayed.

If approved, we cannot fully predict the timing or the magnitude of narsoplimab revenues.

We plan to fund our operations for the next twelve months with our cash and investments on hand from sales of OMIDRIA and, if FDA approval is granted, from sales of narsoplimab for HSCT-TMA.

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Cash Flow Data

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

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Operating Activities.

Net cash used in operating activities for the three months ended March 31, 2021 increased by $31.1 million as compared to the same period in 2020.

The net increase is primarily due to a $32.1 million reduction in accounts receivable cash collections, a $6.1 million increase in our net loss and a $2.3 million decrease in non-cash charges offset by $4.4 million decrease in prepaids and a $4.7 million increase in accounts payable and accrued expenses.

Net cash used in operating activities for the six months ended June 30, 2021 increased by $21.1 million as compared to the same period in 2020.

The net increase is primarily due to a $47.4 million increase in accounts receivable due to a reduction in receivables in the prior year period caused by reduced revenues resulting from the COVID-19 pandemic.

We are also seeing the impact of net loss adjusted for non-cash charges of $5.3 million due to the adoption of ASU 2020-06, Debt—Debt with Conversion Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).

These uses of cash are partially offset by a $28.1 million increase in accounts payable and accrued expenses as well as a $3.7 million decrease in prepaid expenses.

Investing Activities.

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Because we manage our cash usage with respect to our total cash, cash equivalents and short-term investments, we do not consider fluctuations in cash flows from investing activities to be important to the understanding of our liquidity and capital resources.

Net cash provided by investing activities during the three months ended March 31, 2021 was $33.0 million, an increase of $22.2 million for the same period in 2020 due to net proceeds from investment maturities exceeding investment purchases.

Net cash provided by investing activities during the six months ended June 30, 2021 was $63.4 million, an increase of $20.0 million from the same period in 2020 primarily due to an increase in net proceeds received from investment activities.

Financing Activities.

Net cash provided by financing activities during the three months ended March 31, 2021 was $5.8 million, an increase of $3.4 million compared to the same period in 2020.

The increase was due to incremental cash proceeds from the exercise of our common stock.

Net cash provided by financing activities during the six months ended June 30, 2021 was $6.7 million, an increase of $4.4 million compared to the same period in 2020.

The increase was primarily due to incremental cash proceeds from exercises of options to purchase our common stock.

At the Market Sales Agreement.

On March 1, 2021, we entered into a sales agreement to sell shares of our common stock, from time to time and having an aggregate offering price of up to $150.0 million, through an “at the market” equity offering program.

As of March 31, 2021, we have not sold any shares under this agreement.

As of June 30, 2021, we have not sold any shares under this agreement.

Line of Credit Agreement.

Our Line of Credit Agreement with Silicon Valley Bank provides for a $50.0 million revolving line of credit facility.

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.

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.

The Line of Credit Agreement is secured by all of our assets, excluding intellectual property and development program inventories, and matures on August 2, 2022.

As of March 31, 2021, we had no outstanding borrowings under the Line of Credit Agreement, and we were in compliance with all covenants in all material respects.

See earlier discussion under “Liquidity and Capital Resources” for further detail regarding the availability of the line of credit.

As of June 30, 2021, we had no outstanding borrowings under the Line of Credit Agreement, and we were in compliance with all covenants in all material respects.

Contractual Obligations and Commitments

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We have two five-year options to extend the lease term.

As of March 31, 2021, the remaining aggregate non-cancelable rent payable under the initial term of the lease, excluding common area maintenance and related operating expenses, is $53.8 million.

As of June 30, 2021, the remaining aggregate non-cancelable rent payable under the initial term of the lease, excluding common area maintenance and related operating expenses, is $53.3 million.

Goods and Services

We have certain other non-cancelable obligations under various agreements that relate to goods and services.

As of March 31, 2021, our aggregate firm commitments were $30.9 million.

As of June 30, 2021, our aggregate firm commitments were $33.9 million.

We may be required, in connection with in-licensing or asset acquisition agreements, to make certain royalty and milestone payments and we cannot, at this time, determine when or if the related milestones will be achieved or whether the events triggering the commencement of payment obligations will occur.

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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-Q

Item 2. Management’s Discussion and Analysis