What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-09 compared with 2021-08-09 · 121 added, 82 removed, 231 unchanged (47% of the section changed)

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Our drug product OMIDRIA ® is marketed in the United States for use during cataract surgery or intraocular lens replacement for adult and pediatric patients.

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”).

On October 18, 2021, we announced the receipt of a Complete Response Letter (“CRL”) from the U.S.

Food and Drug Administration (“FDA”) regarding the biologics license application (“BLA”) for our drug candidate narsoplimab for treatment of hematopoietic stem cell transplant-associated thrombotic microangiopathy (“HSCT-TMA”).

Our BLA remains pending and we are engaged in discussions with FDA regarding the CRL and the path to approval of narsoplimab in 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.

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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.

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

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 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.

Outside the U.S., we maintain authorization from the European Commission (“EC”) to market OMIDRIA in the European Economic Area (“EEA”) for use in adults 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.

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ketorolac, an anti-inflammatory agent, and phenylephrine, a mydriatic, or pupil dilating, agent.

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.

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.

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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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.

In November 2021, CMS issued its final OPPS and ASC Payments Systems rule for calendar year 2022.

The 2022 final rule reconfirmed CMS’ policy regarding non-opioid pain management surgical drugs and states that OMIDRIA will continue to receive separate payment when used on Medicare Part B patients in the ASC setting.

Clinical Development Programs

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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.

In October 2021, we received a complete response letter (“CRL”) from FDA regarding the BLA.

FDA expressed difficulty in estimating the treatment effect of narsoplimab in HSCT-TMA and asserted that additional information will be needed to support regulatory approval.

We intend to request a Type A meeting with FDA to discuss the CRL and determine the most expeditious path forward for the approval of narsoplimab in the treatment of HSCT-TMA.

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

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These include:

In the U.S., the FDA has granted narsoplimab (1) breakthrough therapy designation in patients who have persistent TMA despite modification of immunosuppressive therapy and (2) orphan drug designation for the treatment of HSCT-TMA.

The EC also granted narsoplimab a designation as an orphan medicinal product for treatment in hematopoietic stem cell transplantation.

In the U.S., the FDA has granted narsoplimab (1) breakthrough therapy designation in patients who have persistent TMA despite modification of immunosuppressive therapy and (2) orphan

drug designation for the treatment of HSCT-TMA.

In the EU, narsoplimab has been granted designation as an orphan medicinal product for treatment in hematopoietic stem cell transplantation.

● IgA nephropathy:

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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.

We are targeting to complete our MAA submission in early 2022.

In our IgA nephropathy program, patient enrollment continues in the narsoplimab Phase 3 clinical trial, ARTEMIS-IGAN.

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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.

The trial includes multiple sites in the U.S., Asia and Europe;

however, 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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The study evaluated CEC counts in a separate group of four patients receiving only steroids for a short duration, and the counts were found to be unaffected by steroid administration.

This suggests that any beneficial effect of steroids on COVID-19-associated endothelial damage may be delayed and had little effect on the recovery course of the narsoplimab-treated patients who initiated steroid treatment after improving.

This suggests that any beneficial effect of steroids on COVID-19-associated endothelial damage

may be delayed and had little effect on the recovery course of the narsoplimab-treated patients who initiated steroid treatment after improving.

Narsoplimab treatment was associated with rapid and sustained reduction across all of the above-named markers of endothelial damage and inflammation.

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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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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.

and have provided treatment for an additional ten 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.

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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 three subcutaneous dosing cohort in the single-ascending dose study and reported preliminary data from the Phase 1 trial in June 2021.

We have dosed subjects across all dosing cohorts in the single-ascending dose study and reported preliminary data from the Phase 1 trial in June 2021.

OMS906 has been well tolerated at all doses tested and preliminary human pharmacokinetic and pharmacodynamic are consistent with once-monthly subcutaneous dosing and recent data show high level suppression of alternative pathway activity.

We have determined to forego the multiple-ascending dose portion of our Phase 1 trial in healthy subjects and plan to move directly into patients with paroxysmal nocturnal hematuria, or PNH, who have an unsatisfactory response to the C5 inhibitor ravulizumab.

We expect that this will accelerate our overall clinical development program for OMS906 in PNH.

● PDE7 - OMS527 .

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Based on our data, we believe that GPR174 controls a major, previously unrecognized pathway in cancer and modulation of the receptor could provide a seminal advance in immuno-oncologic treatments for a wide range of tumors.

O ur studies in mouse models of melanoma and colon carcinoma found that GPR174-deficiency resulted in significantly reduced tumor growth and improved survival of the animals versus normal mice.

O ur studies in mouse models of melanoma and colon carcinoma found that GPR174-deficiency resulted in

significantly reduced tumor growth and improved survival of the animals versus normal mice.

Our discoveries suggest a new approach to cancer immunotherapy that targets inhibition of GPR174 and can be combined with and significantly improve the tumor-killing effects of other oncologic agents, including radiation, adenosine pathway inhibitors and checkpoint inhibitors.

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Financial Summary

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.

We recognized net losses of $22.7 million and $38.5 million for the three months ended September 30, 2021 and 2020, respectively, and our OMIDRIA net revenues were $30.0 million and $26.1 million for the same periods.

As of September 30, 2021, we had $50.4 million in cash and cash equivalents and short-term investments available for general corporate use and $33.9 million in accounts receivable, net.

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

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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.

In November 2021, CMS issued its final OPPS and ASC Payments Systems rule for calendar year 2022.

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

Nine Months Ended

September 30,

(In thousands)

Product sales, net

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.

During the three months and nine months ended September 30, 2021, OMIDRIA net revenue was $30.0 million and $79.9 million as compared to $26.1 million and $63.2 million for the three months and nine months ended September 30, 2020.

The $3.9 million increase in revenue during the three-months ended September 30, 2021 compared to the same period in the prior year was due to the change in status of OMIDRIA reimbursement under Medicare Part B following expiration of the pass-through extension period for OMIDRIA.

Specifically, on October 1, 2020, OMIDRIA lost separate payment and this negatively affected our revenues for the three months ended September 30, 2020 as customers significantly reduced their purchases late in the third quarter.

In December 2020, separate payment for OMIDRIA was reinstated for cataract procedures performed in the ASC setting.

The increase in revenue for the nine months ended September 30, 2021 compared to the prior year period is due to separate payment for OMIDRIA being available under Medicare Part B throughout the current year whereas in the prior year customers reduced purchases late in the third quarter due to the impending loss of Medicare Part B reimbursement on October 1, 2020.

Additionally, during the current year period, we did not experience a shut-down of elective surgical procedures due to the COVID-19 pandemic, which occurred during the first two quarters of 2020.

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 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:

Our total gross-to-net provision for the three and nine months ended September 30, 2021 was 29.3% and 29.7% of gross OMIDRIA product sales, respectively.

This compares to 46.8% and 36.6% for the three and nine months ended September 30, 2020, respectively.

The decrease in gross-to-net deductions as a percentage of sales in 2021 compared to 2020 is largely due to the OMIDRIA return provision recorded in the third quarter of 2020 related to the temporary loss of OMIDRIA separate payment on October 1, 2020.

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

(In thousands)

Balance as of December 31, 2020

Balance as of June 30, 2021

Balance as of September 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 upfront discount to our ASC and hospital customers.

Our chargebacks are related to a pharmaceutical pricing agreement, a federal supply schedule 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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We record a provision for returns upon sale of OMIDRIA to our wholesaler.

When a return or claim is received, we issue a credit memo to the wholesaler against its outstanding receivable to us or we reimburse the customer.

When a return or claim is received, we issue a credit memo to the wholesaler against its outstanding receivable to us or we reimburse the ASC or hospital customer.

Research and Development Expenses

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

internal, overhead and other

internal, overhead and other expenses;

and stock-based compensation expense.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

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Total research and development expenses

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 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.

Clinical research and development expenses decreased $4.3 million for the three months ended September 30, 2021 compared to the same period in 2020 as the prior year included a $5.0 million license fee related to OMS906.

This decrease was partially offset by a $0.7 million increase in OMIDRIA costs related to establishing a second drug product manufacturing site.

Clinical research and development expenses for the nine months ended September 30, 2021 compared to the same period in 2020 increased $1.5 million due to higher costs associated with narsoplimab manufacturing and medical affairs.

In addition, OMS906 expenses were included in preclinical research and development costs until the third quarter of 2020 when we initiated a Phase 1 clinical trial .

Preclinical research and development expenses were similar for the three months ended September 30, 2021 and the same period in 2020.

The $1.2 million increase in preclinical research and development expenses for the nine months ended September 30, 2021 as compared to the same period in 2020 reflect increased manufacturing costs related to our OMS1029 program, partially offset by the migration of OMS906 program expenses in the third quarter of 2020 to clinical research and development following initiation of a Phase 1 clinical trial.

Internal overhead and other expenses increased for the nine months ended September 30, 2021 compared to the same period in 2020 due to additional employee-related costs and additional leased laboratory facilities to support our research and development activities.

The increases in stock-based compensation for the three and nine months ended September 30, 2021 compared to the prior year period are due to the increase in the overall number of employees between the periods and the timing of annual stock option grants to employees.

We expect overall research and development costs will remain relatively unchanged in the fourth quarter of 2021 compared to the third quarter of 2021.

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.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

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Total selling, general and administrative expenses

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.

Total selling, general and administrative expenses increased by $1.0 million for the three months ended September 30, 2021 compared to the prior period primarily due to the timing of annual stock option grants to employees.

Total selling, general and administrative expenses increased $5.7 million for the nine months ended September 30, 2021 compared to the prior year period due to increased marketing activities and employee-related costs in preparation for the anticipated U.S.

commercial launch of narsoplimab.

We expect that our selling, general and administrative expenses will be similar during the fourth quarter of 2021 as compared to the third quarter of 2021.

Interest Expense

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

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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.

Interest expense decreased $2.0 million and $4.0 million for the three and nine months ended September 30, 2021 compared to the same periods 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”).

Loss on Early Extinguishment of Debt

Three Months Ended

Nine Months Ended

September 30,

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Loss on early extinguishment of debt

In August 2020, we repurchased $115.0 million of the previously outstanding 2023 Notes.

We recorded a $13.4 million loss on early extinguishment of debt related to the unamortized discount and issuance costs related to the repurchased 2023 Notes in the three and nine months ended September 30, 2020.

Income Tax Benefit

Three Months Ended

Nine Months Ended

September 30,

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Income tax benefit

In August 2020, we issued the 2026 Notes which created an income tax benefit of $7.9 million.

Financial Condition - Liquidity and Capital Resources

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 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.

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.

As of September 30, 2021, we had cash, cash equivalents and short-term investments of $50.4 million and an accounts receivable-based line of credit that allows us to borrow up to the lesser of $50.0 million or 85% of our accounts receivable borrowing base, less certain reserves.

For the nine months ended September 30, 2021, we incurred losses from operations of $72.9 million, including non-cash charges of $14.4 million.

For the three months ended September 30, 2021, we incurred losses from operations of $18.3 million, including non-cash charges of $6.4 million.

Cash used in operating activities was $91.5 million for the nine months ended September 30, 2021.

We will continue to incur losses from operating activities until our revenues exceed operating costs and debt service obligations.

We are unable to include in the determination regarding our prospects as a going concern amounts available under our accounts receivable-based line of credit or any proceeds from debt transactions or other financing instruments despite our successful track record in accessing capital through these avenues.

We also have not included any potential partnerships related to our products or product candidates.

The conditions described above, when evaluated within the constraints of the accounting literature, raise substantial doubt with respect to our ability to meet our obligations through November 9, 2022 and, therefore, to continue as a going concern.

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

In addition, we may utilize funds available under our line of credit which matures August 2, 2022.

As of September 30, 2021, the amount available under our line of credit was approximately $30.0 million.

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 through reduction of our expenses by delaying clinical trials, reducing selected research and development efforts, or implementing other restructuring activities.

In this regard, in March 2021 we entered into a sales agreement to sell shares of our common stock, from time to time, in an “at the market” equity offering facility through which we may offer and sell shares of our common stock having an aggregate amount of up to $150.0 million.

addition, 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.

Cash Flow Data

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

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Operating Activities.

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).

Net cash used in operating activities for the nine months ended September 30, 2021 increased by $9.8 million as compared to the same period in 2020.

The net increase is primarily due to a $27.9 million increase in accounts receivable due to the reinstatement of OMIDRIA separate payment by CMS in December 2020 following expiration of the pass-through extension and temporary loss of separate payment on October 1, 2020.

We are also seeing the impact of net loss adjusted for non-cash charges of $12.5 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) and prior year effects related to the repurchase of the 2023 Notes and the issuance of the 2026 Notes.

These uses of cash are partially offset by a $13.5 million increase in accounts payable and accrued expenses as well as a $1.6 million decrease in prepaid expenses.

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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 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.

Net cash provided by investing activities during the nine months ended September 30, 2021 was $81.3 million compared to a $75.0 million use of cash for the same period in the preceding year.

The $156.3 million change between years is primarily due to purchasing short-term investments with the net proceeds from 2020 debt and equity financing activities.

In both years, sales of investments were used to fund operating activities.

Financing Activities.

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.

Net cash provided by financing activities during the nine months ended September 30, 2021 was $7.1 million, a decrease of $167.6 million compared to the same period in 2020.

The decrease from the prior year period was primarily due to receiving net cash proceeds of $218.2 million in August 2020 from the issuance of our 2026 Notes and $7.5 million from the termination of the 2023 Capped Call contract offset by $125.6 million to repurchase a portion of our 2023 Notes and $23.2 million to purchase the 2026 Capped Call.

In conjunction with the issuance of the 2026 Notes, we sold 6.9 million shares of our common stock in a public offering and received net proceeds of $93.7 million.

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

As of September 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 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.

As of September 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

4 unchanged sentences

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

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.

As of September 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 $51.3 million.

Goods and Services

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

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

As of September 30, 2021, our aggregate firm commitments were $34.8 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.

6 unchanged sentences

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