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Item 2. Management’s Discussion and Analysis

2022-05-10 compared with 2021-11-09 · 157 added, 245 removed, 107 unchanged (79% of the section changed)

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The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

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, and immune-related diseases, including cancers.

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

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.

We have also initiated a Phase 1 clinical program for our MASP-3 inhibitor OMS906 targeting the alternative pathway of complement and have successfully completed a Phase 1 study in our phosphodiesterase 7 (“PDE7”) program focused on addiction.

Omeros Corporation (“Omeros,” the “Company” or “we”) is an innovative biopharmaceutical company committed to discovering, developing and commercializing small-molecule and protein therapeutics for large-market and orphan indications targeting immunologic diseases, including complement-mediated diseases and cancers related to dysfunction of the immune system, as well as addictive and compulsive disorders.

Our drug candidate narsoplimab is the subject of a biologics license application (“BLA”) pending before 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 FDA regarding the BLA.

In the CRL, 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.

In February 2022, we had a Type A end-of-review meeting with FDA to discuss the CRL, including each of the review issues that FDA identified as presenting difficulties interpreting the treatment response in the pivotal trial.

Although we feel that we adequately addressed all of the issues noted in the CRL, the meeting minutes included a number of the review division’s critiques that we believe had already been addressed and/or were inaccurate.

As a result, we currently plan to submit a Formal Dispute Resolution Request.

Formal dispute resolution is an official pathway that enables a sponsor to appeal a decision by an FDA review division to a higher authority within FDA, in this case the Office of New Drugs.

Our request is for regular approval based on the data in our existing BLA.

We continue to believe that our BLA, as submitted, merits approval and that the data meet or exceed the threshold for substantial evidence of effectiveness;

however, there can be no assurances that the Formal Dispute Resolution process will result in approval of our BLA, will provide a clear path to resubmission of our BLA, or that any identified path to BLA resubmission will be satisafactory in terms of the information, time and/or expenditure required.

We also have multiple Phase 3 and Phase 2 clinical-stage development programs in progress with narsoplimab, which are focused on:

complement-mediated disorders, including immunoglobulin A (“IgA”) nephropathy, atypical hemolytic uremic syndrome (“aHUS”) and COVID-19.

We are also initiating a Phase 1b clinical program in paroxysmal nocturnal hemoglobinuria (“PNH”) for our MASP-3 inhibitor OMS906 targeting the alternative pathway of complement and have successfully completed a Phase 1 study in our phosphodiesterase 7 (“PDE7”) program focused on addiction.

In addition, we have a diverse group of preclinical programs, including GPR174, a novel target in immuno-oncology that modulates a new cancer immunity axis that we discovered.

Small-molecule and antibody inhibitors of GPR174 are part of our proprietary G protein-coupled receptor (“GPCR”) platform through which we control 54 GPCR drug targets and their corresponding compounds.

We also have a proprietary-asset-enabled antibody-generating technology.

We have retained control of all commercial rights for OMIDRIA and each of our product candidates and programs.

Impact of Global Pandemic

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.

As a result, we did not record any sales of OMIDRIA to our wholesalers from March 25 to May 19, 2020.

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.

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 preclinical 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 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 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.

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

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.

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.

We sell OMIDRIA primarily through wholesalers which, in turn, sell to ASCs and hospitals.

The Centers for Medicare & Medicaid Services (“CMS”), the federal agency responsible for administering the Medicare program, granted transitional pass-through reimbursement status for OMIDRIA from January 1, 2015 through December 31, 2017.

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

In March 2018, Congress extended pass-through reimbursement status for OMIDRIA through September 30, 2020 when used during procedures performed on Medicare Part B fee-for-service patients.

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

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.

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.

Small-molecule inhibitors of GPR174 are part of our proprietary G protein-coupled receptor (“GPCR”) platform through which we control 54 GPCR drug targets and their corresponding compounds.

Also as part of our immuno-oncology platform, we are developing other novel anti-cancer therapeutics as well as adoptive T cell therapies.

We previously developed and commercialized OMIDRIA ® (phenylephrine and ketorolac intraocular solution) 1%/0.3%, which is approved by FDA for use during cataract surgery or intraocular lens (“IOL”) replacement to maintain pupil size by preventing intraoperative miosis (pupil constriction) and to reduce postoperative ocular pain.

We marketed OMIDRIA in the United States (“U.S.”) from the time of its commercial launch in 2015 until December 2021.

On December 23, 2021, we completed the sale of OMIDRIA and certain related assets and liabilities to Rayner Surgical Inc.

(“Rayner”) pursuant to an Asset Purchase Agreement dated December 1, 2021 (the “Asset Purchase Agreement”).

We received approximately $126.0 million in cash at the closing and we receive a royalty of 50% of the net revenue, as defined in the Asset Purchase Agreement, from sales of OMIDRIA in the U.S.

between the closing date

and the earlier of January 1, 2025 or the payment of the $200.0 million milestone described below.

After such date, we will receive a royalty of 30% of the net revenue from sales of OMIDRIA in the U.S.

until the expiration or termination of the last issued and unexpired patent with respect to OMIDRIA in the U.S.

base royalty rate is subject to a reduction down to 10% upon the occurrence of certain events described in the Asset Purchase Agreement, including during any specific period in which OMIDRIA is no longer eligible for separate payment (i.e., outside the packaged payment rate for the surgical procedure) under Medicare Part B.

We will also will receive a royalty of 15% of the net revenue from sales of OMIDRIA outside the U.S.

on a country-by-country basis between the closing date and the expiration or termination of the last issued and unexpired patent with respect to OMIDRIA in such country.

In addition, we will receive a $200.0 million milestone payment if, prior to January 1, 2025, separate payment for OMIDRIA is secured under Medicare Part B for a continuous period of at least four years.

Clinical Development Programs

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● MASP-2 - narsoplimab (OMS721) - Lectin Pathway Disorders .

Narsoplimab, also referred to as OMS721, is our lead fully human monoclonal antibody targeting mannan-binding lectin-associated serine protease-2 (“MASP-2”), a novel pro-inflammatory protein target involved in activation of the lectin pathway of complement.

The lectin pathway plays an important role in the body’s inflammatory response and becomes activated as a result of tissue damage or microbial pathogen invasion.

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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.

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.

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

In the CRL, 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.

In February 2022, we had a Type A meeting with FDA to discuss the CRL, including each of the review issues that FDA identified as presenting difficulties interpreting the treatment response in the pivotal trial.

As a result, we currently plan to submit a Formal Dispute Resolution Request.

Formal dispute resolution is an official pathway that enables a sponsor to appeal a decision by an FDA review division to a higher authority within FDA, in this case the Office of New Drugs.

Our request is for regular approval based on the data in our existing BLA.

We continue to believe that our BLA, as submitted, merits approval and that the data meet or exceed the threshold for substantial evidence of effectiveness;

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.

Although our resources are currently focused primarily on BLA approval in the U.S., we continue to advance toward submission of our MAA.

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.

In addition, narsoplimab is the only complement inhibitor included in a nationwide, late-stage adaptive platform trial evaluating multiple agents as potential treatments for COVID-19.

Narsoplimab also 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.

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.

In the U.S., 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:

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

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

In the U.S., FDA has granted narsoplimab orphan drug designation for the prevention (inhibition) of complement-mediated TMAs and fast-track designation for the treatment of patients with aHUS.

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

The single Phase 3 trial design is a randomized, double-blind, placebo-controlled multicenter trial in patients at least 18 years of age with biopsy-confirmed IgA nephropathy and with 24-hour urine protein excretion greater than one gram per day at baseline on optimized renin-angiotensin system blockade.

The single Phase 3 trial design is a randomized, double-blind, placebo-controlled multicenter trial in patients at least 18 years of age with biopsy-confirmed IgA nephropathy and 24-hour urine protein excretion greater than 1 g/day at baseline on optimized renin-angiotensin system blockade.

This trial includes a run-in period.

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additional weekly dosing can be administered to achieve optimal response.

The primary endpoint, which we believe could suffice for full or accelerated approval depending on the effect size, is reduction in proteinuria at 36 weeks after the start of dosing.

The primary endpoint, which could suffice for full or accelerated approval depending on the effect size, is reduction in proteinuria at 36 weeks after the start of dosing.

The trial is designed to allow intra-trial adjustment in sample size.

For the purposes of safety and efficacy assessments, the initial sample size for the proteinuria endpoint is estimated at 140 patients in each of the treatment and placebo groups.

This will include a subset of patients (78 per arm) with high levels of proteinuria (i.e., equal to or greater than 2 g/day) at baseline, and a substantial improvement at 36 weeks in this subset of patients alone could potentially form the basis for approval.

This will include a subset of patients with high levels of proteinuria ( i.e.

, equal to or greater than 2 g/day) at baseline, and a substantial improvement at 36 weeks in this subset of patients alone could potentially form the basis for approval.

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.

In the event of full approval, estimated glomerular filtration rate (“eGFR”) becomes a safety endpoint only.

In the event that the primary endpoint at 36 weeks results in accelerated approval from FDA, change in eGFR is expected to be assessed at approximately two years after the start of dosing.

These eGFR data, if satisfactory, would then likely form the basis for full approval.

In response to investigators’ concerns about extended withholding of narsoplimab treatment from any high-proteinuria patient initially randomized to the placebo-treated group, FDA will allow patients in that sub-population open-label treatment with narsoplimab after at least one year of blinded treatment.

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.

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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 .

In March 2020, in response to a request from physicians at the Papa Giovanni XXIII Hospital in Bergamo, Italy, we initiated a compassionate use program for narsoplimab to treat patients with severe COVID-19 requiring mechanical ventilation.

The initial cohort treated under this compassionate use program included a total of six COVID-19 patients treated with narsoplimab, all with acute respiratory distress syndrome (“ARDS”) and requiring continuous positive airway pressure (“CPAP”) or intubation.

At baseline, circulating endothelial cell (“CEC”) counts and serum levels of interleukin-6 (“IL-6”), IL-8, C-reactive protein (“CRP”), LDH, D-dimer and aspartate aminotransferase (“AST”) were markedly elevated.

During the course of the compassionate use program, institutional guidelines at the treating hospital were updated to require that all COVID-19 patients in the hospital receive steroids.

One patient treated with narsoplimab did not receive steroids.

Of the five narsoplimab-treated patients who received steroids, two initiated them after already improving such that CPAP was no longer required or was discontinued the following day.

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.

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

In addition, massive bilateral pulmonary thromboses, seen in two of the patients, resolved while on narsoplimab.

All six narsoplimab-treated patients recovered, survived and were discharged.

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%.

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

All six patients were evaluated five to six months after cessation of narsoplimab treatment.

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 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.

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.

Endothelial damage activates the lectin pathway of complement.

We believe the results observed following narsoplimab treatment in critically ill COVID-19 patients at Papa Giovanni were consistent with those seen in HSCT-TMA and underscore the pathophysiologic similarities between these two disorders.

Narsoplimab has been shown to inhibit lectin pathway activation and to block the MASP-2-mediated conversion of prothrombin to thrombin, microvascular injury-associated thrombus formation and the activation of factor XII as well as the MASP-2-mediated activation of kallikrein.

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

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

and internationally.

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

To date, no drug investigated in the trial has been reported to show a benefit relative to the background therapy in the trial.

Quantum is finalizing analyses of the narsoplimab data, and we look forward to sharing the outcome of the trial.

● MASP-3 - OMS906 - Alternative Pathway Disorders .

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Our current primary focus in this program is developing MASP-3 inhibitors for the treatment of disorders related to the APC.

We believe that MASP-3 inhibitors have the potential to treat patients suffering from a wide range of diseases and conditions, including:

paroxysmal nocturnal hemoglobinuria (“PNH”);

multiple sclerosis;

neuromyelitis optica;

age-related macular degeneration;

Alzheimer’s disease;

systemic lupus erythematosus;

diabetic retinopathy;

chronic obstructive pulmonary disease;

antineutrophil cytoplasmic antibody-associated vasculitis;

anti-phospholipid syndrome;

atherosclerosis;

myasthenia gravis and others.

Our OMS906 monoclonal antibody program has generated positive data in well-established animal models of PNH and rheumatoid arthritis as well as strong pharmacodynamic activity in non-human primates.

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 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.

OMS906 has been well tolerated at all doses tested and preliminary human pharmacokinetic and pharmacodynamic data are consistent with once-monthly subcutaneous dosing and every-other-month or less frequent IV dosing.

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 a Phase 1b clinical trial in patients with 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.

Preparations for the Phase 1b trial are underway and enrollment is expected to begin this summer.

● PDE7 - OMS527 .

In our PDE7 program, we are developing proprietary compounds to treat addiction and compulsive disorders as well as movement disorders.

In September 2019 we reported positive results from our Phase 1 single-ascending- and multiple-ascending-dose clinical trial designed to assess safety, tolerability and pharmacokinetics of our lead compound in healthy subjects.

Our PDE7 program is based on our discoveries of previously unknown links between PDE7 and any addiction or compulsive disorder, and between PDE7 and any movement disorders, such as Parkinson’s disease.

PDE7 appears to modulate the dopaminergic system, which plays a significant role in regulating both addiction and movement.

We believe that PDE7 inhibitors could be effective therapeutics for the treatment of addictions and compulsions as well as for movement disorders.

Data generated in preclinical studies support the use of PDE7 inhibitors in both of these therapeutic areas .

In September 2019, we reported positive results from our completed Phase 1 clinical trial designed to assess the safety, tolerability and pharmacokinetics of the compound in healthy subjects.

In the double blind, randomized Phase 1 study, the study drug, referred to as OMS182399, met the primary endpoints of safety and tolerability and showed a favorable and dose-proportional pharmacokinetic profile supporting once-daily dosing.

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.

Continued clinical development in our PDE7 program is currently subject to allocation of internal financial and other resources, which are at present are prioritized for other programs, and/or accessing external funding.

Preclinical Development Programs and Platforms

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We have generated positive preclinical data from MASP-2 inhibition in in vivo models of age-related macular degeneration, myocardial infarction, diabetic neuropathy, stroke, traumatic brain injury, ischemia-reperfusion injury, and other diseases and disorders.

We are also developing a longer-acting second generation antibody targeting MASP-2 for which we expect to initiate clinical trials in 2022.

We are also developing a longer-acting second generation antibody targeting MASP-2 for which we expect to initiate clinical trials this summer.

This program is designated “OMS1029.” Development efforts are also directed to a small-molecule inhibitor of MASP-2 designed for oral administration as well as to small-molecule inhibitors of MASP-3 and bispecific small- and large-molecule inhibitors of MASP-2/-3.

● GPR174 and GPCR Platform .

● GPR174, GPCR Platform and and Immuno-oncology Platform .

We have developed a proprietary cellular redistribution assay which we use in a high-throughput manner to identify synthetic ligands, including antagonists, agonists and inverse agonists, that bind to and affect the function of orphan GPCRs.

We have screened Class A orphan GPCRs against our small-molecule chemical libraries using the cellular redistribution assay and have identified and confirmed compounds that interact with 54 of the 81 Class A orphan GPCRs linked to a wide range of indications including cancer as well as metabolic, cardiovascular, immunologic, inflammatory and central nervous system disorders.

We have screened Class A orphan GPCRs against our small-molecule chemical libraries using the cellular redistribution

assay and have identified and confirmed compounds that interact with 54 of the 81 Class A orphan GPCRs linked to a wide range of indications including cancer as well as metabolic, cardiovascular, immunologic, inflammatory and central nervous system disorders.

One of our priorities in this program is GPR174, which is involved in the modulation of the immune system.

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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.

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.

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

We are also exploring several of our other GPCR targets.

Additionally, we are advancing research on a technology that may improve the potency and durability of adoptive T cell therapies.

We validated our novel approach – which enforces memory phenotypes in cultured T cells through a previously unexplored pathway – in an aggressive mouse tumor model and are building a broad and exclusive intellectual property position around our platform.

We believe that our novel approach has the potential to improve response rates for patients receiving either engineered or native T-cell therapies for liquid or solid tumors and are continuing to explore the application of this technology to human CAR-T and adoptive T cell therapy systems.

Financial Summary

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

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 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.

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.

On December 23, 2021, we completed the sale of our commercial product OMIDRIA and certain related assets, including inventory and prepaid expenses, to Rayner.

We received $126.0 million in cash at closing, and we retained all outstanding accounts receivable as of the closing date.

We will receive a royalty on world-wide sales of OMIDRIA and potentially a $200.0 million milestone payment if separate payment for OMIDRIA is secured in the U.S.

for a continuous period of at least four years before January 1, 2025.

As a result of the OMIDRIA divestiture, all the revenues and expenses related to OMIDRIA have been reclassified to net income from discontinued operations in our condensed consolidated statements of operations and comprehensive loss and excluded from continuing operations for all periods presented (see “Net Income from Discontinued Operations” below for additional information).

As of March 31, 2022, we had $142.2 million in cash and cash equivalents and short-term investments available for general corporate use and $16.3 million in receivables.

Results of Operations

Our revenue consists of OMIDRIA product sales to ASCs and hospitals in the U.S.

Our product sales, net are as follows:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Product sales, net

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

We record OMIDRIA product sales net of estimated chargebacks, rebates, distribution fees and product returns.

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

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 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 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.

Distribution Fees and Product Return Allowances

We pay our wholesalers a distribution fee for services they perform for us based on the dollar value of their purchases of OMIDRIA.

We record a provision for these charges as a reduction to revenue at the time of sale to the wholesaler and make payments to our wholesalers based on contractual terms.

We allow for the return of product up to 12 months past its expiration date or for product that is damaged or not used by our customers.

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 ASC or hospital customer.

Research and Development Expenses

Our research and development expenses can be divided into three categories:

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

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

internal, overhead and other expenses;

and stock-based compensation expense.

Direct external expenses consist primarily of expenses incurred pursuant to agreements with third-party manufacturing organizations prior to receiving regulatory approval for a drug candidate, contract research organizations (“CROs”), clinical trial sites, collaborators, and licensors and consultants.

Costs are reported in preclinical research and development until the program enters the clinic.

Internal, overhead and other expenses consist of personnel costs, overhead costs such as rent, utilities and depreciation and other miscellaneous

The discontinued operations of OMIDRIA relate to the costs of drug manufacturing stability and quality control testing and costs of employees and consultants.

The following table illustrates our expenses associated with these activities:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Continuing research and development expenses:

Direct external expenses:

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MASP-3 program - OMS906

OMIDRIA - Ophthalmology

PDE7 - OMS527

Total clinical research and development

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Internal overhead and other expenses

Stock-based compensation expense

Total research and development expenses

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.

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.

In addition, we cannot forecast with precision which product candidates, if any, may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

We are required to expend substantial resources in the development of our product candidates due to the lengthy process of completing clinical trials and seeking regulatory approval.

Stock-based compensation expenses

Total continuing research and development expenses

Clinical research and development expenses decreased $8.3 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 due primarily to the timing of narsoplimab drug substance manufacturing activities and timing of clinical trial costs related to OMS906.

Internal overhead and other expenses decreased $0.4 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 due to returning a small portion of our leased building to the landlord and a reduction in employee-related costs.

The increases in stock-based compensation for the three months ended March 31, 2022 compared to the same period in the prior year are due to the valuation and timing of annual stock option grants to employees.

We expect overall research and development costs will increase in the second quarter of 2022 compared to the first quarter of 2022 due to the timing of certain research and development activities and increased employee related costs.

At this time, we are unable to estimate with certainty the longer-term costs we will incur in the continued development of our drug candidates due to the inherently unpredictable nature of our preclinical and clinical development activities.

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

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

In addition, we cannot forecast with precision which drug candidates, if any, may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

We are required to expend substantial resources in the development of our drug candidates due to the lengthy process of completing clinical trials and seeking regulatory approval.

Any failure or delay in completing clinical trials, or in obtaining regulatory approvals, could delay our generation of product revenue and increase our research and development expenses.

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Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Continuing selling, general and administrative expense:

Selling, general and administrative expenses, excluding stock-based compensation expense

Stock-based compensation expense

Total selling, general and administrative expenses

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.

Total continuing selling, general and administrative expense

Total selling, general and administrative expenses decreased by $1.8 million for the three months ended March 31, 2022 compared to the same period in the prior year.

The decrease was primarily related to narsoplimab pre-launch sales and marketing costs in the prior year quarter and the timing of legal costs.

The increase in stock-based compensation for the three months ended March 31, 2022 compared to the same period in the prior year is due to the valuation and timing of annual stock option grants to employees.

We expect that our selling, general and administrative expenses will be higher in the second quarter of 2022 compared to the first quarter of 2022 due to additional employee related costs.

Interest Expense

Three Months Ended

Nine Months Ended

September 30,

(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 interest on our finance leases.

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,

(In thousands)

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

Interest expense is primarily comprised of contractual interest and amortization of debt issuance and debt discount related to our 6.25% Convertible Senior Notes (the “2023 Notes”) and 5.25% Convertible Senior Notes (the “2026 Notes”) as well as interest on our finance leases (see “Note 8— Unsecured Convertible Senior Notes”).

OMIDRIA Royalties

On December 23, 2021, we sold our commercial drug, OMIDRIA, to Rayner.

We currently receive royalty payments of 50% of Rayner’s U.S.

net sales of OMIDRIA (see the “Overview” section of the Management’s Discussion and Analysis for additional details).

During the three months ended March 31, 2022, we earned royalties of $13.8 million on sales of OMIDRIA which we recorded as a reduction to the OMIDRIA contract royalty asset.

We also recorded $7.0 million of income in discontinued operations representing interest income and remeasurement adjustments to the OMIDRIA contract royalty asset.

The following schedule presents a rollforward of the OMIDRIA contract royalty asset (in thousands):

OMIDRIA contract royalty asset at December 31, 2021

Royalties earned

Royalty interest income and remeasurement adjustments

OMIDRIA contract royalty asset at March 31, 2022

Net Income from Discontinued Operations

As a result of the OMIDRIA divestiture, all the revenue and expenses related to OMIDRIA have been reclassified to discontinued operations in our condensed consolidated statements of operations and comprehensive loss for all periods presented.

Net income from discontinued operations is as follows:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Income tax benefit

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

Product sales, net

Royalty interest income and remeasurement adjustments

Costs and expenses

Net income from discontinued operations

OMIDRIA sales have historically been highly dependent on separate payment under Medicare Part B and we would likely experience significant fluctuations in period-over-period OMIDRIA royalty earnings should CMS change its reimbursement policy for OMIDRIA.

Financial Condition - Liquidity and Capital Resources

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.

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.

As of March 31, 2022, we had $142.2 million in cash, cash equivalents and short-term investments available for general corporate use held primarily in money-market accounts as compared to $157.3 million at December 31, 2021.

For the three months ended March 31, 2022, we incurred a net loss from operations of $33.0 million, including non-cash charges of $4.2 million.

We plan to continue to fund our operations with our cash and investments, realization of our outstanding accounts receivable, OMIDRIA royalties and potentially the $200.0 million milestone related to achieving long-term OMIDRIA separate payment.

If FDA approval is granted for narsoplimab for HSCT-TMA within the next twelve months, we expect that sales of narsoplimab would also provide funds for our operations.

In addition, we have 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.

Should it be determined to be strategically advantageous, we could also 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 could also reduce our projected cash requirements by delaying clinical trials, reducing selected research and development efforts, or implementing other restructuring activities.

We have $95.0 million of 2023 Notes that will mature and become due in November 2023.

We plan to fund the repayment of the 2023 Notes through a combination of cash from operations, including narsoplimab HSCT-TMA revenues should approval be granted by FDA, the $200.0 million milestone related to OMIDRIA, strategic transactions, sale of stock or through issuance of additional debt.

Cash Flow Data

Nine Months Ended September 30,

Three Months Ended

(In thousands)

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Operating Activities.

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.

Net cash used in operating activities for the three months ended March 31, 2022 decreased by $25.1 million as compared to the same period in 2021.

The decrease was primarily due to a $42.9 million change in cash provided from accounts receivable due to collecting trade receivables outstanding during the three months ended March 31, 2022 and the increase in receivables during the same quarter in the prior year due to reinstatement of OMIDRIA separate payment by CMS in December 2020.

Other changes in operating activities between the periods included a $2.1

million decrease to net loss, a $6.8 million decrease in OMIDRIA contract royalty asset due to royalties earned on OMIDRIA net sales, a $22.2 million decrease in accounts payable and accrued expenses and a $4.5 million decrease in prepaids and other.

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 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.

Net cash used by investing activities during the three months ended March 31, 2022 was $76.8 million compared to net cash provided by investing activities of $33.0 million for the same period in the preceding year.

The $109.8 million change between years is due to purchasing short-term investments with a portion of the cash received upon the sale of OMIDRIA to Rayner.

Financing Activities.

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

Net cash provided by financing activities during the three months ended March 31, 2022 decreased $5.6 million compared to the same period in 2021 due to a reduction in proceeds from the exercise of employee stock options.

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.

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 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.

We have a Loan and Security Agreement with Silicon Valley Bank (“SVB”) which provides for a $50.0 million revolving line of credit facility (the “Line of Credit Agreement”) based on 85% of our eligible royalty and trade receivables, net.

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

As of March 31, 2022, 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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Other than the following, our future minimum contractual obligations and commitments have not changed materially from the amounts previously reported.

Lease Agreements

Operating Leases

Our lease for our office and laboratory space ends in November 2027.

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

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.

On January 14, 2022, we entered into an agreement with our landlord to early terminate a portion of the rentable square footage of our office and laboratory facilities which reduced the right of use asset by $4.7 million and related lease liability by $5.2 million.

We recorded a non-cash gain of $0.5 million to terminate the lease for a portion of our office and laboratory space.

In addition, we carry various finance leases for laboratory equipment.

As of March 31, 2022, the remaining aggregate non-cancelable rent payable under the initial term of the lease, excluding common area maintenance and related operating expenses, is $41.1 million.

Convertible Notes

See “Financial Condition—Liquidity and Capital Resources—Convertible Notes” above.

Goods and Services

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

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.

As of March 31, 2022, our aggregate firm commitments were $31.0 million.

the events triggering the commencement of payment obligations will occur.

Therefore, such payments are not included in the amounts described above.

Critical Accounting Policies and Significant Judgments and Estimates

On January 1, 2021, we adopted 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 (for more information, see “ Note 2—Significant Accounting Policies, Recently Adopted Pronouncements ”).

Other than the adoption of ASU 2020-06, there have not been any material changes in our critical accounting policies and significant judgments and estimates as disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Off-Balance Sheet Arrangements

We have not engaged in any off-balance sheet arrangements.

There have not been any material changes in our critical accounting policies and significant judgments and estimates as disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021.

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