What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-10 · 102 added, 87 removed, 177 unchanged (52% of the section changed)

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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.

In February 2022, we had a Type A post-action meeting with FDA to discuss the CRL.

Although we felt 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, in June 2022, we submitted 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.

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

Unless the deciding official asks us for more information or notifies us that more time is needed to complete the review, we expect a decision on the dispute in August 2022.

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 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 have successfully completed a Phase 1 study of OMS906, our lead MASP-3 inhibitor targeting the alternative pathway of complement.

We are initiating a Phase 1b clinical trial in patients with paroxysmal nocturnal hemoglobinuria (“PNH”) who have had an unsatisfactory response to the C5 inhibitor ravulizumab.

We are also working to expand our program of OMS906 clinical trials to include treatment-naïve PNH patients and complement 3 (“C3”) glomerulopathy patients, as well as one or more related indications.

In August, 2022 , we began dosing in a Phase 1 clinical trial of OMS1029, our long-acting, next-generation MASP-2 inhibitor and have successfully completed a Phase 1 study in our phosphodiesterase 7 (“PDE7”) program focused on addiction.

We also 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.

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/CAR-T 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.

We marketed OMIDRIA in the United States (the “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.

We received $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.

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

On October 18, 2021, we announced the receipt of a 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;

As described above, we

are engaged with FDA in a Formal Dispute Resolution regarding the BLA for narsoplimab.

We are currently awaiting a decision on the dispute from FDA.

Unless the deciding official asks us for more information or notifies us that more time is needed to complete the review, we expect a decision on the dispute in August 2022.

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.

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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.

In our IgA nephropathy program, patient enrollment in the narsoplimab Phase 3 clinical trial, ARTEMIS-IGAN, continues to progress toward an anticipated readout of 9-month proteinuria data by mid-2023.

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.

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additional weekly dosing can be administered to achieve optimal response.

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 primary endpoint, which could suffice for regular 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.

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, 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.

We believe that the trial design will allow assessment for either regular 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 regular 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 144 weeks after the start of dosing.

These eGFR data, if satisfactory, would then likely form the basis for subsequent regular 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 to receive open-label treatment with narsoplimab after at least 18 months 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.

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

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

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

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

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

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.

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.

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

The narsoplimab treatment arm has concluded and we look forward to Quantum Leap’s disclosure of the narsoplimab results.

● MASP 2 – OMS1029 - Lectin Pathway Disorders .

We are also developing a longer-acting second-generation antibody targeting MASP-2.

This program is designated “OMS1029.” A Phase 1 clinical trial assessing safety, tolerability and pharmacokinetics/pharmacodynamics (“PK/PD”) of OMS1029 in healthy subjects began dosing in August 2022.

Designed for longer duration of pharmacologic activity than narsoplimab, we anticipate that OMS1029 will enable us to pursue a range of indications complementary to those for narsoplimab.

Based on animal PK/PD data to date, dosing in humans is expected to be once-monthly to once-quarterly by subcutaneous or intravenous administration.

● 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.

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 received designation from FDA as an orphan drug for the treatment of paroxysmal nocturnal hemoglobinuria (“PNH”) in July 2022.

We have completed a placebo-controlled, double-blind, single-ascending-dose Phase 1 clinical trial to evaluate the safety, tolerability, pharmacodynamics and pharmacokinetics of OMS906 in healthy subjects.

Preliminary data from the Phase 1 trial were previously reported and we plan to present the results of the Phase 1 study at an upcoming medical congress.

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.

We are initiating a Phase 1b clinical trial in patients with PNH who have had an unsatisfactory response to the C5 inhibitor ravulizumab.

We are also working to expand our program of OMS906 clinical trials to include treatment-naïve PNH patients and C3 glomerulopathy patients, as well as one or more related indications.

● PDE7 - OMS527 .

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

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.

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

In addition to our work in addiction, researchers at Emory University are evaluating, in clinically predictive primate models, the potential of our PDE7 inhibitors to improve levodopa-induced dyskinesias.

More than 50% of Parkinson’s patients develop dyskinesias following prolonged levodopa treatment.

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 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, GPCR Platform and and Immuno-oncology Platform .

In our OMS906 monoclonal antibody program, we have generated positive data from MASP-3 inhibition in a well-established animal model associated with PNH as well as positive data in a well-established animal model of arthritis.

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, GPCR Platform 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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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 small-molecule inhibitors of GPR174 with the objective of moving compounds into human trials.

We are also exploring several of our other GPCR targets.

We are developing, and plan to advance to clinical trials, inhibitors of GPR174 and of the pathways affected by this receptor and/or adenosine receptors.

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.

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

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.

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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.

As of June 30, 2022, we had $122.6 million in cash and cash equivalents and short-term investments available for general corporate use and $14.5 million in receivables.

Results of Operations

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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.

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

The following table illustrates our expenses associated with these activities:

Three Months Ended

Six Months Ended

(In thousands)

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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.

Clinical research and development expenses decreased $1.8 million and $10.1 million for the three and six months ended June 30, 2022 compared to the prior year period due primarily to the manufacturing of narsoplimab and OMS906.

We expense inventory costs related to product candidates as research and development until regulatory approval is reasonably assured in either the U.S.

The $2.9 million and $2.8 million decreases in our preclinical research and development expenses for the three and six months ended June 30, 2022 as compared to the same periods in 2021 reflect timing of third-party manufacturing costs and preclinical animal toxicology safety studies related to our OMS1029 development program.

Internal overhead and other expenses decreased $1.9 million and $2.4 million for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021 due to a reduction in employee-related costs and returning a small portion of our leased building to the landlord in the first quarter of the current year.

The increases in stock-based compensation for the three and six months ended June 30, 2022 compared to the same periods in the prior year are due to the valuation and timing of the vesting of employee stock options.

We expect overall research and development costs will increase modestly in the third quarter of 2022 compared to the second quarter of 2022.

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.

Clinical development timelines, the probability of success and development costs can change 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.

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Three Months Ended

Six Months Ended

(In thousands)

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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.

Total selling, general and administrative expenses decreased by $1.6 million and $3.4 million for the three and six months ended June 30, 2022 compared to the same periods in the prior year.

The decreases were primarily related to narsoplimab pre-launch sales and marketing development costs in the prior year quarters and the timing of legal costs.

We expect that our third quarter 2022 selling, general and administrative expenses will be similar to the second quarter of 2022.

Interest Expense

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Six Months Ended

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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”).

Three Months Ended

Six Months Ended

(In thousands)

Other income principally includes sublease rental income and interest earned on our cash and investments.

The increases in other income for the three and six months ended June 30, 2022 compared to the same periods in the prior year are due to increased interest earned on our investments and increased sublease income.

OMIDRIA Royalties

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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.

During the six months ended June 30, 2022, we earned royalties of $31.1 million on sales of OMIDRIA which we recorded as a reduction from the OMIDRIA contract royalty asset.

We also recorded $17.1 million of income in discontinued operations representing interest income and remeasurement adjustments related to the OMIDRIA contract royalty asset.

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

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Royalty interest income and remeasurement adjustments

OMIDRIA contract royalty asset at March 31, 2022

OMIDRIA contract royalty asset at June 30, 2022

Net Income from Discontinued Operations

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Three Months Ended

Six Months Ended

(In thousands)

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Royalty interest income and remeasurement adjustments

Costs and expenses

Other (income), costs and expenses, net

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.

In July 2022, CMS issued its proposed Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems rule for calendar year 2023.

The rule includes confirmation that OMIDRIA continues to qualify for separate payment under the CMS’ policy regarding non-opioid pain management surgical drugs when used in ambulatory surgical centers (ASCs).

If the proposed rule is adopted as final, OMIDRIA would continue to be paid separately in the ASCs under Medicare Part B at least throughout calendar year 2023.

Financial Condition - Liquidity and Capital Resources

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.

As of June 30, 2022, we had $122.6 million in cash, cash equivalents and short-term investments available for general corporate use held primarily in money-market accounts.

During the three and six months ended June 30, 2022 we had an overall decrease in our cash, cash equivalents and short-term investments of $19.7 million and $34.7, respectively.

For the three months ended June 30, 2022, we incurred a net loss from operations of $30.9 million, including non-cash charges of $3.7 million.

For the six months ended June 30, 2022, we incurred a net loss from operations of $63.9 million, including non-cash charges of $7.9 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.

If FDA approval is granted for narsoplimab for HSCT-TMA, 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.

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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.

Unless the debt is converted to equity at or prior to maturity, 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, if long-term separate payment is achieved for OMIDRIA, strategic transactions, sales of stock or through issuance of additional debt.

Cash Flow Data

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Six Months Ended

(In thousands)

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Operating Activities.

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.

Net cash used in operating activities for the six months ended June 30, 2022 decreased by $33.2 million as compared to the same period in 2021.

The decrease in cash used was primarily due to a $51.7 million change in cash provided from receivables resulting from collecting and not replacing trade receivables outstanding at December 31, 2021 due to the sale of OMIDRIA to Rayner in December 2021.

In the prior year period, receivables increased due to reinstatement of OMIDRIA separate payment in December 2020, which resulted in increased sales and receivables during the first half of 2021.

Other changes in operating activities between the periods included a $14.0 million decrease in the OMIDRIA contract royalty asset resulting from royalties earned on OMIDRIA net sales, a $22.5 million decrease in accounts payable and accrued expenses and a $9.3 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 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.

Net cash used by investing activities during the six months ended June 30, 2022 was $52.1 million compared to net cash provided by investing activities of $63.4 million for the same period in the preceding year.

The $115.5 million change between years is due to the purchase of 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 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.

Net cash provided by financing activities during the six months ended June 30, 2022 decreased $6.6 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

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.

As of June 30, 2022, we had a Loan and Security Agreement with Silicon Valley Bank (“SVB”) providing for a $50.0 million revolving line of credit facility (the “Line of Credit Agreement”).

As of June 30, 2022, we had no outstanding borrowings under the Line of Credit Agreement.

The Line of Credit Agreement expired on August 2, 2022.

Contractual Obligations and Commitments

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

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.

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.

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.

As of June 30, 2022, the remaining aggregate non-cancelable rent payable under the initial term of the lease, excluding common area maintenance and related operating expenses, is $38.8 million.

Convertible Notes

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

As of March 31, 2022, our aggregate firm commitments were $31.0 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 June 30, 2022, our aggregate firm commitments were $30.5 million.

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

Critical Accounting Policies and Significant Judgments and Estimates

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