What changed in this filing

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Item 1A. Risk Factors

2023-03-13 compared with 2022-03-01 · 72 added, 92 removed, 266 unchanged (38% of the section changed)

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Risks Related to Our Products, Programs and Operations

Our ability to achieve profitability is highly dependent on the royalty income we could expect to receive from the sales of OMIDRIA, and to the extent OMIDRIA is not successful, our business, financial condition and results of operations may be materially adversely affected and the price of our common stock may decline.

We are entitled to receive royalty income at 50% of net product sales of OMIDRIA by Rayner until the earlier of January 1, 2025 or the date that separate payment for OMIDRIA under Medicare Part B is secured for a continuous period of at least four years.

For the three and 12 months ended December 31, 2021, we reclassified to discontinued operations net sales of OMIDRIA of $30.8 million and $110.7 million, respectively.

Royalty income from Rayner for sales of OMIDRIA may not be sufficient to fund our current operations fully and we cannot provide assurance that royalty income from Rayner will be sufficient to fund our operations fully in the future.

In the event that royalties from Rayner are insufficient now or in the future, we will need to generate substantially more royalty or milestone income from Rayner or generate other revenue such as through sales of future approved products to achieve and sustain profitability.

Our ability to meet our future capital requirements is partially dependent on the amount and duration of royalty income we expect to receive from Rayner’s sales of OMIDRIA, and, if sales of OMIDRIA are less than anticipated, our financial condition and results of operations may be materially adversely affected, the price of our common stock may decline and we may be unable to access needed capital on favorable terms, or at all.

We currently are entitled to receive royalties on Rayner’s U.S.

net sales of OMIDRIA at the rate of 30%, which was reduced from 50% following the occurrence of the milestone event in late 2022 that resulted in our receipt of the $200.0 million Milestone Payment.

The royalty rate is subject to further reduction to 10% of U.S.

net sales upon the occurrence of certain events, including during any specific period in which OMIDRIA is no longer eligible for separate payment.

Additionally, we previously sold to DRI an interest in a portion of our future OMIDRIA royalty receipts and we are entitled to retain royalties paid by Rayner in a given period only to the extent that such payments exceed the specified amount to which DRI is entitled for such period.

We cannot provide assurance that our cash and investments on hand, together with royalty income from Rayner, will be sufficient to fund our operations fully in the future.

In the event that royalties from Rayner are insufficient now or in the future, we will need to generate substantially more royalty income from Rayner or generate other revenue such as through sales of future approved products to achieve and sustain profitability.

Sales-based royalty income may be affected by any number of factors, including:

● whether CMS will maintain its current payment policies, which can be revised through annual rulemaking and associated comment periods, and will continue to pay separately under Medicare Part B for non-opioid pain management drugs like OMIDRIA when used during surgery in the ASC setting, as the U.S.

base royalty rate would be reduced to 10% during any specific period in which OMIDRIA is no longer eligible for separate payment under Medicare Part B and procedures utilizing OMIDRIA would likely decline significantly, further reducing royalty income;

● whether and when separate payment for OMIDRIA may be secured for a continuous period of at least four years prior to January 1, 2025;

● Rayner’s ability to successfully market and sell OMIDRIA in the U.S.;

● whether, and to what extent, if any, we derive royalties from the sale of OMIDRIA outside the U.S.;

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● a lack of acceptance by physicians, patients and other members of the healthcare community;

● interruptions in supply of OMIDRIA from our contract manufacturing partners;

● interruptions in the supply of OMIDRIA;

● the availability, relative price and efficacy of the product as compared to alternative treatment options or branded, compounded or generic competing products;

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The regulatory process is subject to substantial agency discretion and risks, including those described herein and elsewhere in these “Risk Factors.” In October 2021, we received a CRL from FDA regarding our BLA for narsoplimab for the treatment of HSCT-TMA.

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.

We are currently awaiting FDA’s response to our rebuttals to each of those review issues.

Although we believe that our BLA, as submitted, merits approval and that the data meet or exceed the threshold for substantial evidence of effectiveness, there can be no assurance that the path to approval will not be delayed, and any such path to approval may be costly, require significant time and may not result in approval.

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

We appealed FDA’s decision to issue the CRL through a formal dispute resolution process that concluded in late 2022.

Although our appeal was denied, the decision identified a potential path for resubmission of the BLA based on inclusion of certain additional information and analyses, the specifics of which will be determined through further discussion with the FDA.

We can provide no assurance that we will reach a satisfactory agreement with FDA regarding the additional information to be included with a resubmitted BLA, and the requirements for resubmission of our BLA may be costly, require significant time and may not result in approval.

Ultimately, we cannot guarantee that FDA will ever approve narsoplimab for the treatment of HSCT-TMA or any other indication.

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In addition, even if we were able to obtain regulatory approval for a product in one or more foreign jurisdictions, we may need to complete additional requirements to maintain that approval and our ability to market the product in the applicable jurisdiction.

Clinical trials evaluating narsoplimab for treatment of COVID-19 may be unsuccessful and, even if successful, we may be unable to manufacture narsoplimab in quantities adequate to meet demand.

Narsoplimab has been used to treat approximately 23 critically ill COVID-19 patients under our compassionate use program with highly positive results.

However, we cannot provide assurance that the results observed in the

compassionate use program will be observed in any future study of narsoplimab for this indication, including the I-SPY COVID-19 trial, or that we will receive regulatory authorization or approval for narsoplimab in the treatment of COVID-19 patients.

Narsoplimab or any other therapeutic candidate that we may develop to treat COVID-19 will be subject to risks in addition to those normally associated with pharmaceutical research, development, and commercialization, such as higher risk of technical failure, lower and transient opportunities for revenue, higher manufacturing costs, product safety or efficacy risks related to an expedited research and development timeline, and novel liability theories.

Results from the I-SPY COVID-19 trial may be unfavorable or inconclusive or, even if the results are favorable, FDA or other regulatory bodies may require that we conduct a large-scale trial of narsoplimab in COVID-19 patients, in addition to the I-SPY COVID-19 trial to grant any approval or authorization.

These risks may affect our ability to develop or commercialize a therapeutic for COVID-19.

Additionally, contract manufacturing capacity and supplies of raw materials necessary for the production of narsoplimab are limited and we may be unable to secure the large-scale manufacturing capacity from third parties necessary to manufacture narsoplimab in sufficient quantities to enable broader availability of narsoplimab for COVID-19 patients.

In addition, widespread vaccination and/or the availability of alternative therapies for COVID-19 could lead to the diversion of governmental and other potential sources of funding or other manufacturing assistance away from us and toward COVID-19 vaccines or other therapeutics and/or limit the commercial viability of narsoplimab for the treatment of COVID-19.

The spread of COVID-19 and efforts to reduce its transmission may negatively impact our business, operations and financial results.

The COVID-19 pandemic has significantly affected the global economy and has adversely affected our prior sales of OMIDRIA due to a reduction in the overall volume of cataract surgery and intraocular lens replacement procedures.

Although cataract surgeries have resumed to varying degrees in locations throughout the country, if the number of cataract procedures once again becomes meaningfully limited, either by necessity for time-consuming safety protocols, reduction in patient demand, or the imposition of prohibitions on elective surgeries in some localities, then we would expect there to be a corresponding reduction in demand for OMIDRIA and royalty income we may receive in the future.

We may also experience disruptions to our operations due to COVID-19, such as delays or disruptions with respect to manufacturing of clinical or commercial drug substance or drug product and delays in our clinical trials or in the submission or review of regulatory applications.

Such delays or disruptions could negatively affect our commercial operations, clinical programs, and research and development.

The health of our employees, contractors and other persons on whom we rely may be adversely affected by COVID-19.

Although we are taking precautionary measures intended to help minimize the risk of the virus to our employees, these measures may be ineffective or may otherwise adversely affect our productivity.

In addition, the conditions created by the pandemic may intensify other risks inherent in our business.

Due to the unknown magnitude, duration and outcome of the COVID-19 pandemic, it is not possible to estimate precisely its impact on our business, operations or financial results;

however, the impact could be material.

To the extent COVID-19 adversely affects our business, financial condition, and results of operations and global economic conditions more generally, it may also have the effect of heightening many of the other risk factors set forth herein.

If any other product that we develop and commercialize does not receive adequate coverage or reimbursement from governments and/or private payers, or those potential other commercialized products, our prospects for revenue and profitability would suffer.

Our royalty income and potential revenues depend heavily on the pricing, availability and duration of adequate coverage or reimbursement for the use of products that we or our third-party business partners commercialize, including OMIDRIA, from government, private and other third-party payers, both in the U.S.

If any product that we develop and commercialize does not receive adequate coverage or reimbursement from governments and/or private payers our prospects for revenue and profitability would suffer.

The success of any product that we or our third-party business partners commercialize in the future will depend heavily on the pricing, availability and duration of adequate coverage or reimbursement for any such product from government, private and other third-party payers, both in the U.S.

and in other countries.

Pass-through reimbursement, which allows for separate payment (i.e., outside the packaged payment rate for the surgical procedure) under Medicare Part B, expired for OMIDRIA on October 1, 2020.

In December 2020, CMS confirmed that OMIDRIA qualifies for separate payment when used on Medicare Part B patients in the ASC setting under CMS’ policy for non-opioid pain management surgical drugs.

CMS made separate payment for OMIDRIA effective retroactively as of October 1, 2020.

CMS’ current non-opioid separate payment policy and, as a result, separate payment for OMIDRIA thereunder, like other CMS policies in the OPPS and ASC systems, can be changed by CMS through its OPPS/ASC annual rulemaking and comment process.

We believe that CMS will continue its separate payment policy for non-opioid pain management surgical drugs, which has been in effect since 2019, and that OMIDRIA will continue to be separately reimbursed when used in the ASC setting.

However, we can provide no guarantee that CMS will continue its separate payment policy in future years.

If the future reimbursement status of OMIDRIA continues to be uncertain, then demand for OMIDRIA from ASCs and hospitals may be reduced substantially and would negatively impact the amount of royalty income we receive from net product sales of OMIDRIA.

There may be significant delays in obtaining coverage or reimbursement for newly approved products, and we may not be able to provide data sufficient to be granted adequate coverage or reimbursement.

Even when a payer determines that a product is eligible for reimbursement, coverage may be limited to the uses of a product that are either approved by FDA (or, in other countries, the relevant country’s regulatory agency) and/or appear in a recognized drug compendium, or other conditions may apply.

Moreover, eligibility for coverage does not mean that any product will be reimbursed at a rate that allows us to make a profit in all cases or at a rate that covers our costs, including research, development, manufacturing, sales and distribution.

Moreover, eligibility for coverage does not mean that any product will be reimbursed at a rate that allows us to make a profit or at a rate that covers our costs, including research, development, manufacturing, sales and distribution.

Increasingly, government and private third-party payers that reimburse for healthcare services and products are requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products, which could adversely impact the pricing of our products.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payers.

Any reduction in reimbursement from Medicare, including as a result of the IRA (as discussed below), or other government programs may result in a similar reduction in payments from private payers.

Pricing may also be adversely affected by changes in the terms, scope and/or complexity of government pricing requirements.

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In addition, obtaining acceptable coverage and reimbursement from one payer does not guarantee that we will obtain similar acceptable coverage or reimbursement from another payer.

On August 16, 2022, President Biden signed the IRA into law, which sets forth meaningful changes to drug product reimbursement by Medicare.

Among other actions, the IRA permits HHS to engage in price-capped negotiation to set the price of certain drugs and biologics reimbursed under Medicare Part B and Part D.

The IRA contains statutory exclusions to the negotiation program, including for certain orphan designated drugs for which the only approved indication (or indications) is for the orphan disease or condition.

Should our product candidates be approved and covered by Medicare Part B or Part D, and fail to fall within a statutory exclusion, such as that for an orphan drug, those products could, after a period of time, be selected for negotiation and become subject to prices representing a significant discount from average prices to wholesalers and direct purchasers.

The IRA also establishes a rebate obligation for drug manufacturers that increase prices of Medicare Part B and Part D covered drugs at a rate greater than the rate of inflation.

The inflation rebates may require us to pay rebates if we increased the cost of a covered Medicare Part B or Part D approved product faster than the rate of inflation.

In addition, the law eliminates the “donut hole” under Medicare Part D beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and requiring manufacturers to subsidize, through a newly established manufacturer discount program, 10% of Part D enrollees’ prescription costs for brand drugs below the out-of-pocket maximum and 20% once the out-of-pocket maximum has been reached.

Our cost-sharing responsibility for any approved product covered by Medicare Part D could be significantly greater under the newly designed Part D benefit structure compared to the pre-IRA benefit design.

Additionally, manufacturers that fail to comply with certain provisions of the IRA may be subject to penalties, including civil monetary penalties.

The IRA is anticipated to have significant effects on the pharmaceutical industry and may reduce the prices we can charge and reimbursement we can receive for our products, among other effects.

jurisdictions, we must obtain separate reimbursement approvals and comply with related foreign legal and regulatory requirements.

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We believe that our quarterly and annual results of operations may be affected by a variety of factors, including:

● the level and timing of royalty income from Rayner, as well as our drug candidates if and when approved and commercialized;

● the extent of coverage and reimbursement for OMIDRIA which may impact whether or not we receive significant milestone payments and/or royalties;

● the extent of any payments received from collaboration arrangements and development funding as well as the achievement of development and clinical milestones under collaboration and license agreements that we may enter into from time to time and that may vary significantly from quarter to quarter;

● the timing, cost and level of investment in our research and development activities as well as expenditures we will or may incur to acquire or develop additional technologies, drug candidates, or in preparation for potential commercialization of our drug candidates.

Any of these risk factors, should one or more occur, could cause the trading price of our stock to decline.

● the level and timing of royalty income from Rayner’s net sales of OMIDRIA, which may be affected by the extent of coverage and reimbursement for OMIDRIA, market acceptance of the product and Rayner’s ability to execute an effective sales strategy;

● the extent of any payments received from any collaboration agreements or development funding arrangements that we may enter into from time to time, as well as the extent of any payments that we are required to make under existing or future collaboration and license agreements, which may include sales-based royalties and milestone payments based on the achievement of development, regulatory and sales milestones and may vary significantly from quarter to quarter;

● the timing, cost and level of investment in our research and development activities as well as expenditures we may incur to acquire or develop additional technologies, drug candidates, or in preparation for potential commercialization of our drug candidates;

● whether we are able to obtain marketing approval for any of our drug candidates, the extent and timing of revenue from sales of any such approved product and the magnitude and timing of expenses associated with the manufacturing and sale of any such approved product.

Any of these risk factors, should one or more occur, could adversely affect our results of operations and financial condition and cause the trading price of our stock to decline.

We have incurred cumulative operating losses since inception.

If we are unable to raise additional capital when needed, our commercial operations may be limited and we may be unable to complete the development and commercialization of our drug candidates or to continue our other preclinical development programs.

Our operations have consumed substantial amounts of cash since our incorporation and, as of December 31, 2021, we had an accumulated deficit of approximately $682.1 million.

If we are unable to raise additional capital when needed we may be unable to complete the development and commercialization of our drug candidates or to continue our other preclinical development programs.

Our operations have consumed substantial amounts of cash since our incorporation, As of December 31, 2022, we had cash, cash equivalents and short-term investments of $194.9 million and outstanding accounts receivable of $213.2 million, substantially all of which have since been collected .

Our cash used in operations was $86.5 million and our net income for the year ended December 31, 2022 was $47.4 million which included the $200.0 million Milestone Payment.

We expect to continue to spend substantial amounts to:

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In addition, we may be required to seek collaborators for one or more of our current or future products at an earlier stage than otherwise would be desirable or on terms that are less favorable than otherwise might be available or to relinquish or license on unfavorable terms our rights to technologies or products that we otherwise would seek to develop or commercialize ourselves.

We also may have insufficient funds or otherwise be unable to advance our preclinical programs, such as potential new drug targets developed from our GPCR program, to a point where they can generate revenue through partnerships, collaborations or other arrangements.

We also may have insufficient funds or otherwise be unable to advance our preclinical programs to a point where they can generate revenue through partnerships, collaborations or other arrangements.

Any of these actions could limit the amount of revenue we are able to generate and harm our business and prospects.

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Obtaining FDA approval of our drug candidates requires substantial time, effort and financial resources and may be subject to both expected and unforeseen delays, and there can be no assurance that any approval will be granted on any of our drug candidates on a timely basis, if at all.

Even if we discuss with, and obtain feedback from, FDA regarding our proposed clinical trials, clinical data collection protocols and nonclinical studies before initiating those trials or studies, FDA may decide that the design of our clinical trials or clinical data collection protocols as actually run, or our resulting data, are insufficient for approval of our drug candidates and may require us to run additional preclinical, clinical or other studies or perform additional work related to chemistry, manufacturing and controls.

As was the case with the issuance with our BLA for narsoplimab in HSCT-TMA, with respect to which FDA issued a CRL indicating that certain additional information would be required to support approval, even if we discuss with, and obtain feedback from, FDA regarding our proposed clinical trials, clinical data collection protocols and nonclinical studies before initiating those trials or studies, FDA may decide that the design of our clinical trials or clinical data collection protocols as actually run, or our resulting data, are insufficient for approval of our drug candidates and may require us to run additional preclinical, clinical or other studies or perform additional work related to chemistry, manufacturing and controls.

In addition, we, FDA or an independent institutional review board or ethics committee may suspend or terminate human clinical trials at any time on various grounds, including a finding that the patients are or would be exposed to an unacceptable health risk or because of the way in which the investigators on whom we rely carry out the trials.

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In addition, we must maintain an effective healthcare compliance program in order to comply with U.S.

and other laws applicable to marketed drug products and, in particular, laws (such as the Anti-Kickback Statute, the False Claims Act and the Sunshine Act) applicable when drug products are purchased or reimbursed by a federal or state healthcare program.

and other laws applicable to marketed drug products and, in particular, laws (such as the Anti-Kickback Statute, the False Claims Act and the Sunshine Act) applicable when drug products are reimbursed by a federal or state healthcare program.

laws such as the Foreign Corrupt Practices Act prohibit the offering or payment of bribes or inducements to foreign public officials, including potentially physicians or other medical professionals who are employees of public healthcare entities in jurisdictions outside the U.S.

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We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

There is uncertainty with respect to the impact that healthcare reform legislation and the policies of the Biden administration may have on coverage and reimbursement for healthcare items and services covered by plans that are authorized by the Affordable Care Act (the “ACA”).

We expect that the ACA, if it remains in effect, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and apply downward pressure on the price that we receive for any approved product.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payers.

If the ACA were to be invalidated or repealed, any resulting reduction in the percentage of the U.S.

population that has healthcare insurance could reduce the market for our products.

The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate sufficient revenue, attain and/or maintain profitability or commercialize our drug candidates.

We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on OMIDRIA or the marketing approvals of our drug candidates, if any, may be.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we

are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

Any reduction in reimbursement from Medicare resulting from the IRA or other legislative or policy changes or from other government programs may result in a similar reduction in payments from private payers.

These healthcare reforms and the implementation of any future cost containment measures or other reforms may prevent us from being able to generate sufficient revenue, attain and/or maintain profitability or commercialize our drug candidates.

We cannot be sure whether additional legislative changes will be enacted, or the effect of forthcoming guidance implementing the IRA, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on OMIDRIA or the marketing approvals of our drug candidates, if any, may be.

We have no internal capacity to manufacture commercial or clinical supplies of our drug candidates and intend to continue to rely solely on third-party manufacturers.

If the contract manufacturers that we rely on experience difficulties manufacturing and supplying our drug candidates, or fail FDA or other regulatory inspections, our clinical trials or regulatory submissions may be significantly limited or delayed.

If we are unable to establish relationships with contract manufacturers that have sufficient manufacturing capacity available to meet our needs, or if the contract manufacturers that we rely on experience difficulties manufacturing and supplying our drug candidates, or fail FDA or other regulatory inspections, then our clinical trials or regulatory submissions may be significantly limited or delayed or we may have inadequate supply to meet demand for any product that we commercialize in the future.

We rely and intend to continue to rely on third-party manufacturers to produce quantities of clinical drug supplies of our drug candidates that are needed for clinical trials and to support NDAs, BLAs, or similar applications to regulatory authorities seeking marketing approval for our drug candidates, as well as to produce inventory of our drug candidates for commercial use in anticipation of marketing approval.

We cannot provide any assurance that we will be able to enter into or maintain these types of arrangements on commercially reasonable terms, or at all.

Global demand for contract manufacturing is high and the available supply of contract manufacturing capacity is limited.

We cannot provide any assurance that we will be able to enter into or maintain these types of arrangements on commercially reasonable terms, or at all, or that manufacturing arrangements will meet our requirements.

If we or one of our manufacturers were to terminate one of these arrangements early, or the manufacturer was unable to supply product quantities sufficient to meet our requirements, we would be required to transfer manufacturing to an approved alternative facility and/or establish additional manufacturing and supply arrangements.

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Additionally, if we are unable to engage multiple suppliers to manufacture our products, we may have inadequate supply to meet demand for our product.

In addition, narsoplimab is a biologic drug product and any other drug candidate from certain of our programs, including but not limited to MASP-2 and MASP-3, could be a biologic drug product.

In addition, narsoplimab, OMS906 and OMS1029 are biologic drug products and other drug candidates from certain of our programs, including but not limited to MASP-2 and MASP-3, could be biologic drug products.

We do not have the internal capability to produce biologics for use in clinical trials or on a commercial scale.

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Our contract manufacturers may encounter difficulties with formulation, manufacturing, supply chain and/or release processes that could result in delays in clinical trials and/or regulatory submissions or that could impact adversely the commercialization of our products or drug candidates, as well as in the initiation of enforcement actions by FDA and other regulatory authorities.

For example, our manufacturers are required to comply with FDA’s GMP requirements and are subject to periodic inspections by FDA.

For example, our manufacturers are required to comply with FDA’s GMP requirements and

are subject to periodic inspections by FDA.

If our manufacturers are unable to comply with FDA requirements, they may be unable to meet our supply needs.

These difficulties also could result in the recall or withdrawal of a product from the market or a failure to have adequate supplies to meet market demand.

clinical trials or to obtain and maintain regulatory approval for one or more of our drug candidates, which would harm our business and prospects significantly.

If the safety or manufacturing quality of any drug candidate supplied by contract manufacturers is compromised due to one or more of those contract manufacturers’ failure to adhere to applicable laws or for other reasons, we may not be able to maintain regulatory approval to run clinical trials or to obtain and maintain regulatory approval for one or more of our drug candidates, which would harm our business and prospects significantly.

Any significant delays in the manufacture and/or supply of clinical or commercial supplies could materially harm our business, financial condition, results of operations and prospects.

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We and our third-party manufacturers must obtain from third-party suppliers the APIs, excipients, and/or other raw materials plus primary and secondary packaging materials necessary for our contract manufacturers to produce our drug candidates for our clinical trials and, to the extent approved or commercialized, for commercial distribution.

Although we have entered or intend to enter into agreements with third-party suppliers that will guarantee the availability and timely delivery of APIs, excipients, test kits and materials for our drug candidates, we have not yet entered into agreements for the supply of all such ingredients, excipients, test kits or materials, and we may be unable to secure all such supply agreements or guarantees on commercially reasonable terms, if at all.

Although we have entered or intend to enter into agreements with third-party suppliers that will guarantee the availability and timely delivery of APIs, excipients, test kits and materials for our drug candidates, we have not entered into agreements for the supply of all such ingredients, excipients, test kits or materials, and we may be unable to secure all such supply agreements or guarantees on commercially reasonable terms, if at all.

Even if we were able to secure such agreements or guarantees, our suppliers may be unable or choose not to provide us the ingredients, excipients, test kits or materials in a timely manner or in the quantities required.

If Rayner or its third-party manufacturers experience difficulty obtaining the quantities of these ingredients, excipients or materials that are necessary for the manufacture of commercial supplies of OMIDRIA, the amount of royalty income we could expect to receive would be materially and adversely affected.

Further, if we or our third-party manufacturers are unable to obtain APIs, excipients, test kits and materials as necessary for our clinical trials or for the manufacture of commercial supplies of our drug candidates, if approved, potential regulatory approval or commercialization would be delayed, which would materially and adversely affect our ability to generate revenue from the sale of our drug candidates.

Similarly, if Rayner or its third-party manufacturers experience difficulty obtaining the quantities of these ingredients, excipients or materials that are necessary for the manufacture of commercial supplies of OMIDRIA, the amount of royalty income we could expect to receive would be materially and adversely affected.

We may be unable to advance clinical development of narsoplimab for treatment of COVID-19 and, even if successful, we may be unable to manufacture narsoplimab in sufficient quantities.

Narsoplimab has been used to treat critically ill COVID-19 patients under our compassionate use program with highly positive results and, in an analysis of the randomized population in the narsoplimab treatment arm of I-SPY COVID-19 trial, the addition of narsoplimab to standard-of-care treatment of critically ill COVID-19 patients resulted in a mortality benefit.

Notwithstanding these results, we may determine not to continue clinical development of narsoplimab for COVID-19 and/or further clinical evaluation of narsoplimab for the treatment of COVID-19 may not be feasible as a result of a number of factors, including decreasing rates of severe illness in patients with COVID-19 and the availability of alternative preventive or therapeutic agents for COVID-19.

Additionally, the results of the I-SPY-COVID-19 trial may be not be viewed by regulators, government officials and others as strong evidence of narsoplimab’s efficacy in the treatment of severe COVID-19 because the narsoplimab treatment arm of the I-SPY-COVID-19 trial was terminated prior to accrual of the maximum of 125 patients on the basis of analysis in a pre-consented population in which substantial bias was detected.

Also, contract manufacturing capacity and supplies of raw materials necessary for the production of narsoplimab are limited and we may be unable to secure the large-scale manufacturing capacity from third parties necessary to manufacture narsoplimab in sufficient quantities to enable broad availability of narsoplimab for COVID-19 patients.

These risks could limit our ability to develop or commercialize a therapeutic for COVID-19.

If our clinical trials or clinical protocols are delayed, suspended or terminated, we may be unable to develop our drug candidates on a timely basis, which would adversely affect our ability to obtain regulatory approvals, increase our development costs and delay or prevent commercialization of approved products.

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● delays in enrolling patients into clinical trials, collecting data from enrolled patients or collecting historical control data for any reason including disease severity, trial or data collection protocol design, study eligibility criteria, patient population size ( e.g.

, for orphan diseases or for some pediatric indications), proximity and/or availability of clinical trial sites for prospective patients, availability of competing therapies and clinical trials, regional differences in diagnosis and treatment, perceived risks and benefits of the product or drug candidate, disruptions due to external events, including an outbreak of pandemic or contagious disease such as the COVID-19 coronavirus, which has slowed enrollment in our clinical trials of narsoplimab in patients with IgA nephropathy;

, for orphan diseases or for some pediatric indications), proximity and/or availability of clinical trial sites for prospective patients, availability of competing therapies and clinical trials, regional differences in diagnosis and treatment, perceived risks and benefits of the product or drug candidate, disruptions due to external events or conditions affecting the localities or regions in which our clinical trials are conducted, such as such as war, terrorism, political crises, natural disasters or outbreaks of contagious disease such as the COVID-19 pandemic, which previously slowed enrollment in our clinical trials of narsoplimab in patients with IgA nephropathy;

● lower than anticipated retention rates of patients in clinical trials;

candidate, poorly executed testing, a failure of a clinical site to adhere to the clinical protocol or to follow GCPs or other study requirements, an unacceptable study design or other problems;

● the need to repeat or conduct additional clinical trials as a result of inconclusive or negative results, failure to replicate positive early clinical data in subsequent clinical trials, failure to deliver an efficacious dose of a drug candidate, poorly executed testing, a failure of a clinical site to adhere to the clinical protocol or to follow GCPs or other study requirements, an unacceptable study design or other problems;

● adverse findings in clinical or nonclinical studies related to the safety of our drug candidates in humans;

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Generic drug manufacturers could seek approval to market a generic version of our products or challenge our intellectual property rights with respect to our drug candidates.

It may not be feasible to detect and undertake patent enforcement action to stop infringing activity by a number of individual entities, each on a small scale, such as compounding pharmacies.

Further, our industry has produced a large number of patents and it is not always clear which patents cover various types of products or methods of use.

party may claim that we or our contract manufacturers are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging in the alleged infringing activity, including making, using or selling our drug candidates.

A third party may claim that we or our contract manufacturers are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging in the alleged infringing activity, including making, using or selling our drug candidates.

These lawsuits are costly and could affect our results of operations and divert the attention of managerial and technical personnel.

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Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection for the use, formulation and structure of our drug candidates, the methods used to manufacture them, the related therapeutic targets and associated methods of treatment as well as on successfully defending these patents against potential third-party challenges.

Our ability to protect our drug candidates from unauthorized making, using, selling, offering to sell or importing by third parties is dependent on the extent to which we have rights under valid and enforceable patents that cover these activities.

Our ability to protect our drug candidates from unauthorized making, using, selling,

offering to sell or importing by third parties is dependent on the extent to which we have rights under valid and enforceable patents that cover these activities.

The patent positions of pharmaceutical, biotechnology and other life sciences companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved.

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Our existing and future indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things:

● requiring a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes;

● requiring a substantial portion of our cash flow from operations to service and repay our indebtedness, which will reduce the amount of cash available for other purposes;

● limiting our ability to obtain additional financing;

● limiting our flexibility to plan for, or react to, changes in our business;

● diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the Convertible Notes;

● diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon any conversion of the Convertible Notes;

● placing us at a possible competitive disadvantage with competitors that are less leveraged than we are or have better access to capital;

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Competitors may develop products that are less expensive, safer or more effective, or which may otherwise diminish or eliminate the success of any products that we may commercialize.

We may not achieve commercial success if our competitors, many of whom have significantly more resources and experience than we, market products that are safer, more effective, less expensive or faster to reach the market than any products that we may develop and commercialize.

We may not achieve commercial success if our competitors, many of which have significantly more resources and experience than we have, market products that are safer, more effective, less expensive or faster to reach the market than any products that we may develop and commercialize.

Our competitors also may market a product that proves to be unsafe or ineffective, which may affect the market for future product we are developing, regardless of the safety or efficacy of our product.

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The members of our management team are at-will employees, and we do not maintain any key-person life insurance policies other than on the life of Gregory A.

Demopulos, M.D., our president, chief executive

officer and chairman of the board of directors.

Demopulos, M.D., our president, chief executive officer and chairman of the board of directors.

Losing the services of any key member of our management team, whether from death or disability, retirement, competing offers or other causes, without having a readily available and appropriate replacement could delay the execution of our business strategy, cause us to lose a strategic partner, or otherwise materially affect our operations.

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Additionally, our inability to manage growth effectively could cause our operating costs to grow even faster than we currently are anticipating.

Our credit facility contains restrictive covenants that may limit our operating flexibility.

In August 2019, we entered into a loan and security agreement with Silicon Valley Bank (“SVB”).

The credit facility contains restrictive covenants that limit our ability to transfer or dispose of assets, merge with other companies or consummate certain changes of control, acquire other companies, incur additional indebtedness and liens and enter into new businesses.

We therefore may not be able to engage in any of the foregoing transactions unless we obtain the consent of the lender or terminate the credit facility, which may limit our operating flexibility.

In addition, our credit facility is secured by all of our assets, excluding our intellectual property and development program inventories.

While we had no outstanding borrowings under the credit facility and were in compliance with all covenants as of December 31, 2021, there is no guarantee that we will be able to generate sufficient cash flow or revenue to meet these financial covenants or pay the principal and interest on any future borrowings under our facility.

Product liability claims may damage our reputation and, if insurance proves inadequate, these claims may harm our business.

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If we are unable to continue to access rights to these active ingredients prior to conducting preclinical toxicology studies intended to support clinical trials, we may need to develop alternate drug candidates from these programs by either accessing or developing alternate active ingredients, resulting in increased development costs and delays in commercialization of these drug candidates.

If we are unable to maintain continued access rights to the desired active ingredients on commercially reasonable terms or develop suitable alternate active ingredients, or if we do not meet diligence or other obligations under the corresponding licenses, we may not be able to commercialize drug candidates from these programs.

If we are unable to maintain continued access rights to the desired active

ingredients on commercially reasonable terms or develop suitable alternate active ingredients, or if we do not meet diligence or other obligations under the corresponding licenses, we may not be able to commercialize drug candidates from these programs.

General Risk Factors Related to our Business

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During the 12-month period ended December 31, 2022, our stock traded as high as $7.46 per share and as low as $1.75 per share.

The trading price of our common stock is likely to continue to be highly volatile and could be subject to

wide fluctuations in response to numerous factors, many of which are beyond our control.

The trading price of our common stock is likely to continue to be highly volatile and could be subject to wide fluctuations in response to numerous factors, many of which are beyond our control.

In addition, the stock market has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of publicly traded companies.

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In addition, approximately 13.9 million shares of common stock were subject to outstanding options, awards and warrants as of December 31, 2022 and may become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements.

As of December 31, 2021, we also had approximately 6.0 million shares of common stock reserved for future issuance under our employee benefit plans that are not subject to outstanding options.

As of December 31, 2022, we also had approximately 5.0 million additional shares of common stock reserved for future issuance under our employee benefit plans that are not subject to outstanding options.

Further, to the extent we issue common stock upon conversion of the Convertible Notes, such conversion would dilute the ownership interests of existing stockholders despite the expected reduction of such dilution as a result of the capped call transactions that we entered into in connection with the original issuances of the Convertible Notes.

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We currently plan to invest all available funds and future earnings, if any, in the development and growth of our business.

Additionally, under the loan and security agreement with SVB, we have agreed not to pay any dividends.

Therefore, we currently do not anticipate paying any cash dividends on our common stock in the foreseeable future.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors