OMEROS CORP 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements ​ ​ ​ Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 60 Consolidated Balance Sheets 62 Consolidated Statements of Operations and Comprehensive Income (Loss ) 63 Consolidated Statement of Shareholders’ Equity (Deficit) 64 Consolidated Statements of Cash Flows 65 Notes to Consolidated Financial Statements 66 ​ ​ ​ 59 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors Omeros Corporation ​ Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheets of Omeros Corporation (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income (loss), shareholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. ​ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 13, 2023 expressed an unqualified opinion thereon. ​ Adoption of ASU No. 2020-06 ​ As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for convertible instruments in 2021 due to the adoption of ASU No. 2020-06, Debt–Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging–Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ Critical Audit Matters ​ The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates. ​ 60 Table of Contents ​ OMIDRIA Contract Royalty Asset Description of the Matter As more fully described in Note 2 of the financial statements, the Company recorded a contract royalty asset in connection with its sale of OMIDRIA to Rayner Surgical, Inc. on December 23, 2021. To measure that contract royalty asset, the Company used the expected value approach, which is the discounted sum of the probability-weighted royalty payments using a range of potential outcomes, to the extent that it is probable that a significant reversal in the amount of cumulative income recognized will not occur. ​ Auditing management’s forecasts is complex and requires judgment due to the level of estimation uncertainty and the sensitivity of the asset’s value to changes in assumptions. In particular, the value of the OMIDRIA contract royalty asset is sensitive to changes in significant assumptions such as forecasted royalties due from Rayner Surgical, Inc. in various scenarios and the probability-weighting of those scenarios, which are affected by expectations about future market and regulatory conditions. ​ How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s internal controls over management’s process for measuring the OMIDRIA contract royalty asset. ​ To test the measurement of the OMIDRIA contract royalty asset, we performed audit procedures that included, among others, evaluating (1) the estimated future royalties in various scenarios, and (2) management’s relative weighting of those scenarios. We compared estimated future royalties to the Company’s historical revenues and royalty rates in the asset purchase agreement. We evaluated the appropriateness and likelihood of occurrence of the various scenarios included in management’s calculation, given the Company’s experience and industry trends, and verified the clerical accuracy of the calculation. We also evaluated the Company’s disclosures in the consolidated financial statements related to these matters. /s/Ernst & Young LLP ​ We have served as the Company’s auditor since 1998. Seattle, Washington March 13, 2023 61 Table of Contents OMEROS CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2022 2021 Assets ​ ​ ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 11,009 ​ $ 100,808 Short-term investments ​ 183,909 ​ 56,458 OMIDRIA contract royalty asset, short-term ​ ​ 28,797 ​ ​ 44,319 Receivables, net ​ 213,221 ​ 38,155 Prepaid expense and other assets ​ 6,300 ​ 8,216 Total current assets ​ 443,236 ​ 247,956 OMIDRIA contract royalty asset ​ ​ 123,425 ​ ​ 140,251 Right of use assets ​ ​ 21,762 ​ ​ 28,276 Property and equipment, net ​ 1,492 ​ 1,731 Restricted investments ​ 1,054 ​ 1,054 Total assets ​ $ 590,969 ​ $ 419,268 ​ ​ ​ ​ ​ ​ ​ Liabilities and shareholders’ equity ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 5,989 ​ $ 13,400 Accrued expenses ​ 30,551 ​ 33,134 Current portion of unsecured convertible senior notes, net ​ ​ 94,381 ​ ​ — Current portion of OMIDRIA royalty obligation ​ ​ 1,152 ​ ​ — Current portion of lease liabilities ​ 4,310 ​ 5,255 Total current liabilities ​ 136,383 ​ 51,789 Unsecured convertible senior notes, net ​ 220,906 ​ 313,458 OMIDRIA royalty obligation ​ ​ 125,126 ​ ​ — Lease liabilities, non-current ​ ​ 22,426 ​ ​ 29,126 Other accrued liabilities - noncurrent ​ 444 ​ 1,115 Commitments and contingencies (Note 11) ​ ​ Shareholders’ equity: ​ ​ Preferred stock, par value $ 0.01 per share, 20,000,000 shares authorized; none issued and outstanding at December 31, 2022 and December 31, 2021. ​ — ​ — Common stock, par value $ 0.01 per share, 150,000,000 shares authorized at December 31, 2022 and December 31, 2021; 62,828,765 and 62,628,855 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively. ​ 628 ​ 626 Additional paid-in capital ​ 720,773 ​ 706,288 Accumulated deficit ​ ( 635,717 ) ​ ( 683,134 ) Total shareholders’ equity ​ 85,684 ​ 23,780 Total liabilities and shareholders’ equity ​ $ 590,969 ​ $ 419,268 ​ See accompanying Notes to Consolidated Financial Statements ​ 62 Table of Contents OMEROS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Costs and expenses: ​ ​ ​ ​ ​ Research and development ​ $ 112,721 ​ $ 118,775 ​ $ 107,612 Selling, general and administrative ​ 50,668 ​ 54,842 ​ 49,306 Total costs and expenses ​ 163,389 ​ 173,617 ​ 156,918 Loss from operations ​ ( 163,389 ) ​ ( 173,617 ) ​ ( 156,918 ) Loss on early extinguishment of debt ​ — ​ — ​ ( 13,374 ) Interest expense ​ ( 22,702 ) ​ ( 19,669 ) ​ ( 26,751 ) Interest and other income ​ 4,062 ​ 1,740 ​ 654 Loss from continuing operations before income tax benefit ​ ( 182,029 ) ​ ( 191,546 ) ​ ( 196,389 ) Income tax benefit ​ — ​ — ​ 23,256 Net loss from continuing operations ​ ​ ( 182,029 ) ​ ​ ( 191,546 ) ​ ​ ( 173,133 ) Net income from discontinued operations, net of tax ​ ​ 229,446 ​ ​ 385,781 ​ ​ 35,072 Net income (loss) ​ $ 47,417 ​ $ 194,235 ​ $ ( 138,061 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic and diluted net income (loss) per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss from continuing operations ​ $ ( 2.90 ) ​ $ ( 3.07 ) ​ $ ( 3.02 ) Net income from discontinued operations ​ ​ 3.66 ​ ​ 6.19 ​ ​ 0.61 Net income (loss) ​ $ 0.76 ​ $ 3.12 ​ $ ( 2.41 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average shares used to compute basic and diluted net income (loss) per share ​ ​ 62,737,091 ​ ​ 62,344,100 ​ ​ 57,176,743 ​ See accompanying Notes to Consolidated Financial Statements ​ 63 Table of Contents OMEROS CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) (In thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Shareholders’ ​ ​ Shares ​ Amount ​ Capital ​ Deficit ​ Equity/(Deficit) Balance at December 31, 2019 54,200,810 $ 542 $ 625,048 $ ( 734,611 ) $ ( 109,021 ) Issuance of common stock in direct offering, net of offering costs ​ 6,900,000 ​ ​ 69 ​ ​ 93,606 ​ ​ — ​ ​ 93,675 Issuance of common stock upon exercise of stock options 556,421 ​ 5 ​ 5,017 ​ — ​ 5,022 Issuance of common stock upon grant of restricted stock awards ​ 14,000 ​ ​ — ​ ​ 155 ​ ​ — ​ ​ 155 Stock-based compensation — ​ — ​ 14,770 ​ — ​ 14,770 Equity component of 2026 Notes, net of issuance costs ​ — ​ ​ — ​ ​ 61,628 ​ ​ — ​ ​ 61,628 Purchase of 2026 Capped Calls ​ — ​ ​ — ​ ​ ( 23,223 ) ​ ​ — ​ ​ ( 23,223 ) Equity component of early extinguishment of 2023 Notes ​ — ​ ​ — ​ ​ ( 22,073 ) ​ ​ — ​ ​ ( 22,073 ) Termination of the 2023 Capped Call contracts related to debt repurchased ​ — ​ ​ — ​ ​ 8,387 ​ ​ — ​ ​ 8,387 Income tax benefit related to issuance of 2026 Notes ​ — ​ ​ — ​ ​ ( 12,011 ) ​ ​ — ​ ​ ( 12,011 ) Net loss — ​ — ​ — ​ ( 138,061 ) ​ ( 138,061 ) Balance at December 31, 2020 61,671,231 ​ 616 ​ 751,304 ​ ( 872,672 ) ​ ( 120,752 ) Issuance of common stock upon exercise of stock options 945,924 ​ ​ 10 ​ ​ 8,372 ​ ​ — ​ ​ 8,382 Issuance of common stock upon grant of restricted stock awards ​ 11,700 ​ ​ — ​ ​ 91 ​ ​ — ​ ​ 91 At the market offering fees ​ — ​ ​ — ​ ​ ( 241 ) ​ ​ — ​ ​ ( 241 ) Stock-based compensation — ​ — ​ 17,539 ​ — ​ 17,539 Cumulative effect of adopting ASU 2020-06 ​ — ​ ​ — ​ ​ ( 70,777 ) ​ ​ ( 4,697 ) ​ ​ ( 75,474 ) Net income — ​ — ​ — ​ 194,235 ​ 194,235 Balance at December 31, 2021 62,628,855 ​ 626 ​ 706,288 ​ ( 683,134 ) ​ 23,780 Issuance of common stock upon exercise of stock options 101,160 ​ ​ 1 ​ ​ 414 ​ ​ — ​ ​ 415 Issuance of common stock upon vesting of restricted stock units ​ 98,750 ​ ​ 1 ​ ​ ( 1 ) ​ ​ — ​ ​ — Stock-based compensation — ​ ​ — ​ ​ 14,072 ​ ​ — ​ ​ 14,072 Net income — ​ ​ — ​ ​ — ​ ​ 47,417 ​ ​ 47,417 Balance at December 31, 2022 62,828,765 ​ $ 628 ​ $ 720,773 ​ $ ( 635,717 ) ​ $ 85,684 ​ See accompanying Notes to Consolidated Financial Statements ​ 64 Table of Contents OMEROS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 Operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) ​ $ 47,417 ​ $ 194,235 ​ $ ( 138,061 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: ​ ​ ​ ​ Stock-based compensation expense ​ ​ 14,072 ​ ​ 17,630 ​ ​ 14,925 Gain on sale of OMIDRIA, gross ​ ​ — ​ ​ ( 310,563 ) ​ ​ — Non-cash interest expense on unsecured convertible debt ​ ​ 1,830 ​ 1,696 ​ 11,649 Non-cash interest expense on future royalty obligation ​ ​ 1,695 ​ ​ — ​ ​ — Depreciation and amortization ​ ​ 952 ​ 1,386 ​ 1,616 Noncash adjustments on buyout of equipment finance leases ​ ​ 64 ​ ​ — ​ ​ — Remeasurement on OMIDRIA contract royalty asset ​ ​ ( 18,634 ) ​ ​ — ​ ​ — Interest on OMIDRIA contract royalty asset ​ ​ ( 14,457 ) ​ ​ — ​ ​ — Early termination of operating lease ​ ​ ( 454 ) ​ ​ — ​ ​ — Loss on early extinguishment of debt ​ — ​ — ​ 13,374 Deferred income tax ​ — ​ — ​ ( 12,011 ) Fair value settlement upon termination of cap call contract ​ — ​ — ​ 838 Changes in operating assets and liabilities: ​ ​ ​ ​ Receivables ​ ( 175,066 ) ​ ( 34,314 ) ​ 31,344 Prepaid expenses and other ​ 1,324 ​ 5,568 ​ ( 4,024 ) OMIDRIA contract royalty asset ​ ​ 65,439 ​ ​ — ​ ​ — Accounts payable and accrued expense ​ ( 10,665 ) ​ 14,640 ​ ( 19,736 ) Net cash used in operating activities ​ ( 86,483 ) ​ ( 109,722 ) ​ ( 100,086 ) Investing activities: ​ ​ ​ Cash proceeds on sale of OMIDRIA ​ ​ — ​ ​ 125,993 ​ ​ — Purchases of investments ​ ​ ( 429,045 ) ​ ​ ( 32,006 ) ​ ​ ( 133,194 ) Proceeds from the sale and maturities of investments ​ ​ 301,594 ​ ​ 100,000 ​ ​ 66,446 Purchases of property and equipment ​ ( 113 ) ​ ( 277 ) ​ ( 283 ) Net cash provided by (used in) investing activities ​ ( 127,564 ) ​ 193,710 ​ ( 67,031 ) Financing activities: ​ ​ ​ Proceeds upon entering into OMIDRIA royalty obligation ​ ​ 125,000 ​ ​ — ​ ​ — Principal payments on OMIDRIA royalty obligations ​ ​ ( 417 ) ​ ​ — ​ ​ — Proceeds from issuance of convertible debt ​ ​ — ​ ​ — ​ ​ 225,030 Payments for debt issuance costs ​ ​ — ​ ​ — ​ ​ ( 6,785 ) Purchases of capped calls related to convertible senior notes ​ — ​ — ​ ( 23,223 ) Payments for repurchases of convertible senior notes ​ — ​ — ​ ( 125,638 ) Proceeds from termination of capped call contracts ​ — ​ — ​ 7,549 Proceeds from issuance of common stock, net ​ ​ — ​ ​ — ​ ​ 93,675 Release in restricted investments ​ — ​ — ​ 99 Proceeds upon exercise of stock options and warrants ​ 415 ​ 8,383 ​ 5,022 Payments on finance lease obligations ​ ​ ( 750 ) ​ ​ ( 1,823 ) ​ ​ ( 1,195 ) At the market offering costs ​ — ​ ( 241 ) ​ — Net cash provided by financing activities ​ 124,248 ​ 6,319 ​ 174,534 Net increase (decrease) in cash and cash equivalents ​ ( 89,799 ) ​ 90,307 ​ 7,417 Cash and cash equivalents at beginning of period ​ 100,808 ​ 10,501 ​ 3,084 Cash and cash equivalents at end of period ​ $ 11,009 ​ $ 100,808 ​ $ 10,501 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental cash flow information ​ ​ ​ Cash paid for interest ​ $ 19,178 ​ $ 17,876 ​ $ 11,603 Equipment acquired under finance lease ​ $ 40 ​ $ 289 ​ $ 216 ​ See accompanying Notes to Consolidated Financial Statements ​ 65 Table of Contents OMEROS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1—Organization and Basis of Presentation General Omeros Corporation (“Omeros,” the “Company” or “we”) is a clinical-stage biopharmaceutical company committed to discovering, developing and commercializing small-molecule and protein therapeutics for large-market as well as orphan indications targeting immunologic disorders including complement-mediated diseases, cancers, and addictive and compulsive disorders. We marketed our first drug product OMIDRIA ® (phenylephrine and ketorolac intraocular solution) 1% / 0.3% for use during cataract surgery or intraocular lens replacement in the United States (the “U.S.”) until we sold OMIDRIA and related business assets on December 23, 2021 (see “Sale of OMIDRIA Assets” below for additional information). ​ The lead drug candidate in our pipeline of complement-targeted therapeutics is narsoplimab, a proprietary, patented human monoclonal antibody targeting mannan-binding lectin-associated serine protease 2 (“MASP-2”), the key activator of the lectin pathway of complement. Clinical development of narsoplimab is currently focused primarily on hematopoietic stem cell transplant-associated thrombotic microangiopathy (“HSCT-TMA”) and immunoglobulin A (“IgA”) nephropathy. Our pipeline of clinical-stage investigational agents also includes: our long-acting MASP-2 inhibitor, OMS1029, our inhibitor of mannan-binding lectin-associated serine protease-3 (“MASP-3”), OMS906, and our phophodiesterase 7 (“PDE7”) inhibitor, OMS527. Sale of OMIDRIA Assets On December 23, 2021, we closed on an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Rayner Surgical Inc. (“Rayner”) for the sale of our commercial product OMIDRIA and certain related assets including inventory and prepaid expenses. Rayner paid us $ 126.0 million in cash at closing, and we retained all outstanding accounts receivable, accounts payable and accrued expenses as of the closing date. ​ Under the Asset Purchase Agreement, Omeros is entitled to receive a milestone payment of $ 200.0 million (the “Milestone Payment”) within 30 days following an event that establishes separate payment for OMIDRIA for a continuous period of at least four years when furnished in the ambulatory surgery center (“ASC”) setting. In December 2022, the milestone event occurred and we recorded a $ 200.0 million milestone receivable. We received the Milestone Payment together with accrued interest in February 2023. ​ As a result of the divestiture, the results of OMIDRIA operations (e.g., revenues and operating costs) have been reclassified to discontinued operations in our consolidated statements of operations and comprehensive income (loss) and excluded from continuing operations for all periods presented (See “Note 3 – Discontinued Operations”). ​ Basis of Presentation Our consolidated financial statements include the financial position and results of operations of Omeros and our wholly owned subsidiaries. All inter-company transactions have been eliminated. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Liquidity and Capital Resources 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 subsequent to year end . 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. In addition, the principal balance of $ 95.0 million outstanding on our 2023 convertible senior notes becomes due in November 2023. 66 Table of Contents ​ Historically, we have incurred net losses from continuing operations and negative operating cash flows. We have not yet established an ongoing source of revenue sufficient to cover our operating costs and, therefore, could need to raise additional capital to accomplish our business plan and to retire our outstanding convertible senior notes due in 2026. We plan to continue to fund our operations for at least the next twelve months with our existing cash and investments and our accounts receivable. If FDA approval is granted for HSCT-TMA within the next twelve months, sales of narsoplimab may also provide funds for our operations . 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 equaling an aggregate amount up to $ 150.0 million. Should it be determined to be strategically advantageous, we could pursue debt financings as well as public and private offerings of our equity securities, similar to those we have previously completed, or other strategic transactions, which may include licensing a portion of our existing technology. Segments We operate in one segment. Management uses cash flow as the primary measure to manage our business and does not segment our business for internal reporting or decision-making. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant items subject to such estimates include OMIDRIA contract royalty asset valuation, stock-based compensation expense, and accruals for clinical trials and manufacturing of drug product. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances; however, actual results could differ from these estimates. ​ ​ Note 2—Significant Accounting Policies Discontinued Operations We review the presentation of planned or completed business dispositions in the consolidated financial statements based on the available information and events that have occurred. The review consists of evaluating whether the business meets the definition of a component for which the operations and cash flows are clearly distinguishable from the other components of the business and, if so, whether it is anticipated that after the disposal the cash flows of the component would be eliminated from continuing operations and whether the disposition represents a strategic shift that has a major effect on operations and financial results. Planned or completed business dispositions are presented as discontinued operations when all the criteria described above are met. For those divestitures that qualify as discontinued operations, all comparative periods presented are reclassified in the consolidated balance sheets. Additionally, the results of operations of a discontinued operation are reclassified to income from discontinued operations, net of tax, for all periods presented in the consolidated statements of operations and comprehensive income (loss). Results of discontinued operations include all revenues and expenses directly derived from such businesses; general corporate overhead is not allocated to discontinued operations. The OMIDRIA asset sale to Rayner qualifies as a discontinued operation and has been presented as such for all reporting periods presented. The Company included information regarding cash flows from discontinued operations (see “Note 3 – Discontinued Operations”). 67 Table of Contents OMIDRIA Royalties, Milestones and Contract Royalty Assets We have rights to receive future royalties from Rayner on OMIDRIA net sales at royalty rates that vary based on geography and certain regulatory contingencies. Therefore, future OMIDRIA royalties are treated as variable consideration. The sale of OMIDRIA qualified as an asset sale under GAAP. To measure the OMIDRIA contract royalty asset, we used the expected value approach which is the sum of the discounted probability-weighted royalty payments, we would receive using a range of potential outcomes, to the extent that it is probable that a significant reversal in the amount of cumulative income recognized will not occur. As contemplated by the Asset Purchase Agreement, the royalty rate applicable to U.S. net sales of OMIDRIA was reduced from 50 % to 30 % upon the occurrence, in December 2022, of the event triggering the $ 200.0 million Milestone Payment. Consequently, we revalued the OMIDRIA contract royalty asset using the 30 % royalty rate on U.S. net sales and adjusted the probability weighted outcomes to reflect the occurrence of the milestone event. Royalties earned are recorded as a reduction to the OMIDRIA contract royalty asset. The amount recorded in discontinued operations in future periods will reflect interest earned on the outstanding OMIDRIA contract royalty asset at 11.0 % and any amounts we receive that are different from the expected royalties. The OMIDRIA contract royalty asset will be re-measured periodically using the expected value approach based on actual results and future expectations. Any required adjustment to the OMIDRIA contract royalty asset will be recorded in discontinued operations. OMIDRIA Royalty Obligation On September 30, 2022, we sold to DRI Healthcare Acquisitions LP (“DRI”) an interest in a portion of our future OMIDRIA royalty receipts for a purchase price of $ 125.0 million in cash (see “Note 9 - OMIDRIA Royalty Obligation”). The $ 125.0 million cash consideration was recorded as an “OMIDRIA royalty obligation” on our consolidated balance sheet. The liability is amortized over the term of the arrangement using the implied effective interest rate of 9.4 %. Interest expense is recorded as a component of continuing operations. To the extent our estimates of future royalties are less than previous estimates, we will adjust the carrying amount of the OMIDRIA royalty obligation to the present value of the revised estimated cash flows, discounted at the 9.4 % original effective interest rate utilizing the cumulative catch-up method. The adjustment would be recognized as a component of net income (loss) from continuing operations. Cash and Cash Equivalents, Short-Term Investments and Restricted Investments Cash and cash equivalents include highly liquid investments with a maturity of three months or less on the date of purchase which can be easily converted into cash without a significant impact to their value. Short-term investment securities are classified as held-to-maturity or available-for-sale. Investments classified as held-to-maturity are carried at cost. Investments classified as available-for-sale are carried at fair value. Unrealized gains and losses on investments classified as available-for-sale are reported as a separate component of shareholders’ equity. Amortization, accretion, interest, and dividends, realized gains and losses and declines in value judged to be other-than-temporary are included in other income. The cost of securities sold is based on the specific-identification method. Investments with maturities of less than one year, or those for which management intends to use the investments to fund current operations, are included in current assets. We evaluate whether an investment is other-than-temporarily impaired based on the specific facts and circumstances. Factors that are considered in determining whether an other-than-temporary decline in value has occurred include: the market value of the security in relation to its cost basis; the financial condition of the investee; and the intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment. Restricted investments held in money-market funds include security deposits held by our landlord. ​ Investment income, which is included as a component of other income, consists primarily of interest earned. 68 Table of Contents Inventory We expense inventory costs related to product candidates as research and development expenses until regulatory approval is reasonably assured in the U.S. or the European Union (“EU”). Once approval is reasonably assured, costs, including amounts related to third-party manufacturing, transportation and internal labor and overhead, will be capitalized. Receivables, Net Receivables at December 31, 2022 primarily consisted of the $ 200.0 million milestone and royalties receivable from Rayner. Receivables at December 31, 2021 were primarily OMIDRIA customer receivables made prior to the sale to Rayner and collected after the closing. Considering the nature of our receivables, we concluded an allowance for doubtful accounts was not necessary as of December 31, 2022 and 2021. Property and Equipment, Net Property and equipment are stated at cost, and depreciation is calculated using the straight-line method over the estimated useful life of the assets, which is generally three to 10 years . Equipment acquired through finance leases is recorded as property and equipment and is amortized over the shorter of the useful lives of the related assets or the lease term. Expenditures for repairs and maintenance are expensed as incurred. Right-of-Use Assets and Related Lease Liabilities We record operating leases as right-of-use assets and recognize the related lease liabilities equal to the fair value of the lease payments using our incremental borrowing rate when the implicit rate in the lease agreement is not readily available. We recognize variable lease payments, when incurred. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease. We record finance leases as a component of property and equipment and amortize these assets within operating expenses on a straight-line basis to their residual values over the shorter of the term of the underlying lease or the estimated useful life of the equipment. The interest component of a finance lease is included in interest expense and recognized using the effective interest method over the lease term. We account for leases with initial terms of 12 months or less as operating expenses on a straight-line basis over the lease term. Unsecured Convertible Senior Notes On January 1, 2021, we adopted Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion Options (Subtopic 470.20 and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) on a modified retrospective basis. ASU 2020- 06 removed the separate liability and equity accounting for our convertible senior notes that was required under previous guidance and allows us to account for our convertible senior notes wholly as debt. Upon adoption, we removed the equity component allocated to debt issuance costs increasing unsecured convertible senior notes and shareholders’ equity by $ 75.5 million. Transactions involving contemporaneous exchanges of cash between the same debtor and creditor in connection with the issuance of a new debt obligation and satisfaction of an existing debt obligation by the debtor are evaluated as a modification or an exchange transaction depending on whether the exchange is determined to have substantially different terms. The 6.25 % Convertible Senior Notes (the “2023 Notes”) repurchase and issuance of the 5.25 % Convertible Senior Notes (“2026 Notes”) were deemed to have substantially different terms due to the significant difference between the value of the conversion option immediately prior to and after the exchange. Therefore, the repurchase of the 2023 Notes was accounted for as a debt extinguishment. (See “Note 8 - Unsecured Convertible Senior Debt”). 69 Table of Contents Impairment of Long-Lived Assets We assess the impairment of long-lived assets, primarily property and equipment, whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of these assets is measured by comparing the carrying value to future undiscounted cash flows that the asset is expected to generate. If the asset is impaired, the amount of any impairment will be reflected in the results of operations in the period of impairment. We have not recognized any impairment losses for the years ended December 31, 2022, 2021 and 2020. Revenue Recognition When we enter into a customer contract, we perform the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. Research and Development Research and development expenses are comprised primarily of contracted research and manufacturing costs prior to approval; costs for personnel, including salaries, benefits and stock compensation; clinical study costs; contracted research; manufacturing costs prior to approval; consulting services; depreciation; materials and supplies; milestones; an allocation of our occupancy costs; and other expenses incurred to sustain our overall research and development programs. Advance payments for goods or services that will be used or rendered for future research and development activities are deferred and then recognized as an expense as the related goods are delivered or the services are performed, or when the goods or services are no longer expected to be provided. All other research and development costs are expensed as incurred. Selling, General and Administrative Selling, general and administrative expenses are comprised primarily of salaries, benefits, and stock-compensation costs for sales, marketing, and other personnel not directly engaged in research and development. Additionally, selling, general and administrative expenses include marketing and selling expenses, professional and legal services; patent costs; depreciation, an allocation of our occupancy costs; and other general corporate expenses. Advertising costs, which we consider to be media and marketing materials, are expensed as incurred and were $ 3.2 million, $ 7.8 million and $ 5.6 million during the years ended December 31, 2022, 2021 and 2020, respectively. Of these amounts, advertising costs related to the discontinued operations of OMIDRIA were $ 2.0 million and $ 1.1 million in 2021 and 2020, respectively. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained upon an examination. A valuation allowance is established when it is more likely than not that the deferred tax assets will not be realized. Stock-Based Compensation Stock-based compensation expense is recognized for all share-based payments, including grants of stock option awards and restricted stock units (“RSU”) based on estimated fair values. The fair value of our stock is calculated using the Black-Scholes option-pricing model, which requires judgmental assumptions around volatility, forfeiture rates, risk-free rate and expected term. Compensation expense is recognized over the requisite service periods, which is generally the vesting period, using the straight-line method. Forfeiture expense is estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. 70 Table of Contents Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) is comprised of net income (loss) and certain changes in equity that are excluded from net income (loss). There was no difference between comprehensive income (loss) and net income (loss) for the years ended December 31, 2022, 2021 or 2020. Financial Instruments and Concentrations of Credit Risk Cash and cash equivalents, receivables, accounts payable and accrued liabilities, which are recorded at invoiced amount or cost, approximate fair value based on the short-term nature of these financial instruments. The fair value of short-term investments is based on quoted market prices. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and receivables. Cash and cash equivalents are held by financial institutions and are federally insured up to certain limits. At times, our cash and cash equivalents balance held at a financial institution may exceeds the federally insured limits. To limit the credit risk, we invest our excess cash in high-quality securities such as money market mutual funds, certificates of deposit and U.S. treasury bills. Note 3—Discontinued Operations On December 23, 2021, we closed an Asset and Purchase Agreement for the sale of OMIDRIA and certain related assets including inventory and prepaid expenses. We retained the outstanding accounts receivable and all outstanding liabilities related to OMIDRIA as of the closing date. ​ Upon closing, we received an up-front cash payment of $ 126.0 million. We received a 50 % royalty on OMIDRIA net sales in the U.S. following the sale of OMIDRIA. The occurrence of the milestone event in December 2022 resulted in recognition of the $ 200.0 million Milestone Payment and reduced our royalty rate on U.S. OMIDRIA net sales (the “U.S. base royalty rate”) to 30 % until the expiration or termination of the last issued and unexpired U.S. patent, which we expect to occur no earlier than 2033. The U.S. base royalty rate would be reduced to 10 % upon the occurrence of certain events described in the Asset Purchase Agreement, including during any specific period in which OMIDRIA is no longer eligible for separate payment. ​ The sale of OMIDRIA was recorded as an asset sale. Additionally, the results of operations for OMIDRIA are recorded as income from discontinued operations for all periods presented in the consolidated statements of operations and comprehensive income (loss). ​ The following schedule is a rollforward of the OMIDRIA contract royalty asset (in thousands): ​ ​ ​ ​ ​ OMIDRIA contract royalty asset at December 31, 2021 ​ $ 184,570 Royalties earned ​ ​ ( 65,439 ) Interest on OMIDRIA contract royalty asset ​ ​ 18,634 Remeasurement adjustments ​ ​ 14,457 OMIDRIA contract royalty asset at December 31, 2022 ​ $ 152,222 ​ During the year ended December 31, 2022, we earned royalties of $ 65.4 million on U.S. net sales of OMIDRIA, which we recorded as a reduction from the OMIDRIA contract royalty asset. Additionally, we recorded $ 33.1 million of income in discontinued operations comprising effective interest on the OMIDRIA contract royalty asset and remeasurement adjustments. 71 Table of Contents Net income from discontinued operations, net of tax is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 ​ ​ (In thousands) Product sales, net ​ $ — ​ $ 110,735 ​ $ 73,813 Costs and expenses ​ ​ — ​ ​ 30,631 ​ ​ 27,496 Gross margin ​ ​ — ​ ​ 80,104 ​ ​ 46,317 Gain on sale of OMIDRIA ​ ​ — ​ ​ 305,648 ​ ​ — Milestone income ​ ​ 200,000 ​ ​ — ​ ​ — Interest on OMIDRIA contract royalty asset ​ ​ 18,634 ​ ​ — ​ ​ — Remeasurement adjustments ​ ​ 14,457 ​ ​ — ​ ​ — Other income ​ 307 ​ ​ 1,035 ​ ​ — Income before income tax ​ ​ 233,398 ​ ​ 386,787 ​ ​ 46,317 Income tax expense (1) ​ ​ ( 3,952 ) ​ ​ ( 1,006 ) ​ ​ ( 11,245 ) Net income from discontinued operations, net of tax ​ $ 229,446 ​ $ 385,781 ​ $ 35,072 ​ (1) For further discussion of income tax expense refer to “Note 14 – Income Taxes”. ​ The year ended December 31, 2021 included a gain on the sale of OMIDRIA comprised as follows (in thousands): ​ ​ ​ ​ ​ Cash proceeds ​ $ 125,993 OMIDRIA contract royalty asset ​ ​ 184,570 Gain on sale of OMIDRIA, gross ​ ​ 310,563 Transaction and closing costs ​ ​ ( 1,972 ) RSUs granted to transferred employees ​ ​ ( 1,419 ) Prepaid assets and inventory at cost ​ ​ ( 1,524 ) Gain on sale of OMIDRIA ​ $ 305,648 ​ Cash flow from discontinued operations is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022 ​ 2022 2021 2020 ​ ​ (In thousands) Net cash provided by discontinued operations from operating activities ​ $ 44,929 ​ $ 56,344 ​ $ 25,888 Net cash provided by discontinued operations from investing activities ​ $ — ​ $ 125,993 ​ $ — ​ We historically recorded revenue from product sales when the product was delivered to our wholesalers and title for the product was transferred. Product sales were recorded net of wholesaler distribution fees and estimated chargebacks, rebates, returns and purchase-volume discounts. Accruals or allowances were established for these deductions in the same period when revenue was recognized, and actual amounts incurred were offset against the applicable accruals or allowances. We reflected each of these accruals or allowances as either a reduction in the related accounts receivable or as an accrued liability depending on how the amount was expected to be settled. ​ Prior to the sale of OMIDRIA to Rayner, we sold OMIDRIA through four wholesalers. These wholesalers, including entities under their common control, each accounted for greater than 15 % of our total revenues for the years ended December 31, 2021 and 2020. Collectively, they accounted for 100 % of our total sales. These wholesalers, and entities under their common control, each represented greater than 10 % of our accounts receivable as of December 31, 2021 and 2020. ​ ​ ​ 72 Table of Contents Note 4—Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share (“Diluted EPS”) is computed by dividing net income (loss) by the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Our potentially dilutive securities include common shares related to our stock options, warrants, RSUs and unsecured convertible senior notes calculated using the treasury stock method. In periods where we have a net loss from continuing operations but overall net income, we do not compute Diluted EPS. Potentially dilutive securities excluded from Diluted EPS are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 2021 2020 2026 Notes convertible to common stock (1) ​ 12,172,008 ​ 12,172,008 ​ 6,086,004 2023 Notes convertible to common stock (1) ​ 4,941,739 ​ 4,941,739 ​ 7,932,791 Outstanding options to purchase common stock ​ 9,488 ​ 1,707,371 ​ 1,585,332 Outstanding restricted stock units ​ 98,750 ​ 2,642 ​ — Outstanding warrants to purchase common stock ​ — ​ — ​ 10,792 Total potentially dilutive shares excluded from net income (loss) per share ​ 17,221,985 ​ 18,823,760 ​ 15,614,919 ​ (1) The 2023 Notes and 2026 Notes (defined below) are subject to a capped call arrangement that potentially reduces the dilutive effect as described in “Note 8 - Unsecured Convertible Senior Notes”. Any potential impact of the capped call arrangement is excluded from this table. ​ Note 5—Receivables, Net Receivables, net consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2022 2021 ​ ​ (In thousands) OMIDRIA milestone receivable ​ $ 200,000 ​ $ — OMIDRIA royalty receivables ​ ​ 12,966 ​ ​ 1,035 Trade receivables, net ​ ​ — ​ ​ 35,470 Sublease and other receivables ​ 255 ​ 1,650 Total receivables, net ​ $ 213,221 ​ $ 38,155 ​ Trade receivables contained no significant chargeback and product return allowance as of December 31, 2022 compared to $ 2.0 million of chargeback and product return allowances as of December 31, 2021. Based on the nature of our receivables, we determined a reserve for doubtful accounts was not required for the years ended December 31, 2022 and 2021. ​ ​ ​ Note 6—Fair-Value Measurements As of December 31, 2022, all investments were classified as held-to-maturity and earnings were included in interest and other income. As of December 31, 2021, all investments were classified as short-term and available-for-sale. On a recurring basis, we measure certain financial assets at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting standard establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required: Level 1—Observable inputs for identical assets or liabilities, such as quoted prices in active markets; Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable; and 73 Table of Contents Level 3—Unobservable inputs in which little or no market data exists, therefore they are developed using estimates and assumptions developed by us, which reflect those that a market participant would use. Our fair-value hierarchy for our financial assets are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ Level 1 Level 2 Level 3 Total ​ ​ (In thousands) Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money-market funds classified as short-term investments ​ $ 84,882 ​ $ — ​ $ — ​ $ 84,882 U.S. government treasury bills classified as short-term investments ​ ​ 99,027 ​ ​ — ​ ​ — ​ ​ 99,027 Total short-term investments ​ ​ 183,909 ​ ​ — ​ ​ — ​ ​ 183,909 Money-market funds classified as non-current restricted investments ​ 1,054 ​ — ​ — ​ 1,054 Total ​ $ 184,963 ​ $ — ​ $ — ​ $ 184,963 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Level 1 Level 2 Level 3 Total ​ ​ (In thousands) Assets: ​ ​ ​ ​ ​ Money-market funds classified as short-term investments ​ $ 56,458 ​ $ — ​ $ — ​ $ 56,458 Money-market funds classified as non-current restricted investments ​ 1,054 ​ — ​ — ​ 1,054 Total ​ $ 57,512 ​ $ — ​ $ — ​ $ 57,512 ​ Unrealized gains and losses on our short-term investments were not material for either period presented. Cash held in demand deposit accounts of $ 11.0 million and $ 100.8 million is excluded from our fair-value hierarchy disclosure as of December 31, 2022 and 2021, respectively. The carrying amounts for receivables, accounts payable and accrued liabilities, and other current monetary assets and liabilities, including lease financing obligations, approximate fair value. See “Note 8 - Unsecured Convertible Senior Notes” and “Note 9 – OMIDRIA Royalty Obligation” for the carrying amount and estimated fair value of our 5.25 % convertible senior notes due 2026, 6.25 % convertible senior notes due 2023 and OMIDRIA royalty obligation. Note 7—Certain Balance Sheet Accounts Property and Equipment, Net Property and equipment, net consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2022 ​ 2021 ​ ​ (In thousands) Equipment under finance leases ​ $ 6,204 ​ $ 5,979 Laboratory equipment ​ 3,135 ​ 3,091 Computer equipment ​ 1,076 ​ 1,069 Office equipment and furniture ​ 625 ​ 625 Total cost ​ 11,040 ​ 10,764 Less accumulated depreciation and amortization ​ ( 9,548 ) ​ ( 9,033 ) Total property and equipment, net ​ $ 1,492 ​ $ 1,731 ​ For the years ended December 31, 2022, 2021 and 2020, depreciation and amortization expenses were $ 1.0 million, $ 1.4 million and $ 1.6 million, respectively. 74 Table of Contents Accrued Expenses Accrued expenses consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2022 ​ 2021 ​ ​ (In thousands) Employee compensation ​ $ 6,665 ​ $ 3,706 Clinical trials ​ ​ 5,536 ​ ​ 2,430 Interest payable ​ ​ 5,172 ​ ​ 5,172 Income taxes payable ​ ​ 4,871 ​ ​ 338 Consulting and professional fees ​ ​ 4,425 ​ ​ 7,455 Contract research and development ​ ​ 3,209 ​ ​ 3,916 Sales rebates, fees and discounts ​ — ​ 8,442 Other accrued expenses ​ 673 ​ 1,675 Total accrued expenses ​ $ 30,551 ​ $ 33,134 ​ Note 8—Unsecured Convertible Senior Notes On January 1, 2021, we adopted ASU 2020-06, Debt—Debt with Conversion Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) on a modified retrospective basis. ASU 2020- 06 removes the separate liability and equity accounting for our convertible senior notes. Consequently, we now account for our convertible senior notes wholly as debt. Upon adoption, we removed the equity component allocated to debt issuance costs increasing unsecured convertible senior notes and shareholders’ equity by $ 75.5 million. In November 2018, we issued $ 210.0 million in aggregate principal amount on our 2023 Notes, and in August and September 2020, we issued an aggregate principal amount of $ 225.0 million on our 2026 Notes. We used a portion of the proceeds from the 2026 Notes to repurchase $ 115.0 million principal amount of the 2023 Notes and terminate a corresponding portion of the related capped call. Unsecured convertible senior notes outstanding at December 31, 2022 and 2021, respectively, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of December 31, 2022 ​ 2023 Notes 2026 Notes Total ​ ​ (In thousands) Principal amount ​ $ 95,000 ​ $ 225,030 ​ $ 320,030 Unamortized debt issuance costs ​ ( 619 ) ​ ( 4,124 ) ​ ( 4,743 ) Total unsecured convertible senior notes, net ​ $ 94,381 ​ $ 220,906 ​ $ 315,287 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value of outstanding unsecured convertible senior notes (1) ​ $ 92,031 ​ $ 118,141 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of December 31, 2021 ​ 2023 Notes 2026 Notes Total ​ ​ (In thousands) Principal amount ​ $ 95,000 ​ $ 225,030 ​ $ 320,030 Unamortized discount ​ ( 1,282 ) ​ ( 5,290 ) ​ ( 6,572 ) Total unsecured convertible senior notes, net ​ $ 93,718 ​ $ 219,740 ​ $ 313,458 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value of outstanding unsecured convertible senior notes (1) ​ $ 87,163 ​ $ 171,867 ​ ​ ​ (1) The fair value is classified as Level 3 due to the limited trading activity for the unsecured convertible senior notes. 75 Table of Contents 2023 Convertible Senior Notes The 2023 Notes are unsecured and accrue interest at an annual rate of 6.25 % per annum, payable semi-annually in arrears on May 15 and November 15 of each year. The 2023 Notes mature on November 15, 2023 unless earlier purchased, redeemed or converted in accordance with their terms and are classified as a current liability on our Consolidated Balance Sheets as of December 31, 2022. The 2023 Notes are convertible into cash, shares of our common stock or a combination thereof, as we elect at our sole discretion. The initial conversion rate is 52.0183 shares of our common stock per $ 1,000 of note principal (equivalent to an initial conversion price of approximately $ 19.22 per share of common stock), subject to adjustment in certain circumstances. To reduce the dilutive impact or potential cash expenditure associated with conversion of the 2023 Notes, we entered into a capped call transaction (the “2023 Capped Call”), which essentially covers the number of shares of our common stock underlying the 2023 Notes when our common stock is trading between the initial conversion price of $ 19.22 per share and $ 28.84 per share. However, should the market price of our common stock exceed the $ 28.84 cap, then the conversion of the 2023 Notes would have an additional dilutive impact or may require a cash expenditure to the extent the market price exceeds the cap price. In August and September 2020, we issued the 2026 Notes and used approximately $ 125.6 million of the net proceeds to repurchase $ 115.0 million principal amount of the 2023 Notes (see “2026 Convertible Senior Notes” below). Upon repurchase, the settlement consideration was allocated between the repurchase of the liability and the equity component with the fair value of the liability component estimated to be $ 103.6 million based on the expected future cash flows associated with the $ 115.0 million principal amount discounted at a 9.9 % effective interest rate. The remaining $ 22.0 million was accounted for as a repurchase of the equity component, reducing additional paid-in capital. As of the repurchase date of August 14, 2020, the carrying value of the repurchased 2023 Notes, net of unamortized debt discount and issuance costs, was $ 90.2 million. The difference between the $ 103.6 million fair value of the 2023 Notes repurchased and the carrying value of $ 90.2 million resulted in a $ 13.4 million loss on early extinguishment of debt. After giving effect to the repurchase, the total principal amount outstanding under the 2023 Notes as of August 14, 2020 was $ 95.0 million. In connection with the repurchase of $ 115.0 million in principal amount of the 2023 Notes, we terminated a proportionate amount of the related 2023 Capped Call for approximately 6.0 million underlying shares. Upon settlement, the Company received $ 7.5 million in cash and recorded a $ 0.8 million loss due to the change in fair value of the contract between signing and settlement dates. The proceeds were recorded as cash with a corresponding increase in additional paid-in capital, and the loss was recorded to other expense in the consolidated statements of operations and comprehensive income (loss). As of December 31, 2022, approximately 4.9 million shares remained outstanding on the 2023 Capped Call. Upon adoption of ASU 2020-06 in January 2021, we removed the equity component allocated to debt issuance costs. The unamortized debt issuance costs of $ 0.6 million as of December 31, 2022 will be amortized to interest expense at an effective interest rate of 7.0 % over the remaining term. The following table sets forth total interest expense recognized in connection with the 2023 Notes: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 2021 2020 ​ ​ (In thousands) Contractual interest expense ​ $ 5,938 ​ $ 5,938 ​ $ 10,410 Amortization of debt issuance costs ​ 663 ​ 618 ​ 669 Amortization of debt discount ​ — ​ — ​ 7,728 Total ​ $ 6,601 ​ $ 6,556 ​ $ 18,807 ​ 76 Table of Contents 2026 Convertible Senior Notes In August and September 2020, we issued $ 225.0 million aggregate principal amount of our 2026 Notes and repurchased $ 125.6 million of our 2023 Notes. The 2026 Notes are unsecured and accrue interest at an annual rate of 5.25 % per annum, payable semi-annually in arrears on February 15 and August 15 of each year. The 2026 Notes mature on February 15, 2026, unless earlier purchased, redeemed or converted in accordance with their terms. The initial conversion rate is 54.0906 shares of our common stock per $ 1,000 of note principal (equivalent to an initial conversion price of approximately $ 18.4875 per share of common stock), which equals approximately 12.2 million shares issuable upon conversion, subject to adjustment in certain circumstances. The 2026 Notes are convertible at the option of the holders on or after November 15, 2025 at any time prior to the close of business on February 12, 2026, the second scheduled trading day immediately before the stated maturity date of February 15, 2026. Additionally, holders may convert their 2026 Notes at their option at specified times prior to the maturity date only if: (1) during any calendar quarter, beginning after September 30, 2020, that the last reported sale price per share of our common stock exceeds 130 % of the conversion price of the 2026 Notes for each of at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five -consecutive-trading-day period (such five -consecutive-trading-day period, the “measurement period”) in which the trading price per $ 1,000 principal amount of 2026 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day; (3) there is an occurrence of one or more certain corporate events or distributions of our common stock; or (4) we call the 2026 Notes for redemption. We may elect, at our sole discretion, to convert the 2026 Notes into cash, shares of our common stock or a combination thereof. Subject to the satisfaction of certain conditions, we may redeem in whole or in part the 2026 Notes at our option beginning August 15, 2023 through the 50th scheduled trading day immediately before the maturity date at a cash redemption price equal to the principal amount of the 2026 Notes to be redeemed plus any accrued and unpaid interest to, but excluding, the redemption date. The 2026 Notes are subject to redemption only if certain requirements are satisfied, including that the last reported sale price per share of our common stock exceeds 130 % of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice and (ii) the trading day immediately before the date we send such notice. In order to reduce the dilutive impact or potential cash expenditure associated with the conversion of the 2026 Notes, we entered into capped call transactions in connection with the issuances of the 2026 Notes (the ‘2026 Capped Call’). The 2026 Capped Call will cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2026 Notes, the number of shares of common stock underlying the 2026 Notes when our common stock is trading within the range of approximately $ 18.49 and $ 26.10 . However, should the market price of our common stock exceed the $ 26.10 cap, then the conversion of the 2026 Notes would have an additional dilutive impact or may require a cash expenditure to the extent the market price exceeds the cap price. The 2026 Capped Call will expire on various dates over the 50 -trading-day period ranging from December 2, 2025 to February 12, 2026, if not exercised earlier. The 2026 77 Table of Contents Capped Call is a separate transaction and not part of the terms of the 2026 Notes and was executed separately from the issuance of the 2026 Notes. The amount paid for the 2026 Capped Call was recorded as a reduction to additional paid-in capital in the consolidated balance sheet. As of December 31, 2022, approximately 12.2 million shares remained outstanding under the 2026 Capped Call. We evaluated the accounting for the issuance of the 2026 Notes and concluded that the embedded conversion features meet the requirements for a derivative scope exception for instruments that are both indexed to an entity’s own stock and classified in stockholders’ equity in its balance sheet, and that the cash conversion guidance applies. Upon issuance, the proceeds of $ 225.0 million were allocated first to the liability component based on the fair value of non-convertible debt with the residual proceeds allocated to the equity component for the conversion features. The Company allocated $ 6.8 million in issuance costs associated with the 2026 Notes to the liability and equity component in the same proportion as the $ 225.0 million in proceeds. Further, we concluded the 2026 Capped Call qualifies for a derivative scope exception for instruments that are both indexed to an entity’s own stock and classified in stockholders’ equity in its balance sheet. Consequently, the fair value of the 2026 Capped Call of $ 23.2 million is classified as equity, not accounted for as derivatives, and will not be subsequently remeasured. Upon adoption of ASU 2020-06 in January 2021, we removed the equity component allocated to debt issuance costs. The unamortized debt issuance costs of $ 4.1 million as of December 31, 2022 will be amortized to interest expense at an effective interest rate of 5.9 % over the remaining term. The following table sets forth interest expense recognized related to the 2026 Notes: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ (In thousands) Contractual interest expense ​ $ 11,814 ​ $ 11,814 ​ $ 4,397 Amortization of debt issuance costs ​ 1,167 ​ 1,078 ​ 230 Amortization of debt discount ​ — ​ — ​ 3,022 Total ​ $ 12,981 ​ $ 12,892 ​ $ 7,649 ​ Future Minimum Principal Payments Future minimum principal for the 2023 and 2026 Notes as of December 31, 2022 are as follows (in thousands): ​ ​ ​ ​ ​ 2023 $ 95,000 2024 ​ — 2025 ​ — 2026 ​ 225,030 Total future minimum principal payments under the 2023 Notes and 2026 Notes $ 320,030 ​ ​ 78 Table of Contents Note 9—OMIDRIA Royalty Obligation On September 30, 2022, we sold to DRI an interest in our future OMIDRIA royalty receipts and received $ 125.0 million in cash consideration which was recorded as an OMIDRIA royalty obligation on our consolidated balance sheet. DRI is entitled to receive royalties on OMIDRIA net sales between September 1, 2022 and December 31, 2030, subject to annual caps. DRI receives their prorated monthly cap amount before we receive any royalty proceeds. DRI is not entitled to carry-forward nor recoup any shortfall if the royalties paid by Rayner for an annual period are less than the cap amount applicable to each discrete calendar year. Additionally, DRI has no recourse to or security interest in our assets other than our OMIDRIA royalty receipts, and we retain all royalty receipts in excess of the respective cap in any given calendar year. DRI will receive a total of $ 125.0 million in payment no sooner than August 2028, and the maximum future payout that DRI is entitled to receive as of December 31, 2022 is $ 186.8 million which, if fully paid, would be at an effective interest rate of 9.4 %. ​ The changes in the OMIDRIA royalty obligation during the year ended December 31, 2022 are as follows (in thousands): ​ ​ ​ ​ ​ Principal amount borrowed at September 30, 2022 ​ $ 125,000 Capitalized accrued interest ​ ​ 1,695 Principal payments ​ ​ ( 417 ) OMIDRIA royalty obligation at December 31, 2022 ​ $ 126,278 ​ The OMIDRIA royalty obligation is classified as a Level 3 liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. As of December 31, 2022, the obligation’s carrying value approximates fair value. ​ For the year ended December 31, 2022, we incurred $ 2.9 million of interest expense of which $ 1.7 million was non-cash and added to the outstanding principal balance of the OMIDRIA royalty obligation and $ 1.2 million was cash. ​ As of December 31, 2022, the maximum scheduled principal and interest payments (based on an implied effective interest rate of 9.4 %) are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ Principal Interest ​ Annual Cap ​ ​ (In thousands) 2023 ​ $ 1,152 ​ $ 11,848 ​ $ 13,000 2024 ​ 8,576 ​ 11,424 ​ ​ 20,000 2025 ​ 14,641 ​ 10,359 ​ ​ 25,000 2026 ​ 16,081 ​ 8,919 ​ ​ 25,000 2027 ​ 17,664 ​ 7,336 ​ ​ 25,000 Thereafter ​ 68,164 ​ 10,586 ​ ​ 78,750 Total scheduled payments ​ $ 126,278 ​ $ 60,472 ​ $ 186,750 ​ ​ ​ Note 10—Lease Liabilities We have operating leases related to our office and laboratory space. The initial term of the leases is through November 2027 and we have two options to extend the lease term, each by five years . We have finance leases for certain laboratory and office equipment that have lease terms expiring through June 2026. In January 14, 2022, we entered into an agreement with our landlord to early terminate a portion of our office and lab premises, which reduced the right of use asset by $ 4.7 million and related liability by $ 5.2 million. We recorded a non-cash gain of $ 0.5 million on early termination of this portion of our lease. 79 Table of Contents Lease-related assets and liabilities recorded on our consolidated balance sheet are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2022 2021 ​ ​ (In thousands) ​ Assets ​ ​ ​ ​ ​ ​ Operating lease assets $ 21,762 $ 28,276 ​ Finance lease assets, net 945 ​ 1,009 ​ Total lease assets $ 22,707 $ 29,285 ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ Current: ​ ​ ​ ​ ​ ​ Operating leases $ 3,888 $ 4,607 ​ Finance leases 422 ​ 648 ​ Non-current: ​ ​ ​ ​ ​ ​ Operating leases 21,971 ​ 28,811 ​ Finance leases 455 ​ 315 ​ Total lease liabilities $ 26,736 $ 34,381 ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average remaining lease term ​ ​ ​ ​ ​ ​ Operating leases 4.8 years ​ 5.9 years ​ Finance leases 2.3 years ​ 1.7 years ​ Weighted-average discount rate ​ ​ ​ ​ ​ ​ Operating leases 12.81 % 12.81 % Finance leases 10.44 % 12.70 % ​ The components of total lease costs are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2022 2021 ​ ​ (In thousands) Lease cost ​ ​ ​ Operating lease cost ​ $ 6,152 ​ $ 7,364 Finance lease cost: ​ ​ ​ Amortization ​ 812 ​ 1,102 Interest ​ 174 ​ 181 Variable lease cost ​ 3,191 ​ 3,519 Sublease income ​ ( 1,755 ) ​ ( 1,776 ) Net lease cost ​ $ 8,574 ​ $ 10,390 ​ The supplemental cash flow information related to leases is as follows: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ December 31, ​ 2022 2021 ​ (In thousands) Cash paid for amounts included in the measurement of lease liabilities ​ ​ ​ ​ ​ Cash payments for operating leases $ 7,072 ​ $ 7,483 Cash payments for financing leases $ 790 $ 939 ​ 80 Table of Contents The future maturities of our lease liabilities as of December 31, 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating ​ Finance ​ ​ ​ ​ Leases Leases ​ ​ Total ​ ​ (In thousands) 2023 ​ $ 8,312 ​ $ 495 ​ $ 8,807 2024 ​ 7,031 ​ 321 ​ ​ 7,352 2025 ​ 7,088 ​ 150 ​ ​ 7,238 2026 ​ 6,870 ​ 60 ​ ​ 6,930 2027 ​ 5,837 ​ — ​ ​ 5,837 Total undiscounted lease payments ​ ​ 35,138 ​ ​ 1,026 ​ ​ 36,164 Less interest ​ ​ ( 9,279 ) ​ ​ ( 149 ) ​ ​ ( 9,428 ) Total lease liabilities ​ $ 25,859 ​ $ 877 ​ $ 26,736 ​ ​ Note 11—Commitments and Contingencies Contracts We have various agreements with third parties that collectively require payment of termination fees totaling $ 24.2 million as of December 31, 2022 if we cancel the work within specific time frames, either prior to commencing or during performance of the contracted services. Development Milestones and Product Royalties We have licensed a variety of intellectual property from third parties that we are currently developing or may develop in the future. These licenses may require milestone payments on achievement of clinical development, regulatory or sales milestones, as well as low-single-to low-double-digit royalties on the net income or net sales of the product. For the years ended December 31, 2022, 2021 and 2020, we paid $ 0.3 million, $ 0.5 million and $ 5.5 million, respectively in development milestones. ​ Note 12—Shareholders’ Equity Common Stock As of December 31, 2022, we had reserved shares of common stock under our equity plans as follows: ​ ​ ​ ​ Stock options outstanding 13,872,973 RSUs outstanding ​ 98,750 Awards available to issue under the 2017 Plan 4,967,281 Total shares reserved 18,939,004 ​ Securities Offerings – In August 2020, we sold 6.9 million shares of our common stock at a public offering price of $ 14.50 per share. After deducting underwriter discounts and offering expenses, we received net proceeds from the transaction of $ 93.7 million. At the Market Sales Agreement – We have a sales agreement to sell shares of our common stock having an aggregate offering price of up to $ 150.0 million, from time to time, through an “at the market” equity offering program. 81 Table of Contents Warrants We have outstanding warrants to purchase shares of our common stock as follows: ​ ​ ​ ​ ​ ​ ​ Outstanding At ​ ​ ​ December 31, 2022 ​ Expiration Date ​ Exercise Price 200,000 ​ April 12, 2023 ​ $ 23.00 ​ ​ Note 13—Stock-Based Compensation Our equity plans provide for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance units, performance shares and other stock and cash awards to employees and consultants. Stock options are granted with an exercise price not less than the fair market value of Omeros’ common stock on the date of the grant. Any unexercised options expire 10 years from grant date, and any unvested stock options granted which are subsequently canceled become available for future reissuance. Vesting schedules for our equity plans generally are as follows: ​ ​ ​ Grant Type Vesting Schedule Employee initial options grants 25 % at one-year anniversary, 1/ 48 monthly thereafter Employee recurring options grants 1/ 48 monthly Non-employee consultant options grants 1/ 12 or 1/ 48 monthly Employee RSUs ​ 50 % after one year, 50 % after two years ​ Stock-based compensation expense is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 ​ ​ (In thousands) Continuing operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ $ 6,123 ​ $ 6,791 ​ $ 6,163 Selling, general and administrative ​ 8,042 ​ 8,154 ​ 7,614 Total stock-based compensation in continuing operations ​ ​ 14,165 ​ ​ 14,945 ​ ​ 13,777 Discontinued operations ​ ​ ( 93 ) ​ ​ 2,685 ​ ​ 1,148 Total stock-based compensation ​ $ 14,072 ​ $ 17,630 ​ $ 14,925 ​ In November 2020 and 2021, respectively, restricted stock awards totaling 14,000 shares with a fair value of $ 11.05 per share and 11,700 shares with a fair value of $ 7.80 per share were granted to OMIDRIA sales employees. The awards vested immediately. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were applied to stock option grants during the periods ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ ​ 2021 ​ ​ 2020 ​ Estimated weighted-average fair value ​ $ 2.94 ​ ​ $ 10.54 ​ ​ $ 8.19 ​ Weighted-average assumptions: ​ ​ ​ ​ ​ ​ ​ Expected volatility ​ 90 % ​ 81 % ​ 77 % Expected life, in years ​ 6.0 ​ ​ 6.0 ​ ​ 6.0 ​ Risk-free interest rate ​ 2.83 % ​ 1.06 % ​ 1.06 % Expected dividend yield ​ — % ​ — % ​ — % ​ Expected volatility is based on the historical volatility of our stock price weighted by grant issuances over the reporting period. We use the simplified method to calculate expected life used in the valuation of our stock options. The 82 Table of Contents risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Forfeiture expense is estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. Stock option activity for all stock option plans is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ Aggregate ​ ​ ​ ​ Exercise ​ Remaining ​ Intrinsic ​ ​ Options ​ Price per ​ Contractual Life ​ Value ​ ​ Outstanding ​ Share ​ (In years) ​ (In thousands) Balance at December 31, 2021 12,709,887 ​ $ 12.61 ​ Granted 2,742,834 ​ 3.81 ​ Exercised ( 101,160 ) ​ 4.10 ​ Forfeited ( 1,478,588 ) ​ 12.05 ​ Balance at December 31, 2022 13,872,973 ​ $ 11.02 5.8 ​ $ 21 Vested and expected to vest at December 31, 2022 13,454,543 ​ $ 11.10 5.7 ​ $ 19 Exercisable at December 31, 2022 9,859,720 ​ $ 12.12 4.6 ​ $ — ​ The total intrinsic value of stock options exercised during the years ended December 31, 2022, 2021 and 2020 was $ 0.2 million, $ 7.8 million and $ 5.6 million, respectively. At December 31, 2022, there were 4.0 million unvested stock options outstanding that vest over a weighted-average period of 2.2 years. The remaining estimated compensation expense to be recognized in connection with these unvested stock options is $ 19.8 million. ​ RSU activity for all stock plans is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- Average ​ ​ ​ ​ Grant Date ​ ​ RSUs ​ Fair Value ​ ​ Outstanding ​ Per Share Balance at December 31, 2021 222,000 ​ $ 7.53 Vested and released ( 98,750 ) ​ 7.53 Forfeited ( 24,500 ) ​ 7.53 Balance at December 31, 2022 98,750 ​ $ 7.53 ​ ​ ​ 83 Table of Contents Note 14—Income Taxes The components of income tax expense (benefit) from continuing and discontinued operations were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 2020 ​ ​ (In thousands) Continuing operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ Current income tax expense: ​ ​ ​ ​ Federal ​ $ — ​ $ — ​ $ — State ​ — ​ — ​ — Total current income tax expense ​ — ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred income tax benefit: ​ ​ ​ Federal ​ — ​ — ​ ( 19,472 ) State ​ — ​ — ​ ( 3,784 ) Total deferred income tax benefit ​ ​ — ​ ​ — ​ ​ ( 23,256 ) Income tax benefit in continuing operations ​ $ — ​ $ — ​ $ ( 23,256 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income tax expense as a component of discontinued operations ​ $ 3,952 ​ $ 1,006 ​ $ 11,245 ​ In 2022 and 2021, for federal and state income tax purposes, we had net losses from continuing operations and net income from discontinued operations, which resulted in overall taxable net income. For federal income tax purposes, we utilized existing net operating loss carryforwards of $ 269.8 million and $ 245.1 million respectively to fully offset our federal tax liability for both periods. For state income tax purposes, we did not have adequate net operating losses and tax credits to fully offset our state tax liability. We recorded a state income tax expense of $ 4.0 million and $ 1.0 million in discontinued operations in 2022 and 2021, respectively. As of December 31, 2022, income taxes payable of $ 4.9 million is included in accrued expenses in our consolidated balance sheet. In 2020, we adopted ASU 2019-12, Income Taxes (Topic 740), which eliminated the exception to the incremental approach of intra-period tax allocation whereby losses from continuing operations can no longer offset income from discontinued operations. This resulted in an income tax benefit of $ 23.3 million in continuing operations and income tax expense of $ 11.2 million in discontinued operations in 2020. Deferred income taxes reflect the tax effect of net operating loss and tax credit carryforwards and the net temporary difference between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. 84 Table of Contents Significant components of deferred income taxes were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 ​ ​ (In thousands) Deferred tax assets: ​ ​ ​ Net operating loss carryforwards ​ $ 85,887 ​ $ 143,657 Research and development tax credits ​ 78,992 ​ 66,612 OMIDRIA royalty obligation ​ ​ 28,938 ​ ​ — Capitalized research and development ​ ​ 21,864 ​ ​ — Stock-based compensation ​ 12,517 ​ 11,327 Lease liability ​ 5,926 ​ 9,995 Other ​ 9,234 ​ 17,862 Total deferred tax assets ​ 243,358 ​ 249,453 Deferred tax liabilities: ​ ​ Gain on discontinued operations ​ ​ ( 34,883 ) ​ ​ ( 42,212 ) Right of use assets ​ ​ ( 4,987 ) ​ ​ ( 6,467 ) Property and equipment ​ ​ ( 288 ) ​ ​ ( 102 ) Total deferred tax liabilities ​ ( 40,158 ) ​ ( 48,781 ) Net deferred tax assets before valuation allowance ​ 203,200 ​ 200,672 Less valuation allowance ​ ( 203,200 ) ​ ( 201,340 ) Net deferred tax liabilities ​ $ — ​ $ ( 668 ) ​ As of December 31, 2022, we had federal net operating loss carryforwards of approximately $ 361.0 million and state net operating loss carryforwards of approximately $ 220.0 million. Pre-2018 federal net operating losses of $ 109.4 million expire between 2035 and 2037. Post-2018 federal net operating losses of $ 251.6 million do not expire. Research and development tax credit carryforwards of $ 79.2 million expire between 2023 and 2042. The Tax Cuts and Jobs Act was enacted on December 22, 2017 and requires the capitalization and subsequent amortization of research and experimental expenditures beginning in 2022. During 2022, we capitalized $ 21.9 million of research and development expenses into deferred tax assets. Prior to 2022, these costs were expensed as incurred for tax purposes. We established a 100 % valuation allowance for all periods due to the uncertainty around our ability to generate sufficient taxable income to realize our deferred tax assets. During 2022 and 2021, respectively, our valuation allowance decreased $ 1.9 million and $ 19.3 million. Reconciliation of income tax computed at federal statutory rates to the reported provisions for income taxes from continuing operations are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2022 2021 2020 U.S. Federal statutory rate on net loss ​ ( 21.0 ) % ( 21.0 ) % ( 21.0 ) % State tax, net of federal tax benefit ​ ( 1.7 ) % ( 0.6 ) % ( 3.1 ) % Change in valuation allowance ​ 28.3 % 26.9 % 19.3 % Research and development tax credits ​ ( 6.8 ) % ( 5.5 ) % ( 6.2 ) % Stock compensation ​ 1.4 % 0.3 % 0.5 % Other ​ ( 0.2 ) % ( 0.1 ) % ( 1.3 ) % Effective tax rate ​ ( 0.0 ) % ( 0.0 ) % ( 11.8 ) % ​ We file federal and certain state income tax returns, which provides varying statutes of limitations on assessments. However, because of net operating loss carryforwards, substantially all our tax years remain open to federal and state tax examination. 85 Table of Contents We recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense. To date, there have been no significant interest or penalties charged to us in relation to the underpayment of income taxes. ​ Note 15—401(k) Retirement Plan Our 401(k) retirement plan provides for an annual company discretionary match on employee contributions up to 4.0 % of each participating employee’s eligible earnings, with a maximum company match of $ 4,000 per employee per year. All employees are eligible to participate. ​ ​ ​ ​ 86 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ​