TELA Bio, Inc. 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as other sections in this Quarterly Report, should be read in conjunction with our unaudited interim consolidated financial statements and related notes thereto included elsewhere herein and the consolidated financial statements and notes thereto for the year ended December 31, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report filed with the SEC on March 23, 2023. In addition to historical financial information, some of the information contained in the following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts, including statements regarding our future results of operations and financial position, business strategy, current and prospective products, product approvals, research and development costs, current and prospective collaborations, timing and likelihood of success, plans and objectives of management for future operations and future results of current and anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties, assumptions and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Overview We are a commercial-stage medical technology company focused on providing innovative soft-tissue reconstruction solutions that optimize clinical outcomes by prioritizing the preservation and restoration of the patient’s own anatomy. Our growing product portfolio is purposefully designed to leverage the patient’s natural healing response while minimizing long-term exposure to permanent synthetic materials. We are committed to delivering our advanced technologies with a strong economic value proposition to assist surgeons and institutions in providing next-generation soft-tissue repair solutions to more patients worldwide. We are dedicated to building true partnerships with surgeons and healthcare providers to deliver solutions that provide both clinical and economic improvements. We believe that genuine collaboration with surgeons and healthcare providers results in the development of new solutions that empower patient care. Our first portfolio of products, the OviTex Reinforced Tissue Matrix (“OviTex”), which we first commercialized in the U.S. in July 2016, addresses unmet needs in hernia repair and abdominal wall reconstruction by combining the benefits of biologic matrices and polymer materials while minimizing their shortcomings, at a cost-effective price. ​ Hernia repair is one of the most common surgeries performed in the U.S., representing approximately 1.1 million procedures annually. Based on the volume weighted average selling price of our OviTex products, we estimate the annual U.S. total addressable market opportunity for our OviTex products to be approximately $1.5 billion. ​ Our OviTex portfolio consists of multiple product configurations intended to address various surgical procedures within hernia repair and abdominal wall reconstruction, including ventral, inguinal, and hiatal hernia repair. In addition, we have also designed an OviTex product specifically for use in laparoscopic and robotic-assisted hernia repair, which we market as OviTex LPR and began commercializing this product in November 2018. In February 2023, we launched two new, larger configurations of OviTex LPR, designed for ventral and incisional hernias. ​ We have also focused on evaluating and publishing clinical data on the effectiveness and safety of our OviTex products. To date, there have been over thirty published or presented works relating to these clinical findings, either by us or a third-party evaluating the OviTex product. In October 2022, the 24-month results of our single arm, multicenter post-market clinical study, which we refer to as our BRAVO study, were published in the Annals of Medicine and Surgery . The BRAVO study was designed to evaluate the clinical performance of OviTex for primary or recurrent ventral hernias using open, laparoscopic, or robotic techniques in 92 enrolled patients. The recurrence rate at the 24-month time point was 2.6%, and surgical site occurrences (“SSOs”) were observed in 38% of the study population. Of the enrolled patients, 78% were characterized as high risk for experiencing an SSO based on at least one known risk factor, which 19 Table of Contents included obesity, active smoking, COPD, diabetes mellitus, coronary artery disease, or advanced age (≥75 years). The results also indicated that BRAVO patients experienced statistically significant and clinically meaningful improvements in their quality of life and perceived health based on patient responses to the EuroQol-5 Dimension (EQ-5D) health assessment and the validated 12-question Hernia-Related Quality of Life survey (HerQLes). In addition to the BRAVO study and other current clinical initiatives, we also commenced enrollment in May 2021 for our BRAVO II study, a prospective study evaluating the use of OviTex in robot-assisted ventral and inguinal hernia repairs. ​ Our second portfolio of products, the OviTex PRS Reinforced Tissue Matrix (“OviTex PRS”), which we first commercialized in the U.S. in May 2019, addresses unmet needs in plastic and reconstructive surgery. OviTex PRS is indicated for use in implantation to reinforce soft-tissue where weakness exists in patients requiring soft-tissue repair or reinforcement in plastic and reconstructive surgery. Our OviTex PRS portfolio is supported by non-human primate data that demonstrated more rapid tissue integration and tissue remodeling compared to the market leading biologic matrix used in this indication. Based on the current sales of biologic matrices in the U.S., we estimate the annual U.S. current addressable market opportunity for our OviTex PRS products to be approximately $700 million. ​ Our OviTex products have received 510(k) clearances from the U.S. Food and Drug Administration (“FDA”), which clearances were obtained and are currently held by our exclusive contract manufacturer of these products, Aroa. In April 2019, our first OviTex PRS products received 510(k) clearance from the FDA, which clearance was initially obtained by Aroa and is currently held by us. In March 2023, we received an additional 510(k) clearance, which expands the OviTex PRS portfolio to include OviTex PRS Long-Term Resorbable. We have also engaged in discussions with the FDA regarding an Investigational Device Exemption protocol to study the safety and effectiveness of our OviTex PRS product for an indication in breast reconstruction surgery. The FDA has stated that a premarket approval, rather than 510(k) clearance will be required for such an indication. We have also commenced a retrospective clinical study evaluating the effectiveness and safety of our OviTex PRS products. ​ We also continue to expand our service offerings and diversify our supplier base as we continue to create a soft tissue restoration portfolio, including through the development of complimentary solutions targeting surgical wound management and infection control. In September 2023, we entered into a distribution agreement with Advanced Medical Solutions Limited, a company registered in England, to be their exclusive distributor of certain hernia mesh fixation devices. We will market and distribute LiquiFix Hernia Mesh Fixation Devices (LiquiFix FIX8™ and LiquiFix Precision™) via our sales force across the U.S. Additionally in January 2023, we announced an exclusive development and distribution partnership with Regenity Biosciences, pursuant to which we launched the commercialization of our NIVIS Fibrillar Collagen Pack, an absorbent matrix of Type I and Type III bovine collagen designed to manage moderately to heavily exudating wounds and to control minor bleeding. We are assessing additional strategic partnerships with medical device companies whereby we may enter into distribution, product development and/or licensing agreements for new products complimentary to, or related to, existing and future products in our distribution channel. ​ We have a broad portfolio of intellectual property protecting our products that we believe, when combined with the proprietary manufacturing processes associated with our products and our know-how, provides significant barriers to entry. Our intellectual property applies to our differentiated product construction and materials. In addition, we believe our exclusive manufacturing and long-term supply and license agreement (the “Aroa License”) with Aroa creates a competitive advantage by allowing us to secure an exclusive supply of ovine rumen at a low cost. Ovine rumen, the forestomach of a sheep, is the source of the biologic material used in our OviTex portfolio products. We use biologic material from ovine rumen because of its plentiful supply, optimal biomechanical profile and open collagen architecture that allows for rapid cellular infiltration. Our OviTex products are manufactured by Aroa at their FDA registered and ISO 13485 compliant facility in Auckland, New Zealand. We purchase product from Aroa at a fixed cost equal to 27% of our net sales of licensed products. This revenue sharing arrangement allows us to competitively price our products and pass along cost-savings to our customers. We market our products through a single direct sales force, predominantly in the U.S., as augmented by a smaller number of sales representatives and distributors in certain European countries. We have invested in our direct sales and marketing infrastructure to expand our presence and to promote awareness and adoption of our products. As of September 30, 2023, we had 85 sales territories in the U.S. As part of our commercial strategy, we plan to continue to 20 Table of Contents invest in our commercial organization by hiring additional territory managers and administrative and field-based support employees to support and service new accounts for soft-tissue reconstruction procedures. We believe we can enhance the productivity of our sales force by improving customer segmentation and targeting, implementing and further refining our proprietary training programs, leveraging support from our medical education and clinical development functions to drive physician awareness and education on our products, and utilizing engagement analytics to support product development. Additionally, we have contracted with three national group purchasing organizations (“GPOs”) covering our OviTex product and plan to continue to contract with additional GPOs and other integrated delivery networks to increase access to and penetration of hospital accounts. We are currently devoting research and development resources to develop additional versions of our OviTex hernia product lines, including self-adhering technology to further enhance product compatibility in robotic procedures, as well as additional configurations of our OviTex PRS product lines. We are also working to develop new product features and designs for both our existing OviTex and OviTex PRS products, as well as new packaging technology to increase the shelf life of these products. We are also exploring additional technologies that may complement our existing products, or expand the number of our product lines, in each case within the hernia, plastic and reconstruction, and broader soft-tissue reconstruction and preservation market. We intend to continue to make investments in research and development efforts to develop improvements and enhancements. We are also assessing strategic partnerships with medical device companies whereby we may enter into distribution, product development and/or licensing agreements for products complimentary to, or related to, existing and future products in our distribution channel, which could result in the payment of single digit percentage royalties or other product acquisition costs. Our business was directly impacted by the COVID-19 pandemic. We experienced volatility in demand for our products which primarily resulted from government and hospital restrictions, as well as patient health and safety concerns, decreasing the volume of elective procedures using our products. We anticipate that procedure volumes will continue to normalize to pre-pandemic levels yet we continue to monitor the potential impact of the COVID-19 pandemic on labor and hospital staffing levels, procedural volumes and ultimately on our results. The vast majority of our revenue to date has been generated by the sale of our OviTex products. Our revenue increased by $3.9 million, or 35%, from $11.2 million for the three months ended September 30, 2022 to $15.1 million for the three months ended September 30, 2023 and by $11.7 million, or 39%, from $29.8 million for the nine months ended September 30, 2022 to $41.5 million for the nine months ended September 30, 2023. Our net loss increased by $0.2 million, or 2%, from $10.7 million for the three months ended September 30, 2022 to $11.0 million for the three months ended September 30, 2023 and decreased by $0.5 million, or 2%, from $34.3 million for the nine months ended September 30, 2022 to $33.8 million for the nine months ended September 30, 2023. We have not been profitable since inception and as of September 30, 2023, we had an accumulated deficit of $308.0 million. We expect to incur losses for the foreseeable future. Business Update Regarding Macroeconomic Conditions and COVID-19 Our business, results of operations and commercial operations have been impacted by macroeconomic conditions, including the COVID-19 pandemic, as well as, to a lesser extent, inflationary pressures, fluctuations in foreign currency in the jurisdictions in which we operate, banking instability and geopolitical conflicts. These factors have and may continue to impact us in the following ways: COVID-19 : We have been directly impacted by the COVID-19 pandemic since the onset of the pandemic in 2020. Over the past year, regional surges of the COVID-19 variants resulted in some government restrictions on elective procedures and surgical staffing challenges leading to the deferral of elective surgeries and lower surgical procedural volumes overall. While we anticipate the normalization of surgical procedures to pre-pandemic levels, the pace of increased procedural volume remains unknown as hospitals allocate to address staffing shortages to prioritize any backlog of non-elective procedures. Additionally, other labor and financial strains on healthcare systems may continue to reduce procedural volumes. General Economic Uncertainty : Continued concerns about the systemic impact of potential long-term and wide-spread recession, increasing interest rates, further economic downturn or banking instability and geopolitical issues, including 21 Table of Contents the ongoing war in Ukraine and the evolving events in Israel and Gaza, have contributed to increased market volatility and diminished expectations for economic growth in the world. As a result, we have experienced high volatility in our stock price over the prior year. Continued uncertainty, perception of worsening market conditions and the introduction of new products which may be perceived to negatively impact the demand for our products now or in the future could result in a decline in our stock price, high inflation, an increase in our cost of capital and an adverse effect on our ability to access the capital markets in the future on terms acceptable to us or at all. Financial Strain : Market acceptance of our medical products in the U.S. and other countries is dependent upon the procurement practices of our customers, patient need for our products and procedures and the reimbursement of patients’ medical expenses by government healthcare programs and third-party payors. The continuing uncertainty surrounding global economic conditions and financial markets, including the financial strain suffered by hospital customers during the COVID-19 pandemic, may adversely affect demand for our products and procedures and result in lower reimbursement rates or coverage for our products, resulting in lower sales volume and downward pricing pressure on our products and slower adoption of new products. Components of Our Results of Operations Revenue Substantially all our revenue consists of direct sales of our products to hospital accounts in the U.S. Depending on the terms of our agreements with our customers, we recognize revenue related to product sales either when control transfers, which generally occurs when the product is shipped to the customer, or when the product is utilized in a surgical procedure in the case of consignment agreements. Fees charged to customers for shipping are recognized as revenue. Recent revenue growth has been driven by increasing revenue from product sales due to our expanding customer base, although it is unclear at this point what long-term effect the COVID-19 pandemic and macroeconomic pressures will have on our ability to continue to generate revenue and expand our customer base. Cost of Revenue (excluding amortization of intangible assets) Cost of revenue primarily consists of the costs of licensed products, charges related to excess and obsolete inventory adjustments, royalties and costs related to shipping. We purchase product from Aroa at a fixed cost equal to 27% of our net sales of licensed products. The initial term of our Aroa License terminates on the expiration of the last patent covering bovine and ovine products, with an option to extend for an additional ten-year period. We expect our cost of revenue to increase in absolute dollars as, and to the extent, our sales volume grows, although it is unclear at this point what long-term effect, if any, the COVID-19 pandemic and related macroeconomic pressures will have on our product demand which could lead to additional charges to excess and obsolete inventory. Amortization of Intangible Assets Amortization of intangible assets relates to the amortization of capitalized milestone amounts paid or probable to be paid to Aroa related to license fees or commercialization rights after future economic benefit has been established for a product. These capitalized milestone amounts relate to regulatory clearances, the receipt of certain supply quantities of product, and amounts based upon aggregate net sales thresholds within a specified territory, and are amortized over the remaining useful life of the intellectual property. Gross Profit and Gross Margin Our gross profit is calculated by subtracting our cost of revenue and amortization of intangible assets from our revenue. We calculate our gross margin percentage as our gross profit divided by our revenue. Our gross margin has been, and we expect it will continue to be, affected by a variety of factors, including sales volume, royalties and inventory excess and obsolescence costs. Our gross profit may increase to the extent our revenue grows. 22 Table of Contents Sales and Marketing Expenses Sales and marketing expenses consist of commercial activities related to the sale of our products, along with the salaries and related benefits, including sales commissions and stock-based compensation for employees focused on these efforts. Other significant sales and marketing expenses include costs incurred with post-market clinical studies, conferences and trade shows, promotional and marketing activities, market research, as well as travel and training expenses. Over time we expect our sales and marketing expenses to increase in absolute dollars as we continue to expand our commercial organization to both drive and support our planned growth in revenue. We expect our sales and marketing expenses to continue to decrease as a percentage of revenue, as and to the extent, our revenue grows. General and Administrative Expenses General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, for personnel in executive, finance, information technology and administrative functions. General and administrative expenses also include professional service fees for legal, accounting, consulting, investor and public relations, insurance costs and direct and allocated facility-related costs. We expect that our general and administrative expenses will increase in absolute dollars as we execute our growth initiatives and expand our business and headcount to support these initiatives. We expect our general and administrative expenses to decrease as a percentage of revenue primarily as, and to the extent, our revenue grows. Research and Development Expenses Research and development expenses consist primarily of product research, engineering, product development, regulatory compliance and clinical development. These expenses include salaries and related benefits, including stock-based compensation, for employees focused on these efforts, consulting services, costs associated with our preclinical studies, costs incurred with our manufacturing partner under development agreements related to technology transfer, costs incurred from license agreements with no alternative future uses, laboratory materials and supplies and an allocation of related facilities costs. We expense research and development costs as they are incurred. We expect research and development expenses in absolute dollars to increase in the future as we develop new products and enhance existing products. We expect research and development expenses as a percentage of revenue to vary over time depending on the level and timing of new product development initiatives. Interest Expense Interest expense consists of cash interest related to our credit facilities, non-cash interest attributable to the amortization of final payment fees and the amortization of deferred financing costs related to our indebtedness. Other Income (Expense) Other income (expense) consists primarily of income earned on our cash and cash equivalents offset by miscellaneous tax expenses and foreign currency exchange gains and losses. 23 Table of Contents Results of Operations Comparison of the Three Months Ended September 30, 2023 and 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended September 30, ​ Change ​ 2023 2022 Dollar Percentage ​ ​ (in thousands, except percentages) Revenue ​ $ 15,052 ​ $ 11,159 ​ $ 3,893 35 % Cost of revenue (excluding amortization of intangible assets) ​ 4,568 ​ 3,745 ​ 823 22 ​ Amortization of intangible assets ​ 95 ​ 95 ​ — — ​ Gross profit ​ 10,389 ​ 7,319 ​ 3,070 42 ​ Gross margin ​ 69 % 66 % ​ ​ ​ Operating expenses: ​ ​ ​ ​ ​ Sales and marketing ​ 14,474 ​ 11,172 ​ 3,302 30 ​ General and administrative ​ 3,728 ​ 3,532 ​ 196 6 ​ Research and development ​ 2,368 ​ 2,102 ​ 266 13 ​ Total operating expenses ​ 20,570 ​ 16,806 ​ 3,764 22 ​ Loss from operations ​ (10,181) ​ (9,487) ​ (694) 7 ​ Other expense: ​ ​ ​ ​ ​ ​ ​ Interest expense ​ (1,334) ​ (1,032) ​ (302) 29 ​ Other income (expense) ​ 558 ​ (195) ​ 753 (386) ​ Total other expense ​ (776) ​ (1,227) ​ 451 (37) ​ Net loss ​ $ (10,957) ​ $ (10,714) ​ $ (243) 2 % ​ Revenue Revenue increased by $3.9 million, or 35%, to $15.1 million for the three months ended September 30, 2023 from $11.2 million for the three months ended September 30, 2022. The increase in revenue was primarily driven by an increase in unit sales of our products due to the ongoing expansion of our commercial organization, which resulted in the addition of new customers, increased penetration within existing customer accounts and growing international sales. During the three months ended September 30, 2023, we sold 3,426 units of OviTex as compared to 2,631 units of OviTex during the three months ended September 30, 2022, a 30% increase in unit sales volume. Additionally, we sold 896 units of OviTex PRS during the three months ended September 30, 2023 as compared to 618 units during the three months ended September 30, 2022, a 45% increase in unit sales volume. ​ Cost of Revenue Cost of revenue (excluding amortization of intangible assets) increased by $0.8 million, or 22%, to $4.6 million for the three months ended September 30, 2023 from $3.7 million for the three months ended September 30, 2022. The increase in cost of revenue was primarily the result of an increase in products purchased to support demand from our higher unit sales, partially offset by a lower charge for excess and obsolete inventory. Amortization of Intangible Assets Amortization of intangible assets was $95,000 for both the three months ended September 30, 2023 and 2022. Gross Margin Gross margin increased to 69% for the three months ended September 30, 2023 from 66% for the three months ended September 30, 2022. The increase was primarily due to a lower charge for excess and obsolete inventory as a percentage of revenue due to improvements in inventory management. 24 Table of Contents Sales and Marketing Sales and marketing expenses increased by $3.3 million, or 30%, to $14.5 million for the three months ended September 30, 2023 from $11.2 million for the three months ended September 30, 2022. The increase was primarily due to higher compensation costs as a result of the expansion of our commercial organization, increased travel and consulting expenses and additional employee-related costs due to an increase in headcount. General and Administrative General and administrative expenses increased by $0.2 million, or 6%, to $3.7 million for the three months ended September 30, 2023 from $3.5 million for the three months ended September 30, 2022. The increase was primarily due to higher compensation costs and employee-related costs due to an increase in headcount which offset a decrease in insurance expense. Research and Development Research and development expenses increased by $0.3 million, or 13%, to $2.4 million for the three months ended September 30, 2023 from $2.1 million for the three months ended September 30, 2022. The increase was primarily due to higher compensation costs due to an increase in headcount and increased testing and development expenses. Interest Expense Interest expense increased by $0.3 million, or 29%, to $1.3 million for the three months ended September 30, 2023 from $1.0 million for the three months ended September 30, 2022 due to the increased levels of borrowings under our Credit and Security Agreement (the “MidCap Credit Agreement”) with MidCap Financial Trust, as agent and certain lender parties thereto, and an increase to the variable component of our interest rate. Other Income (Expense) Other income increased $0.8 million to $0.6 million for the three months ended September 30, 2023. The increase was primarily due to higher interest income on increased cash balances and favorable foreign currency translation adjustments. 25 Table of Contents Comparison of the Nine Months Ended September 30, 2023 and 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ Change ​ 2023 2022 Dollar Percentage ​ ​ (in thousands, except percentages) Revenue ​ $ 41,455 ​ $ 29,796 ​ $ 11,659 39 % Cost of revenue (excluding amortization of intangible assets) ​ 12,682 ​ 10,219 ​ 2,463 24 ​ Amortization of intangible assets ​ 285 ​ 709 ​ (424) (60) ​ Gross profit ​ 28,488 ​ 18,868 ​ 9,620 51 ​ Gross margin ​ 69 % 63 % ​ Operating expenses: ​ ​ ​ ​ Sales and marketing ​ 42,517 ​ 31,605 ​ 10,912 35 ​ General and administrative ​ 10,834 ​ 10,620 ​ 214 2 ​ Research and development ​ 6,934 ​ 6,211 ​ 723 12 ​ Total operating expenses ​ 60,285 ​ 48,436 ​ 11,849 24 ​ Loss from operations ​ (31,797) ​ (29,568) ​ (2,229) 8 ​ Other expense: ​ ​ ​ ​ ​ Interest expense ​ (3,878) ​ (2,877) ​ (1,001) 35 ​ Loss on extinguishment of debt ​ ​ — ​ ​ (1,228) ​ ​ 1,228 ​ (100) ​ Other income (expense) ​ ​ 1,901 ​ (644) ​ 2,545 (395) ​ Total other expense ​ (1,977) ​ (4,749) ​ 2,772 (58) ​ Net loss ​ $ (33,774) ​ $ (34,317) ​ $ 543 (2) % ​ Revenue Revenue increased by $11.7 million, or 39%, to $41.5 million for the nine months ended September 30, 2023 from $29.8 million for the nine months ended September 30, 2022. The increase in revenue was primarily driven by an increase in unit sales of our products due to the ongoing expansion of our commercial organization, which resulted in the addition of new customers, increased penetration within existing customer accounts and growing international sales. During the nine months ended September 30, 2023, we sold 9,704 units of OviTex as compared to 7,096 units of OviTex during the nine months ended September 30, 2022, a 37% increase in unit sales volume. Additionally, we sold 2,484 units of OviTex PRS during the nine months ended September 30, 2023 as compared to 1,733 units during the nine months ended September 30, 2022, a 43% increase in unit sales volume. ​ Cost of Revenue Cost of revenue (excluding amortization of intangible assets) increased by $2.5 million, or 24%, to $12.7 million for the nine months ended September 30, 2023 from $10.2 million for the nine months ended September 30, 2022. The increase in cost of revenue was primarily the result of an increase in products purchased to support demand from our higher unit sales, partially offset by a lower charge for excess and obsolete inventory. Amortization of Intangible Assets Amortization of intangible assets decreased by $0.4 million, or 60% to $0.3 million for the nine months ended September 30, 2023 from $0.7 million for the nine months ended September 30, 2022. In June 2022, we determined that our final milestone target under our licensing agreement with Aroa was probable of being met and recorded the payment obligation as an intangible asset, resulting in a cumulative amortization charge of $0.5 million for the nine months ended September 30, 2022. 26 Table of Contents Gross Margin Gross margin increased to 69% for the nine months ended September 30, 2023 from 63% for the nine months ended September 30, 2022. The increase was primarily due to a lower charge for excess and obsolete inventory as a percentage of revenue due to improvements in inventory management. Sales and Marketing Sales and marketing expenses increased by $10.9 million, or 35%, to $42.5 million for the nine months ended September 30, 2023 from $31.6 million for the nine months ended September 30, 2022. The increase was primarily due to higher compensation costs as a result of the expansion of our commercial organization, increased travel and consulting expenses and additional employee-related costs due to an increase in headcount. General and Administrative General and administrative increased by $0.2 million, or 2%, to $10.8 million for the nine months ended September 30, 2023 from $10.6 million for the nine months ended September 30, 2022. Higher compensation costs and employee related expenses due to an increase in headcount offset decreases in insurance expenses and professional fees. Research and Development Research and development expenses increased by $0.7 million, or 12%, to $6.9 million for the nine months ended September 30, 2023 from $6.2 million for the nine months ended September 30, 2022. The increase was primarily due to higher compensation costs due to an increase in headcount and increased study costs. Interest Expense Interest expense increased by $1.0 million, or 35%, to $3.9 million for the nine months ended September 30, 2023 from $2.9 million for the nine months ended September 30, 2022 due to the increased levels of borrowings under our Credit and Security Agreement (the “MidCap Credit Agreement”) with MidCap Financial Trust, as agent and certain lender parties thereto, and an increase to the variable component of our interest rate. Loss on Extinguishment of Debt We recorded a loss on the extinguishment of debt of $1.2 million during the nine months ended September 30, 2022 related to the repayment of borrowings of our credit facilities with OrbiMed in May 2022. The losses were primarily comprised of the write-off of unamortized debt discounts and prepayment penalties at the time of extinguishment. Other Income (Expense) Other income increased $2.5 million to $1.9 million for the nine months ended September 30, 2023. The increase was primarily due to higher interest income on increased cash balances and favorable foreign currency translation adjustments. 27 Table of Contents Liquidity and Capital Resources ​ Overview As of September 30, 2023, we had cash and cash equivalents of $58.2 million, working capital of $66.9 million and an accumulated deficit of $308.0 million. As of December 31, 2022, we had cash and cash equivalents of $42.0 million, working capital of $50.0 million and an accumulated deficit of $274.2 million. In April 2023, we completed an underwritten public offering in which we issued and sold 5,219,190 shares of our common stock (including 469,190 shares sold pursuant to the underwriters’ overallotment option in May 2023) at a public offering price of $9.50 per share. We received net proceeds of approximately $46.3 million after deducting underwriting discounts, commissions and other offering expenses. ​ We have incurred operating losses since our inception, and we anticipate that our operating losses will continue in the near term as we seek to invest in our sales and marketing initiatives to support our growth in existing and new markets and in additional research and development activities. As of September 30, 2023, we had $40.0 million of borrowings outstanding under the MidCap Credit Agreement. The MidCap Credit Agreement matures in May 2027 and provides for up to $50.0 million in term loans (the “MidCap Term Loans”), consisting of a $40.0 million Tranche 1 (“Tranche 1”) and a $10.0 million Tranche 2 (“Tranche 2”). Upon closing, we borrowed $40.0 million of Tranche 1 and used a portion of the proceeds to repay borrowings under the OrbiMed Credit Facility and intend to use the remaining proceeds to fund operations and other general corporate purposes. We will be eligible to borrow Tranche 2 at our option if certain conditions are met, including, but not limited to, reaching $65.0 million of net product revenue over the preceding four quarters by fiscal year end 2023. ​ Based on our current business plan, we believe that our existing cash resources will be sufficient to meet our capital requirements and fund our operations for at least the next 12 months from the issuance of this Quarterly Report. If these sources are insufficient to satisfy our liquidity requirements, we may seek to sell common or preferred equity or debt securities or enter into a new credit facility. In November 2023, we entered into a new Equity Distribution Agreement (the “2023 Equity Agreement”) with Piper Sandler & Co, (the “Agent”) in connection with the establishment of an at-the-market offering program under which we may sell shares of our common stock, from time to time through the Agent as sales agent. The 2023 Equity Agreement supersedes and replaces the Company’s previous Equity Distribution Agreement with the Agent dated December 18, 2020 (the “2020 Equity Agreement”), which is no longer effective. No sales were made under the 2020 Equity Agreement during the nine months ended September 30, 2023. If we raise additional funds by issuing equity or equity-linked securities, our stockholders would experience dilution and any new equity securities could have rights, preferences and privileges superior to those of holders of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. We cannot be assured that additional equity, equity-linked or debt financing will be available on terms favorable to us or our stockholders, or at all, including as a result of market volatility following the COVID-19 pandemic, recent banking instability, increasing interest rates or other factors. If we are unable to obtain adequate financing, we may be required to delay or reduce the current development, commercialization and marketing plans for our products. Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, (in thousands) 2023 2022 Cash used in operating activities ​ $ (29,806) ​ $ (29,765) Cash used in investing activities ​ (406) ​ (826) Cash provided by financing activities ​ 46,245 ​ 41,071 Effect of exchange rate changes on cash and cash equivalents ​ ​ 150 ​ ​ (185) Net increase in cash and cash equivalents ​ $ 16,183 ​ $ 10,295 ​ 28 Table of Contents Operating Activities During the nine months ended September 30, 2023, we used $29.8 million of cash in operating activities, resulting from our net loss of $33.8 million and the change in operating assets and liabilities of $1.9 million, offset by non-cash charges of $5.8 million. Our non-cash charges were comprised of stock-based compensation expense of $3.8 million, our excess and obsolete inventory charge of $1.0 million, depreciation and amortization expense of $0.6 million and noncash interest expense of $0.4 million. The change in our operating assets and liabilities was primarily related to increases in accounts receivable and inventory partially offset by increases in accounts payable and accrued expenses and other current and long-term liabilities. During the nine months ended September 30, 2022, we used $29.8 million of cash in operating activities, resulting from our net loss of $34.3 million and the change in operating assets and liabilities of $2.9 million, offset by non-cash charges of $7.4 million. Our non-cash charges were comprised of stock-based compensation expense of $3.0 million, our excess and obsolete inventory charge of $1.8 million, a loss on debt extinguishment of $1.2 million, depreciation and amortization expense of $1.0 million and noncash interest expense of $0.5 million. The change in our operating assets and liabilities was primarily related to an increase in our inventory and accounts receivable offset by increases in accounts payable and accrued expenses and other current and long-term liabilities. Investing Activities During the nine months ended September 30, 2023, cash used in investing activities was $0.4 million consisting of purchases of property and equipment. During the nine months ended September 30, 2022, cash used in investing activities was $0.8 million, consisting of purchases of property and equipment. Financing Activities During the nine months ended September 30, 2023, cash provided by financing activities was $46.2 million, consisting primarily of $46.3 million in proceeds received from the sale of our common stock partially offset by the payment of withholding taxes related to stock-based compensation to employees. During the nine months ended September 30, 2022, cash provided by financing activities was $41.1 million, consisting primarily of $34.7 million in proceeds from an underwritten public offering, $40.0 million in proceeds received from the issuance of long-term debt offset by $30.0 million in repayments of long-term debt and $3.5 million in payments of issuance costs. Ind ebte dness On May 26, 2022, we entered into the MidCap Credit Agreement with MidCap Financial Trust, as agent and certain lender parties thereto. The MidCap Credit Agreement provides for up to $50.0 million in MidCap Term Loans, consisting of a $40.0 million Tranche 1 and a $10.0 million Tranche 2. Upon closing, we borrowed $40.0 million of Tranche 1 and used a portion of the proceeds to repay borrowings under the OrbiMed Credit Facility and intend to use the remaining proceeds to fund operations and other general corporate purposes. We will be eligible to borrow Tranche 2 at our option if certain conditions are met, including, but not limited to, reaching $65.0 million of net product revenue over the preceding four quarters by fiscal year end 2023. ​ Pursuant to the MidCap Credit Agreement, we provided a first priority security interest in all existing and future acquired assets, including intellectual property, owned by us. The MidCap Credit Agreement contains certain covenants that limit our ability to engage in certain transactions that may be in our long-term best interests, including the incurrence of additional indebtedness, effecting certain corporate changes, making certain investments, acquisitions or dispositions and paying dividends. ​ 29 Table of Contents The MidCap Credit Agreement also contains customary indemnification obligations and customary events of default, including, among other things, (i) non-payment, (ii) breach of warranty, (iii) non-performance of covenants and obligations, (iv) default on other indebtedness, (v) judgments, (vi) change of control, (vii) bankruptcy and insolvency, (viii) impairment of security, (ix) key permit events, (x) termination of a pension plan, (xi) regulatory matters, (xii) material adverse effect and (xiii) breach of material contracts. ​ In addition, we must maintain minimum net revenue levels tested quarterly. In the event of default under the MidCap Credit Agreement, we would be required to pay interest on principal and all other due and unpaid obligations at the current rate in effect plus 2%. ​ The MidCap Term Loans mature on May 1, 2027 and bear interest at a rate equal to 6.25% plus the greater of one-month Term SOFR (as defined in the MidCap Credit Agreement) or 1.0%. We are required to make 36 monthly interest payments beginning on June 1, 2022 (the “Interest-Only Period”). If we are in covenant compliance at the end of the Interest-Only Period, we will have the option to extend the Interest-Only Period by 12 months to 48 monthly interest payments, followed by 12 months of straight-line amortization, with the entire principal payment due at maturity. If we are not in covenant compliance at the end of the Interest-Only Period, we are required to make 24 months of straight-line amortization payments, with the entire principal amount due at maturity. ​ Subject to certain limitations, the MidCap Term Loans have a prepayment fee equal to 3.0% of the prepaid principal amount for the first year following the closing date of the MidCap Term Loans, 2.0% of the prepaid principal amount for the second year following the closing date and 1.0% of the prepaid principal amount for the third year following the closing date and thereafter. We are also required to pay an exit fee at the time of maturity or prepayment event equal to 5% of all principal borrowings (or in the event of a prepayment event, the amount of principal being prepaid). ​ Contractual Obligations and Commitments On October 18, 2023, we amended our Malvern lease as described in Note 9 “Subsequent Events.” The amended lease will increase our commitments and future minimum contractual obligations by approximately $2.0 million in the aggregate during the period from December 1, 2023 through May 31, 2030. Critical Accounting Policies and Significant Judgments and Estimates The Critical Accounting Policies and Significant Judgements and Estimates included in our Annual Report have not materially changed. Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.