What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-22 compared with 2023-03-23 · 89 added, 82 removed, 162 unchanged (51% of the section changed)

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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.

in July 2016 and in Europe in February 2019, 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.

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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.

We recently launched two new, larger configurations of OviTex LPR, designed for ventral and incisional hernias.

In February 2023, we launched two new, larger configurations of OviTex LPR, designed for ventral and incisional hernias.

More recently, we have designed a set of OviTex products specifically for use in the inguinal hernia repair (“IHR”), which we expect to launch in the second quarter of 2024.

We have also focused on evaluating and publishing clinical data on the effectiveness and safety of our OviTex products.

To date, there have been thirty published or presented works relating to these clinical findings, either by us or a third-party evaluating the OviTex product.

Recently 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 .

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.

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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.

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 consists of three product configurations with two or three layers of high-quality tissue derived from ovine rumen, which is reinforced with either permanent or resorbable polymer for added strength, stabilization, and controlled stretch.

These products are designed to improve outcomes by facilitating functional tissue remodeling while controlling the degree and direction of stretch.

In August 2023, we announced the launch of our OviTex PRS Long-Term Resorbable product configuration, which was designed to enhance the OviTex PRS portfolio with specific design features including bi-directional stretch and a fully resorbable, long-term polymer for reinforcement.

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.

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current addressable market opportunity for our OviTex PRS products to be approximately $700 million.

Our OviTex products have received 510(k) clearance from the U.S.

Food and Drug Administration (“FDA”), which clearance was obtained and is currently held by our exclusive contract manufacturer of these products, Aroa.

In April 2019, our OviTex PRS products received 510(k) clearance from the FDA, which clearance was obtained by Aroa and is currently held by us.

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 for our OviTex PRS Long-Term Resorbable device, which is currently held by us.

We have also engaged in discussions with the FDA regarding an Investigational Device Exemption (“IDE”) 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 PMA, rather than 510(k) clearance will be required for such an indication.

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 January 2023, we announced an exclusive development and distribution partnership with Collagen Matrix, Inc.

(“CMI”), 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 also previously commercialized through a distribution agreement with Next Science Technologies Pty Limited (“Next Science”), a proprietary antimicrobial surgical wash in the U.S.

plastic reconstructive market.

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 also continue to expand our service offerings and diversify our supplier base as we continue to create a soft tissue preservation and restoration portfolio, including through the development of complimentary solutions in our indications such as atraumatic mesh fixation devices or 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 their LiquiFix Hernia Mesh Fixation Devices (LiquiFix FIX8™ and LiquiFix Precision™).

In March 2024, we announced the full commercial launch of LiquiFix in the U.S.

We previously co-developed and commercialized our NIVIS Fibrillar Collagen Pack (“NIVIS”), an absorbent matrix of Type I and Type III bovine collagen designed to manage moderately to heavily exudating wounds and to control minor bleeding, in partnership with Regenity Biosciences.

In March 2024, we sold our distribution rights to MiMedx Group, Inc.

in exchange for an initial $5.0 million payment and additional future payments aggregating between a minimum of $3.0 million and a maximum of $7.0 million based on net sales of NIVIS over the next two years.

We continue to assess 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.

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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.

In manufacturing the product, 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.

We purchase product from Aroa at a fixed cost equal to 27% of our net sales of licensed products.

Ovine rumen, the forestomach of a sheep, is the source of the biologic material used in our OviTex and OviTex PRS 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 transfer cost as a percentage of Aroa’s cost of goods sold, and, with the exception of our recent IHR-dedicated products equals 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.

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As part of our commercial strategy, we plan to continue to 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 GPOs covering our OviTex product and plan to continue to contract with additional GPOs and other integrated delivery networks (“IDNs”) 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 versions 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.

Additionally, we are exploring new packaging technology to increase the shelf life of our OviTex and OviTex PRS 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 royalties or other product acquisition costs.

Our OviTex products are manufactured by Aroa at their FDA registered and ISO 13485 compliant facility in Auckland, New Zealand.

We maintain our Aroa License for the exclusive supply of ovine rumen and manufacture of our reinforced tissue matrices under which 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 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 medical affairs functions to drive physician awareness, education and clinical understanding of our products, and utilizing engagement analytics to support further product development and enhancement opportunities.

Additionally, we have contracted with three national group purchasing organizations (“GPOs”) covering our OviTex and OviTex PRS products and plan to continue to contract with additional GPOs and other integrated delivery networks (“IDNs”) to increase access to and penetration of hospital accounts.

We are currently devoting research and development resources to develop additional variations of our OviTex and OviTex PRS product lines, including the additional IHR configurations to further enhance product compatibility in robotic procedures, larger versions of our current product configurations, the development of configurations with longer-acting resorbable polymers and other potential product and packaging enhancements to extend the shelf life of our products.

In addition, we also continue to explore the development of lower-cost, higher-margin resorbable polymer-based devices targeting our current indications.

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 markets.

We intend to continue to make investments in research and development efforts to develop improvements and enhancements to our product portfolio.

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 by us 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 saw improvement in our business during the second half of 2022 and anticipate that procedure volumes will continue to normalize to pre-pandemic levels;

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.

While procedure volumes have continued to normalize to pre-pandemic levels, we continue to monitor any lingering economic effects on labor and hospital staffing levels, procedural volumes and ultimately on our results.

Our revenue for the years ended December 31, 2023 and 2022 was $58.5 million and $41.4 million, respectively, which represents an increase of $17.0 million, or 41% for the year ended December 31, 2023.

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The vast majority of our revenue to date has been generated from sales of our OviTex and OviTex PRS products in the U.S., with the remainder generated from sales of our OviTex products in Europe and the sale of other products.

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, and geopolitical conflicts.

Business Update Regarding Macroeconomic Conditions

These factors have and may continue to impact us in the following ways:

In the first quarter of 2022, regional surges of the COVID-19 Omicron variant 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.

Our business was directly impacted by the COVID-19 pandemic, including due to government restrictions on elective procedures and surgical staffing challenges that lead to the deferral of elective surgeries and lower surgical procedural volumes overall.

We believe that surgical procedures have started to normalize to pre-pandemic levels and that hospital systems have begun to address any remaining backlog of procedures previously delayed due to the COVID-19 pandemic.

Additionally, the true economic effects of COVID-19 pandemic may have created other labor and financial strains on healthcare systems that continue to reduce procedural volumes.

General Economic Uncertainty :

Continued concerns about the systemic impact of potential long-term and wide-spread recession and geopolitical issues, including the war in Ukraine, have contributed to increased market volatility and diminished expectations for economic growth in the world.

Continued concerns about the systemic impact of a potential economic downturn or recession, increasing interest rates, further economic downturn or banking instability and geopolitical issues, including the ongoing Russia-Ukraine conflict and the current conflict in Israel and Gaza (including any escalation or expansion), 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 and perception of worsening market conditions could result in a decline in our stock price, high inflation, increase our cost of capital and adversely affect our ability to access the capital markets in the future.

Financial Strain and Inflationary Pressures :

Continued uncertainty, perception of worsening market conditions and the introduction of new products which may, or 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.

The continuing uncertainty surrounding macroeconomic 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

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.

Depending on the terms of our agreements with our customers, we recognize revenue related to product sales 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 related macroeconomic pressures will have on our ability to continue to generate revenue and expand our customer base.

Recent revenue growth has been driven by increasing revenue from product sales due to our expanding customer base, although macroeconomic pressures described in this Annual Report may impair our ability to continue to generate revenue and expand our customer base at historic rates.

Cost of Revenue

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.

We purchase product from Aroa at a fixed transfer cost as a percentage of Aroa’s cost of goods, which, with the exception of our recent IHR-dedicated products, equals 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.

We expect our cost of revenue to increase in absolute dollars as, and to the extent, our sales volume grows.

Any delay in volume growth, whether due to macroeconomic pressures or otherwise, 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.

Amortization of intangible assets relates to the amortization of capitalized milestone amounts 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.

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Loss on extinguishment of debt consists of the excess consideration paid over the net carrying value of our debt at the time of extinguishment.

Other Expense

Other expense consists primarily of miscellaneous tax expenses and foreign currency exchange gains and losses offset by income earned on our cash and cash equivalents.

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.

Results of Operations

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Loss on extinguishment of debt

Other expense

Other income (expense)

Total other expense

Revenue increased by $17.0 million, or 41%, to $58.5 million for the year ended December 31, 2023 from $41.4 million for the year ended December 31, 2022.

The increase in revenue was primarily driven by an increase in unit sales of our products due to the expansion of our commercial organization, increased penetration within existing customer accounts and stronger international sales.

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 year ended December 31, 2023, we sold 13,675 units of OviTex compared to 10,083 units of OviTex during the year ended December 31, 2022, a 36% increase in unit sales volume.

Additionally, we sold 2,385 units of OviTex PRS compared to 1,260 units during the year ended December 31, 2021, an 89% increase in unit sales volume.

Additionally, we sold 3,544 units of OviTex PRS compared to 2,385 units during the year ended December 31, 2022, a 49% increase in unit sales volume.

Cost of Revenue

Cost of revenue (excluding amortization of intangible assets) increased by $3.2 million to $13.6 million for the year ended December 31, 2022 from $10.3 million for the year ended December 31, 2021.

The increase in cost of revenue was primarily the result of an increase in products purchased to support demand from our higher unit sales.

Cost of revenue (excluding amortization of intangible assets) increased by $4.4 million, or 32%, to $18.0 million for the year ended December 31, 2023 from $13.6 million for the year ended December 31, 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 increased by $0.5 million, or 164%, to $0.8 million for the year ended December 31, 2022 from $0.3 million for the year ended December 31, 2021.

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 an additional cumulative amortization charge of $0.5 million.

Amortization of intangible assets decreased by $0.4 million, or 53%, to $0.4 million for the year ended December 31, 2023 from $0.8 million for the year ended December 31, 2022.

Gross margin increased to 69% for the year ended December 31, 2023 from 65% for the year ended December 31, 2022.

The increase was primarily due to a lower expense recognized for excess and obsolete inventory adjustments as a percentage of revenue which resulted from improved inventory management processes during the year ended December 31, 2022 as compared to the prior year partially offset by higher amortization of intangible assets.

The increase was primarily due to lower expense recognized for excess and obsolete inventory adjustments as a

percentage of revenue which resulted from improved inventory management processes and lower amortization of intangible assets.

Sales and Marketing

Sales and marketing expenses increased by $16.4 million, or 38%, to $59.7 million for the year ended December 31, 2023 from $43.3 million for the year ended December 31, 2022.

The increase was primarily due to higher salaries, benefits and commission costs as a result of our expanded commercial organization, higher travel and consulting expenses and additional employee-related costs due to an increase in headcount.

The increase was primarily due to higher compensation costs as a result of the expansion of our commercial organization, increased travel, consulting and marketing expenses and additional employee-related costs due to an increase in headcount.

General and Administrative

General and administrative expenses increased by $1.0 million, or 7%, to $14.9 million for the year ended December 31, 2023 from $13.9 million for the year ended December 31, 2022.

The increase was primarily due to higher salaries and benefits due to an increase in headcount, higher software related expenses and additional bad debt expense which offset lower insurance expense and recruiting fees.

The increase was primarily due to higher compensation costs and employee-related expenses due to an increase in headcount and increases in professional fees and bad debt expense, offset by a decrease in insurance expense.

Research and Development

Research and development expenses increased by $0.7 million, or 8%, to $9.6 million for the year ended December 31, 2023 from $8.9 million for the year ended December 31, 2022.

The increase was primarily due to an in-process research and development charge, higher salaries and benefits due to an increase in headcount and higher study costs, which offset a decrease in stock-based compensation expense.

The increase was primarily due to higher compensation costs due to an increase in headcount, offset by lower study costs.

Interest Expense

Interest expense increased by $0.5 million, or 13%, to $4.1 million for the year ended December 31, 2022 from $3.6 million for the year ended December 31, 2021 as our borrowings increased under our MidCap Credit Agreement at higher interest rates.

Interest expense increased by $1.2 million, or 29%, to $5.2 million for the year ended December 31, 2023 from $4.1 million for the year ended December 31, 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 year ended December 31, 2022 related to the repayment of borrowings of our credit facilities with OrbiMed in May.

We recorded a loss on the extinguishment of debt of $1.2 million during the year ended December 31, 2022 related to the repayment of borrowings of our credit facilities with OrbiMed.

The losses were primarily comprised of the write-off of unamortized debt discounts and prepayment penalties at the time of extinguishment.

Other Expense

Other expense decreased by $0.2 million, or 96%, primarily due to foreign currency translation adjustments offset by increased interest income.

No losses were recorded during the year ended December 31, 2023.

Other Income (Expense)

Other income (expense) increased by $2.6 million primarily due to higher interest income on increased cash balances and foreign currency translation adjustments.

Liquidity and Capital Resources

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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 August 2022, we completed an underwritten public offering in which we issued and sold 4,600,000 shares of common stock at a public offering price of $8.00 per share.

We received net proceeds of $34.4 million after deducting underwriting discounts, commissions and other offering expenses.

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.

In March 2024, we sold our distribution rights to MiMedx Group, Inc.

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.

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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 upon meeting certain conditions, including, but not limited to, reaching $65.0 million of net product revenue over the preceding four quarters by fiscal year end 2023.

As of December 31, 2023, no additional borrowings were made and our ability to draw from Tranche 2 has since expired.

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 Annual 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 December 2020, we entered into an Equity Distribution Agreement (the “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 up to an aggregate of $50.0 million of shares of our common stock, from time to time through the Agent as sales agent.

No sales were made under the Equity Agreement during the years ended December 31, 2022, 2021 or 2020.

In November 2023, we entered into a new Equity Distribution Agreement (the “2023 Equity Agreement”) with Piper Sandler & Co, (“Piper”) 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 Piper as sales agent, in an initial amount of up to $50 million.

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 2023 Equity Agreement or the 2020 Equity Agreement during the year ended December 31, 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 resulting from the COVID-19 pandemic, inflationary pressures, geopolitical conflict or other factors.

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 stemming from macroeconomic conditions, including those related to 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.

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Cash used in operating activities

Cash (used in) provided by investing activities

Cash used in investing activities

Cash provided by financing activities

Effect of exchange rate change on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents and restricted cash

Operating Activities

During the year ended December 31, 2023, we used $40.9 million of cash in operating activities, resulting from our net loss of $46.7 million and the change in operating assets and liabilities of $2.0 million, offset by non-cash charges of $7.8 million.

Our non-cash charges were comprised of stock-based compensation expense of $5.0 million, our excess and obsolete inventory charge of $1.4 million, depreciation and amortization expense of $0.8 million and interest expense of $0.6 million.

The change in our operating assets and liabilities was primarily related to increases in accounts receivable and inventory partially offset by increases in accrued expenses and other current and long-term liabilities.

During the year ended December 31, 2022, we used $40.7 million of cash in operating activities, resulting from our net loss of $44.3 million and the change in operating assets and liabilities of $5.3 million, offset by non-cash charges of $8.9 million.

Our non-cash charges were comprised of stock-based compensation expense of $4.0 million, our excess and obsolete inventory charge of $1.9 million, loss on extinguishment of debt of $1.2 million, depreciation and amortization expense of $1.2 million and interest expense of $0.7 million.

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Our non-cash charges were comprised of stock-based compensation expense of $3.7 million, our excess and obsolete inventory charge of $1.4 million, interest expense of $0.7 million and depreciation and amortization expense of $0.5 million.

The change in our operating assets and liabilities was primarily related to an increase in our inventory and prepaid expenses and other assets, partially offset by increases in accrued expenses and other current and long-term liabilities.

During the year ended December 31, 2020, we used $24.5 million of cash in operating activities, resulting from our net loss of $28.8 million and the change in operating assets and liabilities of $0.2 million offset by non-cash charges of $4.5 million.

Our non-cash charges were comprised of stock-based compensation expense of $2.1 million, our excess and obsolete inventory charge of $1.3 million, interest expense of $0.6 million and depreciation and amortization expense of $0.5 million.

The change in our operating assets and liabilities was primarily related to an increase in our inventory, accounts receivable and prepaid expenses and other assets, partially offset by increases in accounts payable and accrued expenses and other current and long-term liabilities.

Investing Activities

During the year ended December 31, 2023, cash used in investing activities was $0.6 million consisting of purchases of property and equipment.

During the year ended December 31, 2022, cash used in investing activities was $1.9 million consisting of a $1.0 million payment made for our intangible asset and purchases of property and equipment.

During the year ended December 31, 2021, cash used in investing activities was $0.6 million consisting of purchases of property and equipment.

During the year ended December 31, 2020, cash provided by investing activities was $9.1 million consisting primarily of the proceeds from the sale and maturity of short-term investments.

Financing Activities

During the year ended December 31, 2023, cash provided by financing activities was $46.3 million, consisting primarily of $46.3 million in proceeds received from the sale of our common stock and $0.1 million of proceeds received from the exercise of stock options partially offset by the payment of withholding taxes related to stock-based compensation to employees.

During the year ended December 31, 2022, cash provided by financing activities was $40.9 million, consisting primarily of $34.4 million in proceeds from an underwritten public offering, $40.0 million in proceeds received from the issuance of long-term debt, partially offset by $30.0 million in repayments of long-term debt and $3.5 million in payments of issuance costs.

During the year ended December 31, 2021, cash provided by financing activities was $0.6 million, consisting primarily of the proceeds received from the exercise of stock options.

During the year ended December 31, 2020, cash provided by financing activities was $44.4 million, consisting primarily of the net proceeds received from a follow-on public offering of our common stock.

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 fully repay borrowings under the OrbiMed Credit Facility and intend to

use the remaining proceeds to fund operations and other general corporate purposes.

Upon closing, we borrowed $40.0 million of Tranche 1 and used a portion of the proceeds to fully repay borrowings under the OrbiMed Credit Facility and intend to use the remaining proceeds to fund operations and other general corporate purposes.

As of December 31, 2023, no additional borrowings were made and our ability to draw from Tranche 2 has since expired.

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.

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Purchase commitments

(1) Assumes extension of Interest-Only Period to 48 months under the MidCap Credit Facilty.

(2) Interest payable reflects the rate in effect as of December 31, 2023.

3 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis