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What changed in KALA BIO, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of KALA BIO, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+609 added−563 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-29)

Top changes in KALA BIO, Inc.'s 2024 10-K

609 paragraphs added · 563 removed · 437 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

349 edited+158 added−61 removed805 unchanged
Biggest changeThe ability of the FDA to review and approve new biologics can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes and other events that may otherwise affect the FDA’s ability to perform routine functions.
Biggest changeState Medicaid programs and other payers are developing strategies and implementing significant coverage barriers, or refusing to cover these products outright, arguing that accelerated approval drugs have insufficient or limited evidence despite meeting the FDA’s standards for accelerated approval. ​ Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns personnel losses, or regulatory reform could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business. ​ 90 Table of Contents The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, statutory, regulatory, and policy changes and other events that may otherwise affect the FDA’s ability to perform routine functions.
In February 2023, we dosed our first patient in our CHASE ( C orneal H ealing A fter SE cretome therapy) Phase 2b clinical trial of KPI-012 for PCED in the United States, or the CHASE trial. The CHASE trial is comprised of two patient cohorts.
In February 2023, we dosed our first patient in the United States in our CHASE ( C orneal H ealing A fter SE cretome therapy) Phase 2b clinical trial of KPI-012 for PCED, or the CHASE trial. The CHASE trial is comprised of two patient cohorts.
Conventional therapies, which include bandage contact lenses, autologous serum and surgery, are usually ineffective in overcoming the dysregulation present in multiple cellular pathways that may need to be addressed to heal a PCED.
Conventional therapies, which include bandage contact lenses, autologous serum and surgery, are usually ineffective in overcoming the dysregulation present in multiple cellular pathways that may need to be addressed to heal a PCED.
In pertinent part, FDA’s regulations state that an application “shall not be considered as filed until all pertinent information and data have been received” by the FDA. In the event that FDA determines that an application does not satisfy this standard, it will issue a Refuse to File, or RTF, determination to the sponsor.
In pertinent part, the FDA’s regulations state that an application “shall not be considered as filed until all pertinent information and data have been received” by the FDA. In the event that FDA determines that an application does not satisfy this standard, it will issue a Refuse to File, or RTF, determination to the sponsor.
This approach was subsequently endorsed by Congress in 1998 with legislation providing, in pertinent part, that “If [FDA] determines, based on relevant science, that data from one adequate and well-controlled clinical investigation and confirmatory evidence (obtained prior to or after such investigation) are sufficient to establish effectiveness, the FDA may consider such data and evidence to constitute substantial evidence.” This modification to the law recognized the potential for the FDA to find that one adequate and well controlled clinical investigation with confirmatory evidence, including supportive data outside of a controlled trial, is sufficient to establish effectiveness.
This approach was subsequently endorsed by Congress in 1998 with legislation providing, in pertinent part, that “If the FDA determines, based on relevant science, that data from one adequate and well-controlled clinical investigation and confirmatory evidence (obtained prior to or after such investigation) are sufficient to establish effectiveness, the FDA may consider such data and evidence to constitute substantial evidence.” This modification to the law recognized the potential for the FDA to find that one adequate and well controlled clinical investigation with confirmatory evidence, including supportive data outside of a controlled trial, is sufficient to establish effectiveness.
Regulatory Exclusivity Governing Biologics When a biological product is licensed for marketing by FDA with approval of a BLA, the product may be entitled to certain types of market and data exclusivity barring FDA from approving competing products for certain periods of time.
Regulatory Exclusivity Governing Biologics When a biological product is licensed for marketing by the FDA with approval of a BLA, the product may be entitled to certain types of market and data exclusivity barring the FDA from approving competing products for certain periods of time.
On January 23, 2023, FDA announced that, in matters beyond the scope of that court order, the FDA will continue to apply its existing regulations tying orphan-drug exclusivity to the uses or indications for which the orphan drug was approved.
On January 23, 2023, the FDA announced that, in matters beyond the scope of that court order, the FDA will continue to apply its existing regulations tying orphan-drug exclusivity to the uses or indications for which the orphan drug was approved.
In July 2020, the Court of Justice of the European Union, or the Court of Justice of the European Union, or CJEU, invalidated the EU-U.S. Privacy Shield framework, one of the mechanisms used to legitimize the transfer of personal data from the EEA to the United States.
In July 2020, the Court of Justice of the European Union, or CJEU, invalidated the EU-U.S. Privacy Shield framework, one of the mechanisms used to legitimize the transfer of personal data from the EEA to the United States.
We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we conduct research and development activities, and initiate clinical trials of, and seek regulatory approval for, KPI-012 and any other product candidate that we develop in the future.
We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we conduct research and development activities, and initiate and conduct clinical trials of, and seek regulatory approval for, KPI-012 and any other product candidate that we develop in the future.
Each administration of Oxervate requires the use of a vial containing the drug product, a vial adapter, a single-use pipette and disinfectant wipes. To our knowledge, there are currently only two product candidates in active clinical development for the treatment of a broad PCED population.
Each administration of Oxervate requires the use of a vial containing the drug product, a vial adapter, a single-use pipette and disinfectant wipes. To our knowledge, there are currently only two product candidates in active clinical development for the treatment of a broad PCED population.
While the drug product for Combangio’s early research and Phase 1b clinical trial was cultivated using a planar culture model, we implemented a bioreactor cultivation model for our ongoing CHASE Phase 2b clinical trial of KPI-012. We also plan to utilize a bioreactor cultivation model for our planned clinical trials and for commercial supply of KPI-012.
While the drug product for Combangio’s early research and Phase 1b clinical trial was cultivated using a planar culture model, we implemented a bioreactor cultivation model for our ongoing CHASE Phase 2b clinical trial of KPI-012. We also plan to utilize a bioreactor cultivation model for our planned clinical trials and for commercial supply of KPI-012.
Under the terms of the CIRM Award, Combangio is obligated to pay a royalty on net sales of any product, service or approved drug resulting in whole or in part from the CIRM Award in the amount of 0.1% per $1.0 million of funds utilized by us until the earlier of 10 years from the date of first commercial sale of such product, service or approved drug and such time as nine times the amount of funds awarded by CIRM has been paid in royalties, or the Base Royalty.
Under the terms of the CIRM Award, Combangio is obligated to pay a royalty on net sales of any product, service or approved drug resulting in whole or in part from the CIRM Award in the amount of 0.1% per $1.0 million of funds utilized by us until the earlier of 10 years from the date of first commercial sale of such product, service or approved drug and such time as nine times the amount of funds awarded by CIRM has been paid in royalties, or the Base Royalty.
The PREVENT Pandemics Act, which was enacted in December 2022, clarifies that foreign drug manufacturing establishments are subject to registration and listing requirements even if a drug or biologic undergoes further manufacture, preparation, propagation, compounding, or processing at a separate establishment outside the United States prior to being imported or offered for import into the United States.
The PREVENT Pandemics Act, which was enacted in December 2022, clarifies that foreign drug manufacturing establishments are subject to registration and listing requirements even if a drug or biologic undergoes further manufacture, preparation, propagation, compounding, or processing at a separate establishment outside the United States prior to being imported or offered for import into the United States.
CMS may negotiate prices for ten high-cost drugs paid for by Medicare Part D starting in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028 and 20 Part B or Part D drugs in 2029 and beyond.
CMS may negotiate prices for ten high-cost drugs paid for by Medicare Part D starting in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028 and 20 Part B or Part D drugs in 2029 and beyond.
This provision applies to drug products that have been approved for at least 9 years and biologics that have been licensed for 13 years, but it does not apply to drugs and biologics that have been approved for a single rare disease or condition.
This provision applies to drug products that have been approved for at least 9 years and biologics that have been licensed for 13 years, but it does not apply to drugs and biologics that have been approved for a single rare disease or condition.
The Draft Framework sets forth the factors that an agency may consider when deciding whether to exercise march-in rights pursuant to Bayh-Dole, and includes a first-ever specification that price can be a factor in determining that a drug or other taxpayer-funded invention is not accessible to the public. NIST is currently seeking public comments on the proposed Draft Framework.
The Draft Framework sets forth the factors that an agency may consider when deciding whether to exercise march-in rights pursuant to Bayh-Dole, and includes a first-ever specification that price can be a factor in determining that a drug or other taxpayer-funded invention is not accessible to the public. NIST is currently seeking public comments on the proposed Draft Framework.
The potential inclusion of price as a factor in a march-in determination and the exercise of “march-in” rights by the federal government could result in decreased demand for our future products, which could have a material adverse effect on our results of operations and financial condition.
The potential inclusion of price as a factor in a march-in determination and the exercise of “march-in” rights by the federal government could result in decreased demand for our future products, which could have a material adverse effect on our results of operations and financial condition.
The CCPA also affords California residents the right to opt-out of “sales” of their personal information. The CCPA contains significant penalties for companies that violate its requirements.
The CCPA also affords California residents the right to opt-out of “sales” of their personal information. The CCPA contains significant penalties for companies that violate its requirements.
Like the CCPA and CPRA, these laws create obligations related to the processing of personal information, as well as special obligations for the processing of “sensitive” data, which includes health data in some cases. Some of the provisions of these laws may apply to our business activities.
Like the CCPA and CPRA, these laws create obligations related to the processing of personal information, as well as special obligations for the processing of “sensitive” data, which includes health data in some cases. Some of the provisions of these laws may apply to our business activities.
There are ongoing concerns about the ability of companies to transfer personal data from the EU to other countries. In July 2020, the Court of Justice of the European Union, or CJEU, invalidated the EU-U.S. Privacy Shield, one of the mechanisms used to legitimize the transfer of personal data from the EEA to the United States.
There are ongoing concerns about the ability of companies to transfer personal data from the European Union to other countries. In July 2020, the Court of Justice of the European Union, or CJEU, invalidated the EU-U.S. Privacy Shield, one of the mechanisms used to legitimize the transfer of personal data from the EEA to the United States.
Restrictions under applicable federal and state health care laws and regulations, include the following: ● the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal health care program such as Medicare and Medicaid; ● the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false, fictitious or 34 Table of Contents fraudulent or knowingly making, using or causing to made or used a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government. ● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal laws that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any health care benefit program or making false statements relating to health care matters; ● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, including the Final Omnibus Rule published in January 2013, which impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ● the federal false statements statute, which prohibits knowingly and willfully falsifying, concealing ·or covering up a material fact or making any materially false statement in connection with the delivery of or payment for health care benefits, items or services; ● the Foreign Corrupt Practices Act, or FCPA, which prohibits companies and their intermediaries from making, or offering or promising to make improper payments to non-U.S. officials for the purpose of obtaining or retaining business or otherwise seeking favorable treatment; ● the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or the Affordable Care Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services, or CMS, within the United States Department of Health and Human Services, information related to payments and other transfers of value made by that entity to physicians, other healthcare providers and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and ● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to health care items or services that are reimbursed by non-government third-party payors, including private insurers.
Restrictions under applicable federal and state health care laws and regulations, include the following: ● the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal health care program such as Medicare and Medicaid; ● the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false, fictitious or fraudulent or knowingly making, using or causing to made or used a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government. ● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal laws that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any health care benefit program or making false statements relating to health care matters; ● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, including the Final Omnibus Rule published in January 2013, which impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ● the federal false statements statute, which prohibits knowingly and willfully falsifying, concealing ·or covering up a material fact or making any materially false statement in connection with the delivery of or payment for health care benefits, items or services; 37 Table of Contents ● the Foreign Corrupt Practices Act, or FCPA, which prohibits companies and their intermediaries from making, or offering or promising to make improper payments to non-U.S. officials for the purpose of obtaining or retaining business or otherwise seeking favorable treatment; ● the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or the Affordable Care Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services, or CMS, within the United States Department of Health and Human Services, information related to payments and other transfers of value made by that entity to physicians, other healthcare providers and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and ● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to health care items or services that are reimbursed by non-government third-party payors, including private insurers.
Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements. ​ Collaborations that we enter into may pose a number of risks, including the following: ​ ● collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to these collaborations; ● collaborators may not perform their obligations as expected; ● collaborators may not pursue development of our product candidates or may elect not to continue or renew development programs based on results of clinical trials or other studies, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; ● collaborators may not pursue commercialization of our product candidates that receive marketing approval or may elect not to continue or renew commercialization programs based on changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; ● collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; ● collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; ● product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own products or product candidates, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; 66 Table of Contents ● a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product or products; ● disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would divert management attention and resources, be time-consuming and expensive; ● collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; ● collaborators may infringe, misappropriate or otherwise violate the intellectual property rights of third parties, which may expose us to litigation and potential liability; and ● collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.
Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements. ​ Collaborations that we enter into may pose a number of risks, including the following: ​ ● collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to these collaborations; ● collaborators may not perform their obligations as expected; ● collaborators may not pursue development of our product candidates or may elect not to continue or renew development programs based on results of clinical trials or other studies, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; ● collaborators may not pursue commercialization of our product candidates that receive marketing approval or may elect not to continue or renew commercialization programs based on changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; ● collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; ● collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; ● product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own products or product candidates, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; ● a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product or products; ● disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to 70 Table of Contents product candidates, or might result in litigation or arbitration, any of which would divert management attention and resources, be time-consuming and expensive; ● collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; ● collaborators may infringe, misappropriate or otherwise violate the intellectual property rights of third parties, which may expose us to litigation and potential liability; and ● collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.
We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize KPI-012 or any other product candidate that we may develop, including: ​ ● clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may recommend or require us, to conduct additional clinical trials or abandon product development programs; ● the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate; ● our third-party contractors may fail to comply with regulatory requirements or meet their obligations to us in a timely manner, or at all; ● regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; ● we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites; ● we may decide, or regulators or institutional review boards may require us, to suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; ● we may be subject to additional post-marketing testing requirements to maintain regulatory approval; ● regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate; ● the cost of clinical trials of our product candidates may be greater than we anticipate; ● the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate or may be delayed; ● our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate trials; ● restrictions resulting from health epidemics, including COVID-19, and their collateral consequences may result in internal and external operational delays and limitations; and 54 Table of Contents ● regulatory authorities may withdraw their approval of a product or impose restrictions on its distribution, such as in the form of a modified Risk Evaluation and Mitigation Strategy, or REMS.
We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize KPI-012 or any other product candidate that we may develop, including: ​ ● clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may recommend or require us, to conduct additional clinical trials or abandon product development programs; ● the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate; ● our third-party contractors may fail to comply with regulatory requirements or meet their obligations to us in a timely manner, or at all; ● regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; ● we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites; ● we may decide, or regulators or institutional review boards may require us, to suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; ● we may be subject to additional post-marketing testing requirements to maintain regulatory approval; ● regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate; ● the cost of clinical trials of our product candidates may be greater than we anticipate; ● the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate or may be delayed; ● our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate trials; ● restrictions resulting from health epidemics, including COVID-19, and their collateral consequences may result in internal and external operational delays and limitations; and ● regulatory authorities may withdraw their approval of a product or impose restrictions on its distribution, such as in the form of a modified Risk Evaluation and Mitigation Strategy, or REMS.
Conditional Approval In particular circumstances, E.U. legislation (Article 14–a Regulation (EC) No 726/2004 (as amended by Regulation (EU) 2019/5 and Regulation (EC) No 507/2006 on Conditional Marketing Authorizations for Medicinal Products for Human Use) enables sponsors to obtain a “conditional marketing authorization” prior to obtaining the comprehensive clinical data required for an application for a full marketing authorization.
Conditional Marketing Authorization In particular circumstances, E.U. legislation (Article 14–a Regulation (EC) No 726/2004 (as amended by Regulation (EU) 2019/5 and Regulation (EC) No 507/2006 on Conditional Marketing Authorizations for Medicinal Products for Human Use) enables sponsors to obtain a “conditional marketing authorization” prior to obtaining the comprehensive clinical data required for an application for a full marketing authorization.
The degree of market acceptance of KPI-012 or any other product candidate for which we may obtain marketing approval, will depend on a number of factors, including: ​ ● the efficacy and potential advantages of our product candidates compared to alternative treatments, including the existing standard of care; ● our ability to offer our products for sale at competitive prices, particularly in light of the lower cost of alternative treatments; ● the availability of third-party formulary coverage and adequate reimbursement; ● the clinical indications for which the product is licensed or approved; ● the convenience and ease of administration compared to alternative treatments; ● the willingness of the target patient population to try new therapies and of clinicians to prescribe these therapies; ● the strength of our marketing and distribution support; ● the timing of market introduction of competitive products; 58 Table of Contents ● the prevalence and severity of any side effects; and ● any restrictions on the use of our products together with other medications.
The degree of market acceptance of KPI-012 or any other product candidate for which we may obtain marketing approval, will depend on a number of factors, including: ​ ● the efficacy and potential advantages of our product candidates compared to alternative treatments, including the existing standard of care; 61 Table of Contents ● our ability to offer our products for sale at competitive prices, particularly in light of the lower cost of alternative treatments; ● the availability of third-party formulary coverage and adequate reimbursement; ● the clinical indications for which the product is licensed or approved; ● the convenience and ease of administration compared to alternative treatments; ● the willingness of the target patient population to try new therapies and of clinicians to prescribe these therapies; ● the strength of our marketing and distribution support; ● the timing of market introduction of competitive products; ● the prevalence and severity of any side effects; and ● any restrictions on the use of our products together with other medications.
Any Contingent Consideration payable under the Merger Agreement in the future will be paid only in cash as follows: ​ ● (i) $5.0 million payable upon the first patient dosed with any product candidate whose active ingredient comprises one or more biological factors secreted by MSCs or their progenitors, including KPI-012, or the Product Candidate, in a pivotal clinical trial, (ii) $12.5 million payable upon regulatory approval by the FDA of marketing and sale of a Product Candidate in the United States, subject to certain specified reductions; (iii) $17.5 million payable upon the first commercial sale of a Product Candidate in the United States, subject to certain specified reductions and (iv) an aggregate of up to $65.0 million payable upon the achievement of specified sales milestones; ​ ● tiered cash royalties at percentage rates in the mid-to-high single digits payable on annual net sales of all Product Candidates; and ​ 18 Table of Contents ● a cash payment at a percentage rate in the high single digits of all income, including earnout payments, received by us or any of our affiliates from a product license granted by us to a third party to sell or otherwise commercialize the Product Candidate in countries where neither we nor our affiliates conduct sales of such Product Candidate, subject to certain exceptions set forth in the Merger Agreement. ​ If the aggregate amount of Contingent Consideration payable in any calendar year exceeds $2.5 million, or the Excess Cash Cap, such excess portion, or the Carry Forward Contingent Cash Consideration, will be carried forward and, subject to application of the Excess Cash Cap in the following calendar year, become payable on the first business day of the following calendar year.
Any Contingent Consideration payable under the Merger Agreement in the future will be paid only in cash as follows: ​ ● (i) $5.0 million payable upon the first patient dosed with any product candidate whose active ingredient comprises one or more biological factors secreted by MSCs or their progenitors, including KPI-012, or the Product Candidate, in a pivotal clinical trial, (ii) $12.5 million payable upon regulatory approval by the FDA of marketing and sale of a Product Candidate in the United States, subject to certain specified reductions; (iii) $17.5 million payable upon the first commercial sale of a Product Candidate in the United States, subject to certain specified reductions and (iv) an aggregate of up to $65.0 million payable upon the achievement of specified sales milestones; ​ ● tiered cash royalties at percentage rates in the mid-to-high single digits payable on annual net sales of all Product Candidates; and ​ ● a cash payment at a percentage rate in the high single digits of all income, including earnout payments, received by us or any of our affiliates from a product license granted by us to a third party to sell or otherwise commercialize the Product Candidate in countries where neither we nor our affiliates conduct sales of such Product Candidate, subject to certain exceptions set forth in the Merger Agreement. ​ If the aggregate amount of Contingent Consideration payable in any calendar year exceeds $2.5 million, or the Excess Cash Cap, such excess portion, or the Carry Forward Contingent Cash Consideration, will be carried forward and, subject to application of the Excess Cash Cap in the following calendar year, become payable on the first business day of the following calendar year.
As a result, we intend to devote a substantial portion of our research and development resources and business efforts to the development of KPI-012. ​ The success of KPI-012 and any other product candidates we may develop in the future will depend on many factors, including the following: ​ ● completing and obtaining favorable results from our ongoing and planned clinical trials of KPI-012 and any other product candidate we develop; ● clearance of any investigational new drug application, or IND, submission for any other product candidates we develop; ● applying for and receiving marketing approvals from the FDA and any other regulatory authorities for KPI-012 and any other product candidate we develop; ● if approved, successfully launching and commercializing KPI-012 or any other product candidate we develop in the United States, including establishing and maintaining sales, marketing, manufacturing and distribution capabilities for KPI-012 or any other product candidate we develop; 52 Table of Contents ● if approved, obtaining acceptance of KPI-012 and any other product candidate we develop by patients, the medical community and third-party payors; ● obtaining and maintaining coverage, adequate pricing, and adequate reimbursement from third-party payors, including government payors, for our product candidates; ● obtaining and maintaining regulatory approval of our manufacturing processes and our third-party manufacturers’ facilities from applicable regulatory authorities and obtaining and maintaining adequate supply of any such approved products; ● maintaining a workforce of experienced scientists and others with experience in eye diseases and biologics to continue to develop our product candidates; ● effectively competing with other therapies; ● maintaining an acceptable potency, purity and safety profile of our products following approval; ● obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; ● protecting our rights in our intellectual property portfolio; and ● not infringing, misappropriating or otherwise violating others’ intellectual property rights.
As a result, we intend to devote a substantial portion of our research and development resources and business efforts to the development of KPI-012. ​ The success of KPI-012 and any other product candidates we may develop in the future will depend on many factors, including the following: ​ ● completing and obtaining favorable results from our ongoing and planned clinical trials of KPI-012 and any other product candidate we develop; ● clearance of any investigational new drug application, or IND, submission for any other product candidates we develop; ● applying for and receiving marketing approvals from the FDA and any other regulatory authorities for KPI-012 and any other product candidate we develop; ● if approved, successfully launching and commercializing KPI-012 or any other product candidate we develop in the United States, including establishing and maintaining sales, marketing, manufacturing and distribution capabilities for KPI-012 or any other product candidate we develop; ● if approved, obtaining acceptance of KPI-012 and any other product candidate we develop by patients, the medical community and third-party payors; ● obtaining and maintaining coverage, adequate pricing, and adequate reimbursement from third-party payors, including government payors, for our product candidates; ● obtaining and maintaining regulatory approval of our manufacturing processes and our third-party manufacturers’ facilities from applicable regulatory authorities and obtaining and maintaining adequate supply of any such approved products; ● maintaining a workforce of experienced scientists and others with experience in eye diseases and biologics to continue to develop our product candidates; ● effectively competing with other therapies; ● maintaining an acceptable potency, purity and safety profile of our products following approval; ● obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; ● protecting our rights in our intellectual property portfolio; and ● not infringing, misappropriating or otherwise violating others’ intellectual property rights.
The applicable period is seven years in the United States and ten years in the European Union. The exclusivity period in the European Union can be reduced to six years if a product no longer meets the criteria for orphan drug designation, in particular if the product is sufficiently profitable so that market exclusivity is no longer justified.
The applicable period is seven years in the United States and currently ten years in the European Union. The exclusivity period in the European Union can be reduced to six years if a product no longer meets the criteria for orphan drug designation, in particular if the product is sufficiently profitable so that market exclusivity is no longer justified.
If a competing product candidate with an orphan designation for PCED were to obtain regulatory approval before we are able to obtain approval of KPI-012 for PCED, we could be barred from marketing KPI-012 for PCED in the United States during the seven-year orphan exclusivity period, which would have a severe adverse effect on our business. 78 Table of Contents ​ In order for the FDA to grant orphan drug exclusivity to one of our products, the FDA must find that the product is indicated for the treatment of a condition or disease with a patient population of fewer than 200,000 individuals annually in the United States.
If a competing product candidate with an orphan designation for PCED were to obtain 83 Table of Contents regulatory approval before we are able to obtain approval of KPI-012 for PCED, we could be barred from marketing KPI-012 for PCED in the United States during the seven-year orphan exclusivity period, which would have a severe adverse effect on our business. ​ In order for the FDA to grant orphan drug exclusivity to one of our products, the FDA must find that the product is indicated for the treatment of a condition or disease with a patient population of fewer than 200,000 individuals annually in the United States.
In addition, any failure to comply with applicable laws or regulations could harm our business and divert our management’s attention. ​ If we fail to comply with our obligations in our intellectual property licenses and funding arrangements with third parties, we could lose rights that are important to our business.
In addition, any failure to comply with applicable laws or regulations could harm our business and divert our management’s attention. ​ If we fail to comply with our obligations under our intellectual property licenses and funding arrangements with third parties, we could lose rights that are important to our business.
Specifically, in April 2023, the U.S. District Court for the Northern District of Texas stayed the approval by the FDA of mifepristone, a drug product which was originally approved in 2000 and whose distribution is governed by various conditions adopted under a REMS.
In April 2023, the U.S. District Court for the Northern District of Texas stayed the approval by the FDA of mifepristone, a drug product which was originally approved in 2000 and whose distribution is governed by various conditions adopted under a REMS.
Among other things, these provisions: ● provide for a classified board of directors such that only one of three classes of directors is elected each year; ● allow the authorized number of our directors to be changed only by resolution of our board of directors; ● limit the manner in which stockholders can remove directors from our board of directors; ● provide for advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors; ● require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent; ● limit who may call stockholder meetings; ● authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and ● require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal specified provisions of our certificate of incorporation or bylaws.
Among other things, these provisions: ● provide for a classified board of directors such that only one of three classes of directors is elected each year; ● allow the authorized number of our directors to be changed only by resolution of our board of directors; 99 Table of Contents ● limit the manner in which stockholders can remove directors from our board of directors; ● provide for advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors; ● require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent; ● limit who may call stockholder meetings; ● authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and ● require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal specified provisions of our certificate of incorporation or bylaws.
Key inclusion criteria for the PCED cohort included: ​ ● Subjects with PCED of at least 10 days without improvement from one or more conventional non-surgical treatments in study eye due to any of the following: - NK, provided there was no active herpetic infection of the eye in the prior three months 9 Table of Contents - Corneal Burns (alkali, acid and thermal) - Post-photorefractive Keratectomy - Post-corneal Transplant Surgery - Corneal epithelial debridement resulting from Diabetic Vitrectomy Surgery - Trauma - Keratoconjunctivtis sicca - Sj ö gren’s - Corneal cross-linking ● Subjects with bilateral corneal burns could only have one eye entered into the clinical trial ● Any previous treatment was stopped except for the study medication The participants in the Phase 1b trial were treated with KPI-012 topically twice a day, with the subjects in the safety cohort treated for one week and patients in the PCED cohort treated between one to eight weeks.
Key inclusion criteria for the PCED cohort included: ​ ● Subjects with PCED of at least 10 days without improvement from one or more conventional non-surgical treatments in study eye due to any of the following: - NK, provided there was no active herpetic infection of the eye in the prior three months - Corneal Burns (alkali, acid and thermal) - Post-photorefractive Keratectomy - Post-corneal Transplant Surgery - Corneal epithelial debridement resulting from Diabetic Vitrectomy Surgery - Trauma - Keratoconjunctivtis sicca - Sj ö gren’s - Corneal cross-linking ● Subjects with bilateral corneal burns could only have one eye entered into the clinical trial ● Any previous treatment was stopped except for the study medication The participants in the Phase 1b trial were treated with KPI-012 topically twice a day, with the subjects in the safety cohort treated for one week and patients in the PCED cohort treated between one to eight weeks.
Food and Drug Administration, or FDA, or non-U.S. regulatory agencies to perform clinical trials or studies in addition to those expected; ● there are any delays in enrollment of patients in or completing our clinical trials or the development of our product candidates; ● we in-license or acquire rights to other products, product candidates or technologies; or ● there are any third-party challenges to our intellectual property portfolio, or the need arises to defend against intellectual property-related claims or enforce our intellectual property rights. 47 Table of Contents Our ability to become and remain profitable depends on our ability to generate revenue.
Food and Drug Administration, or FDA, or non-U.S. regulatory agencies to perform clinical trials or studies in addition to those expected; ● there are any delays in enrollment of patients in or completing our clinical trials or the development of our product candidates; ● we in-license or acquire rights to other products, product candidates or technologies; or ● there are any third-party challenges to our intellectual property portfolio, or the need arises to defend against intellectual property-related claims or enforce our intellectual property rights. 50 Table of Contents Our ability to become and remain profitable depends on our ability to generate revenue.
In addition, following the satisfaction of the Base Royalty, Combangio is obligated to pay a 1.0% royalty on net sales of any CIRM-funded invention in excess of $500 million per year until the last to expire patent covering such invention expires. ​ Additionally, there are significant compliance requirements associated with the CIRM Award, such as reporting, notification, recordkeeping and audit requirements, for which internal and external resources may be needed and which may increase our costs of doing business. ​ Securities Purchase Agreement for 2022 Private Placement ​ On November 28, 2022, we entered into a Securities Purchase Agreement, or the 2022 Securities Purchase Agreement, with certain institutional investors named therein, or the Purchasers, pursuant to which we agreed to issue and sell, in a private placement priced at-the-market under Nasdaq rules, shares of our common stock and shares of our Series E Convertible Non-Redeemable Preferred Stock, or Series E Preferred Stock, in two tranches for aggregate gross proceeds of up to $31.0 million, which we refer to collectively as the Private Placement. ​ Pursuant to the 2022 Securities Purchase Agreement, if at any time during the four-year period following the date of the first tranche closing, or the Participation Period, we propose to offer and sell new equity securities in an offering that is conducted pursuant to an exemption from registration under the Securities Act of 1933, as amended, or the Securities Act, or in an offering that is registered under the Securities Act that is not conducted as a firm-commitment underwritten offering, then, subject to compliance with securities laws and regulations, we have agreed to offer each Purchaser the right to purchase its pro rata share of the total amount of the new equity securities, subject to certain conditions and limitations.
In addition, following the satisfaction of the Base Royalty, Combangio is obligated to pay a 1.0% royalty on net sales of any CIRM-funded invention in excess of $500 million per year until the last to expire patent covering such invention expires. ​ Additionally, there are significant compliance requirements associated with the CIRM Award, such as reporting, notification, recordkeeping and audit requirements, for which internal and external resources may be needed and which may increase our costs of doing business. ​ Securities Purchase Agreements for Private Placements ​ Series E Private Placement ​ On November 28, 2022, we entered into a Securities Purchase Agreement, or the 2022 Securities Purchase Agreement, with certain institutional investors named therein, or the Series E Purchasers, pursuant to which we issued and sold, in a private placement priced at-the-market under Nasdaq rules, shares of our common stock and shares of our Series E Convertible Non-Redeemable Preferred Stock, or Series E Preferred Stock, in two tranches for aggregate gross proceeds of up to $31.0 million, which we refer to collectively as the Series E Private Placement. ​ Pursuant to the 2022 Securities Purchase Agreement, if at any time during the four-year period following the date of the first tranche closing, or the Participation Period, we propose to offer and sell new equity securities in an offering that is conducted pursuant to an exemption from registration under the Securities Act of 1933, as amended, or the Securities Act, or in an offering that is registered under the Securities Act that is not conducted as a firm-commitment underwritten offering, then, subject to compliance with securities laws and regulations, we have agreed to offer each Purchaser the right to purchase its pro rata share of the total amount of the new equity securities, subject to certain conditions and limitations.
We expect that our existing cash resources will be sufficient to enable us to obtain safety and efficacy data from our ongoing CHASE Phase 2b clinical trial of KPI-012 in PCED.
We expect that our existing cash resources will be sufficient to enable us to obtain topline safety and efficacy data from our ongoing CHASE Phase 2b clinical trial of KPI-012 in PCED.
This may be costly, and our investment would be lost if we cannot retain or reposition any such sales, marketing and distribution personnel. ​ Factors that may inhibit our efforts to commercialize on our own KPI-012 or any other product candidate we develop, if and when approved, include: ​ ● our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel; ● our inability to obtain and maintain coverage, adequate pricing and adequate reimbursement from third-party payors, including government payors; ● the inability of sales personnel to obtain access to clinicians or persuade adequate numbers of clinicians to prescribe our products; ● the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and ● unforeseen costs and expenses associated with establishing, maintaining and expanding, if and when necessary, an independent sales, marketing and distribution organization.
This may be costly, and our investment would be lost if we cannot retain or reposition any such sales, marketing and distribution personnel. ​ 63 Table of Contents Factors that may inhibit our efforts to commercialize on our own KPI-012 or any other product candidate we develop, if and when approved, include: ​ ● our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel; ● our inability to obtain and maintain coverage, adequate pricing and adequate reimbursement from third-party payors, including government payors; ● the inability of sales personnel to obtain access to clinicians or persuade adequate numbers of clinicians to prescribe our products; ● the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and ● unforeseen costs and expenses associated with establishing, maintaining and expanding, if and when necessary, an independent sales, marketing and distribution organization.
Treatment with KPI-012 rapidly healed the wound size (as indicated by the disappearance of the green stain by Day 4) relative to vehicle control-treated eyes; (B) Treatment with KPI-012 resulted in more rapid complete healing and a greater percentage of completely healed eyes (dashed line), relative to vehicle-treated eyes (solid line). ​ 13 Table of Contents Other Potential Indications for KPI-012 ​ We believe the multifactorial mechanism of action of KPI-012 also makes it a platform technology, and we are evaluating the potential development of KPI-012 for additional rare front-of-the-eye diseases, such as for the treatment of LSCD and other rare corneal diseases that threaten vision. ​ LSCD is an ocular surface disease characterized by the loss or deficiency of stem cells in the junction of the cornea and limbus, where they play an essential role in the generation and repopulation of corneal epithelial cells.
Treatment with KPI-012 rapidly healed the wound size (as indicated by the disappearance of the green stain by Day 4) relative to vehicle control-treated eyes; (B) Treatment with KPI-012 resulted in more rapid complete healing and a greater percentage of completely healed eyes (dashed line), relative to vehicle-treated eyes (solid line). ​ Other Potential Indications for KPI-012 ​ We believe the multifactorial mechanism of action of KPI-012 also makes it a platform technology, and we are evaluating the potential development of KPI-012 for additional rare front-of-the-eye diseases, such as for the treatment of LSCD and other rare corneal diseases that threaten vision. ​ LSCD is an ocular surface disease characterized by the loss or deficiency of stem cells in the junction of the cornea and limbus, where they play an essential role in the generation and repopulation of corneal epithelial cells.
The participation rights will terminate if the Purchasers are offered the opportunity to participate in an offering pursuant to the participation rights and do not purchase at least 50% of their aggregate pro rata share of the new equity securities offered for sale in such offering. ​ Pursuant to the 2022 Securities Purchase Agreement, the Purchasers have the right to have up to two non-voting observers attend and participate in all Board and committee meetings and, subject to the Purchasers owning directly specified minimum amounts of our common stock, the right to have the Board nominate and recommend for election by the stockholders up to three Purchaser designees to the Board (one designee at 9.9%, two designees at 15.0% and three designees at 25.0%) designated by the Purchasers, provided that at such time as the Purchasers have designated three Board designees, at least one such designee must qualify as an “independent” director under Nasdaq rules and be acceptable to the members of the Board who are not Purchaser designees. ​ The Purchasers’ participation rights, observer rights and Board designation rights also will terminate at such time as the Purchasers and their affiliates cease to own, in the aggregate, specified minimum amounts of the shares purchased in the Private Placement. ​ Pursuant to the 2022 Securities Purchase Agreement, we agreed that we will not without the prior approval of the requisite Purchasers (i) issue or authorize the issuance of any equity security that is senior or pari passu to the Series E Preferred Stock with respect to liquidation preference, (ii) incur any additional indebtedness for borrowed money in excess of $1,000,000, in the aggregate, outside the ordinary course of business, subject to specified exceptions, including the refinancing of our existing indebtedness or (iii) pay or declare any dividend or make any distribution on, any shares of our capital stock, subject to specified exceptions.
The participation rights will terminate if the Purchasers are offered the opportunity to participate in an offering pursuant to the participation rights and do not purchase at least 50% of their aggregate pro rata share of the new equity securities offered for sale in such offering. ​ Pursuant to the 2022 Securities Purchase Agreement, the Series E Purchasers have the right to have up to two non-voting observers attend and participate in all of our board of directors, or the Board, and committee meetings and, subject to the Series E Purchasers owning directly specified minimum amounts of our common stock, the right to have the Board nominate and recommend for election by the stockholders up to three Series E Purchaser designees to the Board (one designee at 9.9%, two designees at 15.0% and three designees at 25.0%) designated by the Series E Purchasers, provided that at such time as the Series E Purchasers have designated three Board designees, at least one such designee must qualify as an “independent” director under Nasdaq rules and be acceptable to the members of the Board who are not Series E Purchaser designees. ​ The Series E Purchasers’ observer rights and Board designation rights will terminate at such time as the Series E Purchasers and their affiliates cease to own, in the aggregate, specified minimum amounts of the shares purchased in the Series E Private Placement. ​ Pursuant to the 2022 Securities Purchase Agreement, we agreed that we will not without the prior approval of the requisite Series E Purchasers (i) issue or authorize the issuance of any equity security that is senior or pari passu to the Series E Preferred Stock with respect to liquidation preference, (ii) incur any additional indebtedness for borrowed money in excess of $1,000,000, in the aggregate, outside the ordinary course of business, subject to specified exceptions, including the refinancing of our existing indebtedness or (iii) pay or declare any dividend or make any distribution on, 20 Table of Contents any shares of our capital stock, subject to specified exceptions.
Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology. ​ 72 Table of Contents In addition, it is possible that Stanford may conclude that we have materially breached the Stanford University License Agreement and might therefore terminate the agreement, thereby removing our ability to market products covered by our license agreement with Stanford.
Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology. ​ 76 Table of Contents In addition, it is possible that Stanford may conclude that we have materially breached the Stanford University License Agreement and might therefore terminate the agreement, thereby removing our ability to market products covered by our license agreement with Stanford.
Stanford may terminate the agreement if we breach certain provisions of the agreement and fail to remedy such breach within 60 days after written notice of such breach by Stanford. ​ Combangio Merger Agreement ​ Pursuant to the Agreement and Plan of Merger, or the Merger Agreement, entered into with Combangio in connection with the acquisition of Combangio in November 2021, the former Combangio stockholders or other equityholders, or the Combangio Equityholders, are entitled to receive from us up to $105.0 million in payments that are contingent upon the achievement of specified development, regulatory and commercialization milestones, or the Contingent Consideration. ​ Upon dosing of the first patient in our CHASE trial for PCED in the United States in February 2023, we paid the former Combangio Equityholders an aggregate of $2.5 million in cash and $2.4 million in shares of our common stock (representing an aggregate of 105,038 shares of our common stock) in March 2023.
Stanford may terminate the agreement if we breach certain provisions of the agreement and fail to remedy such breach within 60 days after written notice of such breach by Stanford. ​ 18 Table of Contents Combangio Merger Agreement ​ Pursuant to the Agreement and Plan of Merger, or the Merger Agreement, we entered into with Combangio in connection with the acquisition of Combangio in November 2021, the former Combangio stockholders or other equityholders, or the Combangio Equityholders, are entitled to receive from us up to $105.0 million in payments that are contingent upon the achievement of specified development, regulatory and commercialization milestones, or the Contingent Consideration. ​ Upon dosing of the first patient in our CHASE trial for PCED in the United States in February 2023, we paid the former Combangio Equityholders an aggregate of $2.5 million in cash and $2.4 million in shares of our common stock (representing an aggregate of 105,038 shares of our common stock) in March 2023.
If we obtain marketing approval for KPI-012 or any product candidates we may develop, we expect that our selling, general and administrative expenses will increase substantially if and as we incur commercialization expenses related to product marketing, sales and distribution. ​ Our expenses will also increase if and as we: ● continue the clinical development of KPI-012 for PCED; ● initiate and continue the research and development of KPI-012 for additional indications, such as Limbal Stem Cell Deficiency, including initiating and conducting preclinical studies and clinical trials; ● scale up our manufacturing processes and capabilities to manufacture the clinical supply of KPI-012; ● seek regulatory approval for KPI-012 for PCED in the United States and other jurisdictions; ● seek regulatory approval for KPI-012 for additional indications; ● grow our sales, marketing and distribution capabilities in connection with the commercialization of any product candidates for which we may submit for and obtain marketing approval; ● initiate and progress any preclinical development programs under our mesenchymal stem cell secretome, or MSC-S platform, including from our KPI-014 program; ● conduct clinical trials and other development activities and/or seek marketing approval for any product candidates we may develop in the future; ● in-license or acquire the rights to other products, product candidates or technologies; ● maintain, expand and protect our intellectual property portfolio; ● hire additional clinical, quality control, scientific, manufacturing, commercial and management personnel to support our operations; ● expand our operational, financial and management systems; and ● increase our product liability insurance coverage if we initiate commercialization efforts for our product candidates.
If we obtain marketing approval for KPI-012 or any product candidates we may develop, we expect that our general and administrative 49 Table of Contents expenses will increase substantially if and as we incur commercialization expenses related to product marketing, sales and distribution. ​ Our expenses will also increase if and as we: ● continue the clinical development of KPI-012 for PCED; ● initiate and continue the research and development of KPI-012 for additional indications, such as Limbal Stem Cell Deficiency, including initiating and conducting preclinical studies and clinical trials; ● scale up our manufacturing processes and capabilities to manufacture the clinical supply of KPI-012; ● seek regulatory approval for KPI-012 for PCED in the United States and other jurisdictions; ● seek regulatory approval for KPI-012 for additional indications; ● grow our sales, marketing and distribution capabilities in connection with the commercialization of any product candidates for which we may submit for and obtain marketing approval; ● initiate and progress any preclinical development programs under our mesenchymal stem cell secretome, or MSC-S platform, including from our KPI-014 program; ● conduct clinical trials and other development activities and/or seek marketing approval for any product candidates we may develop in the future; ● in-license or acquire the rights to other products, product candidates or technologies; ● maintain, expand and protect our intellectual property portfolio; ● hire additional clinical, quality control, scientific, manufacturing, commercial and management personnel to support our operations; ● expand our operational, financial and management systems; and ● increase our product liability insurance coverage if we initiate commercialization efforts for our product candidates.
This could have a material adverse effect on our competitive business position and our financial condition, results of operations and our business prospects. ​ 71 Table of Contents Some intellectual property which we own or have licensed may have been discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements, and a preference for United States industry.
This could have a material adverse effect on our competitive business position and our financial condition, results of operations and our business prospects. ​ 75 Table of Contents Some intellectual property which we own or have licensed may have been discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements, and a preference for United States industry.
Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business. ​ 70 Table of Contents Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business. ​ 74 Table of Contents Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates and harm our business and results of operations. ​ KPI-012 and any other product candidate that we may develop may compete with other product candidates and products for access to a limited number of suitable manufacturing facilities that operate under cGMP regulations.
Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates and harm our business and results of operations. ​ 67 Table of Contents KPI-012 and any other product candidate that we may develop may compete with other product candidates and products for access to a limited number of suitable manufacturing facilities that operate under cGMP regulations.
Delays in designing and completing this study to the satisfaction of the FDA could delay or preclude our development and commercialization plans and thereby limit our revenues and growth. ​ Reliance on third-party manufacturers entails additional risks, including reliance on the third-party for regulatory compliance and quality assurance, the possible breach of the manufacturing agreement by the third-party, the possible misappropriation of our proprietary information, including our trade secrets and know-how, and the possible termination or nonrenewal of the agreement by the third-party at a time that is costly or inconvenient for us. ​ Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside the United States.
Delays in designing and completing this study to the satisfaction of the FDA could delay or preclude our development and commercialization plans and thereby limit our revenues and growth. ​ Reliance on third-party manufacturers entails additional risks, including reliance on the third-party for regulatory compliance and quality assurance, the possible breach of the manufacturing agreement by the third-party, the possible misappropriation of our proprietary information, including our trade secrets and know-how, and the possible termination or nonrenewal of the agreement by the third-party at a time that is costly or inconvenient for us. ​ Third-party manufacturers may not be able to comply with current good manufacturing practice, or cGMP, regulations or similar regulatory requirements outside the United States.
In addition, the sponsor must show that the biosimilar and reference products have the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meet standards designed to assure product safety, purity and potency. ​ For the FDA to approve a biosimilar product as interchangeable with a reference product, the FDA must find not only that the product is biosimilar to the reference product but also that it can be expected to produce the same clinical results as the reference product such that the two products may be switched without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
In addition, the sponsor must show that the biosimilar and reference products have the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meet standards designed to assure product safety, purity and potency. ​ 33 Table of Contents For the FDA to approve a biosimilar product as interchangeable with a reference product, the FDA must find not only that the product is biosimilar to the reference product but also that it can be expected to produce the same clinical results as the reference product such that the two products may be switched without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation; ● federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.
A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation; 86 Table of Contents ● federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.
If microbial, viral or other contaminations are discovered at the facilities of our manufacturers, such facilities may need to be closed for an extended period of time to investigate and remedy the contamination, which could delay clinical trials and adversely harm our business. ​ 64 Table of Contents In addition, there are risks associated with large scale manufacturing for clinical trials or commercial scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability issues, compliance with cGMPs, lot consistency and timely availability of raw materials.
If microbial, viral or other contaminations are discovered at the facilities of our manufacturers, such facilities may need to be closed for an extended period of time to investigate and remedy the contamination, which could delay clinical trials and adversely harm our business. ​ In addition, there are risks associated with large scale manufacturing for clinical trials or commercial scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability issues, compliance with cGMPs, lot consistency and timely availability of raw materials.
The revisions may however have a significant impact on the pharmaceutical industry and our business in the long term. ​ Even if our product candidates receive regulatory approval, they will be subject to significant post-marketing regulatory requirements and oversight. ​ Any regulatory approvals that we may receive for our product candidates will require the submission of reports to regulatory authorities and ongoing surveillance to monitor the safety and efficacy of the product candidate, may contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, and may include burdensome post-approval study or risk management requirements and regulatory inspection.
The revisions may however have a significant impact on the pharmaceutical industry and our business in the long term. ​ 81 Table of Contents Even if our product candidates receive regulatory approval, they will be subject to significant post-marketing regulatory requirements and oversight. ​ Any regulatory approvals that we may receive for our product candidates will require the submission of reports to regulatory authorities and ongoing surveillance to monitor the safety and efficacy of the product candidate, may contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, and may include burdensome post-approval study or risk management requirements and regulatory inspection.
Effective July 1, 2023, the term loan bears interest at a floating rate equal to the greater of (i) 8.00% and (ii) the sum of (a) the 1-Month CME Term Secured Overnight Financing Rate, or SOFR, (b) 0.10% and (c) 7.89%. Fluctuations in interest rates could materially affect the interest expense on our Loan Agreement.
Effective July 1, 2023, the term loan bears interest at a floating rate equal to the greater of (i) 8.00% and (ii) the sum of (a) the 1-Month CME Term Secured Overnight Financing Rate, (b) 0.10% and (c) 7.89%. Fluctuations in interest rates could materially affect the interest expense on our Loan Agreement.
In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. ​ If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay the potential commercialization of a product candidate or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization 67 Table of Contents activities at our own expense.
In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. ​ If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay the potential commercialization of a product candidate or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.
Such a decline will adversely affect our investors and also might make it difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. ​ Our existing stockholders will experience dilution upon any future conversion of the outstanding shares of our preferred stock into shares of our common stock.
Such a decline would adversely affect our investors and also might make it difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. ​ Certain existing stockholders will experience dilution upon any future conversion of the outstanding shares of our preferred stock into shares of our common stock.
Pediatric Exclusivity If a sponsor obtains a marketing authorization in all EU Member States, or a marketing authorization granted in the centralized procedure by the European Commission, and the study results for the pediatric population are included in the product information, even when negative, the medicine is then eligible for an additional six-month period of qualifying patent protection through extension of the term of the Supplementary Protection Certificate, or SPC, or alternatively a one year extension of the regulatory market exclusivity from ten to eleven years, as selected by the marketing authorization holder.
Pediatric Exclusivity If a sponsor obtains a marketing authorization in all EU Member States, or a marketing authorization granted in the centralized procedure by the European Commission, and the study results for the pediatric population are included in the product information, even when negative, the medicine is then eligible for an additional six-month period of 45 Table of Contents qualifying patent protection through extension of the term of the Supplementary Protection Certificate, or SPC, or alternatively a one year extension of the regulatory market exclusivity from ten to eleven years, as selected by the marketing authorization holder.
If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our product platform. ​ Risks Related to Our Intellectual Property We may be unable to obtain and maintain patent protection for our technology or product candidates, or the scope of the patent protection obtained may not be sufficiently broad or enforceable, such that our competitors could develop and commercialize technology, products and product candidates similar or identical to ours, and our ability to successfully commercialize our technology and product candidates may be impaired.
If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our product platform. 71 Table of Contents ​ Risks Related to Our Intellectual Property We may be unable to obtain and maintain patent protection for our technology or product candidates, or the scope of the patent protection obtained may not be sufficiently broad or enforceable, such that our competitors could develop and commercialize technology, products and product candidates similar or identical to ours, and our ability to successfully commercialize our technology and product candidates may be impaired.
As such, we may encounter delays or difficulties in our efforts to develop and commercialize KPI-012. ​ Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had prior experience developing biological product candidates or a longer operating and commercialization history. ​ 48 Table of Contents We expect our financial condition and operating results to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control.
As such, we may encounter delays or difficulties in our efforts to develop and commercialize KPI-012. ​ Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had prior experience developing biological product candidates or a longer operating and commercialization history. ​ We expect our financial condition and operating results to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control.
Although sponsors are also obligated to disclose the results of their clinical trials after completion, 22 Table of Contents disclosure of the results can be delayed in some cases for up to two years after the date of completion of the trial. The NIH’s final rule on registration and reporting requirements for clinical trials became effective in 2017.
Although sponsors are also obligated to disclose the results of their clinical trials after completion, 23 Table of Contents disclosure of the results can be delayed in some cases for up to two years after the date of completion of the trial. The NIH’s final rule on registration and reporting requirements for clinical trials became effective in 2017.
Detecting the disclosure or misappropriation of a trade secret and enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling 74 Table of Contents to protect trade secrets.
Detecting the disclosure or misappropriation of a trade secret and enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling 78 Table of Contents to protect trade secrets.
There are also states that are strongly considering or have already passed comprehensive privacy laws during the 2024 legislative sessions. Other states will be considering these laws in the future, and Congress has also been debating passing a federal privacy law. There are also states that are specifically regulating health information that may affect our business.
There are also states that are strongly considering or have already passed comprehensive privacy laws during the 2025 legislative sessions. Other states will be considering these laws in the future, and Congress has also been debating passing a federal privacy law. There are also states that are specifically regulating health information that may affect our business.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, and its implementing regulations, as well as the Drug Supply Chain Security Act, or DSCA, which regulate the distribution and tracing of prescription drug samples at the federal level, and set minimum standards for the regulation of distributors by the states.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, and its implementing regulations, as well as the Drug Supply Chain Security Act, or DSCSA, which regulate the distribution and tracing of prescription drug samples at the federal level, and set minimum standards for the regulation of distributors by the states.
In addition, if during the Participation Period, we propose to offer and sell new equity 19 Table of Contents securities in a firm-commitment underwritten offering registered under the Securities Act, then subject to compliance with securities laws and regulations, we have agreed to use our commercially reasonable efforts to cause the managing underwriters of such offering to contact the Purchasers about potentially participating in such offering and to provide to each Purchaser the opportunity to purchase its pro rata share of such new equity securities, subject to certain conditions and limitations.
In addition, if during the Participation Period, we propose to offer and sell new equity securities in a firm-commitment underwritten offering registered under the Securities Act, then subject to compliance with securities laws and regulations, we have agreed to use our commercially reasonable efforts to cause the managing underwriters of such offering to contact the Purchasers about potentially participating in such offering and to provide to each Purchaser the opportunity to purchase its pro rata share of such new equity securities, subject to certain conditions and limitations.
Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors, such as those developing treatments for PCED, to bring products to market before we do and impair our ability to successfully commercialize our product candidates. ​ If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.
Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors, such as those developing treatments for PCED, to bring products to market before we do and impair our ability to successfully commercialize our product candidates. ​ 58 Table of Contents If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.
If any of the clinicians or other healthcare providers or entities with whom we do or expect to do business is found to be not in compliance with applicable laws, it may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government funded healthcare programs. ​ Existing and future legislation may affect our ability to commercialize our products, if and when approved, and increase the difficulty and cost for us to obtain reimbursement for our products, if and when approved.
If any of the clinicians or other healthcare providers or entities with whom we do or expect to do business is found to be 87 Table of Contents not in compliance with applicable laws, it may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government funded healthcare programs. ​ Existing and future legislation may affect our ability to commercialize our products, if and when approved, and increase the difficulty and cost for us to obtain reimbursement for our products, if and when approved.
We may never generate the necessary data or results required to obtain regulatory approval of KPI-012 or any other product candidate we develop and the commercialization of KPI-012 or any other product candidate we develop may never occur. ​ If clinical trials of KPI-012 or any other biological product candidate that we develop fail to demonstrate potency, safety and purity to the satisfaction of the FDA or other regulatory authorities or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of such product candidate.
We may never generate the necessary data or results required to 56 Table of Contents obtain regulatory approval of KPI-012 or any other product candidate we develop and the commercialization of KPI-012 or any other product candidate we develop may never occur. ​ If clinical trials of KPI-012 or any other biological product candidate that we develop fail to demonstrate potency, safety and purity to the satisfaction of the FDA or other regulatory authorities or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of such product candidate.
The failure of us or our third 63 Table of Contents party manufacturers to obtain the raw materials necessary to manufacture sufficient quantities of KPI-012 or any other product candidates we may develop, may have a material adverse effect on our business. ​ The FDA maintains strict requirements governing the manufacturing process and third-party manufacturers are subject to inspection and approval by the FDA before a company can commence the manufacture and sale of any of its products or product candidates, and thereafter subject to FDA inspection from time to time.
The failure of us or our third party manufacturers to obtain the raw materials necessary to manufacture sufficient quantities of KPI-012 or any other product candidates we may develop, may have a material adverse effect on our business. ​ The FDA maintains strict requirements governing the manufacturing process and third-party manufacturers are subject to inspection and approval by the FDA before a company can commence the manufacture and sale of any of its products or product candidates, and thereafter subject to FDA inspection from time to time.
Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions. ​ We may in the future operate in jurisdictions that pose a high risk of potential FCPA or Bribery Act violations, and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to 85 Table of Contents liability under the FCPA, Bribery Act or local anti-corruption laws.
Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions. ​ We may in the future operate in jurisdictions that pose a high risk of potential FCPA or Bribery Act violations, and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the FCPA, Bribery Act or local anti-corruption laws.
Pursuant to the license agreement with Stanford, or the Stanford Agreement, we hold a worldwide, exclusive, sublicensable license under certain patent rights, or licensed patents, directed to methods to promote eye wound healing, to make, have made, use, import, offer to sell and sell products that are covered by the licensed patents, or licensed products, for use in all fields. ​ 17 Table of Contents Financial Terms ​ In consideration for that license, Combangio paid Stanford an upfront fee of $15,000.
Pursuant to the license agreement with Stanford, or the Stanford Agreement, we hold a worldwide, exclusive, sublicensable license under certain patent rights, or licensed patents, directed to methods to promote eye wound healing, to make, have made, use, import, offer to sell and sell products that are covered by the licensed patents, or licensed products, for use in all fields. ​ Financial Terms ​ In consideration for that license, Combangio paid Stanford an upfront fee of $15,000.
If our manufacturers are unable to produce sufficient quantities for clinical trials or for commercialization, our development and commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of operations and growth prospects. ​ Our reliance on CIRM funding for KPI-012 adds uncertainty to our research and development efforts, imposes certain compliance obligations on us and imposes requirements that may increase the costs of commercializing KPI-012.
If our manufacturers are unable to produce sufficient quantities for clinical trials or for commercialization, our development and commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of operations and growth prospects. ​ 68 Table of Contents Our reliance on CIRM funding for KPI-012 adds uncertainty to our research and development efforts, imposes certain compliance obligations on us and imposes requirements that may increase the costs of commercializing KPI-012.
We also expect to have to negotiate budgets and contracts with such third parties, and we may not be able to do so on favorable terms, which may result in delays to our development timelines and increased costs. 90 Table of Contents ​ Risks Related to Our Common Stock If we fail to comply with the continued listing requirements of Nasdaq, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.
We also expect to have to negotiate budgets and contracts with such third parties, and we may not be able to do so on favorable terms, which may result in delays to our development timelines and increased costs. ​ Risks Related to Our Common Stock If we fail to comply with the continued listing requirements of Nasdaq, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.
The applicable legislation in the EU also requires sponsors to either conduct clinical trials in a pediatric population in accordance with a Pediatric Investigation Plan approved by the Pediatric Committee of the European Medicines Agency, or EMA, or to obtain a waiver or deferral from the conduct of these studies by this Committee.
The applicable legislation in the European Union also requires sponsors to either conduct clinical trials in a pediatric population in accordance with a Pediatric Investigation Plan approved by the Pediatric Committee of the European Medicines Agency, or EMA, or to obtain a waiver or deferral from the conduct of these studies by this Committee.
Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our business, financial condition, results of operations or prospects. ​ We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.
Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our business, financial condition, results of operations or prospects. ​ 95 Table of Contents We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.
If we identify one or more material weaknesses in our internal control over financial reporting, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. ​ Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
If 103 Table of Contents we identify one or more material weaknesses in our internal control over financial reporting, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. ​ Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We are also eligible to receive from Alcon up to four commercial-based sales milestone payments as follows: (1) $25.0 million upon the achievement of $50.0 million or more in aggregate worldwide 6 Table of Contents net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (2) $65.0 million upon the achievement of $100.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (3) $75.0 million upon the achievement of $175.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029 and (4) $160.0 million upon the achievement of $250.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029.
We are also eligible to receive from Alcon up to four commercial-based sales milestone payments as follows: (1) $25.0 million upon the achievement of $50.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (2) $65.0 million upon the achievement of $100.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (3) $75.0 million upon the achievement of $175.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029 and (4) $160.0 million upon the achievement of $250.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029.
On each of March 2, 2022 and May 24, 2022, we received a deficiency letter from Nasdaq notifying us that, for 30 consecutive business days, the bid price of our common stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on The Nasdaq Global Select Market pursuant to Nasdaq Listing Rule 5450(a)(1), or the Bid Price Requirement.
On each of March 2, 2022 and May 24, 2022, we received a deficiency letter from Nasdaq notifying us that, for 30 consecutive business days, the bid price of our common stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on The Nasdaq Global Select Market pursuant to Nasdaq 98 Table of Contents Listing Rule 5450(a)(1), or the Bid Price Requirement.
Our website address is included in this Annual Report on Form 10-K as an inactive technical reference only. 45 Table of Contents Item 1A Risk Factors Investing in our common stock involves a high degree of risk.
Our website address is included in this Annual Report on Form 10-K as an inactive technical reference only. 48 Table of Contents Item 1A Risk Factors Investing in our common stock involves a high degree of risk.
We expect to explore commercialization of KPI-012, if approved, in certain markets outside the United States utilizing a variety of collaboration, distribution, co-promotion, distribution and other marketing arrangements with one or more third parties. 15 Table of Contents Manufacturing and Supply We do not own or operate, and currently have no plans to establish, any manufacturing facilities for KPI-012.
We expect to explore commercialization of KPI-012, if approved, in certain markets outside the United States utilizing a variety of collaboration, distribution, co-promotion, distribution and other marketing arrangements with one or more third parties. Manufacturing and Supply We do not own or operate, and currently have no plans to establish, any manufacturing facilities for KPI-012.
Even if a compound is considered to be a new chemical entity so that the innovator gains the prescribed period of data exclusivity, another company nevertheless could also market another version of the product if such company obtained marketing 42 Table of Contents authorization based on an MAA with a complete independent data package of pharmaceutical tests, preclinical tests and clinical trials.
Even if a compound is considered to be a new chemical entity so that the innovator gains the prescribed period of data exclusivity, another company nevertheless could also market another version of the product if such company obtained marketing authorization based on an MAA with a complete independent data package of pharmaceutical tests, preclinical tests and clinical trials.
While we cannot be certain when, if ever, we will seek and/or receive marketing approval to commercialize any of our product candidates outside the United States, we may seek marketing approval and explore commercialization of 60 Table of Contents KPI-012 in certain markets outside the United States utilizing a variety of collaboration, distribution, co-promotion and other marketing arrangements with one or more third parties.
While we cannot be certain when, if ever, we will seek and/or receive marketing approval to commercialize any of our product candidates outside the United States, we may seek marketing approval and explore commercialization of KPI-012 in certain markets outside the United States utilizing a variety of collaboration, distribution, co-promotion and other marketing arrangements with one or more third parties.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. ​ 95 Table of Contents We have incurred and will continue to incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives and corporate governance practices.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. ​ We have incurred and will continue to incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives and corporate governance practices.
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025).
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare beginning in 2026, with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation; and replaces the Part D coverage gap discount program with a new discounting program beginning in 2025.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Audit Committee and Board of Directors receive periodic updates from our Chief Legal Officer and Chief Compliance Officer, together with our outside information technology management/cybersecurity consultant, and the Audit Committee and Board of Directors is notified between such updates regarding significant new cybersecurity threats or incidents. ​ Our Chief Legal Officer and Chief Compliance Officer is responsible for the management oversight of company-wide cybersecurity strategy, policy, standards and processes and works across relevant departments to assess and help prepare us to address cybersecurity risks.
Biggest changeOur Audit Committee and Board of Directors receive periodic updates from our Chief Business Officer, together with our outside information technology management/cybersecurity consultant, and the Audit Committee and Board of Directors is notified between such updates regarding significant new cybersecurity threats or incidents. ​ 105 Table of Contents Our Chief Business Officer is responsible for the management oversight of company-wide cybersecurity strategy, policy, standards and processes and works across relevant departments to assess and help prepare us to address cybersecurity risks.
This training program covers timely and relevant topics, including social engineering, phishing, password protection, confidential data protection, asset use and mobile security, and educates employees on the importance of reporting all cybersecurity incidents immediately. We also use technology-based tools to mitigate cybersecurity risks and to bolster our employee-based cybersecurity programs. ​
This training program covers timely and relevant topics, including social engineering, phishing, password protection, confidential data protection, asset use and mobile security, and educates employees on the importance of reporting all cybersecurity incidents immediately. We also use technology-based tools to mitigate cybersecurity risks and to bolster our employee-based cybersecurity programs. ​ ​ 106 Table of Contents
Our Chief Legal Officer and Chief Compliance Officer is supported by our outside information technology management/cybersecurity consultant and our managed security services provider. ​ We have also established a cross-functional Cybersecurity Committee led by our Chief Legal Officer and Chief Compliance Officer serving as the chair and consisting of senior leaders within our organization.
Our Chief Business Officer is supported by our outside information technology management/cybersecurity consultant and our managed security services provider. ​ We have also established a cross-functional Cybersecurity Committee led by our Chief Business Officer serving as the chair and consisting of senior leaders within our organization.
Our Chief Legal Officer and Chief Compliance Officer has many years of experience overseeing company-wide legal and compliance risks, including at multiple publicly-traded companies.
Our Chief Business Officer has many years of experience overseeing company-wide legal and compliance risks.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe term of the space-sharing agreement expired on June 30, 2023. In April 2023, Combangio entered into a lease agreement with Menlo Prepi I, LLC, pursuant to which Combangio leases approximately 6,135 square feet of office, laboratory and research and development space in Menlo 98 Table of Contents Park, California. The term of the lease commenced on July 1, 2023.
Biggest changeItem 2. Properties We currently lease a limited amount of office space in Arlington, Massachusetts, which serves as our corporate headquarters. In April 2023, Combangio entered into a lease agreement with Menlo Prepi I, LLC, pursuant to which Combangio leases approximately 6,135 square feet of office, laboratory and research and development space in Menlo Park, California.
The initial term of the lease is for 62 months, unless earlier terminated. The lease provides Combangio with an option to extend the lease for an additional five-year term. ​ Item 3. Legal Proceedings We are not currently subject to any material legal proceedings. Item 4. Mine Safety Disclosures None. 99 Table of Contents Part II
The term of the lease commenced on July 1, 2023. The initial term of the lease is for 62 months, unless earlier terminated. The lease provides Combangio with an option to extend the lease for an additional five-year term. ​ Item 3. Legal Proceedings We are not currently subject to any material legal proceedings. Item 4.
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Item 2. Properties We currently lease a limited amount of office space in Arlington, Massachusetts, which serves as our corporate headquarters. Combangio, our wholly-owned subsidiary as a result of the Combangio Acquisition, entered into a space sharing agreement with Lagunita, LLC on October 11, 2019, pursuant to which it subleased 1,550 square feet of shared office and lab space.
Added
Mine Safety Disclosures None. 107 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeInformation About our Equity Compensation Plans The information required by this item will be set forth in our Proxy Statement for the 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
Biggest changeInformation About our Equity Compensation Plans The information required by this item is set forth in “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and is incorporated herein by reference.
In addition, our ability to pay cash dividends is currently restricted by the terms of our Loan and Security Agreement with Oxford Finance LLC and our Securities Purchase Agreements relating to our 2022, 2023 and 2024 private placements (which securities purchase agreements are more fully described in Item 1., Business and Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations).
In addition, our ability to pay cash dividends is currently restricted by the terms of our Loan and Security Agreement with Oxford Finance LLC and our Securities Purchase Agreements relating to our 2022, 2023 and March 2024 private placements (which securities purchase agreements are more fully described in Item 1., Business and Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations).
Recent Sales of Unregistered Securities We did not sell any shares of our common stock, shares of our preferred stock or warrants to purchase shares of our stock, or grant any stock options, restricted stock units or restricted stock awards, during the year ended December 31, 2023 that were not registered under the Securities Act of 1933, as amended, or the Securities Act, and that have not otherwise been described in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K .
Recent Sales of Unregistered Securities We did not sell any shares of our common stock, shares of our preferred stock or warrants to purchase shares of our stock, or grant any stock options, restricted stock units or restricted stock awards, during the year ended December 31, 2024 that were not registered under the Securities Act of 1933, as amended, or the Securities Act, and that have not otherwise been described in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K .
Purchase of Equity Securities We did not purchase any of our registered equity securities during the period covered by this Annual Report on Form 10-K. Item 6. [Reserved] 100 Table of Contents
Purchase of Equity Securities We did not purchase any of our registered equity securities during the period covered by this Annual Report on Form 10-K. Item 6. [Reserved] 108 Table of Contents
Holders As of March 28, 2024, there were approximately 22 holders of record of our common stock. This number does not include beneficial owners whose shares are held by nominees in street name. Dividend Policy We have not declared or paid any cash dividends on our common stock since our inception.
Holders As of March 28, 2025, there were approximately 25 holders of record of our common stock. This number does not include beneficial owners whose shares are held by nominees in street name. Dividend Policy We have not declared or paid any cash dividends on our common stock since our inception.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet cash provided by financing activities for the year ended December 31, 2023 largely consisted of $18.5 million of net proceeds from the sale of shares of our common stock through Jefferies under our at-the market offering, and $2.0 million of proceeds from the sale of Series F Preferred Stock in our 2023 Private Placement, partially offset by $10.0 115 Table of Contents million of repayment of principal and final payment fee on our Loan Agreement and a $2.0 million payment for the First Dosing Milestone reflected in financing activities. ​ Net cash used in financing activities for the year ended December 31, 2022 largely consisted of $40.0 million of repayment of principal, prepayment premium and final payment fee on our Loan Agreement, partially offset by net proceeds of $30.8 million from the sale of common stock and Series E Preferred Stock in our 2022 Private Placement, $1.0 million of net proceeds from the sale of shares of our common stock through Jefferies under our at-the-market offering, and $0.3 million of proceeds from the exercise of stock options and the issuance of common stock under our employee stock purchase plan. ​ Funding Requirements We anticipate that our research and development expenses will increase substantially in the future as compared to prior periods as we advance the clinical development of KPI-012.
Biggest changeNet cash provided by financing activities for the year ended December 31, 2024 largely consisted of $10.8 million of gross proceeds from the sale of common stock and shares of our Series I Preferred Stock in our December 2024 private placement, $12.3 million of net proc eeds from the sale of common stock and shares of our Series H Preferred Stock in our June 2024 private placement, $8.5 million of net proceeds from the sale of shares of our Series G Preferred Stock in our March 2024 private placement and $3.4 million of net proceeds from the sale of shares of our common stock through Jefferies under our at-the-market equity offering, partially offset by a $5.0 million repayment of principal and payment fee on our Loan Agreement and a $0.1 million payment for the First Dosing Milestone reflected in financing activities. ​ Net cash provided by financing activities for the year ended December 31, 2023 largely consisted of $18.5 million of net proceeds from the sale of shares of our common stock through Jefferies under our at-the market equity offering, and $2.0 million of proceeds from the sale of shares of our Series F Preferred Stock in our 2023 private placement, partially offset by $10.0 million of repayment of principal and payment fee on our Loan Agreement and a $2.0 million payment for the First Dosing Milestone reflected in financing activities. ​ Funding Requirements We anticipate that our research and development expenses will increase substantially in the future as compared to prior periods as we advance the clinical development of KPI-012.
Changes in the fair value of our Deferred Purchase Consideration obligations, other than changes due to issuance, are recognized as a gain or loss on fair value remeasurement of Deferred Purchase Consideration in our consolidated statements of operations and comprehensive loss . ​ Loss (Gain) on Fair Value Remeasurement of Contingent Consideration ​ In addition to the Deferred Purchase Consideration, consideration payable to the Combangio Equityholders includes potential payments of up to $105.0 million that are contingent upon the achievement of specified development, regulatory and commercialization milestones.
Changes in the fair value of our Deferred Purchase Consideration obligations, other than changes due to issuance, are recognized as a gain or loss on fair value remeasurement of Deferred Purchase Consideration in our consolidated statements of operations and comprehensive loss . ​ Loss on Fair Value Remeasurement of Contingent Consideration ​ In addition to the Deferred Purchase Consideration, consideration payable to the Combangio Equityholders includes potential payments of up to $105.0 million that are contingent upon the achievement of specified development, regulatory and commercialization milestones.
We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon in July 2022, our IPO, follow-on public common stock offerings and sales of our common stock under our at-the-market equity offerings, private placements of common stock and/or preferred stock, borrowings under credit facilities and our Loan and Security Agreement, or the Loan Agreement, with Oxford Finance LLC, or Oxford Finance, a grant from CIRM, convertible promissory notes and warrants.
We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon in July 2022, our IPO, follow-on public common stock offerings and sales of our common stock under our at-the-market equity offerings, private placements of common stock and/or preferred stock, borrowings under credit facilities and our Loan and Security Agreement, or the Loan Agreement, with Oxford Finance LLC, or Oxford Finance, disbursements under a grant from CIRM, convertible promissory notes and warrants.
As a result, we could deplete our available capital resources sooner or later than we currently expect . ​ Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability.
As a result, we could deplete our available capital resources sooner than we currently expect. ​ Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability.
Our expenses will also increase if and as we: ● continue the clinical development of KPI-012 for PCED; ● initiate and continue the research and development of KPI-012 for additional indications, such as Limbal Stem Cell Deficiency, including initiating and conducting preclinical studies and clinical trials; ● scale up our manufacturing processes and capabilities to manufacture the clinical supply of KPI-012; ● seek regulatory approval for KPI-012 for PCED in the United States and other jurisdictions; ● seek regulatory approval for KPI-012 for additional indications; ● grow our sales, marketing and distribution capabilities in connection with the commercialization of any product candidates for which we may submit for and obtain marketing approval; ● initiate and progress any preclinical development programs under our MSC-S platform, including from our KPI-014 program; ● conduct clinical trials and other development activities and/or seek marketing approval for any product candidates we may develop in the future; ● in-license or acquire the rights to other products, product candidates or technologies; ● maintain, expand and protect our intellectual property portfolio; ● hire additional clinical, quality control, scientific, manufacturing, commercial and management personnel to support our operations; ● expand our operational, financial and management systems; and ● increase our product liability insurance coverage if we initiate commercialization efforts for our product candidates.
Our expenses will also increase if and as we: ● continue the clinical development of KPI-012 for PCED; 120 Table of Contents ● initiate and continue the research and development of KPI-012 for additional indications, such as Limbal Stem Cell Deficiency, including initiating and conducting preclinical studies and clinical trials; ● scale up our manufacturing processes and capabilities to manufacture the clinical supply of KPI-012; ● seek regulatory approval for KPI-012 for PCED in the United States and other jurisdictions; ● seek regulatory approval for KPI-012 for additional indications; ● grow our sales, marketing and distribution capabilities in connection with the commercialization of any product candidates for which we may submit for and obtain marketing approval; ● initiate and progress any preclinical development programs under our MSC-S platform, including from our KPI-014 program; ● conduct clinical trials and other development activities and/or seek marketing approval for any product candidates we may develop in the future; ● in-license or acquire the rights to other products, product candidates or technologies; ● maintain, expand and protect our intellectual property portfolio; ● hire additional clinical, quality control, scientific, manufacturing, commercial and management personnel to support our operations; ● expand our operational, financial and management systems; and ● increase our product liability insurance coverage if we initiate commercialization efforts for our product candidates.
If we obtain marketing approval for KPI-012 or any product candidates we may develop, we expect that our selling, general and administrative expenses will increase substantially if and as we incur commercialization expenses related to product marketing, sales and distribution .
If we obtain marketing approval for KPI-012 or any product candidates we may develop, we expect that our general and administrative expenses will increase substantially if and as we incur commercialization expenses related to product marketing, sales and distribution.
We previously developed and commercialized two marketed products, EYSUVIS ® (loteprednol etabonate ophthalmic suspension) 0.25%, for the short-term (up to two weeks) treatment of the signs and symptoms of dry eye disease, and INVELTYS ® (loteprednol etabonate ophthalmic suspension) 1%, a topical twice-a-day ocular steroid for the 101 Table of Contents treatment of post-operative inflammation and pain following ocular surgery.
We previously developed and commercialized two marketed products, EYSUVIS ® (loteprednol etabonate ophthalmic suspension) 0.25%, for the short-term (up to two weeks) treatment of the signs and symptoms of dry eye disease, and INVELTYS ® (loteprednol etabonate ophthalmic suspension) 1%, a topical twice-a-day ocular steroid for the 109 Table of Contents treatment of post-operative inflammation and pain following ocular surgery.
For further information about the Loan Agreement, see Note 11, “Debt” of our consolidated financial statements. ​ On August 1, 2023, we entered into a fourth amendment to the Loan Agreement pursuant to which certain provisions of the Loan Agreement were amended in connection with the change in our corporate name and the cessation of the U.S. Dollar LIBOR rate.
For further information about the Loan Agreement, see Note 8, “Debt”, of our consolidated financial statements. ​ On August 1, 2023, we entered into a fourth amendment to the Loan Agreement pursuant to which certain provisions of the Loan Agreement were amended in connection with the change in our corporate name and the cessation of the U.S. Dollar LIBOR rate.
We believe the multifactorial mechanism of action of KPI-012 also makes our MSC-S a platform technology. We are evaluating the potential development of KPI-012 for additional rare front-of-the-eye diseases, such as for the treatment of Limbal Stem Cell Deficiency, or LSCD, and other rare corneal diseases that threaten vision.
We believe the multifactorial mechanism of action of KPI-012 also makes our MSC-S a platform technology. We are evaluating the potential development of KPI-012 for additional rare front-of-the-eye diseases, such as for the treatment of Limbal Stem Cell Deficiency and other rare corneal diseases that threaten vision.
Our expenses will increase from what we anticipate if: ● we elect or are required by the FDA or non-U.S. regulatory agencies to perform clinical trials or studies in addition to those expected; ● there are any delays in enrollment of patients in or completing our clinical trials or the development of our product candidates; ● we in-license or acquire rights to other products, product candidates or technologies; or ● there are any third-party challenges to our intellectual property portfolio, or the need arises to defend against intellectual property-related claims or enforce our intellectual property rights.
Our expenses will increase from what we anticipate if: ● we elect or are required by the FDA or non-U.S. regulatory agencies to perform clinical trials or studies in addition to those expected; ● there are any delays in enrollment of patients in or completing our clinical trials or the development of our product candidates; ● we in-license or acquire rights to other products, product candidates or technologies; or 121 Table of Contents ● there are any third-party challenges to our intellectual property portfolio, or the need arises to defend against intellectual property-related claims or enforce our intellectual property rights.
Under the terms of the CIRM Award, Combangio is obligated to pay a royalty on net sales of any product, service or approved drug resulting in whole or in part from the CIRM Award in the amount of 0.1% per $1.0 million of funds utilized by us until the earlier of ten years from the date of first commercial sale of such product, service or approved drug and such time as nine times the amount of funds awarded by CIRM has been paid in royalties, or the Base Royalty.
Under the terms of the CIRM Award, Combangio is obligated to pay a 112 Table of Contents royalty on net sales of any product, service or approved drug resulting in whole or in part from the CIRM Award in the amount of 0.1% per $1.0 million of funds utilized by us until the earlier of ten years from the date of first commercial sale of such product, service or approved drug and such time as nine times the amount of funds awarded by CIRM has been paid in royalties, or the Base Royalty.
In connection with our entry into the purchase agreement for the sale of our Commercial Business to Alcon, on May 21, 2022, we entered into an amendment 112 Table of Contents to the Loan Agreement, or the Second Loan Amendment, pursuant to which the Lender and Agent consented to the entry by us into the asset purchase agreement and the sale of the Commercial Business to Alcon and agreed to release its liens on the Commercial Business in consideration for the payment by us at the closing of the Alcon Transaction of an aggregate amount of $40.0 million, or the Second Amendment Prepayment, to the Lender and Agent.
In connection with our entry into the purchase agreement for the sale of our Commercial Business to Alcon, on May 21, 2022, we entered into an amendment to the Loan Agreement, or the Second Loan Amendment, pursuant to which the Lender and Agent consented to the entry by us into the asset purchase agreement and the sale of the Commercial Business to Alcon and agreed to release its liens on the Commercial Business in consideration for the payment by us at the closing of the Alcon Transaction of an aggregate amount of $40.0 million, or the Second Amendment Prepayment, to the Lender and Agent.
We have initiated the second and final patient cohort of the CHASE trial in the United States, which is a multicenter, randomized, double-masked, vehicle-controlled, parallel-group trial to evaluate the safety and tolerability of two doses of KPI-012 ophthalmic solution (3 U/mL and 1 U/mL) versus vehicle dosed topically QID for 56 days in approximately 90 patients.
We have initiated the second and final patient cohort of the CHASE trial in the United States, which is a multicenter, randomized, double-masked, vehicle-controlled, parallel-group trial to evaluate the safety and efficacy of two doses of KPI-012 ophthalmic solution (3 U/mL and 1 U/mL) versus vehicle dosed topically QID for 56 days in approximately 90 adult patients.
I nterest expense for the years ended December 31, 2023 and 2022 was comprised of the contractual coupon interest expense, the amortization of the debt discount and the accretion of the final payment fee associated with our Loan Agreement with Oxford Finance.
I nterest expense for the years ended December 31, 2024 and 2023 was comprised of the contractual coupon interest expense, the amortization of the debt discount and the accretion of the final payment fee associated with our Loan Agreement with Oxford Finance.
At the first closing of the 2022 Private Placement on December 1, 2022, we issued and sold to the Series E Purchasers (i) 76,813 shares of common stock, at a price per share equal to $5.75 and (ii) 9,666 shares of Series E Preferred Stock, at a price per share of Series E Preferred Stock equal to 113 Table of Contents $575.00, for aggregate gross proceeds of approximately $6.0 million.
At the first closing of the 2022 Private Placement on December 1, 2022, we issued and sold to the Series E Purchasers (i) 76,813 shares of common stock, at a price per share equal to $5.75 and (ii) 9,666 shares of Series E Preferred Stock, at a price per share of Series E Preferred Stock equal to $575.00, for aggregate gross proceeds of approximately $6.0 million.
We expense costs relating to the production of inventory for our product candidates, as research and development expenses within our consolidated statements of operations and comprehensive loss in the period incurred, unless we believe regulatory approval and subsequent 103 Table of Contents commercialization of the product candidate is probable and we expect the future economic benefit from sales of the drug to be realized.
We expense costs relating to the production of inventory for our product candidates, as research and development expenses within our consolidated statements of operations and comprehensive loss in the period incurred, unless we believe regulatory approval and subsequent commercialization of the product candidate is probable and we expect the future economic benefit from sales of the drug to be realized.
As of December 31, 2023, of the up to $105.0 million in contingent milestone payments, we paid to the Combangio Equityholders an aggregate of $2.5 million in cash and $2.4 million in shares of common stock (representing an aggregate of 105,038 shares of our common stock) as a result of our dosing the first patient in our CHASE trial in February 2023, or the First Dosing Milestone.
As of December 31, 2024, of the up to $105.0 million in contingent milestone payments, we paid to the Combangio Equityholders an aggregate of $2.6 million in cash and $2.4 million in shares of common stock (representing an aggregate of 105,038 shares of our common stock) as a result of our dosing the first patient in our CHASE trial in February 2023, or the First Dosing Milestone.
In addition, under the securities purchase agreements for our 2022, 2023 and 2024 Private Placements, we also agreed that we will not, without the prior approval of the requisite purchasers, (i) issue or authorize the issuance of any equity security that is senior or pari passu to the Series E Preferred Stock, the Series F Preferred Stock or the Series G Preferred Stock with respect to liquidation preference, (ii) incur any additional indebtedness for borrowed money in excess of $1.0 million, in the aggregate, outside the ordinary course of business, subject to specified exceptions, including the refinancing of our existing indebtedness or (iii) pay or declare any dividend or make any distribution on, any shares of our capital stock, subject to specified exceptions.
In addition, under the securities purchase agreements for our 2022, 2023 and 2024 private placements, we also agreed that we will not, without the prior approval of the applicable requisite purchasers, under such agreements, (i) issue or authorize the issuance of any equity security that is senior or pari passu to the Series E Preferred Stock, the Series F Preferred Stock, the Series G Preferred Stock, the Series H Preferred Stock and the Series I Preferred Stock with respect to liquidation preference, (ii) incur any additional indebtedness for borrowed money in excess of $1.0 million, in the aggregate, outside the ordinary course of business, 122 Table of Contents subject to specified exceptions, including the refinancing of our existing indebtedness or (iii) pay or declare any dividend or make any distribution on, any shares of our capital stock, subject to specified exceptions.
N et cash used in investing activities for the year ended December 31, 2023 related to purchases of short-term investments of $9.9 million and purchases of property and equipment and other assets of $0.6 million, partially offset by proceeds from the sale or maturities of short-term investments of $10.0 million.
Net cash used in investing activities for the year ended December 31, 2023 related to purchases of short-term investments of $9.9 million and purchases of property and equipment and other assets of $0.6 million, partially offset by proceeds from the sale or maturities of short-term investments of $10.0 million .
Debt financing 117 Table of Contents and preferred equity financing, if available, may involve agreements that include pledging of assets as collateral, covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Debt financing and preferred equity financing, if available, may involve agreements that include pledging of assets as collateral, covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Other income (expense), net Other income and expense was a net expense of $4.3 million for the year ended December 31, 2023 consisting of a $7.6 million expense recorded to assets held for sale to write-off the remaining inventory balance and $1.1 million related to an adjustment for the returns reserve associated with our former commercial products, partially offset by the $4.2 million write-off related to the deferred gain recorded on the sale of the Commercial Business and $0.2 million of reimbursable transition related services we provided to Alcon following the sale of the Commercial Business.
Other expense, net was $4.3 million for the year ended December 31, 2023 and represented a $7.6 million expense recorded to assets held for sale for expiring inventory and $1.1 million related to an adjustment for the returns reserve associated with our former commercial products, partially offset by the $4.2 million write-off related to the deferred gain recorded on the sale of the Commercial Business and $0.2 million of reimbursable transition related services we provided to Alcon following the sale of the Commercial Business.
On July 8, 2022, Alcon Pharmaceuticals Ltd. and Alcon Vision, LLC, which we refer to collectively as Alcon, purchased from us the rights to manufacture, sell, distribute, market and commercialize EYSUVIS and INVELTYS and to develop, manufacture, market and otherwise exploit the AMPPLIFY Drug Delivery Technology, which we collectively refer to as the Commercial Business.
On July 8, 2022, we sold to Alcon Pharmaceuticals Ltd. and Alcon Vision, LLC, which we refer to collectively as Alcon, the rights to manufacture, sell, distribute, market and commercialize EYSUVIS and INVELTYS and to develop, manufacture, market and otherwise exploit the AMPPLIFY Drug Delivery Technology, which we collectively refer to as the Commercial Business.
In the event that more than one milestone is achieved in a calendar year, the higher milestone payment will become payable and the lower milestone payment will become payable 111 Table of Contents only if the corresponding milestone is achieved again in a subsequent calendar year. To date, we have not received any such milestone payments.
In the event that more than one milestone is achieved in a calendar year, the higher milestone payment will become payable and the lower milestone payment will become payable only if the corresponding milestone is achieved again in a subsequent calendar year. To date, we have not received any such milestone payments.
As of December 31, 2023 and 2022, we had $34.0 million and $43.3 million in indebtedness, respectively, which represented the aggregate principal amount that was outstanding under the Loan Agreement with Oxford Finance.
As of December 31, 2024 and 2023, we had $29.3 million and $34.0 million in indebtedness, respectively, which represented the aggregate principal amount that was outstanding under the Loan Agreement with Oxford Finance.
Changes in the fair value of our contingent consideration obligations, other than changes due to issuance, are recognized as a gain or loss on fair value remeasurement of contingent consideration in our consolidated statements of operations and comprehensive loss . 104 Table of Contents ​ The potential payments and milestones are more fully described in Item 1, “Business” and in “Liquidity and Capital Resources” below and Note 3, “Acquisitions and Divestitures” of our consolidated financial statements. ​ Interest Income Interest income consists of interest earned on our cash, cash equivalents and short-term investments, if any.
Changes in the fair value of our contingent consideration obligations, other than changes due to issuance, are recognized as a gain or loss on fair value remeasurement of contingent consideration in our consolidated statements of operations and comprehensive loss . ​ The potential payments and milestones are more fully described in Item 1, “Business” and in “Liquidity and Capital Resources” below. ​ Interest Income Interest income consists of interest earned on our cash, cash equivalents and short-term investments, if any.
On January 25, 2023, we paid the Third Amendment Prepayments and the principal loan balance under the Loan Agreement following such prepayments was $34.0 million . ​ Pursuant to the Third Loan Amendment, in addition to the Third Amendment Prepayments, if we make an additional prepayment under the Loan Agreement equal to $5.0 million (inclusive of the final payment fee) on or prior to December 31, 2024, or the First Extension Prepayment, the Amortization Date will be automatically changed to July 1, 2025, and the maturity date of the Loan Agreement will be automatically changed from May 1, 2026 to November 1, 2026.
On January 25, 2023, we paid the Third Amendment Prepayments and the principal loan balance under the Loan Agreement following such prepayments was $34.0 million . ​ Pursuant to the Third Loan Amendment, if we made an additional prepayment under the Loan Agreement equal to $5.0 million (inclusive of the final payment fee) on or prior to December 31, 2024, or the First Extension Prepayment, the Amortization Date would be automatically changed to July 1, 2025, and the maturity date of the Loan Agreement 117 Table of Contents would be automatically changed from May 1, 2026 to November 1, 2026.
From January 19, 2023 to May 11, 2023, we sold 229,378 shares of our common stock under our at-the-market offering pursuant to the Open Market Sale Agreement under the 2020 Shelf Registration, resulting in net proceeds of $4.9 million.
From January 19, 2023 to May 11, 2023, we sold 229,378 shares of our common stock under our at-the- 116 Table of Contents market offering pursuant to the Open Market Sale Agreement under the 2020 Shelf ATM Prospectus, resulting in net proceeds of $4.9 million .
If, in addition to the Third Amendment Prepayments and the First Extension Prepayment, we make an additional prepayment under the Loan Agreement equal to $2.5 million (inclusive of the final payment fee) on or prior to June 30, 2025, or the Second Extension Prepayment, the Amortization Date will be automatically changed to January 1, 2026, and the maturity date of the Loan Agreement will be automatically changed to May 1, 2027 . ​ Under the Third Loan Amendment, the Oxford Finance also agreed to waive the prepayment fees for the Third Amendment Prepayments, the First Extension Prepayment, the Second Extension Prepayment and any other prepayments under the Loan Agreement.
On December 26, 2024, we paid the First Extension Prepayment, and as a result, the Amortization Date was changed to July 1, 2025 and the maturity date of the Loan Agreement automatically changed to November 1, 2026. ​ If we make an additional prepayment under the Loan Agreement equal to $2.5 million (inclusive of the final payment fee) on or prior to June 30, 2025, or the Second Extension Prepayment, the Amortization Date will be automatically changed to January 1, 2026, and the maturity date of the Loan Agreement will be automatically changed to May 1, 2027 . ​ Under the Third Loan Amendment, Oxford Finance also agreed to waive the prepayment fees for the Third Amendment Prepayments, the First Extension Prepayment, the Second Extension Prepayment and any other prepayments under the Loan Agreement.
For information related to our future commitments relating to our licensing agreement, see Note 17, “Commitments and Contingencies” of our consolidated financial statements.
For information related to our future commitments relating to our license agreement, see Note 14, “Commitments and Contingencies” of our consolidated financial statements.
If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or current or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves .
If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or current or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves or cease operations and, potentially, wind down the company under the bankruptcy laws or otherwise.
Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries, benefits, commissions, stock-based compensation and travel expenses related to our commercial infrastructure and our executive, finance, human resources, legal, compliance, information technology and business development functions.
Financial Operations Overview General and Administrative Expenses General and administrative expenses consist primarily of salaries, benefits, stock-based compensation and travel expenses related to our executive, finance, human resources, legal, compliance, information technology and business development functions.
We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon, our initial public offering, or IPO, follow-on public common stock offerings and sales of our common stock under our sales agreement with Jefferies, LLC, or Jefferies, in at-the-market offerings, private placements of common stock and/or preferred stock (including our private placement of preferred stock for gross proceeds of approximately $2.0 million in December 2023, or our 2023 Private Placement, and $8.6 million in March 2024, or our 2024 Private Placement), borrowings under credit facilities and our Loan Agreement with Oxford Finance, or the Loan Agreement, a grant from California Institute for Regenerative Medicine, or CIRM, convertible promissory notes and warrants.
We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon, our initial public offering, or IPO, follow-on public common stock offerings and sales of our common stock under our sales agreement with Jefferies, LLC, or Jefferies, in at-the-market offerings, private placements of common stock and/or preferred stock (including our most recent private placements resulting in gross proceeds of approximately $8.6 million in March 2024, $12.5 million in June 2024 and $10.8 million in December 2024), borrowings under credit facilities and our Loan Agreement with Oxford Finance, or the Loan Agreement, disbursements under a grant from California Institute for Regenerative Medicine, or CIRM (including our most recent disbursements of $3.2 million and $2.5 million from CIRM in August 2024 and December 2024, respectively, upon the achievement of specified milestones), convertible promissory notes and warrants.
Interest income Interest income was $2.7 million for the year ended December 31, 2023, compared to $0.7 million for the year ended December 31, 2022, an increase of $2.0 million. Interest income consists of interest earned on our cash, cash equivalents and short-term investments, if any.
Interest income Interest income was $2.1 million for the year ended December 31, 2024, compared to $2.7 million for the year ended December 31, 2023, a decrease of $0.6 million. Interest income consists of interest earned on our cash, cash equivalents and short-term investments, if any.
We cannot be certain that we will achieve the milestones within the timeframe required by the CIRM award, or at all, and as such we may never receive the remaining $9.1 million under the award.
Additionally, we cannot be certain that we will achieve the remaining milestones under CIRM award within the required timeframes, or at all, and as such we may never receive the remaining $3.3 million under the award.
During the year ended December 31, 2023, we sold an aggregate of 731,521 shares of our common stock pursuant to (1) our Amended and Restated Sales Agreement and our Open Market Sale Agreement under the 2020 Shelf Registration and (2) the Open Market Sale Agreement under the 2023 Shelf Registration, for total net proceeds of $18.5 million.
During the year ended December 31, 2023, we sold (1) an aggregate of 475,265 shares of our common stock pursuant to the Amended and Restated Sales Agreement and the Open Market Sale Agreement under the 2020 Shelf Registration for total net proceeds of $14.9 million and (2) an aggregate of 256,256 shares of our common stock pursuant to the Open Market Sale Agreement under the 2023 Shelf Registration, for total net proceeds of $3.6 million.
On December 27, 2022, following the certification by our Chief Executive Officer that the FDA accepted our IND application for KPI-012, we issued and sold to the Series E Purchasers at a second closing of the 2022 Private Placement a total of 43,478 shares of Series E Preferred Stock, at a price per share of Series E Preferred Stock equal to $575.00, for aggregate gross proceeds of approximately $25.0 million. ​ On December 21, 2023, we entered into a securities purchase agreement with certain institutional investors named therein pursuant to which we agreed to issue and sell, in a private placement priced at-the-market under Nasdaq rules, 2,928 shares of our Series F Convertible Non-Redeemable Preferred Stock, or the Series F Preferred Stock, at a price per share of $683.00, for aggregate gross proceeds of approximately $2.0 million. ​ On March 25, 2024, we entered into a securities purchase agreement with certain institutional investors named therein pursuant to which we agreed to issue and sell, in a private placement priced at-the-market under Nasdaq rules, 10,901 shares of our Series G Convertible Non-Redeemable Preferred Stock, or the Series G Preferred Stock, at a price per share of $788.90, for aggregate gross proceeds of approximately $8.6 million. ​ CIRM Award ​ On April 28, 2023, CIRM awarded Combangio a $15 million grant, subject to entering into a final award agreement, to support its ongoing KPI-012 program for the treatment of PCED as well as product and process characterization and analytical development for the program.
On December 27, 2022, following the certification by our then Chief Executive Officer that the FDA accepted our IND application for KPI-012, we issued and sold to the Series E Purchasers at a second closing of the 2022 Private Placement a total of 43,478 shares of Series E Preferred Stock, at a price per share of Series E Preferred Stock equal to $575.00, for aggregate gross proceeds of approximately $25.0 million. ​ On December 21, 2023, we entered into a securities purchase agreement with certain institutional investors named therein pursuant to which we issued and sold, in a private placement priced at-the-market under Nasdaq rules, 2,928 shares of our Series F Convertible Non-Redeemable Preferred Stock, or the Series F Preferred Stock, at a price per share of $683.00, for aggregate gross proceeds of approximately $2.0 million. ​ On March 25, 2024, we entered into a securities purchase agreement with certain institutional investors named therein pursuant to which we issued and sold, in a private placement priced at-the-market under Nasdaq rules, 10,901 shares of our Series G Convertible Non-Redeemable Preferred Stock, or the Series G Preferred Stock, at a price per share of $788.90, for aggregate gross proceeds of approximately $8.6 million.
(Gain) Loss on Fair Value Remeasurement of Deferred Purchase Consideration ​ In connection with the closing of the Combangio Acquisition on November 15, 2021, we agreed to issue an aggregate of 155,664 shares, or the Deferred Purchase Consideration, of our common stock to former Combangio stockholders and other equityholders, or the Combangio Equityholders, consisting of (i) an aggregate of 136,314 shares of common stock which were issued on January 3, 2022 and (ii) an aggregate of 19,350 shares of common stock that were held back by us as partial security for the satisfaction of indemnification obligations and other payment obligations of the Combangio Equityholders which were issued on March 10, 2023.
Our failure to raise capital as and when needed would have a material adverse effect on our financial condition and our ability to pursue our business strategy. 111 Table of Contents Gain on Fair Value Remeasurement of Deferred Purchase Consideration ​ In connection with the closing of the Combangio Acquisition on November 15, 2021, we agreed to issue an aggregate of 155,664 shares, or the Deferred Purchase Consideration, of our common stock to former Combangio stockholders and other equityholders, or the Combangio Equityholders, consisting of (i) an aggregate of 136,314 shares of common stock which were issued on January 3, 2022 and (ii) an aggregate of 19,350 shares of common stock that were held back by us as partial security for the satisfaction of indemnification obligations and other payment obligations of the Combangio Equityholders which were issued on March 10, 2023 .
We expect that our selling, general and administrative expenses for 2024 will be comparable to such expenses for the year ended December 31, 2023. We anticipate that our selling, general and administrative expenses will stabilize at 2023 expense levels for the next several years.
We expect that our general and administrative expenses for 2025 will be comparable to such expenses for the year ended December 31, 2024 and expect that our general and administrative expenses will continue at similar levels for the next several years.
In addition, we have initiated preclinical studies under our KPI-014 program to evaluate the utility of our MSC-S platform for inherited retinal degenerative diseases, such as Retinitis Pigmentosa and Stargardt Disease.
In addition, we have initiated preclinical studies under our KPI-014 program to evaluate the utility of our MSC-S platform for inherited retinal degenerative diseases, such as Retinitis Pigmentosa and Stargardt Disease. We expect to commercialize in the United States any of our product candidates that receive marketing approval.
For information related to our future commitments for our lease related obligations, see Note 10, “Lease” of our consolidated financial statements. ​ 114 Table of Contents Cash Flows As of December 31, 2023 and 2022, we had $50.9 million and $70.5 million in cash and cash equivalents, respectively.
For information related to our future commitments for our lease related obligations, see Note 7, “Lease” of our consolidated financial statements. ​ Cash Flows As of December 31, 2024 and 2023, we had $51.2 million and $50.9 million in cash and cash equivalents, respectively.
Loss (gain) on fair value remeasurement of contingent consideration Loss on fair value remeasurement of contingent consideration for the year ended December 31, 2023 was $0.7 million, primarily due to changes in discount rates, partially offset by changes in the expected timing and probability of payment.
Loss on fair value remeasurement of contingent consideration Loss on fair value remeasurement of contingent consideration for the years ended December 31, 2024 and 2023 was $0.5 million and $0.7 million, respectively, primarily due to changes in discount rates, the passage of time and changes in the expected timing and probability of payment .
Inventory and assets held for sale decreased by $7.5 million during the year ended December 31, 2023, as a result of the expense recorded to assets held for sale to write-off the remaining inventory balance, as compared to a decrease of $1.7 million during the year ended December 31, 2022.
Inventory and assets held for sale decreased by $7.5 million during the year ended December 31, 2023, as a result of the expense recorded to assets held for sale to write-off the remaining inventory balance, whereas there was no fluctuation related to inventory for the year ended December 31, 2024.
Both patients in the first cohort successfully completed at least one week of dosing with no safety issues observed.
Both patients in the first cohort successfully completed eight weeks of dosing with no safety issues observed.
The remaining amount of $0.1 million due in connection with the First Dosing Milestone was paid in January 2024. All potential milestone payments to the Combangio Equityholders are payable in cash going forward. We recorded an obligation for such contingent consideration at fair value on the acquisition date. We then revalue our contingent consideration obligations each reporting period.
All potential milestone payments to the Combangio Equityholders are payable in cash going forward. We recorded an obligation for such contingent consideration at fair value on the acquisition date. We then revalue our contingent consideration obligations each reporting period.
During the year ended December 31, 2022, $80.0 million of indebtedness was outstanding under our Loan Agreement until $36.7 million was repaid on July 8, 2022 resulting in an outstanding indebtedness of $43.3 million as of December 31, 2022.
During the year ended December 31, 2024, $34.0 million of indebtedness was outstanding under our Loan Agreement until $4.7 million was repaid on December 26, 2024 resulting in an outstanding indebtedness of $29.3 million as of December 31, 2024.
We expect that our research and development costs will increase in 2024 as compared to such expenses for the year ended December 31, 2023 as we advance the clinical development of KPI-012 and as we conduct any necessary preclinical studies and clinical trials and other development activities for any other product candidate we may develop in the future, including our planned preclinical studies under our KPI-014 program .
We expect that our research and development costs for 2025 will be comparable to such expenses for the year ended December 31, 2024 as we continue to advance the clinical development of KPI-012, including conducting our ongoing CHASE trial from which we anticipate reporting topline safety and efficacy data in the third quarter of 2025, and as we conduct any necessary preclinical studies and clinical trials and other development activities for any other product candidate we may develop in the future, including our planned preclinical studies under our KPI-014 program.
We expect that our existing cash resources will be sufficient to enable us to obtain safety and efficacy data from our ongoing CHASE trial of KPI-012 in PCED.
We expect that our existing cash resources will be sufficient to enable us to obtain topline safety and efficacy data from our ongoing CHASE trial of KPI-012 in PCED. However, we do not expect that our existing cash resources will be sufficient to enable us to complete the clinical development of KPI-012 for PCED or for any other indication .
Prepaid expenses and other current assets decreased by $5.7 million during the year ended December 31, 2023, as compared to an increase of $2.0 million during the year ended December 31, 2022, as a result of the collection of receivables due from Alcon and third parties in connection with transition related services.
Notable working capital fluctuations included a $5.8 million decrease in prepaid expenses and other current assets during the year ended December 31, 2023, as compared to a $0.4 million decrease during the year ended December 31, 2024, as a result of the collection of receivables due from Alcon and third parties in connection with transition-related services in the prior year.
Financing Activities Net cash provided by financing activities for the year ended December 31, 2023 was $8.5 million, a change of $16.4 million compared to net cash used in financing activities of $7.9 million in the year ended December 31, 2022.
Financing Activities Net cash provided by financing activities for the year ended December 31, 2024 was $29.9 million compared to $8.5 million for the year ended December 31, 2023, an increase of $21.4 million.
We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below.
We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used.
The remaining $9.1 million available under the award is payable to Combangio only upon the achievement of specified milestones that are primarily related to Combangio’s progress in conducting the CHASE clinical trial. CIRM may permanently cease disbursements if the milestones are not met within four months of the scheduled completion dates.
The remaining $3.3 million available under the CIRM Award is payable to Combangio only upon the achievement of specified milestones that are primarily related to Combangio’s progress in conducting the CHASE clinical trial.
Selling, general and administrative expenses also include external selling and marketing costs related to EYSUVIS and INVELTYS prior to the sale of the Commercial Business to Alcon, costs to manufacture sample units and professional fees for auditing, tax, information technology, consultants, legal services and allocated facility-related costs not otherwise included in research and development expenses.
General and administrative expenses also include professional fees for auditing, tax, information technology, consultants, legal services and allocated facility-related costs not otherwise included in research and development expenses.
During the year ended December 31, 2023, we sold 256,256 shares of our common stock under our at-the-market offering pursuant to the 2023 Shelf Registration for total net proceeds of $3.6 million.
During the year ended December 31, 2024, we sold an aggregate of 527,940 shares of our common stock under the Open Market Sale Agreement under the 2023 Shelf Registration for total net proceeds of $3.4 million.
On August 2, 2023, Combangio entered into the CIRM Award and became entitled to receive $5.9 million.
On August 2, 2023, Combangio entered into the CIRM Award and received an initial $5.9 million disbursement from CIRM.
Notable working capital fluctuations included a decrease in accounts payable, accrued expenses and other current liabilities during the year ended December 31, 2023 of $4.3 million, as compared to a decrease in accounts payable, accrued expenses and other current liabilities in the year ended December 31, 2022 of $14.0 million.
Accounts payable, accrued expenses and other current liabilities decreased by $1.8 million during the year ended December 31, 2024, compared to a decrease of $4.3 million during the year ended December 31, 2023.
Investing Activities Net cash used in investing activities for the year ended December 31, 2023 was $0.4 million compared to net cash provided of $62.7 million for the year ended December 31, 2022, a decrease of $63.1 million.
Investing Activities Net cash used in investing activities for the year ended December 31, 2024 was $0.2 million compared to $0.4 million for the year ended December 31, 2023, a decrease of $0.2 million. Net cash used in investing activities for the year ended December 31, 2024 related to purchases of property and equipment and other assets.
We have based our estimates on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. For example, we may not receive all of the funds awarded under the CIRM Award.
We have based our estimates on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. For example, our estimates assume that we remain in compliance with the covenants and no event of default occurs under our Loan Agreement with Oxford Finance.
Other (Expense) Income, Net Other (expense) income, net consists of expenses recorded to assets held for sale for the write-off of the remaining inventory balance and the write-off of the deferred gain related to the Alcon Transaction, as well as an 105 Table of Contents adjustment for the returns reserve associated with our former commercial products, partially offset by reimbursable transition-related services we provided to Alcon following the sale of the Commercial Business.
Other Expense, Net Other income (expense), net consists of expenses recorded to assets held for sale for the write-off of the remaining inventory balance related to the Alcon Transaction, as well as an adjustment for the returns reserve associated with our former commercial products, partially offset by reimbursable transition-related services we provided to Alcon following the sale of the Commercial Business. ​ Critical Accounting Policies and Significant Judgments and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles.
On August 2, 2023, Combangio entered into the CIRM Award and became entitled to receive an initial $5.9 million disbursement from CIRM. ​ The CIRM Award is subject to a co-funding requirement under which Combangio is obligated to spend a specified minimum amount on the development of KPI-012 to obtain the full award amount.
In 2024, Combangio received an aggregate of $5.8 million in disbursements from CIRM upon the achievement of specified milestones. ​ The CIRM Award is subject to a co-funding requirement under which Combangio is obligated to spend a specified minimum amount on the development of KPI-012 to obtain the full award amount.
The following table summarizes our sources and uses of cash for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2023 2022 ​ ​ Change ​ ​ (in thousands) ​ ​ ​ Net cash used in operating activities ​ $ (27,927) ​ $ (78,908) ​ $ 50,981 Net cash (used in) provided by investing activities ​ (429) ​ 62,717 ​ (63,146) Net cash provided by (used in) financing activities ​ 8,506 ​ (7,942) ​ 16,448 Decrease in cash and restricted cash ​ $ (19,850) ​ $ (24,133) ​ $ 4,283 ​ Operating Activities Net cash used in operating activities for the year ended December 31, 2023 was $27.9 million compared to $78.9 million for the year ended December 31, 2022, a decrease of $51.0 million, primarily due to a $42.6 million decrease in the net loss adjusted for non-cash charges and an $8.4 million decrease due to the timing of working capital fluctuations.
The following table summarizes our sources and uses of cash for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2024 2023 ​ ​ Change ​ ​ (in thousands) ​ ​ ​ Net cash used in operating activities ​ $ (29,382) ​ $ (27,927) ​ $ (1,455) Net cash used in investing activities ​ (208) ​ (429) ​ 221 Net cash provided by financing activities ​ 29,876 ​ 8,506 ​ 21,370 Net increase (decrease) in cash and cash equivalents ​ $ 286 ​ $ (19,850) ​ $ 20,136 ​ 119 Table of Contents Operating Activities Net cash used in operating activities for the year ended December 31, 2024 was $29.4 million, compared to $27.9 million for the year ended December 31, 2023, an increase of $1.5 million, primarily due to a $10.7 million increase due to the timing of working capital fluctuations, partially offset by the decrease in the net loss adjusted for non-cash charges of $9.2 million.
(Gain) loss on fair value remeasurement of Deferred Purchase Consideration The gain on fair value remeasurement of Deferred Purchase Consideration for the year ended December 31, 2023 was $0.2 million and the loss on fair value remeasurement of Deferred Purchase Consideration for the year ended December 31, 2022 was $0.6 million.
The gain on fair value remeasurement of Deferred Purchase Consideration for the year ended December 31, 2023 was $0.2 million, which was primarily due to a change in the fair value of our underlying stock price .
Also contributing to the decrease as compared to the year ended December 31, 2022, was a $3.3 million decrease in administrative and professional service fees and $0.8 million of transaction costs related to the Alcon Transaction which were not incurred in the year ended December 31, 2023. 109 Table of Contents Research and development expenses The following table summarizes the research and development expenses incurred during the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ December 31, ​ ​ ​ 2023 2022 Change ​ (in thousands) ​ ​ ​ KPI-012 development costs ​ $ 7,678 ​ $ 5,803 ​ $ 1,875 Employee‑related costs ​ 9,710 ​ 9,256 ​ 454 Other research and development costs ​ 1,198 ​ 2,594 ​ (1,396) Total research and development ​ $ 18,586 ​ $ 17,653 ​ $ 933 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development expenses were $18.6 million for the year ended December 31, 2023 compared to $17.7 million for the year ended December 31, 2022, an increase of $0.9 million.
The decrease in general and administrative expenses for the year ended December 31, 2024 was primarily due to a $1.8 million decrease in administrative and professional service fees and a $0.9 million decrease in employee-related costs, partially offset by a $0.4 million increase in stock-based compensation costs and a $0.1 million net increase in other costs including facility related costs . 114 Table of Contents Research and development expenses The following table summarizes the research and development expenses incurred during the years ended December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ 2024 ​ 2023 ​ Change ​ (in thousands) ​ ​ ​ KPI‑012 development costs ​ $ 10,170 ​ $ 7,678 ​ $ 2,492 Employee‑related costs for research and development personnel ​ 10,757 ​ 9,710 ​ 1,047 Other research and development costs ​ 1,167 ​ 1,198 ​ (31) Total research and development ​ $ 22,094 ​ $ 18,586 ​ $ 3,508 ​ Research and development expenses were $22.1 million for the year ended December 31, 2024, compared to $18.6 million for the year ended December 31, 2023, an increase of $3.5 million.
If we obtain marketing approval for KPI-012 or any product candidates we may develop, we expect that our selling, general and administrative expenses will increase substantially if and as we incur commercialization expenses related to product marketing, sales and distribution .
If we obtain marketing approval for KPI-012 or any product candidates we may develop, we expect that our general and administrative expenses will increase substantially if and as we incur commercialization expenses related to product marketing, sales and distribution . 110 Table of Contents Research and Development Expenses Research and development expenses consist of costs associated with our research activities, including compensation and benefits for full-time research and development employees, an allocation of facilities expenses, overhead expenses and certain outside expenses.
The increase was primarily related to a $2.3 million increase in employee-related costs and KPI-012 development costs, as we advance the clinical development of KPI-012, partially offset by a decrease of $1.4 million of other research and development costs, which primarily included preclinical studies related to our former pipeline programs.
The increase was primarily related to a $2.5 million increase in KPI-012 development costs, as we advance the clinical development of KPI-012, and a $1.0 million increase in employee-related costs.
Since inception, we have incurred significant losses from operations and negative cash flows from operations. Our net losses were $42.2 million for the year ended December 31, 2023 and $44.8 million for the year ended December 31, 2022. As of December 31, 2023, we had an accumulated deficit of $629.4 million.
Our net losses were $38.5 million for the year ended December 31, 2024 and $42.2 million for the year ended December 31, 2023. As of December 31, 2024, we had an accumulated deficit of $667.9 million.
For information related to the unobservable inputs related to the contingent consideration, see Note 5, “Fair Value of Financial Instruments”, of our consolidated financial statements. ​ 108 Table of Contents Results of Operations Comparison of the Years ended December 31, 2023 and 2022 The following table summarizes the results of our operations for the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2023 2022 Change ​ ​ (in thousands) ​ ​ ​ Product revenues, net ​ $ — $ 3,892 $ (3,892) Costs and expenses: ​ ​ ​ ​ ​ ​ Cost of product revenues ​ — ​ 2,560 ​ (2,560) Selling, general and administrative ​ ​ 20,567 ​ ​ 65,035 ​ ​ (44,468) Research and development ​ 18,586 ​ 17,653 ​ 933 (Gain) loss on fair value remeasurement of Deferred Purchase Consideration ​ ​ (230) ​ ​ 638 ​ ​ (868) Loss (gain) on fair value remeasurement of contingent consideration ​ ​ 740 ​ ​ (288) ​ ​ 1,028 Total operating expenses ​ 39,663 ​ 85,598 ​ (45,935) Loss from operations ​ (39,663) ​ (81,706) ​ 42,043 Other income (expense) ​ ​ ​ Interest income ​ 2,711 ​ 664 ​ 2,047 Interest expense ​ (5,814) ​ (7,266) ​ 1,452 Grant income ​ ​ 4,825 ​ ​ — ​ 4,825 Loss on extinguishment of debt ​ ​ — ​ ​ (2,583) ​ ​ 2,583 Gain on sale of Commercial Business ​ ​ — ​ ​ 46,995 ​ ​ (46,995) Other (expense) income, net ​ ​ (4,258) ​ ​ (926) ​ ​ (3,332) Net loss ​ $ (42,199) ​ $ (44,822) ​ $ 2,623 ​ Product revenues, net We did not have any product revenues during the year ended December 31, 2023 due to the sale of our Commercial Business to Alcon in July 2022.
For information related to the unobservable inputs related to the contingent consideration, see Note 3, “Fair Value of Financial Instruments”, of our consolidated financial statements. ​ Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 The following table summarizes the results of our operations for the years ended December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2024 2023 Change ​ ​ (in thousands) ​ ​ ​ Costs and expenses: ​ ​ ​ ​ ​ ​ General and administrative ​ $ 18,340 ​ $ 20,567 ​ $ (2,227) Research and development ​ 22,094 ​ 18,586 ​ 3,508 Gain on fair value remeasurement of deferred purchase consideration ​ ​ — ​ ​ (230) ​ ​ 230 Loss on fair value remeasurement of contingent consideration ​ ​ 549 ​ ​ 740 ​ ​ (191) Total operating expenses ​ 40,983 ​ 39,663 ​ 1,320 Loss from operations ​ (40,983) ​ (39,663) ​ (1,320) Other income (expense) ​ ​ ​ Interest income ​ 2,056 ​ 2,711 ​ (655) Interest expense ​ (5,783) ​ (5,814) ​ 31 Grant income ​ ​ 6,199 ​ ​ 4,825 ​ 1,374 Other expense, net ​ ​ — ​ ​ (4,258) ​ ​ 4,258 Net loss ​ $ (38,511) ​ $ (42,199) ​ $ 3,688 ​ General and administrative expenses General and administrative expenses were $18.3 million for the year ended December 31, 2024, compared to $20.6 million for the year ended December 31, 2023, which was a decrease of $2.2 million.
Interest expense Interest expense was $5.8 million for the year ended December 31, 2023, compared to $7.3 million for the year ended December 31, 2022, a decrease of $1.5 million.
The decrease was attributable to a lower cash balance during the year ended December 31, 2024, partially offset by higher interest rates during the year ended December 31, 2024, as compared to the year ended December 31, 2023. Interest expense Interest expense was $5.8 million for each of the years ended December 31, 2024 and 2023.
For a full description of the consideration payable as a result of the Combangio Acquisition , see Note 3, “Acquisitions and Divestitures” of our consolidated financial statements. ​ Other Contractual Obligations ​ Our other material cash requirements from known contractual and other obligations as of December 31, 2023 primarily related to our licensing agreement with Stanford University and our operating lease.
The remaining amount of $0.1 million for this milestone was paid in cash in January 2024. ​ Other Contractual Obligations ​ Our other material cash requirements from known contractual and other obligations as of December 31, 2024 primarily related to our license agreement with Stanford University and our operating lease.
We plan to add trial sites in Latin America, subject to regulatory approval. The primary endpoint of the trial is the complete healing of the PCED as measured by corneal fluorescein staining. We are targeting reporting topline safety and efficacy data from the CHASE trial by the end of 2024.
The primary endpoint of the CHASE trial is the complete healing of the PCED as measured by corneal fluorescein staining. To date, we have randomized 87 patients.
Costs of grant income are recorded as a component of research and development expenses in our statements of operations and comprehensive loss. ​ Revenue Following the sale of our Commercial Business to Alcon in July 2022, we no longer have any commercial products in our portfolio.
Costs of grant income are recorded as a component of research and development expenses in our consolidated statements of operations and comprehensive loss. ​ 113 Table of Contents Acquisition Accounting We are required to make significant judgments and estimates to determine whether an acquisition constitutes an acquisition of a business or assets.
We anticipate that our cash and cash equivalents as of December 31, 2023, together with the $8.6 million of gross proceeds we received from the sale of shares of our preferred stock in a private placement in March 2024 and the $9.1 million of remaining funding anticipated under the CIRM Award, will enable us to fund our operations, lease and debt service obligations, and capital expenditure requirements into the third quarter of 2025.
We expect to continue to incur significant expenses and operating losses. Net losses may fluctuate significantly from quarter-to-quarter and year-to-year. We anticipate that our cash and cash equivalents as of December 31, 2024 will enable us to fund our operations, lease and debt service obligations, and capital expenditure requirements into the first quarter of 2026.
Gain on sale of Commercial Business There was no gain on sale of Commercial Business for the year ended December 31, 2023.
Gain on fair value remeasurement of Deferred Purchase Consideration There was no gain or loss on fair value remeasurement of Deferred Purchase Consideration for the year ended December 31, 2024 due to the final settlement of the liability in March 2023.
We refer to this transaction as the Alcon Transaction. Alcon also assumed certain liabilities with respect to the Commercial Business at the closing of the Alcon Transaction. For a further description of the Alcon Transaction, see Item 1, “Business,” “Liquidity and Capital Resources” below and Note 3, “Acquisitions and Divestitures” of our consolidated financial statements.
We refer to this transaction as the Alcon Transaction. Alcon also assumed certain liabilities with respect to the Commercial Business at the closing of the Alcon Transaction. Since inception, we have incurred significant losses from operations and negative cash flows from operations.
There was no grant income recognized during the year ended December 31, 2022. Loss on extinguishment of debt The was no loss on extinguishment of debt for the year ended December 31, 2023. The loss on extinguishment of debt was $2.6 million for the year ended December 31, 2022.
Grant income Grant income for the years ended December 31, 2024 and 2023 was $6.2 million and $4.8 million, respectively, related to the CIRM Award.
Removed
In connection with the determination to focus our research and development efforts on KPI-012, in 2022, we determined to cease the development of our preclinical pipeline programs that are unrelated to our MSC-S platform . We expect to commercialize in the United States any of our product candidates that receive marketing approval.
Added
To date, we have opened 45 trial sites for the CHASE trial in the United States. We have also initiated several clinical trial sites in Argentina for the CHASE trial and we are in the process of initiating additional clinical trial sites in Latin America.
Removed
For a further description of our acquisition of Combangio, or Combangio Acquisition, see Item 1, “Business,” “Liquidity and Capital Resources” below and Note 3, “Acquisitions and Divestitures” of our consolidated financial statements.
Added
Upon review of the only masked screening and baseline data, we have decided to extend enrollment to account for 13 patients who were enrolled and treated based on the investigators’ determination of the presence of a PCED which was subsequently not verified by the central reading center.
Removed
During 2022, we terminated our entire commercial sales force and certain employees in our commercial, scientific, manufacturing, finance and administrative functions. The determination to proceed with the workforce reduction was made in the context of the closing of the Alcon Transaction and the changes to the scope of our research and development activities of KPI-012 as more fully described above.
Added
We are targeting reporting topline safety and efficacy data from the CHASE trial in the third quarter of 2025.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAn immediate 10% change in the 1-Month CME Term SOFR rate would not have a material impact on our operating results or cash flows.
Biggest changeAn immediate 10% change in the 1-Month CME Term SOFR rate would not have a material impact on our operating results or cash flows. Item 8. Financial Statements and Supplementary Data Our financial statements, together with the report of our independent registered public accounting firm, appear on pages F-1 through F-35 of this Annual Report on Form 10-K. Item 9.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our financial instruments as of December 31, 2023 consisted primarily of cash equivalents which consisted of money market accounts and U.S. treasury securities that have contractual maturities of less than 90 days from the date of acquisition .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our financial instruments as of December 31, 2024 consisted primarily of cash equivalents which consisted of money market accounts and U.S. treasury securities that have contractual maturities of less than 90 days from the date of acquisition .
As of December 31, 2023 and 2022, the aggregate principal amount outstanding under the Loan Agreement was $34.0 million and $43.3 million, respectively. The aggregate principal amount outstanding under the Loan Agreement bore interest through June 30, 2023 at a floating rate equal to the greater of (i) 30-day LIBOR and (ii) 0.11%, plus 7.89%.
As of December 31, 2024 and 2023, the aggregate principal amount outstanding under the Loan Agreement was $29.3 million and $34.0 million, respectively. The aggregate principal amount outstanding under the Loan Agreement bore interest through June 30, 2023 at a floating rate equal to the greater of (i) 30-day LIBOR and (ii) 0.11%, plus 7.89%.
Added
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.

Other KALA 10-K year-over-year comparisons