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What changed in OCULAR THERAPEUTIX, INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of OCULAR THERAPEUTIX, INC's 2022 and 2023 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 2023 report.

+738 added−651 removedSource: 10-K (2024-03-11) vs 10-K (2023-03-06)

Top changes in OCULAR THERAPEUTIX, INC's 2023 10-K

738 paragraphs added · 651 removed · 483 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

398 edited+190 added−99 removed765 unchanged
Biggest changeWe anticipate we will incur substantial expenses if and as we: ● continue to commercialize DEXTENZA in the United States; ● continue to develop and expand our sales, marketing and distribution capabilities for DEXTENZA and any other products or product candidates we intend to commercialize; ● continue ongoing clinical trials for OTX-TKI (in both Australia and the United States) for the treatment of wet AMD and diabetic retinopathy and OTX-TIC for the treatment of open-angle glaucoma or ocular hypertension; ● determine to initiate new clinical trials to evaluate our product candidates, including OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease; ● conduct or support research and development activities on, and seek regulatory approvals for, DEXTENZA and OTX-TIC in specified Asian markets pursuant to our license agreement and collaboration with AffaMed Therapeutics Limited, or AffaMed; 60 Table of Contents ● continue the research and development of our other product candidates; ● seek to identify and develop additional product candidates; ● seek marketing approvals for any of our product candidates that successfully complete clinical development; ● scale up our manufacturing processes and capabilities to support sales of commercial products, clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval, and expand our facilities to accommodate this scale up and any corresponding growth in personnel; ● renovate our existing facilities including research and development laboratories, manufacturing space and office space; ● maintain, expand and protect our intellectual property portfolio; ● expand our operational, financial, administrative and management systems and personnel, including personnel to support our clinical development, manufacturing and commercialization efforts; ● defend ourselves against legal proceedings; ● make investments to improve our defenses against cybersecurity and establish and maintain cybersecurity insurance; ● increase our product liability and clinical trial insurance coverage as we expand our clinical trials and commercialization efforts; and ● continue to operate as a public company.
Biggest changeOur net losses may fluctuate significantly from quarter to quarter and year to year. 61 Table of Contents We anticipate we will incur substantial expenses if and as we: ● continue our ongoing clinical trials, including our pivotal Phase 3 clinical trial of AXPAXLI, which we refer to as the SOL-1 trial, for the treatment of wet age-related macular degeneration, or wet AMD; the HELIOS trial of AXPAXLI for the treatment of non-proliferative diabetic retinopathy, or NPDR; our Phase 2 clinical trial of PAXTRAVA for the reduction of IOP in patients with primary open-angle glaucoma, or OAG, or ocular hypertension, or OHT; and our Phase 2 clinical trial of OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease; ● continue to monitor subjects according to the applicable clinical trial protocols in our clinical trials that have been completed, including our clinical trial to evaluate DEXTENZA in pediatric subjects following cataract surgery; ● determine to initiate new clinical trials to evaluate our product candidates, including our planned second pivotal Phase 3 clinical trial of AXPAXLI for the treatment of wet AMD, which we refer to as the SOL-2 trial; our planned pivotal Phase 3 clinical trial of AXPAXLI for the treatment of NPDR; and, subject to our evaluation of strategic alternatives, possible pivotal clinical trials of PAXTRAVA for the reduction of IOP in patients with primary OAG or OHT; ● continue to commercialize DEXTENZA in the United States; ● continue to develop and expand our sales, marketing and distribution capabilities for DEXTENZA and any other products or product candidates we intend to commercialize; ● conduct or support research and development activities on, and seek regulatory approvals for, DEXTENZA and PAXTRAVA in specified Asian markets pursuant to our license agreement and collaboration with AffaMed Therapeutics Limited, or AffaMed; ● continue the research and development of our other product candidates; ● seek to identify and develop additional product candidates; ● seek marketing approvals for any of our product candidates that successfully complete clinical development; ● scale up our manufacturing processes and capabilities to support sales of commercial products, clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval, and expand our facilities to accommodate this scale up and any corresponding growth in personnel; ● renovate our existing facilities including research and development laboratories, manufacturing space and office space; ● maintain, expand and protect our intellectual property portfolio; ● expand our operational, financial, administrative and management systems and personnel, including personnel to support our clinical development, manufacturing and commercialization efforts; ● defend ourselves against legal proceedings, if any; ● make investments to improve our defenses against cybersecurity and establish and maintain cybersecurity insurance; ● increase our product liability and clinical trial insurance coverage as we expand our clinical trials and commercialization efforts; and ● continue to operate as a public company. 62 Table of Contents 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.
Branded steroids include Lotemax and Alrex (loteprednol etabonate) marketed by Bausch & Lomb, and Durezol (difluprednate) marketed by Alcon. Commonly used generic steroids include prednisolone, dexamethasone and fluorometholone.
Commonly used branded steroids include Lotemax and Alrex (loteprednol etabonate) marketed by Bausch & Lomb, and Durezol (difluprednate) marketed by Alcon. Commonly used generic steroids include prednisolone, dexamethasone and fluorometholone.
We believe that OTX-DED has potential as a short-term treatment of the signs and symptoms of dry eye disease caused by inflammation. ​ Our product candidate OTX-DED incorporates the FDA-approved corticosteroid dexamethasone as a preservative-free active pharmaceutical ingredient in a hydrogel, drug-eluting intracanalicular insert.
We believe that our product candidate OTX-DED has potential as a short-term treatment of the signs and symptoms of dry eye disease caused by inflammation. ​ OTX-DED incorporates the FDA-approved corticosteroid dexamethasone as a preservative-free active pharmaceutical ingredient in a hydrogel, drug-eluting intracanalicular insert.
The FDA has agreed that this Phase 3 clinical trial evaluating DEXTENZA for the treatment of post-surgical ocular inflammation and pain in children following cataract surgery may also satisfy the post-approval requirement for a pediatric trial as it relates to indication ocular itching associated with allergic conjunctivitis.
The FDA has agreed that this Phase 3 clinical trial evaluating DEXTENZA for the treatment of post-surgical ocular inflammation and pain in children following cataract surgery may also satisfy the post-approval requirement for a pediatric trial as it relates to the indication for ocular itching associated with allergic conjunctivitis.
We and any of our sublicensees are obligated to pay Incept royalties as follows under the Second Amended Agreement: (i) consistent with the Prior Agreement, a royalty equal to a low single-digit percentage of net sales by the us or our affiliates of products, devices, materials, or components thereof, or Licensed Products, including or covered by Original IP, excluding the Shape-Changing IP, in the Ophthalmic Field of Use; (ii) a royalty equal to a mid-single-digit percentage of net sales by us or our affiliates of Licensed Products including or covered by Original IP, excluding the Shape-Changing IP, in the Additional Field of Use; and (iii) a royalty equal to a low single-digit percentage of net sales by us or our affiliates of Licensed Products including or covered by Incept IP or Joint IP in the field of drug delivery.
We and any of our sublicensees are obligated to pay Incept royalties as follows under the Second Amended Agreement: (i) consistent with the Prior Agreement, a royalty equal to a low single-digit percentage of net sales by us or our affiliates of products, devices, materials, or components thereof, or Licensed Products, including or covered by Original IP, excluding the Shape-Changing IP, in the Ophthalmic Field of Use; (ii) a royalty equal to a mid-single-digit percentage of net sales by us or our affiliates of Licensed Products including or covered by Original IP, excluding the Shape-Changing IP, in the Additional Field of Use; and (iii) a royalty equal to a low single-digit percentage of net sales by us or our affiliates of Licensed Products including or covered by Incept IP or Joint IP in the field of drug delivery.
We retain development and commercialization rights for the AffaMed Licensed Products in the rest of the world. ​ Under the License Agreement, we granted AffaMed (i) a non-exclusive, royalty-free, non-sublicensable license under certain of our intellectual property rights and know-how to use the AffaMed Licensed Products in connection with specified activities in accordance with a development plan agreed between the parties and (ii) an exclusive, royalty-bearing, sublicensable, non-transferable (subject to specified exceptions), license under certain of our intellectual property rights and know-how to commercialize the AffaMed Licensed Products in the applicable Field in the Territories.
We retain development and commercialization rights for the AffaMed Licensed Products in the rest of the world. ​ Under the AffaMed License Agreement, we granted AffaMed (i) a non-exclusive, royalty-free, non-sublicensable license under certain of our intellectual property rights and know-how to use the AffaMed Licensed Products in connection with specified activities in accordance with a development plan agreed between the parties and (ii) an exclusive, royalty-bearing, sublicensable, non-transferable (subject to specified exceptions), license under certain of our intellectual property rights and know-how to commercialize the AffaMed Licensed Products in the applicable Field in the Territories.
Royalties under the License Agreement are payable on an AffaMed Licensed Product-by-AffaMed Licensed Product and jurisdiction-by-jurisdiction basis and are subject to potential reductions in specified circumstances, subject to a specified floor. ​ Pursuant to the terms of the License Agreement, we are generally responsible for expenses related to the development of the AffaMed Licensed Products in the applicable Fields in the Territories, provided that AffaMed (i) reimburse us a low-teen percentage of expenses incurred in connection with certain clinical trials conducted by us and designed to support marketing approval of the AffaMed Licensed Product by FDA or the European Medicines Agency, or the Global Studies; (ii) is solely responsible for expenses incurred in connection with territory-specific clinical trials that it conducts in furtherance of the development plan agreed between the parties in the applicable Fields in the Territories, or the Local Studies; and (iii) reimburse us in full for expenses incurred in connection with obtaining and maintaining regulatory approvals of the AffaMed Licensed Products in the applicable Fields in the Territories.
Royalties under the AffaMed License Agreement are payable on an AffaMed Licensed Product-by-AffaMed Licensed Product and jurisdiction-by-jurisdiction basis and are subject to potential reductions in specified circumstances, subject to a specified floor. ​ Pursuant to the terms of the AffaMed License Agreement, we are generally responsible for expenses related to the development of the AffaMed Licensed Products in the applicable Fields in the Territories, provided that AffaMed (i) reimburse us a low-teen percentage of expenses incurred in connection with certain clinical trials conducted by us and designed to support marketing approval of the AffaMed Licensed Product by FDA or the European Medicines Agency, or the Global Studies; (ii) is solely responsible for expenses incurred in connection with territory-specific clinical trials that it conducts in furtherance of the development plan agreed between the parties in the applicable Fields in the Territories, or the Local Studies; and (iii) reimburse us in full for expenses incurred in connection with obtaining and maintaining regulatory approvals of the AffaMed Licensed Products in the applicable Fields in the Territories.
During an established period following a change of control of us or our entry into a global licensing agreement that includes the Territories with a third party, we have the option to terminate the License Agreement, subject to a specified notice period and the repayment of any costs and expenses incurred by AffaMed in connection with the License Agreement, including upfront and milestone payments AffaMed has previously paid to us, at a prespecified premium.
During an established period following a change of control of us or our entry into a global licensing agreement that includes the Territories with a third party, we have the option to terminate the AffaMed License Agreement, subject to a specified notice period and the repayment of any costs and expenses incurred by AffaMed in connection with the AffaMed License Agreement, including upfront and milestone payments AffaMed has previously paid to us, at a prespecified premium.
Mati Therapeutics has conducted a Phase 2 clinical trial with an intracanalicular insert for the treatment of glaucoma. ​ Competitors of OTX-CSI and OTX-DED ​ A number of therapies are currently available for the treatment of dry eye disease in the United States.
Mati Therapeutics has conducted a Phase 2 clinical trial with an intracanalicular insert for the treatment of glaucoma. ​ Competitors of OTX-DED and OTX-CSI ​ A number of therapies are currently available for the treatment of dry eye disease in the United States.
A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.
A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.
In 2020, President Trump issued several Executive Orders intended to lower the costs of prescription products and certain provisions in these orders have been incorporated into regulations.
In 2020, President Trump issued several Executive Orders intended to lower the costs of prescription products and certain provisions in these orders have been incorporated into regulations.
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 (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025).
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.
Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law or for taking price increases that exceed inflation.
Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law or for taking price increases that exceed inflation.
Such restrictions under applicable federal and state healthcare laws and regulations, include the following: ​ ● the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, 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 healthcare program such as Medicare and Medicaid; ​ ● the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, 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; ​ ● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; ​ ● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, including the Final Omnibus Rule published in January 2013, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ​ ● the federal false statements statute 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 healthcare 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 under the ACA, known as the federal Physician Payments Sunshine Act, will require certain manufacturers of drugs, devices, biologics and medical supplies to report to CMS within the HHS information related to payments and other transfers of value to physicians, other healthcare providers and teaching hospitals and physician 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, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers. 56 Table of Contents ​ Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, exclusion from participation in federal and state health care programs, such as Medicare and Medicaid.
Such restrictions under applicable federal and state healthcare laws and regulations, include the following: ​ ● the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, 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 healthcare program such as Medicare and Medicaid; ​ ● the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, 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; ​ ● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; ​ ● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, including the Final Omnibus Rule published in January 2013, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ​ 57 Table of Contents ● the federal false statements statute 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 healthcare 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 under the ACA, known as the federal Physician Payments Sunshine Act, will require certain manufacturers of drugs, devices, biologics and medical supplies to report to CMS within the HHS information related to payments and other transfers of value to physicians, other healthcare providers and teaching hospitals and physician 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, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers. ​ Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, exclusion from participation in federal and state health care programs, such as Medicare and Medicaid.
Restrictions under applicable federal and state healthcare laws and regulations include the following: ● the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation or arranging of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid; ● the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government, with potential liability including mandatory treble damages and significant per-claim penalties; 88 Table of Contents ● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; ● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ● the federal Physician Payments Sunshine Act requires applicable manufacturers of covered products to report payments and other transfers of value to physicians, other healthcare providers and teaching hospitals; and ● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency statutes, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.
Restrictions under applicable federal and state healthcare laws and regulations include the following: ● the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation or arranging of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid; ● the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government, with potential liability including mandatory treble damages and significant per-claim penalties; ● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; ● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ● the federal Physician Payments Sunshine Act requires applicable manufacturers of covered products to report payments and other transfers of value to physicians, other healthcare providers and teaching hospitals; and 92 Table of Contents ● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency statutes, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.
Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. ​ The key competitive factors affecting the success of each of our product candidates, if approved for marketing, are likely to be efficacy, safety, method of administration, convenience, price, the level of generic competition and the availability of coverage and adequate reimbursement from government and other third-party payors. ​ Because the active pharmaceutical ingredients in our product candidates are available on a generic basis, or are soon to be available on a generic basis, competitors will be able to offer and sell products with the same active pharmaceutical ingredient as our products so long as these competitors do not infringe the patents that we license.
Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. ​ The key competitive factors affecting the success of each of our product candidates, if approved for marketing, are likely to be efficacy, safety, method and frequency of administration, convenience, price, the level of generic competition and the availability of coverage and adequate reimbursement from government and other third-party payors. ​ Because the active pharmaceutical ingredients in our product candidates are available on a generic basis, or are soon to be available on a generic basis, competitors will be able to offer and sell products with the same active pharmaceutical ingredient as our products so long as these competitors do not infringe the patents that we license.
The market price for our common stock may be influenced by many factors, including: ● our success in commercializing DEXTENZA and any product candidates for which we obtain marketing approval; ● the success of competitive products or technologies; ● results of clinical trials of our product candidates and the product candidates of our competitors; ● regulatory or legal developments in the United States and other countries; ● developments or disputes concerning patent applications, issued patents or other proprietary rights; ● the recruitment or departure of key scientific or management personnel; 97 Table of Contents ● the results of our efforts and the efforts of our current and future collaborators to discover, develop, acquire or in-license and out-license additional products, product candidates or technologies for the treatment of ophthalmic diseases or conditions, the costs of commercializing any such products and the costs of development of any such product candidates or technologies and any potential dilution to our shareholders as a result of these efforts; ● actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; ● variations in our financial results or those of companies that are perceived to be similar to us; ● the ability to secure third-party reimbursement for our products or product candidates; ● market conditions in the pharmaceutical and biotechnology sectors; and ● the other factors described in this “Risk Factors” section.
The market price for our common stock may be influenced by many factors, including: ● our success in commercializing DEXTENZA and any product candidates for which we obtain marketing approval; ● the success of competitive products or technologies; ● results of clinical trials of our product candidates and the product candidates of our competitors; ● regulatory or legal developments in the United States and other countries; ● developments or disputes concerning patent applications, issued patents or other proprietary rights; ● the recruitment or departure of key scientific or management personnel; 102 Table of Contents ● the results of our efforts and the efforts of our current and future collaborators to discover, develop, acquire or in-license and out-license additional products, product candidates or technologies for the treatment of ophthalmic diseases or conditions, the costs of commercializing any such products and the costs of development of any such product candidates or technologies and any potential dilution to our shareholders as a result of these efforts; ● actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; ● variations in our financial results or those of companies that are perceived to be similar to us; ● the ability to secure third-party reimbursement for our products or product candidates; ● market conditions in the pharmaceutical and biotechnology sectors; and ● the other factors described in this “Risk Factors” section.
These product candidates include intracanalicular inserts eluting drug product to the ocular surface; hydrogel drug delivery implants designed to release therapeutic antibodies and small molecules such as TKIs to modulate the biological activity of VEGF over a sustained period following administration by an intravitreal injection for the treatment of diseases and conditions of the back of the eye, including wet AMD; and hydrogel drug delivery implants designed to release drug product into the anterior chamber of the eye via an intracameral injection for the treatment of diseases and conditions of the front of the eye.
These product candidates include intracanalicular inserts eluting drug product to the ocular surface; hydrogel drug delivery implants designed to release therapeutic antibodies and small molecules such as TKIs to modulate the biological activity of VEGF over a sustained period following administration by an intravitreal injection for the treatment of diseases and conditions of the back of the eye, including wet AMD and NPDR; and hydrogel drug delivery implants designed to release drug product into the anterior chamber of the eye via an intracameral injection for the treatment of diseases and conditions of the front of the eye.
The FDA requires that certain classifications of recalls be reported to the FDA within 10 working days after the recall is initiated. ​ The failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions: ​ ● untitled letters, warning letters, fines, injunctions or civil penalties; ​ ● recalls, detentions or seizures of products; ​ ● operating restrictions; ​ ● delays in the introduction of products into the market; ​ ● total or partial suspension of production; ​ 46 Table of Contents ● delay or refusal of the FDA or other regulators to grant 510(k) clearance or PMA application approvals of new products; ​ ● withdrawals of 510(k) clearance or PMA application approvals; or ​ ● in the most serious cases, criminal prosecution. ​ To ensure compliance with regulatory requirements, medical device manufacturers are subject to market surveillance and periodic, pre-scheduled and unannounced inspections by the FDA, and these inspections may include the manufacturing facilities of subcontractors. ​ Review and Approval of Combination Products in the United States ​ ● A combination product is a product composed of any combination of a drug and a device; a biological product and a device; a drug and a biological product; or a drug, device, and a biological product.
The FDA requires that certain classifications of recalls be reported to the FDA within 10 working days after the recall is initiated. ​ The failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions: ​ ● untitled letters, warning letters, fines, injunctions or civil penalties; ​ ● recalls, detentions or seizures of products; ​ ● operating restrictions; ​ ● delays in the introduction of products into the market; ​ ● total or partial suspension of production; ​ ● delay or refusal of the FDA or other regulators to grant 510(k) clearance or PMA application approvals of new products; ​ ● withdrawals of 510(k) clearance or PMA application approvals; or ​ ● in the most serious cases, criminal prosecution. 47 Table of Contents ​ To ensure compliance with regulatory requirements, medical device manufacturers are subject to market surveillance and periodic, pre-scheduled and unannounced inspections by the FDA, and these inspections may include the manufacturing facilities of subcontractors. ​ Review and Approval of Combination Products in the United States ​ ● A combination product is a product composed of any combination of a drug and a device; a biological product and a device; a drug and a biological product; or a drug, device, and a biological product.
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; 96 Table of Contents ● 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; ● 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; 101 Table of Contents ● 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.
In October 2021, Genentech received approval for Susvimo which utilizes the company’s port delivery system for delivery of ranibizumab but has recently launched a voluntary recall of the product due to manufacturing issues. In addition, there are several companies pursuing gene therapy to treat retinal diseases including Adverum Biotechnologies, Inc. and REGENXBIO Inc.
In October 2021, Genentech received approval for Susvimo which utilizes the company’s port delivery system for delivery of ranibizumab but has recently launched a voluntary recall of the product due to manufacturing issues. In addition, there are several companies pursuing gene therapy to treat retinal diseases including Adverum Biotechnologies, and REGENXBIO.
FDA regulations allow access to investigational drugs under an IND by the company or the treating physician for treatment purposes on a case-by-case basis for: individual patients (single-patient IND applications for treatment in emergency settings and non-emergency settings); intermediate-size patient populations; and larger populations for use of the drug under a treatment protocol or Treatment IND Application. ​ When considering an IND application for expanded access to an investigational product with the purpose of treating a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when all of the following criteria apply: patient(s) have a serious or immediately life-threatening disease or condition, and there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition; the potential patient benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or condition to be treated; and the expanded use of the investigational drug for the requested treatment will not interfere initiation, conduct, or completion of clinical investigations that could support marketing approval of the product or otherwise compromise the potential development of the product. ​ There is no obligation for a sponsor to make its investigational products available for expanded access; however, as required by amendments to the FDCA included in the 21st Century Cures Act, or the Cures Act, passed in 2016, if a sponsor has a policy regarding how it responds to expanded access requests with respect to product candidates in development to treat serious diseases or conditions, it must make that policy publicly available.
FDA regulations allow access to investigational drugs under an IND by the company or the treating physician for treatment purposes on a case-by-case basis for: individual patients (single-patient IND applications for treatment in emergency settings and non-emergency settings); intermediate-size patient populations; and larger populations for use of the drug under a treatment protocol or Treatment IND Application. ​ When considering an IND application for expanded access to an investigational product with the purpose of treating a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when all of the following criteria apply: patient(s) have a serious or immediately life-threatening disease or condition, and there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition; the potential patient benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or condition to be treated; and the expanded use of the investigational drug for the requested treatment will not interfere initiation, conduct, or completion of clinical investigations that could support marketing approval of the product or otherwise compromise the potential development of the product. ​ There is no obligation for a sponsor to make its investigational products available for expanded access; however, as required by amendments to the FDCA included in the 21st Century Cures Act, or the Cures Act, passed in 2016, if a sponsor has a policy regarding how it responds to expanded access requests with respect to product candidates in 32 Table of Contents development to treat serious diseases or conditions, it must make that policy publicly available.
The clinical trial consisted of four patient cohorts: cohort 1 included five subjects who received a 15 µg dose, cohort 2 included four subjects who received a 26 µg dose, cohort 3 included five subjects who received a 15 µg dose with a fast-degrading implant, and cohort 4 included five subjects who received a 5 µg dose with a fast-degrading implant. ​ In February 2022, at the Glaucoma 360 virtual meeting, we presented interim results from all four subject cohorts in the Phase 1 clinical trial.
The clinical trial consisted of four subject cohorts: cohort 1 included five subjects who received a 15 µg dose, cohort 2 included four subjects who received a 26 µg dose, cohort 3 included five subjects who received a 15 µg dose with a fast-degrading implant, and cohort 4 included five subjects who received a 5 µg dose with a fast-degrading implant. ​ In February 2022, at the Glaucoma 360 virtual meeting, we presented interim results from all four subject cohorts in the Phase 1 clinical trial.
While we expect that our existing manufacturing facility, or additional facilities that we might be able to build, will be sufficient to meet our requirements for manufacturing DEXTENZA and any of our product candidates for which we obtain marketing approval, we may in the future need to rely on third-party manufacturers for some aspects of the manufacture of our products or product candidates.
While we expect that our existing manufacturing facility, or additional facilities that we might build, will be sufficient to meet our requirements for manufacturing DEXTENZA and any of our product candidates for which we obtain marketing approval, we may in the future need to rely on third-party manufacturers for some aspects of the manufacture of our products or product candidates.
In the future, if and when our product candidates receive approval by the FDA or foreign regulatory authorities, where applicable, we expect to apply for patent term extensions on issued patents covering those products, depending upon the length of the clinical trials for each drug and other factors.
In the future, if and when our product candidates receive approval by the FDA or foreign regulatory authorities, where applicable, we expect to apply for patent term extensions on certain issued patents covering those products, depending upon the length of the clinical trials for each drug and other factors.
If we experience any of a number of possible unforeseen events in connection with our clinical trials, potential marketing approval or commercialization of our product candidates could be delayed or prevented. ​ 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 our product candidates, including: ● clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; ● the number of subjects 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; ● the cost of clinical trials of our product candidates may be greater than we anticipate; and ● 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.
If we experience any of a number of possible unforeseen events in connection with our clinical trials, potential marketing approval or commercialization of our product candidates could be delayed or prevented. ​ 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 our product candidates, including: ● clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; ● the number of subjects 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; 68 Table of Contents ● the cost of clinical trials of our product candidates may be greater than we anticipate; and ● 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.
Failure to comply with regulatory requirements, may yield various results, including: ● restrictions on such products, manufacturers or manufacturing processes; ● restrictions on the labeling or marketing of a product; ● restrictions on product distribution or use of a product; 87 Table of Contents ● requirements to conduct post-marketing studies or clinical trials; ● warning letters or untitled letters; ● withdrawal of the products from the market; ● refusal to approve pending applications or supplements to approved applications that we submit; ● recall of products; ● fines, restitution or disgorgement of profits or revenues; ● suspension or withdrawal of marketing approvals; ● refusal to permit the import or export of our products; ● product seizure or detention; ● injunctions or the imposition of civil or criminal penalties; ● damage to relationships with any potential collaborators; ● unfavorable press coverage and damage to our reputation; or ● litigation involving patients using our products.
Failure to comply with regulatory requirements, may yield various results, including: ● restrictions on such products, manufacturers or manufacturing processes; ● restrictions on the labeling or marketing of a product; ● restrictions on product distribution or use of a product; ● requirements to conduct post-marketing studies or clinical trials; ● warning letters or untitled letters; ● withdrawal of the products from the market; ● refusal to approve pending applications or supplements to approved applications that we submit; ● recall of products; 91 Table of Contents ● fines, restitution or disgorgement of profits or revenues; ● suspension or withdrawal of marketing approvals; ● refusal to permit the import or export of our products; ● product seizure or detention; ● injunctions or the imposition of civil or criminal penalties; ● damage to relationships with any potential collaborators; ● unfavorable press coverage and damage to our reputation; or ● litigation involving patients using our products.
If we fail to commercialize these products successfully, our ability to generate significant product revenues and our business would be materially harmed. ​ The commercial success of DEXTENZA and any other product candidate for which we obtain marketing approval will depend on many factors, including the following: ● successful completion of preclinical studies and clinical trials; 69 Table of Contents ● applying for and receiving and maintaining marketing approvals from applicable regulatory authorities; ● scaling up our manufacturing processes and capabilities to support commercialization efforts; ● developing, validating and maintaining a commercially viable manufacturing process that is compliant with current good manufacturing practices, or cGMP; ● developing our sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others; ● partnering successfully with our current and future collaborators; ● gaining acceptance of our products, if and when approved, by patients, the medical community and third-party payors, competing effectively with other therapies, and obtaining and maintaining coverage and adequate reimbursement from third-party payors; ● maintaining a continued acceptable safety profile of our products following approval; and ● protecting our intellectual property rights, including obtaining and maintaining patent and trade secret protection and regulatory exclusivity.
If we fail to commercialize these products successfully, our ability to generate significant product revenues and our business would be materially harmed. ​ The commercial success of DEXTENZA and any other product candidate for which we obtain marketing approval will depend on many factors, including the following: ● successful completion of preclinical studies and clinical trials; ● applying for and receiving and maintaining marketing approvals from applicable regulatory authorities; ● scaling up our manufacturing processes and capabilities to support commercialization efforts; ● developing, validating and maintaining a commercially viable manufacturing process that is compliant with current good manufacturing practices, or cGMP; ● developing our sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others; ● partnering successfully with our current and future collaborators; ● gaining acceptance of our products, if and when approved, by patients, the medical community and third-party payors, competing effectively with other therapies, and obtaining and maintaining coverage and adequate reimbursement from third-party payors; ● maintaining a continued acceptable safety profile of our products following approval; and ● protecting our intellectual property rights, including obtaining and maintaining patent and trade secret protection and regulatory exclusivity.
Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, or PBMs, unless the price reduction is required by law.
Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.
It has not yet finalized that guidance. ​ After evaluating the application and all related information, including the advisory committee recommendations, if any, and inspection reports of manufacturing facilities and clinical trial sites, the FDA will issue either a CRL or an approval letter.
The FDA has not yet finalized that guidance. ​ After evaluating the application and all related information, including the advisory committee recommendations, if any, and inspection reports of manufacturing facilities and clinical trial sites, the FDA will issue either a CRL or an approval letter.
Funds from external sources may not be available on acceptable terms, if at all. A failure to comply with conditions of our Credit Agreement or the Convertible Notes could result in an event of default under those instruments.
Funds from external sources may not be available on acceptable terms, if at all. A failure to comply with conditions of our Barings Credit Agreement or the Convertible Notes could result in an event of default under those instruments.
In an event of default, including upon the occurrence of an event that would reasonably be expected to have a material adverse effect on our business or operations, the amounts due under our Credit Agreement or the Convertible Notes could accelerate.
In an event of default, including upon the occurrence of an event that would reasonably be expected to have a material adverse effect on our business or operations, the amounts due under our Barings Credit Agreement or the Convertible Notes could accelerate.
We also depend on single-source suppliers for certain materials used in the manufacturing of our products and product candidates, including our supply of PEG, the molecule that forms the basis of our hydrogels, and other raw materials of our products and product candidates and for sterilization of the finished product.
We also depend on single-source suppliers for certain materials used in the manufacturing of our products and product candidates, including our supply of PEG, the molecule that forms the basis of our hydrogels, and other raw materials of our products and product candidates and for sterilization and packaging of the finished product.
The degree of market acceptance of any of our products, or any product candidate for which we obtain marketing approval will depend on a number of factors, including: ● the efficacy and potential advantages compared to alternative treatments; ● our ability to offer our products for sale at competitive prices, particularly in light of the lower cost of alternative treatments; ● the clinical indications for which the product is approved; ● the convenience and ease of administration compared to alternative treatments, including the intracanalicular insert retention rate for our intracanalicular insert products and product candidates; ● the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; ● the strength of our marketing and distribution support; 70 Table of Contents ● timing of market introduction of competitive products; ● the availability of third-party coverage and adequate reimbursement; ● 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 any of our products, or any product candidate for which we obtain marketing approval will depend on a number of factors, including: ● the efficacy and potential advantages compared to alternative treatments; ● our ability to offer our products for sale at competitive prices, particularly in light of the lower cost of alternative treatments; ● the clinical indications for which the product is approved; ● the convenience and ease of administration compared to alternative treatments, including the intracanalicular insert retention rate for our intracanalicular insert products and product candidates; ● the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; ● the strength of our marketing and distribution support; ● timing of market introduction of competitive products; ● the availability of third-party coverage and adequate reimbursement; ● the prevalence and severity of any side effects; and ● any restrictions on the use of our products together with other medications.
If our collaborations are not successful, we may not be able to capitalize on the market potential of these products or product candidates. ​ We have in the past entered into collaboration agreements with third parties, including our collaborations with AffaMed, and expect to utilize a variety of types of collaboration, distribution and other marketing arrangements with third parties to commercialize DEXTENZA, ReSure Sealant, or any of our product candidates for which we obtain marketing approval in markets outside the United States.
If our collaborations are not successful, we may not be able to capitalize on the market potential of these products or product candidates. ​ We have in the past entered into collaboration agreements with third parties, including our collaboration with AffaMed, and expect to utilize a variety of types of collaboration, distribution and other marketing arrangements with third parties to commercialize DEXTENZA, or any of our product candidates for which we obtain marketing approval in markets outside the United States.
Our principal executive offices are located at 24 Crosby Drive, Bedford, MA 01730, and our telephone number is (781) 357-4000. Our manufacturing is located at 36 Crosby Drive, Suite 101, Bedford, MA 01730 and our research and development operations are located at 15 Crosby Drive, Bedford, MA 01730.
Our principal executive offices are located at 15 Crosby Drive, Bedford, MA 01730, and our telephone number is (781) 357-4000. Our manufacturing is located at 36 Crosby Drive, Suite 101, Bedford, MA 01730 and our research and development operations are located at 15 Crosby Drive, Bedford, MA 01730.
We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data.
We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, and certain consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data.
For example, the loss of clinical trial data from clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
For example, the loss of clinical trial data from clinical trials could result in delays or termination of our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
Even though DEXTENZA and ReSure Sealant have received marketing approval from the FDA and even if any of our product candidates receives marketing approval, any of these products may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, and the market opportunity for these products may be smaller than we estimate. ​ DEXTENZA, ReSure Sealant or any of our product candidates that receives marketing approval may fail to gain market acceptance by physicians, patients, third-party payors and others in the medical community.
Even though DEXTENZA has received marketing approval from the FDA and even if any of our product candidates receives marketing approval, these products may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, and the market opportunity for these products may be smaller than we estimate. ​ DEXTENZA, ReSure Sealant or any of our product candidates that receives marketing approval may fail to gain market acceptance by physicians, patients, third-party payors and others in the medical community.
Either party may, subject to specified cure periods, terminate the License Agreement in the event of the other party’s uncured breach. Either party may also terminate the License Agreement under specified circumstances relating to the other party’s insolvency.
Either party may, subject to specified cure periods, terminate the AffaMed License Agreement in the event of the other party’s uncured breach. Either party may also terminate the AffaMed License Agreement under specified circumstances relating to the other party’s insolvency.
Our product candidates and any other product candidates that we may develop based on our platform may not be suitable for continued preclinical or clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance.
Our product candidates and any other product candidates that we may develop based on ELUTYX may not be suitable for continued preclinical or clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance.
The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a drug. ​ The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly.
The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a drug. ​ The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate 39 Table of Contents or intermediate clinical endpoint occurs rapidly.
The new law also caps 58 Table of Contents Medicare out-of-pocket drug costs at an estimated $4,000 a year in 2024 and, thereafter beginning in 2025, at $2,000 a year. ​ At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
The new law also caps Medicare out-of-pocket drug costs at an estimated $4,000 a year in 2024 and, thereafter beginning in 2025, at $2,000 a year. ​ At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA or 505(b)(2) NDA until the earliest of 30 months after the receipt of the Paragraph IV notice, expiration of the patent and a decision in the infringement case that is favorable to the ANDA or 505(b)(2) NDA sponsor. ​ 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.
The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the 42 Table of Contents FDA from approving the ANDA or 505(b)(2) NDA until the earliest of 30 months after the receipt of the Paragraph IV notice, expiration of the patent and a decision in the infringement case that is favorable to the ANDA or 505(b)(2) NDA sponsor. ​ 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.
A sponsor seeking approval to market and distribute a new drug or biological product in the United States must typically undertake the following: ​ ● completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP, regulations; ​ ● design of a clinical protocol and submission to the FDA of an IND, which must take effect before human clinical trials may begin; ​ ● approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated; ​ ● performance of adequate and well-controlled human clinical trials in accordance with Good Clinical Practices, or GCP, to establish the safety and efficacy of the proposed drug product for each indication; ​ ● preparation and submission to the FDA of a new drug application, or NDA, for a drug candidate product and a biological licensing application, or BLA, for a biological product requesting marketing for one or more proposed indications; ​ ● review by an FDA advisory committee, where appropriate or if applicable; ​ ● satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with current Good Manufacturing Practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; ​ ● satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of clinical data; ​ ● payment of user fees and securing FDA approval of the NDA or BLA; and ​ ● compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post-approval studies. ​ 30 Table of Contents Preclinical Studies ​ Preclinical studies include laboratory evaluation of the purity and stability of the manufactured drug substance or active pharmaceutical ingredient and the formulated product, as well as in vitro and animal studies to assess the safety and activity of the investigational product for initial testing in humans and to establish a rationale for therapeutic use.
A sponsor seeking approval to market and distribute a new drug or biological product in the United States must typically undertake the following: ​ ● completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP, regulations; ​ ● design of a clinical protocol and submission to the FDA of an IND, which must take effect before human clinical trials may begin; ​ ● approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated; ​ ● performance of adequate and well-controlled human clinical trials in accordance with GCPs, to establish the safety and efficacy of the proposed drug product for each indication; ​ ● preparation and submission to the FDA of a new drug application, or NDA, demonstrating the safety and efficacy for the drug candidate product or, with respect to biologics, a biological licensing application, or 30 Table of Contents BLA, demonstrating the safety, purity and potency of the proposed biological product for one or more proposed indications; ​ ● review by an FDA advisory committee, where appropriate or if applicable; ​ ● satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with current Good Manufacturing Practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; ​ ● satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of clinical data; ​ ● payment of user fees and securing FDA approval of the NDA or BLA; and ​ ● compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post-approval studies. ​ Preclinical Studies ​ Preclinical studies include laboratory evaluation of the purity and stability of the manufactured drug substance or active pharmaceutical ingredient and the formulated product, as well as in vitro and animal studies to assess the safety and activity of the investigational product for initial testing in humans and to establish a rationale for therapeutic use.
Under this order, federal agencies are directed to re-examine: policies that undermine protections for people with pre-existing conditions, including complications related to COVID-19; demonstrations and waivers under Medicaid and the PPACA that may reduce coverage or undermine the programs, including work requirements; policies that undermine the Health Insurance Marketplace or other markets for health insurance; policies that make it more difficult to enroll in Medicaid and under the PPACA; and policies that reduce affordability of coverage or financial assistance, including for dependents. ​ 57 Table of Contents Pharmaceutical Prices ​ The prices of prescription pharmaceuticals have also been the subject of considerable discussion in the United States.
Under this order, federal agencies are directed to re-examine: policies that undermine protections for people with pre-existing conditions, including complications related to COVID-19; demonstrations and waivers under Medicaid and the PPACA that may reduce coverage or undermine the programs, including work requirements; policies that undermine the Health Insurance Marketplace or other markets for health insurance; policies that make it more difficult to enroll in Medicaid and under the PPACA; and policies that reduce affordability of coverage or financial assistance, including for dependents. ​ Pharmaceutical Prices ​ The prices of prescription pharmaceuticals have also been the subject of considerable discussion in the United States.
The Credit Agreement and Convertible Notes also have cross-default provisions, pursuant to which a default under one instrument could cause a default in others.
The Barings Credit Agreement and Convertible Notes also have cross-default provisions, pursuant to which a default under one instrument could cause a default in others.
Our initial development efforts are focused on the use of our extended-delivery hydrogel in combination with well-known and well-understood drugs (corticosteroids and cyclosporine) for the treatment of dry eye disease, allergic conjunctivitis and inflammation and pain following ophthalmic surgery. Dry Eye Disease Program ​ OTX-DED (dexamethasone intracanalicular insert) ​ One of the causes of dry eye disease is inflammation.
Our development efforts are focused on the use of our extended-delivery hydrogel in combination with well-known and well-understood drugs (corticosteroids and cyclosporine) for the treatment of dry eye disease, allergic conjunctivitis and inflammation and pain following ophthalmic surgery. OTX-DED (dexamethasone intracanalicular insert) One of the causes of dry eye disease is inflammation.
DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis also represents our first indication approved to be administered in a physician’s office during a routine, non-surgical appointment. ​ Although dexamethasone is clinically effective in the treatment of late-phase inflammatory allergic reactions, the safety limitations associated with eye drop administration, including the potential to generate spikes in IOP due to the high levels of drug due to potential patient abuse to treat this symptomatic condition, have limited its widespread adoption.
DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis also represents our first indication approved to be administered in a physician’s office during a routine, non-surgical appointment. ​ Although dexamethasone is clinically effective in the treatment of late-phase inflammatory allergic reactions, the safety limitations associated with eye drop administration, including the potential to generate spikes in IOP due to the high levels of drug due to potential patient abuse to treat this symptomatic condition, have limited its widespread 22 Table of Contents adoption.
Generally, pivotal trials are Phase 3 trials, but they may be Phase 2 trials if the design provides a well-controlled and reliable assessment of clinical benefit, particularly in an area of unmet medical need. ​ In December 2022, with the passage of Food and Drug Omnibus Reform Act, or FDORA, Congress began requiring sponsors to develop and submit a diversity action plan for each phase 3 clinical trial or any other “pivotal study” of a new drug or biological product.
Generally, pivotal trials are Phase 3 trials, but they may be Phase 2 trials if the design provides a well-controlled and reliable assessment of clinical benefit, particularly in an area of unmet medical need. ​ 33 Table of Contents In December 2022, with the passage of Food and Drug Omnibus Reform Act, or FDORA, Congress began requiring sponsors to develop and submit a diversity action plan for each Phase 3 clinical trial or any other “pivotal study” of a new drug or biological product.
As part of the conformity assessment process, depending on the type of devices, the Notified Body will review the manufacturer’s clinical evaluation process, assess the clinical evaluation data of a representative sample of the device’s subcategory or generic group, or assess all the clinical evaluation data, verify the manufacturer’s assessment of that data and assess the validity of the clinical evaluation report and the conclusions drawn by the manufacturer. ​ Even after a manufacturer receives a CE Certificate of Conformity enabling the CE mark to be placed on it products and the right to sell the products in the EEA countries, a Notified Body or a competent authority may require post-marketing studies of the products.
As part of the conformity assessment process, depending on the type of devices, the Notified Body will review the manufacturer’s clinical evaluation process, assess the clinical evaluation data of a representative sample of the device’s subcategory or generic group, or assess all the clinical evaluation data, verify the manufacturer’s assessment of that data and assess the validity of the clinical evaluation report and the conclusions drawn by the manufacturer. ​ 53 Table of Contents Even after a manufacturer receives a CE Certificate of Conformity enabling the CE mark to be placed on it products and the right to sell the products in the EEA countries, a Notified Body or a competent authority may require post-marketing studies of the products.
Following the withdrawal of the U.K. from the European Union, the U.K. Data Protection Act 2018 applies to the processing of personal data that takes place in the U.K. and includes parallel obligations to those set forth by GDPR. ​ Additionally, in October 2022, President Biden signed an executive order to implement the EU-U.S.
Following the withdrawal of the UK from the European Union, the UK Data Protection Act 2018 applies to the processing of personal data that takes place in the UK and includes parallel obligations to those set forth by GDPR. ​ Additionally, in October 2022, President Biden signed an executive order to implement the EU-U.S.
The onset of action of OTX-CSI was seen as early as two weeks for both signs and symptoms of dry eye disease and was observed to continue over the sixteen-week study period. ​ 18 Table of Contents Phase 2 clinical development ​ In September 2020, we dosed the first subjects in a U.S.-based, randomized, double-masked, multi-center, vehicle-controlled Phase 2 clinical trial designed to assess the safety, tolerability and durability and to evaluate the efficacy of OTX-CSI in the chronic treatment of dry eye disease.
The onset of action of OTX-CSI was seen as early as two weeks for both signs and symptoms of dry eye disease and was observed to continue over the sixteen-week study period. ​ Phase 2 clinical development In September 2020, we dosed the first subjects in a U.S.-based, randomized, double-masked, multi-center, vehicle-controlled Phase 2 clinical trial designed to assess the safety, tolerability and durability and to evaluate the efficacy of OTX-CSI in the chronic treatment of dry eye disease.
If clinical trials of our product candidates fail to demonstrate safety and efficacy 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 delayed or unable to complete, the development and commercialization of such product candidate and our business may be harmed. ​ Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans .
If clinical trials of our product candidates fail to demonstrate safety and efficacy 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 delayed or unable to complete, the development and commercialization of such product candidate and our business may be harmed. ​ Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, including our lead product candidate AXPAXLI, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.
Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months from the filing date in which to complete its initial review of a standard application that is a new molecular entity, and six months from 36 Table of Contents the filing date for an application with “priority review.” The review process may be extended by the FDA for three additional months to consider new information or in the case of a clarification provided by the sponsor to address an outstanding deficiency identified by the FDA following the original submission.
Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months from the filing date in which to complete its initial review of a standard application that is a new molecular entity, and six months from the filing date for an application with “priority review.” The review process may be extended by the FDA for three additional months to consider new information or in the case of a clarification provided by the sponsor to address an outstanding deficiency identified by the FDA following the original submission.
Any authorization which is not followed by the actual placing of the medicinal product on the European Union market (in case of centralized procedure) or on the market of the authorizing European Union Member State within three years after authorization ceases to be valid (the so-called sunset clause). ​ Regulatory Requirements after a Marketing Authorization has been Obtained ​ In case an authorization for a medicinal product in the European Union is obtained, the holder of the marketing authorization is required to comply with a range of requirements applicable to the manufacturing, marketing, promotion and sale of medicinal products.
Any authorization which is not followed by the actual placing of the medicinal product on the 51 Table of Contents European Union market (in case of centralized procedure) or on the market of the authorizing European Union Member State within three years after authorization ceases to be valid (the so-called sunset clause). ​ Regulatory Requirements after a Marketing Authorization has been Obtained ​ In case an authorization for a medicinal product in the European Union is obtained, the holder of the marketing authorization is required to comply with a range of requirements applicable to the manufacturing, marketing, promotion and sale of medicinal products.
A variety of factors affect subject enrollment, including: ● the prevalence and severity of the ophthalmic disease or condition under investigation; ● the eligibility criteria for the study in question; ● the perceived risks and benefits of the product candidate under study; ● the efforts to facilitate timely enrollment in clinical trials; ● the patient referral practices of physicians; ● the ability to monitor patients adequately during and after treatment; ● the proximity and availability of clinical trial sites for prospective subjects; ● actual or threatened public health emergencies or outbreaks of disease (including, for example, the COVID-19 pandemic); 67 Table of Contents ● the conduct of clinical trials by competitors for product candidates that treat the same indications as our product candidates; and ● the lack of adequate compensation for prospective subjects.
A variety of factors affect subject enrollment, including: ● the prevalence and severity of the ophthalmic disease or condition under investigation; ● the design and eligibility criteria for the study in question; ● the perceived risks and benefits of the product candidate under study; ● the efforts to facilitate timely enrollment in clinical trials; ● the patient referral practices of physicians; ● the ability to monitor patients adequately during and after treatment; ● the proximity and availability of clinical trial sites for prospective subjects; ● actual or threatened public health emergencies or outbreaks of disease (including, for example, the COVID-19 pandemic); ● the conduct of clinical trials by competitors for product candidates that treat the same indications as our product candidates; and ● the lack of adequate compensation for prospective subjects.
Specifically, Section 505(b)(2) applies to NDAs for a drug for which the investigations made to show whether or not the drug is safe for use and effective in use and relied upon by the sponsor for approval of the application “were not conducted by or for the sponsor and for which the sponsor has not obtained a right of reference or use from the person by or for whom the investigations were conducted.” ​ Section 505(b)(2) thus authorizes the FDA to approve an NDA based on safety and effectiveness data that were not developed by the sponsor.
Specifically, Section 505(b)(2) applies to NDAs for a drug for which the investigations made to show whether or not the drug is safe for use and effective in use and relied upon by the sponsor for approval of the application “were not conducted by or for the sponsor and for which the sponsor has not obtained a right of reference or use from the person by or for whom the investigations were conducted.” 36 Table of Contents ​ Section 505(b)(2) thus authorizes the FDA to approve an NDA based on safety and effectiveness data that were not developed by the sponsor.
These requirements include compliance with European Union cGMP standards when manufacturing medicinal products and active pharmaceutical 50 Table of Contents ingredients, including the manufacture of active pharmaceutical ingredients outside of the European Union with the intention to import the active pharmaceutical ingredients into the European Union. ​ ● The marketing and promotion of authorized drugs, including industry-sponsored continuing medical education and advertising directed toward the prescribers of drugs and/or the general public, are strictly regulated in the European Union notably under Directive 2001/83EC, as amended, and European Union Member State laws.
These requirements include compliance with European Union cGMP standards when manufacturing medicinal products and active pharmaceutical ingredients, including the manufacture of active pharmaceutical ingredients outside of the European Union with the intention to import the active pharmaceutical ingredients into the European Union. ​ ● The marketing and promotion of authorized drugs, including industry-sponsored continuing medical education and advertising directed toward the prescribers of drugs and/or the general public, are strictly regulated in the European Union notably under Directive 2001/83EC, as amended, and European Union Member State laws.
We believe that our local programmed-release drug delivery technology has the potential to enable the treatment of conditions and diseases of both the front and the back of the eye and can be administered through a range of different modalities including intravitreal implants, intracameral implants and intracanalicular inserts.
We believe that our local programmed-release drug delivery technology has the potential to enable the treatment of conditions and diseases of both the front and the back of the eye and can be administered through a range of ocular modalities including intravitreal implants, intracameral implants, and intracanalicular inserts.
The MDR, among other things, is intended to establish a uniform, transparent, predictable and sustainable regulatory framework across the EEA for medical and ensure a high level of safety and health. ​ The MDR became applicable on May 26, 2021 and will, among other things: ​ ● strengthen the rules on placing devices on the market and reinforce surveillance once they are available; ​ ● establish explicit provisions on manufacturers' responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; ​ ● improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; ​ ● set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the European Union; and ​ ● strengthen rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market. ​ Brexit and the Regulatory Framework in the United Kingdom ​ The United Kingdom’s withdrawal from the European Union took place on January 31, 2020.
The MDR, among other things, is intended to establish a uniform, transparent, predictable and sustainable regulatory framework across the EEA for medical and ensure a high level of safety and health. ​ The MDR became applicable on May 26, 2021 and will, among other things: ​ ● strengthen the rules on placing devices on the market and reinforce surveillance once they are available; ​ ● establish explicit provisions on manufacturers' responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; ​ ● improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; ​ ● set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the European Union; and 54 Table of Contents ​ ● strengthen rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market. ​ Brexit and the Regulatory Framework in the United Kingdom ​ The UK’s withdrawal from the EU took place on January 31, 2020.
Regardless of merit or eventual outcome, liability claims may result in: ● decreased demand for any products or product candidates that we develop; ● injury to our reputation and significant negative media attention; ● withdrawal of clinical trial participants; 74 Table of Contents ● significant costs to defend the related litigation; ● substantial monetary awards to trial participants or subjects; ● loss of revenue; ● reduced time and attention of our management to pursue our business strategy; and ● the inability to commercialize any products that we develop.
Regardless of merit or eventual outcome, liability claims may result in: ● decreased demand for any products or product candidates that we develop; ● injury to our reputation and significant negative media attention; ● withdrawal of clinical trial participants; ● significant costs to defend the related litigation; ● substantial monetary awards to trial participants or subjects; ● loss of revenue; ● reduced time and attention of our management to pursue our business strategy; and ● the inability to commercialize any products that we develop.
Sponsors are required to make such policies publicly available upon the earlier of initiation of a Phase 2 or Phase 3 study for a covered investigational product; or 15 days after the investigational product receives designation from the FDA as a breakthrough therapy, fast track product, or regenerative medicine advanced therapy. 32 Table of Contents ​ In addition, on May 30, 2018, the Right to Try Act was signed into law.
Sponsors are required to make such policies publicly available upon the earlier of initiation of a Phase 2 or Phase 3 study for a covered investigational product; or 15 days after the investigational product receives designation from the FDA as a breakthrough therapy, fast track product, or regenerative medicine advanced therapy. ​ In addition, on May 30, 2018, the Right to Try Act was signed into law.
Subject to certain exceptions specified in the Second Amended Agreement, Incept will own and license to the us (i) all intellectual property rights included in the Original License, or the Original IP, in the Ophthalmic Field of Use and the Additional Field of Use, (ii) intellectual property rights in the field of drug delivery conceived solely by the Company Individuals on or before the Effective Date, or Incept IP, and (iii) intellectual property rights in the field of drug delivery conceived by one or more Company Individuals jointly with one or more individuals from Incept, including Dr.
Subject to certain exceptions specified in the Second Amended Agreement, Incept will own and license to the us (i) all intellectual property rights included in the Original License, or the Original IP, in the Ophthalmic Field of Use and the Additional Field of Use, (ii) intellectual property rights in the field of drug delivery conceived solely by the Company Individuals on or before the Effective Date, or Incept IP, and (iii) intellectual property rights in the field of 26 Table of Contents drug delivery conceived by one or more Company Individuals jointly with one or more individuals from Incept, including Dr.
The License Agreement contemplates that the parties negotiate and enter into a future agreement requiring us to use commercially reasonable efforts to manufacture 27 Table of Contents and supply finished drug products in sufficient quantity for clinical development and commercialization of the AffaMed Licensed Products in the applicable Fields in the Territories. ​ In accordance with its terms, the License Agreement expires upon the expiration of the last royalty term for the last AffaMed Licensed Product in any applicable Field in the Territories.
The AffaMed License Agreement contemplates that the parties negotiate and enter into a future agreement requiring us to use commercially reasonable efforts to manufacture and supply finished drug products in sufficient quantity for clinical development and commercialization of the AffaMed Licensed Products in the applicable Fields in the Territories. ​ In accordance with its terms, the AffaMed License Agreement expires upon the expiration of the last royalty term for the last AffaMed Licensed Product in any applicable Field in the Territories.
Many Class I devices are exempt from premarket regulation; however, some Class I devices require premarket clearance by the FDA through the 510(k) premarket notification process. ​ Class II devices are moderate-risk devices and are subject to the FDA’s general controls, and any other special controls, such as performance standards, post-market surveillance, and FDA guidelines, deemed necessary by the FDA 43 Table of Contents to provide reasonable assurance of the devices’ safety and effectiveness.
Many Class I devices are exempt from premarket regulation; however, some Class I devices require premarket clearance by the FDA through the 510(k) premarket notification process. ​ Class II devices are moderate-risk devices and are subject to the FDA’s general controls, and any other special controls, such as performance standards, post-market surveillance, and FDA guidelines, deemed necessary by the FDA to provide reasonable assurance of the devices’ safety and effectiveness.
To obtain reimbursement or pricing approval in some countries, pharmaceutical firms may be required to conduct a clinical trial that compares the cost-effectiveness of the product to other available therapies. 51 Table of Contents ​ Review and Approval of Medical Devices in the European Union ​ The European Union has adopted numerous directives and standards regulating, among other things, the design, manufacture, clinical trials, labeling, approval and adverse event reporting for medical devices.
To obtain reimbursement or pricing approval in some countries, pharmaceutical firms may be required to conduct a clinical trial that compares the cost-effectiveness of the product to other available therapies. ​ Review and Approval of Medical Devices in the European Union ​ The European Union has adopted numerous directives and standards regulating, among other things, the design, manufacture, clinical trials, labeling, approval and adverse event reporting for medical devices.
CMS evaluates the eligibility of products such as DEXTENZA for separate payment annually, and there can be no assurance that CMS will not change the criteria applicable to non-opioid pain management drugs for 2023 or beyond.
CMS evaluates the eligibility of products such as DEXTENZA for separate payment annually, and there can be no assurance that CMS will not change the criteria applicable to non-opioid pain management drugs for 2024 or beyond.
If the FDA disagrees with the manufacturer’s determination and requires new 510(k) clearances or PMA application approvals for modifications to previously cleared 44 Table of Contents products for which the manufacturer concluded that new clearances or approvals are unnecessary, the manufacturer may be required to cease marketing or distribution of the products or to recall the modified product until it obtains clearance or approval, and the manufacturer may be subject to significant regulatory fines or penalties.
If the FDA disagrees with the manufacturer’s determination and requires new 510(k) clearances or PMA application approvals for modifications to previously cleared products for which the manufacturer concluded that new clearances or approvals are unnecessary, the manufacturer may be required to cease marketing or distribution of the products or to recall the modified product until it obtains clearance or approval, and the manufacturer may be subject to significant regulatory fines or penalties.
Given the breadth and depth of changes in data protection obligations, preparing for and complying with these requirements is rigorous and time intensive and requires significant resources and a review of our technologies, systems 94 Table of Contents and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that process or transfer personal data collected in applicable jurisdictions.
Given the breadth and depth of changes in data protection obligations, preparing for and complying with these requirements is rigorous and time intensive and requires significant resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that process or transfer personal data collected in applicable jurisdictions.
The implants are preferably polymeric, biodegradable and provide sustained release of at least one therapeutic agent to both the trabecular meshwork and associated ocular tissue and the fluids within the anterior chamber of an eye. ​ 9 Table of Contents Intravitreal Implants We are engaged in the clinical development of our hydrogel administered via intravitreal injection to address the large and growing markets for diseases and conditions of the back of the eye.
The implants are preferably polymeric, biodegradable and provide sustained release of at least one therapeutic agent to both the trabecular meshwork and associated ocular tissue and the fluids within the anterior chamber of an eye. ​ Intravitreal Implants We are engaged in the clinical development of our hydrogel administered via intravitreal injection to address the large and growing markets for diseases and conditions of the back of the eye.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or 40 Table of Contents imposition of distribution or other restrictions under a REMS program.
Premarket notifications are subject to user fees, unless a specific exemption applies. ​ Class III devices are deemed by the FDA to pose the greatest risk, such as those for which reasonable assurance of the device’s safety and effectiveness cannot be assured solely by the general controls and special controls described above and that are life-sustaining or life-supporting.
Premarket notifications are subject to user fees, unless a specific exemption applies. ​ 44 Table of Contents Class III devices are deemed by the FDA to pose the greatest risk, such as those for which reasonable assurance of the device’s safety and effectiveness cannot be assured solely by the general controls and special controls described above and that are life-sustaining or life-supporting.
We may not be successful in our efforts to develop additional products and product candidates based on our bioresorbable hydrogel technology platform. ​ We are currently directing most of our development efforts towards applying our proprietary, bioresorbable hydrogel technology platform to products and product candidates that are designed to provide local programmed-release hydrogel-based therapeutic agents to the eye using active pharmaceutical ingredients that are currently used in FDA-approved ophthalmic drugs.
We may not be successful in our efforts to develop additional products and product candidates based on our bioresorbable hydrogel-based formulation technology ELUTYX. ​ We are currently directing most of our development efforts towards applying our proprietary, bioresorbable hydrogel-based formulation technology ELUTYX to products and product candidates that are designed to provide local programmed-release hydrogel-based therapeutic agents to the eye using active pharmaceutical ingredients that are currently used in FDA-approved ophthalmic drugs.
We have further agreed not to, and to cause its affiliates or agents not to, develop or commercialize in the Territories (i) the AffaMed Licensed Products outside of the applicable Fields and (ii) any other product containing the same active pharmaceutical ingredients as the AffaMed Licensed Products and administered into the anterior chamber of the eye, in each case without AffaMed’s prior written consent.
We have further agreed not to, and to cause its affiliates or agents not to, develop or commercialize in the Territories (i) the AffaMed Licensed Products outside of the applicable Fields and (ii) any other product containing 27 Table of Contents the same active pharmaceutical ingredients as the AffaMed Licensed Products and administered into the anterior chamber of the eye, in each case without AffaMed’s prior written consent.
For products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional. ​ Under the centralized procedure, the Committee for Medicinal Products for Human Use, or the CHMP, established at the European Medicines Agency, or EMA, is responsible for conducting the initial assessment of a drug.
For products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional. ​ 50 Table of Contents Under the centralized procedure, the Committee for Medicinal Products for Human Use, or the CHMP, established at the European Medicines Agency, or EMA, is responsible for conducting the initial assessment of a drug.
In addition, if we 68 Table of Contents do not accurately evaluate the commercial potential of a target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
In addition, if we do not accurately evaluate the commercial potential of a target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
Our website address is www.ocutx.com. 59 Table of Contents ​ Available Information We make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act.
Our website address is www.ocutx.com. ​ Available Information We make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our current facilities are suitable and adequate to meet our current needs. ​
Biggest changeWe do not intend to renew the lease that expires in March 2024 nor do we intend to lease new space, as we believe that our remaining current facilities are suitable and adequate to meet our current needs. ​
The lease for approximately 71,000 square feet of this space expires in July 2027, the lease for approximately 30,000 square feet of this space expires in March 2024, and the lease for approximately 20,000 square feet of this space expires in July 2023.
The lease for approximately 71,000 square feet of this space expires in July 2027, the lease for approximately 30,000 square feet of this space expires in March 2024, and the lease for approximately 20,000 square feet of this space, which includes our manufacturing facility, expires in July 2028.
Removed
In October 2022, we exercised an option under the lease scheduled to expire in July 2023 to extend it through July 2028.
Removed
Under the terms of the existing lease, rent for the five-year extension period will be based on the current fair market rent for comparable space in the building and in other similar buildings in the same rental market as of August 1, 2023, the commencement date of the additional five-year term.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not presently a party to any material legal proceedings, nor to the knowledge of management are any material legal proceedings threatened against us. ​ Item 4. Mine Safety Disclosures ​ Not Applicable. ​ 98 Table of Contents ​ PART II
Biggest changeWe are not presently a party to any material legal proceedings, nor to the knowledge of management are any material legal proceedings threatened against us. ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchase 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.] ​ 99 Table of Contents
Biggest changePurchase 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. ​
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 or restricted stock awards, during the year ended December 31, 2022 that were not registered under the Securities Act of 1933, as amended, or the Securities Act, and that have not otherwise been described in an Annual Report on Form 10-K or a Quarterly Report on Form 10-Q.
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 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 an Annual Report on Form 10-K or a Quarterly Report on Form 10-Q.
Securities Authorized for Issuance under Equity Compensation Plans The information required by this item will be set forth in the definitive proxy statement we will file in connection with our 2023 Annual Meeting of Stockholders and is incorporated by reference herein.
Securities Authorized for Issuance under Equity Compensation Plans The information required by this item will be set forth in the definitive proxy statement we will file in connection with our 2024 Annual Meeting of Stockholders and is incorporated by reference herein.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer’s Purchases of Equity Securities Our common stock has been publicly traded on the Nasdaq Global Market under the symbol “OCUL” since July 25, 2014. Holders As of February 28, 2022, there were approximately 12 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer’s Purchases of Equity Securities Our common stock has been publicly traded on the Nasdaq Global Market under the symbol “OCUL” since July 25, 2014. Holders As of March 7, 2024, there were approximately 29 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

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

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Biggest changeWe anticipate we will incur substantial expenses if and as we: ● continue to commercialize DEXTENZA in the United States ; ​ ● continue to develop and expand our sales, marketing and distribution capabilities for DEXTENZA and any other products or product candidates we intend to commercialize; ​ ● continue ongoing clinical trials for OTX-TKI (in both Australia and the United States) for the treatment of wet AMD OTX-TKI in the United States for the treatment of diabetic retinopathy and diabetic retinopathy OTX-TIC for the treatment of open-angle glaucoma or ocular hypertension; ​ ● determine to initiate new clinical trials to evaluate our product candidates, including OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease; 112 Table of Contents ​ ● conduct research and development activities on, and seek regulatory approvals for, DEXTENZA and OTX-TIC in specified Asian markets pursuant to our license agreement and collaboration with AffaMed; ​ ● continue the research and development of our other product candidates; ​ ● seek to identify and develop additional product candidates; ​ ● seek marketing approvals for any of our product candidates that successfully complete clinical development; ​ ● scale up our manufacturing processes and capabilities to support sales of commercial products, clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval, and expand our facilities to accommodate this scale up and any corresponding growth in personnel; ​ ● renovate our existing facilities including research and development laboratories, manufacturing space and office space; ​ ● maintain, expand and protect our intellectual property portfolio; ​ ● expand our operational, financial, administrative and management systems and personnel, including personnel to support our clinical development, manufacturing and commercialization efforts; ​ ● d efend ourselves against legal proceedings; ​ ● make investments to improve our defenses against cybersecurity and establish and maintain cybersecurity insurance; ​ ● increase our product liability and clinical trial insurance coverage as we expand our clinical trials and commercialization efforts; and ​ ● continue to operate as a public company. ​ Based on our current plans and forecasted expenses, which includes estimates related to anticipated cash inflows from DEXTENZA product sales and cash outflows from operating expenses, we believe that our existing cash and cash equivalents, as of December 31, 2022, will enable us to fund our planned operating expenses, debt service obligations and capital expenditure requirements into the middle of 2024, excluding our planned pivotal clinical trials for OTX-TKI as we do not intend to initiate such trials without receipt of additional funding .
Biggest changeWe expect to continue to incur losses in connection with our ongoing activities, particularly as we advance the clinical trials of our product candidates in development and increase our sales and marketing resources to support the commercialization of DEXTENZA and the potential launch of our product candidates, subject to receiving FDA approval. 115 Table of Contents We anticipate we will incur substantial expenses if and as we: ● continue our ongoing clinical trials, including the SOL-1 trial of AXPAXLI for the treatment of wet AMD; our Phase 1 clinical trials of AXPAXLI for the treatment of wet AMD; the HELIOS trial of AXPAXLI for the treatment of NPDR; our Phase 2 clinical trial of PAXTRAVA for the treatment of OAG or OHT; our Phase 2 clinical trial of OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease; ● continue to monitor subjects according to the applicable clinical trial protocols in our clinical trials that have been completed, including our clinical trial to evaluate DEXTENZA in pediatric subjects following cataract surgery; ● determine to initiate new clinical trials to evaluate our product candidates, including our planned SOL-2 trial of AXPAXLI for the treatment of wet AMD; our planned pivotal clinical trials of AXPAXLI for the treatment of NPDR; and, subject to our evaluation of strategic alternatives, possible pivotal clinical trials of PAXTRAVA for the reduction of IOP in patients with primary OAG or OHT; ● continue to commercialize DEXTENZA in the United States; ● continue to develop and expand our sales, marketing and distribution capabilities for DEXTENZA and any other products or product candidates we intend to commercialize; ● conduct or support research and development activities on, and seek regulatory approvals for, DEXTENZA and PAXTRAVA in specified Asian markets pursuant to our license agreement and collaboration with AffaMed Therapeutics Limited, or AffaMed; ● continue the research and development of our other product candidates; ● seek to identify and develop additional product candidates; ● seek marketing approvals for any of our product candidates that successfully complete clinical development; ● scale up our manufacturing processes and capabilities to support sales of commercial products, clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval, and expand our facilities to accommodate this scale up and any corresponding growth in personnel; ● renovate our existing facilities including research and development laboratories, manufacturing space and office space; ● maintain, expand and protect our intellectual property portfolio; ● expand our operational, financial, administrative and management systems and personnel, including personnel to support our clinical development, manufacturing and commercialization efforts; ● defend ourselves against legal proceedings, if any; ● make investments to improve our defenses against cybersecurity and establish and maintain cybersecurity insurance; ● increase our product liability and clinical trial insurance coverage as we expand our clinical trials and commercialization efforts; and ● continue to operate as a public company. 116 Table of Contents The amount and timing of these expenses determines our future capital requirements.
If the last reported sale price of the common stock has been at least 130% of the conversion rate then in effect for twenty of the preceding thirty trading days (including the last trading day of such period), we are entitled, at our option, to redeem all or part of the outstanding principal amount of the 2026 Convertible Notes, on a pro rata basis, at an optional redemption price equal to 100% of the outstanding principal amount of the 2026 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the optional redemption date.
If the last reported sale price of the common stock has been at least 130% of the conversion rate then in effect for twenty of the preceding thirty trading days (including the last trading day of such period), we are entitled, at our option, to redeem all or part of the outstanding principal amount of the Convertible Notes, on a pro rata basis, at an optional redemption price equal to 100% of the outstanding principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the optional redemption date.
The holders of the 2026 Convertible Notes may convert all or part of the outstanding principal amount of their 2026 Convertible Notes into shares of our common stock, par value $0.0001 per share, prior to maturity and provided that no conversion results in a holder beneficially owning more than 19.99% of our issued and outstanding common stock.
The holders of the Convertible Notes may convert all or part of the outstanding principal amount of their Convertible Notes into shares of our common stock, par value $0.0001 per share, prior to maturity and provided that no conversion results in a holder beneficially owning more than 19.99% of our issued and outstanding common stock.
The conversion rate is initially 153.8462 shares of our common stock per $1,000 principal amount of the 2026 Convertible Notes, which is equivalent to an initial conversion price is $6.50 per share. The conversion rate is subject to adjustment in customary circumstances such as stock splits or similar changes to our capitalization.
The conversion rate is initially 153.8462 shares of our common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price is $6.50 per share. The conversion rate is subject to adjustment in customary circumstances such as stock splits or similar changes to our capitalization.
The main input when determining the fair value of the 2026 Convertible Notes is the bond yield that pertains to the host instrument without the conversion option. The significant assumption used in determining the bond yield is the market yield movements of a comparable instrument issued as of the valuation date, which is assessed and updated each period.
The main input when determining the fair value of the Convertible Notes is the bond yield that pertains to the host instrument without the conversion option. The significant assumption used in determining the bond yield is the market yield movements of a comparable instrument issued as of the valuation date, which is assessed and updated each period.
At our election, we may choose to make such conversion payment in cash, in shares of common stock, or in a combination thereof. Upon any conversion of any 2026 Convertible Note, we are obligated to make a cash payment to the holder of such 2026 Convertible Note for any interest accrued but unpaid on the principal amount converted.
At our election, we may choose to make such conversion payment in cash, in shares of common stock, or in a combination thereof. Upon any conversion of any Convertible Note, we are obligated to make a cash payment to the holder of such Convertible Note for any interest accrued but unpaid on the principal amount converted.
In 2019, in connection with the issuance of our 2026 Convertible Notes, we identified an embedded derivative liability, which we are required to measure at fair value at inception and then at the end of each reporting period until the embedded derivative is settled.
In 2019, in connection with the issuance of our Convertible Notes, we identified an embedded derivative liability, which we are required to measure at fair value at inception and then at the end of each reporting period until the embedded derivative is settled.
Our obligations under the Purchase Agreement and the 2026 Convertible Notes are subject to acceleration upon the occurrence of specified events of default, including a default or breach of certain contracts material to us and the delisting and deregistration of our common stock.
Our obligations under the Purchase Agreement and the Convertible Notes are subject to acceleration upon the occurrence of specified events of default, including a default or breach of certain contracts material to us and the delisting and deregistration of our common stock.
The entire embedded conversion option is required to be separated from the 2026 Convertible Notes and accounted for as a freestanding derivative instrument subject to derivative accounting. Therefore, the entire conversion option is bifurcated from the underlying debt instrument and accounted for and valued separately from the host instrument.
The entire embedded conversion option is required to be separated from the Convertible Notes and accounted for as a freestanding derivative instrument subject to derivative accounting. Therefore, the entire conversion option is bifurcated from the underlying debt instrument and accounted for and valued separately from the host instrument.
Research and Development Expenses Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include: ● employee-related expenses, including salaries, related benefits and payroll taxes, travel and stock-based compensation expense for employees engaged in research and development, clinical and regulatory and other related functions; ● expenses incurred in connection with the clinical trials of our product candidates, including with the investigative sites that conduct our clinical trials and under agreements with contract research organizations, or CROs; ● expenses relating to regulatory activities, including filing fees paid to the FDA for our submissions for product approvals; ● expenses associated with developing our pre-commercial manufacturing capabilities and manufacturing clinical study materials; 103 Table of Contents ● ongoing research and development activities relating to our core bioresorbable hydrogel technology and improvements to this technology; ● facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies; ● costs relating to the supply and manufacturing of product inventory, prior to approval by the FDA or other regulatory agencies of our products; and ● expenses associated with preclinical development activities.
Research and Development Expenses Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include: ● employee-related expenses, including salaries, related benefits and payroll taxes, travel and stock-based compensation expense for employees engaged in research and development, clinical and regulatory and other related functions; ● expenses incurred in connection with the clinical trials of our product candidates, including with the investigative sites that conduct our clinical trials and under agreements with contract research organizations, or CROs; ● expenses relating to regulatory activities, including filing fees paid to the FDA for our submissions for product approvals; ● expenses associated with developing our pre-commercial manufacturing capabilities and manufacturing clinical study materials; ● ongoing research and development activities relating to our core bioresorbable hydrogel technology and improvements to this technology; ● facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies; ● costs relating to the supply and manufacturing of product inventory, prior to approval by the FDA or other regulatory agencies of our products; and ● expenses associated with preclinical development activities.
Comparison of the Years Ended December 31, 2021 and 2020 A discussion of changes in our results of operations during the year ended December 31, 2021 compared to the year ended December 31, 2020 has been omitted from this Annual Report on Form 10-K but may be found in “Item 7.
Comparison of the Years Ended December 31, 2022 and 2021 A discussion of changes in our results of operations during the year ended December 31, 2022 compared to the year ended December 31, 2021 has been omitted from this Annual Report on Form 10-K but may be found in “Item 7.
The increase of $0.3 million was primarily due to an increase of $1.3 million in personnel related costs including stock-based compensation, which was partially offset by a decrease in professional fees of $0.8 million and a decrease of $0.2 million in facility related and other costs.
The increase was primarily due to an increase of $3.1 million in personnel related costs including stock-based compensation, which was partially offset by a decrease in professional fees of $0.8 million and a decrease of $0.6 million in facility related and other costs.
Operating Expenses Cost of Product Revenue Cost of product revenue consists primarily of costs of DEXTENZA product revenue, which include: ● Direct materials costs; ● Royalties; ● Direct labor, which includes employee-related expenses, including salaries, related benefits and payroll taxes, and stock-based compensation expense for employees engaged in the production process; ● Manufacturing overhead costs, which includes rent, depreciation, and indirect labor costs associated with the production process; ● Transportation costs; and ● Cost of scrap material.
Operating Expenses Cost of Product Revenue Cost of product revenue consists primarily of costs of DEXTENZA product revenue, which include: ● Direct materials costs; ● Royalties; 108 Table of Contents ● Direct labor, which includes employee-related expenses, including salaries, related benefits and payroll taxes, and stock-based compensation expense for employees engaged in the production process; ● Manufacturing overhead costs, which includes rent, depreciation, and indirect labor costs associated with the production process; ● Transportation costs; and ● Cost of scrap material.
However, we have determined such services received to date are not distinct from our sale of products to the customer and, therefore, these payments have been recorded as a reduction 106 Table of Contents of revenue within the statement of operations and comprehensive loss, as well as a reduction to trade receivables, net on the consolidated balance sheets.
However, we have determined such services received to date are not distinct from our sale of products to the customer and, therefore, these payments have been recorded as a reduction of revenue within the statement of operations and comprehensive loss, as well as a reduction to trade receivables, net on the consolidated balance sheets.
The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period.
The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized 122 Table of Contents as revenue, but remains in the distribution channel inventories at the end of each reporting period.
Derivative Liability The 2026 Convertible Notes allow the holders to convert all or part of the outstanding principal of their 2026 Convertible Notes into shares our common stock provided that no conversion results in a holder beneficially owning more than 19.99% of our issued and outstanding common stock.
Derivative Liabilities The Convertible Notes allow the holders to convert all or part of the outstanding principal of their Convertible Notes into shares our common stock provided that no conversion results in a holder beneficially owning more than 19.99% of our issued and outstanding common stock.
The adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the 107 Table of Contents establishment of a current liability which is included as accrued expenses and other current liabilities on the consolidated balance sheets.
The adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included as accrued expenses and other current liabilities on the consolidated balance sheets.
We do not have any committed external source of funds although our license agreement with AffaMed provides for AffaMed’s reimbursement of certain clinical expenses incurred by us in connection with our collaboration and for our potential receipt of development and sales milestone payments as well as royalty payments.
We do not have any committed external source of funds, although our license agreement with AffaMed provides for AffaMed’s reimbursement of certain clinical expenses incurred by us in connection with our collaboration and for our potential receipt of development 117 Table of Contents and sales milestone payments and royalty payments.
We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.
We have based our estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.
If we raise additional funds through government or other third-party funding, collaborations, strategic alliances, licensing arrangements, royalty agreements, or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
If we raise additional funds through collaborations, strategic alliances, licensing arrangements, royalty agreements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, products or product candidates or grant licenses on terms that may not be favorable to us.
Net cash used in investing activities was $3.7 million for the year ended December 31, 2022, consisting of cash used to purchase property and equipment and leasehold improvements. Net cash used in investing activities was $1.2 million for the year ended December 31, 2021, consisting of cash used to purchase property and equipment.
Investing activities. Net cash used in investing activities was $6.1 million for the year ended December 31, 2023, consisting of cash used to purchase property and equipment and leasehold improvements. Net cash used in investing activities was $3.7 million for the year ended December 31, 2022, consisting of cash used to purchase property and equipment.
We also anticipate that we will continue to incur increased accounting, audit, legal, intellectual property, regulatory, compliance, director and officer insurance costs as well as investor and public relations expenses associated with being a public company.
We also anticipate that we will continue to incur increased accounting, audit, legal, intellectual property, regulatory, compliance, director and officer insurance costs as well as investor and public relations expenses associated with being a public company. Other Income (Expense), Net Interest Income .
We do not allocate employee and contractor-related costs, costs associated with our platform technology, costs related to manufacturing or purchasing clinical trial materials, and facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified.
We do not allocate employee and contractor-related costs, costs associated with our proprietary bioresorbable hydrogel-based formulation technology ELUTYX, costs related to manufacturing or purchasing clinical trial materials, and facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified.
Our net loss was primarily attributed to research and development activities, selling and marketing costs and our general and administrative expenses partially offset by $43.5 million of revenue in the period.
Our net loss was primarily attributed to research and development activities, selling and marketing costs and our general and administrative expenses partially offset by $71.5 million of other income and $43.5 million of revenue.
The 2026 Convertible Notes accrue interest at an annual rate of 6% of its outstanding principal amount, payable at maturity, on March 1, 2026, unless earlier converted, repurchased or redeemed.
The Convertible Notes, as amended, accrue interest at an annual rate of 6% of its outstanding principal amount, payable at maturity, unless earlier converted, repurchased or redeemed.
Net cash used in investing activities was $0.8 million for the year ended December 31, 2020, consisting of cash used to purchase property and equipment. Financing activities.
Net cash used in investing activities was $1.2 million for the year ended December 31, 2021, consisting of cash used to purchase property and equipment. Financing activities.
Our net loss was primarily attributed to research and development activities, selling and marketing costs and our general and administrative expenses partially offset by $51.5 million of revenue in the period.
Our net loss was primarily attributed to research and development activities, selling and marketing costs and our general and administrative expenses partially offset by $51.5 million of revenue and $7.6 million of other income.
Our future capital requirements will depend on many factors, including: ● the level of product sales from DEXTENZA and any additional products for which we obtain marketing approval in the future and the level of third-party reimbursement of such products; ​ ● the costs of sales, marketing, distribution and other commercialization efforts with respect to DEXTENZA and any additional products for which we obtain marketing approval in the future, including cost increases due to inflation; ​ ● the progress, costs and outcome of our ongoing and planned clinical trials of our product candidates, in particular OTX-TKI for the treatment of wet AMD, diabetic retinopathy and OTX-TIC for the treatment of open-angle glaucoma or ocular hypertension; 113 Table of Contents ​ ● the scope, progress, costs and outcome of preclinical development and clinical trials of our other product candidates; ​ ● the costs, timing and outcome of regulatory review of our product candidates by the FDA, the EMA or other regulatory authorities; ​ ● the costs of scaling up our manufacturing processes and capabilities to support sales of commercial products, clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval and of expanding our facilities to accommodate this scale up and any corresponding growth in personnel; ​ ● the extent of our debt service obligations and our ability, if desired, to refinance any of our existing debt on terms that are more favorable to us; ​ ● the amounts we are entitled to receive, if any, as reimbursements for clinical trial expenditures, development, regulatory, and sales milestone payments, and royalty payments under our license agreement with AffaMed; ​ ● the extent to which we choose to establish additional collaboration, distribution or other marketing arrangements for our products and product candidates; ​ ● the costs and outcomes of legal actions and proceedings; ​ ● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and ​ ● the extent to which we acquire or invest in other businesses, products and technologies. ​ Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through equity offerings, debt financings, government or other third-party funding, collaborations, strategic alliances, licensing arrangements, royalty agreements, and marketing and distribution arrangements.
Our future capital requirements will depend on many factors, including: ​ ● the level of product sales from DEXTENZA and any additional products for which we obtain marketing approval in the future and the level of third-party reimbursement of such products; ● the costs of sales, marketing, distribution and other commercialization efforts with respect to DEXTENZA and any additional products for which we obtain marketing approval in the future, including cost increases due to inflation; ● the progress, costs and outcome of our ongoing and planned clinical trials of our product candidates, in particular AXPAXLI for the treatment of wet AMD and NPDR, and, subject to our evaluation of strategic alternatives, PAXTRAVA for the treatment of OAG or OHT; ● the scope, progress, costs and outcome of preclinical development and clinical trials of our other product candidates; ● the costs, timing and outcome of regulatory review of our product candidates by the FDA, the EMA or other regulatory authorities; ● the costs of scaling up our manufacturing processes and capabilities to support sales of commercial products, clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval and of expanding our facilities to accommodate this scale up and any corresponding growth in personnel; ● the extent of our debt service obligations and our ability, if desired, to refinance any of our existing debt on terms that are more favorable to us; ● the amounts we are entitled to receive, if any, as reimbursements for clinical trial expenditures, development, regulatory, and sales milestone payments, and royalty payments under our license agreement with AffaMed; ● the extent to which we choose to establish additional collaboration, distribution or other marketing arrangements for our products and product candidates; ● the costs and outcomes of any legal actions and proceedings; ● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and ● the extent to which we acquire or invest in other businesses, products and technologies.
Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. The covenants under our existing Credit Agreement and the pledge of our assets as collateral limit our ability to obtain additional debt financing.
Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Our net loss was primarily attributed to research and development activities, selling and marketing costs and our general and administrative expenses partially offset by $17.4 million of revenue in the period.
Our net loss was primarily attributed to research and development activities, selling and marketing costs and our general and administrative expenses partially offset by $58.4 million of revenue and other income of $1.6 million.
The following table summarizes our sources and uses of cash for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 ​ ​ (in thousands) ​ Cash used in operating activities ​ $ (59,603) ​ $ (65,550) ​ $ (53,554) ​ Cash used in investing activities ​ (3,715) ​ (1,194) ​ (841) ​ Cash provided by financing activities ​ 1,454 ​ 2,851 ​ 228,014 ​ Net decrease in cash and cash equivalents ​ $ (61,864) ​ $ (63,893) ​ $ 173,620 ​ ​ Operating activities.
Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 ​ ​ (in thousands) Cash used in operating activities ​ $ (70,234) ​ $ (59,603) ​ $ (65,550) Cash used in investing activities ​ (6,087) ​ (3,715) ​ (1,194) Cash provided by financing activities ​ 169,828 ​ 1,454 ​ 2,851 Net increase (decrease) in cash and cash equivalents ​ $ 93,507 ​ $ (61,864) ​ $ (63,893) ​ Operating activities.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, each security holder’s ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect each security holder’s rights as a common stockholder.
To the extent that we raise additional capital through the sale of equity, preferred equity or convertible debt securities, our securityholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing securityholders’ rights as holders or beneficial owners of our common stock.
Net cash used by changes in our operating assets and liabilities during the year ended December 31, 2021 consisted primarily of an increase of $8.9 million in accounts receivable partially offset by increases in accounts payable, accrued expenses and deferred revenue of $6.5 million.
Net cash used by unfavorable changes in our operating assets and liabilities during the year ended December 31, 2021 consisted primarily of an increase of $8.9 million in accounts receivable, partially offset by increases in accrued expenses and other current liabilities, excluding accrued non-cash interest, of $3.7 million, increases of accounts payable, excluding accounts payable related to additions to property and equipment, of $1.8 million, and increases of deferred revenue of $1.0 million.
Upon the occurrence of a Corporate Transaction (as defined in the 2026 Convertible Notes), the holder of a 2026 Convertible Note is entitled, at such holder’s option, to convert all of the outstanding principal amount of the 2026 Convertible Note in accordance 115 Table of Contents with the foregoing and receive an additional, “make-whole” cash payment in accordance with a table set forth in each 2026 Convertible Note. ​ Upon the occurrence of a Corporate Transaction, each holder of a 2026 Convertible Note has the option to require us to repurchase all or part of the outstanding principal amount of such 2026 Convertible Note at a repurchase price equal to 100% of the outstanding principal amount of the 2026 Convertible Note to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.
Upon the occurrence of a Corporate Transaction (as defined in the Convertible Notes), the holder of a Convertible Note is entitled, at such holder’s option, to convert all of the outstanding principal amount of the Convertible Note in accordance with the foregoing and receive an additional, “make-whole” cash payment in accordance with a table set forth in each Convertible Note.
We use internal resources in combination with third-party CROs, including clinical monitors and clinical research associates, to manage our clinical trials, monitor subject enrollment and perform data analysis for many of our clinical trials. These employees work across multiple development programs and, therefore, we do not track their costs by program.
We use internal resources in combination with third-party CROs, including clinical monitors and clinical research associates, to manage our clinical trials, monitor subject enrollment and perform data analysis for many of our clinical trials.
Net cash used in operating activities was $59.6 million for the year ended December 31, 2022, primarily resulting from our net loss of $71.0 million and by non-cash adjustments of $10.1 million and cash generated by changes in our operating assets and liabilities of $1.3 million.
Net cash used in operating activities was $59.6 million for the year ended December 31, 2022, primarily resulting from our net loss of $71.0 million, adjusted for changes in the fair value of our derivative liabilities of $13.8 million, partially offset by $25.2 million of other non-cash items and changes in operating assets and liabilities.
Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this annual report, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this annual report, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our consolidated financial statements. 120 Table of Contents Revenue Recognition We recognize product revenue from the sales of DEXTENZA product.
Net cash generated by changes in our operating assets and liabilities during the year ended December 31, 2022 consisted primarily of an increase in operating lease liability of $2.7 million, an increase of $1.6 million in accrued expenses, an increase in deferred revenue of $1.0 million and an decrease of prepaid expenses of $0.7 million partially offset by increase in inventory of $0.7 million, decrease in accounts payable of $0.6 million and an increase of accounts receivable of $0.2 million.
Net cash generated by changes in our operating assets and liabilities during the year ended December 31, 2022 consisted primarily of an increase of $1.6 million in accrued expenses, an increase in deferred revenue of $1.0 million and a decrease of prepaid expenses of $0.7 million partially offset by increase in inventory of $0.7 million, decrease in accounts payable of $0.6 million and an increase of accounts receivable of $0.2 million. 118 Table of Contents Net cash used in operating activities was $65.6 million for the year ended December 31, 2021, primarily resulting from our net loss of $6.6 million, adjusted for changes in the fair value of our derivative liabilities of $78.1 million, partially offset by $19.1 million of other non-cash items and changes in operating assets and liabilities.
We have generated limited revenues from ReSure Sealant to date and do not expect significant future sales. 105 Table of Contents In November 2018, the FDA approved DEXTENZA for the treatment of ocular pain following ophthalmic surgery. We entered into a limited number of arrangements with specialty distributors in the United States to distribute DEXTENZA.
In November 2018, the FDA approved DEXTENZA for the treatment of ocular pain following ophthalmic surgery. We entered into a limited number of arrangements with specialty distributors in the United States to distribute DEXTENZA.
We enter into contracts in the normal course of business to assist in the performance of our research and development activities and other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts which are not included in contractual obligations and commitments.
We enter into contracts in the normal course of business to assist in the performance of our research and development activities and other services and products for operating purposes.
Our net non-cash charges during the year ended December 31, 2022 primarily consisted of $17.0 million in stock-based compensation, the change in fair value of the derivative liability of $13.8 million, $4.9 million of non-cash interest expense and $2.1 million of depreciation expense.
Our other non-cash items during the year ended December 31, 2022 consisted primarily of $17.0 million of stock-based compensation expense, $4.9 million in non-cash interest expense, $2.1 million in depreciation and amortization expense, and $1.3 million net cash generated by favorable changes in our operating assets and liabilities.
We anticipate that our research and development expenses will increase in the future as we support our continued development of our product candidates. General and Administrative Expenses General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance, information technology, human resources and administrative functions.
We anticipate that our research and development expenses will increase in the future as we support our continued development of our product candidates. Selling and Marketing Expenses Selling and marketing expenses consist primarily of salaries and related costs for personnel in selling and marketing functions as well as consulting, advertising and promotion costs.
Contractual Obligations and Commitments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less Than ​ 1 to 3 ​ 3 to 5 ​ More than ​ Total 1 Year Years Years 5 Years ​ ​ (in thousands) Operating lease commitments ​ $ 13,669 ​ $ 2,663 ​ ​ 5,470 ​ ​ 4,820 ​ ​ 716 Credit Agreement ​ 30,619 ​ 1,994 ​ ​ 28,625 ​ ​ — ​ ​ — 2026 Convertible Notes ​ ​ 53,475 ​ ​ — ​ ​ — ​ ​ 53,475 ​ ​ — Total ​ $ 97,763 ​ $ 4,657 ​ $ 34,095 ​ $ 58,295 ​ $ 716 ​ The table above includes our enforceable and legally binding obligations and future commitments at December 31, 2022, as well as obligations related to contracts that we are likely to continue, regardless of the fact that they may be cancelable at December 31, 2022.
Contractual Obligations and Commitments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less Than ​ 1 to 3 ​ 3 to 5 ​ More than ​ Total 1 Year Years Years 5 Years ​ ​ (in thousands) Operating lease commitments ​ $ 10,713 ​ $ 2,504 ​ ​ 7,493 ​ ​ 716 ​ ​ — Barings Credit Agreement ​ 82,474 ​ — ​ ​ — ​ ​ — ​ ​ 82,474 Convertible Notes ​ ​ 61,535 ​ ​ — ​ ​ — ​ ​ — ​ ​ 61,535 Total ​ $ 154,722 ​ $ 2,504 ​ $ 7,493 ​ $ 716 ​ $ 144,009 ​ The table above includes our enforceable and legally binding obligations and future commitments at December 31, 2023, as well as obligations related to contracts that we are likely to continue, regardless of the fact that they may be cancelable at December 31, 2023.
We primarily derive our product revenues from the sale of DEXTENZA in the United States to a network of specialty distributors, who then sell DEXTENZA to ambulatory surgical centers, or ASCs; hospital out-patient departments, or HOPDs; and physicians’ offices.
Components of our Financial Performance Revenue We recognize product revenue when we sell DEXTENZA in the United States to a network of specialty distributors on a direct basis, who then resell the product to ASCs and hospital out-patient departments, or HOPDs, and physicians’ offices, and when we sell DEXTENZA on a direct basis to a small number of ASCs.
Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our original estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.
If actual results in the future vary from our original estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. 121 Table of Contents Trade Discounts and Allowances —We compensate (through trade discounts and allowances) our customers for sales order management, data, and distribution services.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022, which discussion is incorporated herein by reference and which is available free of charge on the SECs website at www.sec.gov. ​ Liquidity and Capital Resources We have a history of incurring significant operating losses.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023, which discussion is incorporated herein by reference and which is available free of charge on the SECs website at www.sec.gov. 113 Table of Contents ​ Liquidity and Capital Resources Sources of Liquidity We have financed our operations primarily through private placements of our preferred stock, public offerings and private placements of our common stock, borrowings under credit facilities, the private placements of our convertible notes, and sales of our products.
The growth in revenue for DEXTENZA was due to increased market acceptance and the continued commercialization efforts during 2022. ​ Collaboration Revenue ​ We recognized $1.0 million of collaboration revenue related to the performance obligation under our license agreement with AffaMed to conduct a Phase 2 clinical trial of OTX-TIC during the year ended December 31, 2022.
All of our product revenue, net, was attributable to sales of DEXTENZA. ​ Our total gross-to-net provisions for the years ended December 31, 2023 and 2022 were 30.1% and 24.9%, respectively, of gross DEXTENZA product sales. ​ Collaboration Revenue ​ We recognized $0.6 million of collaboration revenue related to the performance obligation under our license agreement with AffaMed to conduct a Phase 2 clinical trial of PAXTRAVA during the year ended December 31, 2023 compared to $1.0 million in the year ended December 31, 2022.
We have not assumed the achievement of these milestones in the table above. ​ On March 2019, we issued the 2026 Convertible Notes pursuant to a note purchase agreement, or the Purchase Agreement, with Cap 1 LLC, an affiliate of Summer Road LLC .
The Barings Credit Agreement also includes customary affirmative and negative covenants. 114 Table of Contents In March 2019, we issued the Convertible Notes pursuant to a note purchase agreement, or the Purchase Agreement, with Cap 1 LLC, an affiliate of Summer Road LLC .
General and administrative expenses also include insurance, facility-related costs and professional fees for legal, patent, consulting and accounting and audit services. 104 Table of Contents We anticipate that our general and administrative expenses will increase in the future as we support our continued development and commercialization of our product candidates.
We anticipate that our general and administrative expenses will increase in the future as we support our continued development and commercialization of our product candidates.
Our net non-cash charges during the year ended December 31, 2021 primarily consisted of the change in fair value of the derivative liability of $78.1 million, $15.0 million of stock-based compensation expense, $4.6 111 Table of Contents million of non-cash interest expense and $2.4 million of depreciation expense.
Our other non-cash items during the year ended December 31, 2021 consisted primarily of $15.0 million of stock-based compensation expense, $4.6 million in non-cash interest expense, and $2.4 million in depreciation and amortization expense, partially offset by $2.9 million unfavorable changes in our operating assets and liabilities.
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 future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves. ​ Since our inception in 2006, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in each year or our earned research and development tax credits, due to our uncertainty of realizing a benefit from those items.
If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product development 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.
For the year ended December 31, 2022, we incurred $11.2 million in direct research and development expenses for our product candidates compared to $16.9 million for the year ended December 31, 2021. The decrease of $5.7 million is related to timing and start of our various clinical trials for our product candidates.
Within research and development expenses, expenses for clinical programs increased $7.2 million, unallocated expenses increased $0.8 million, and expenses for preclinical programs decreased $0.4 million. For the year ended December 31, 2023, we incurred $18.4 million in direct research and development expenses for our products and product candidates compared to $11.2 million for the year ended December 31, 2022.
There was no collaboration revenue during the year ended December 31, 2021. ​ Research and Development Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ December 31, ​ Increase ​ ​ 2022 2021 (Decrease) ​ ​ (in thousands) ​ Direct research and development expenses by program: ​ ​ ​ ​ OTX-TKI for diabetic retinopathy ​ $ 659 ​ $ — ​ $ 659 ​ OTX-TKI for wet AMD ​ ​ 5,296 ​ ​ 4,464 ​ ​ 832 ​ OTX-TIC for glaucoma or ocular hypertension ​ 2,835 ​ 3,127 ​ (292) ​ OTX-CSI for treatment of dry eye disease ​ 453 ​ 3,367 ​ (2,914) ​ OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease ​ 328 ​ 3,963 ​ (3,635) ​ DEXTENZA for post-surgical ocular inflammation and pain ​ ​ 1,649 ​ ​ 1,711 ​ ​ (62) ​ DEXTENZA for ocular itching associated with allergic conjunctivitis ​ ​ 21 ​ ​ 121 ​ ​ (100) ​ ReSure Sealant ​ ​ — ​ ​ 59 ​ ​ (59) ​ Preclinical programs ​ ​ 1,947 ​ ​ 875 ​ ​ 1,072 ​ Unallocated expenses: ​ ​ ​ ​ ​ ​ Personnel costs ​ 25,106 ​ 20,382 ​ 4,724 ​ All other costs ​ 15,168 ​ 12,014 ​ 3,154 ​ Total research and development expenses ​ $ 53,462 ​ $ 50,083 ​ $ 3,379 ​ ​ Research and development expenses were $53.5 million for the year ended December 31, 2022, compared to $50.1 million for the year ended December 31, 2021.
We recognize collaboration revenue based on a cost-to-cost method. ​ 111 Table of Contents Research and Development Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ Increase ​ 2023 2022 (Decrease) ​ ​ (in thousands) Direct research and development expenses by program: ​ ​ ​ AXPAXLI for wet AMD ​ ​ 8,750 ​ ​ 5,296 ​ ​ 3,454 PAXTRAVA for glaucoma or ocular hypertension ​ 3,600 ​ 2,835 ​ 765 AXPAXLI for diabetic retinopathy ​ $ 2,868 ​ $ 659 ​ $ 2,209 DEXTENZA for post-surgical ocular inflammation and pain ​ ​ 2,224 ​ ​ 1,649 ​ ​ 575 OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease ​ 837 ​ 328 ​ 509 OTX-CSI for treatment of dry eye disease ​ 161 ​ 453 ​ (292) DEXTENZA for ocular itching associated with allergic conjunctivitis ​ ​ — ​ ​ 21 ​ ​ (21) Preclinical programs ​ ​ 1,501 ​ ​ 1,947 ​ ​ (446) Unallocated expenses: ​ ​ ​ ​ ​ Personnel costs ​ 27,068 ​ 25,106 ​ 1,962 All other costs ​ 14,046 ​ 15,168 ​ (1,122) Total research and development expenses ​ $ 61,055 ​ $ 53,462 ​ $ 7,593 ​ Research and development expenses were $61.1 million and $53.5 million for the years ended December 31, 2023 and 2022, respectively, reflecting an increase of $7.6 million year-over-year.
Net cash used in operating activities was $65.6 million for the year ended December 31, 2021, primarily resulting from our net loss of $6.6 million and by non-cash adjustments of $56.1 million and cash used by changes in our operating assets and liabilities of $2.9 million.
Net cash used in operating activities was $70.2 million for the year ended December 31, 2023, primarily resulting from our net loss of $80.7 million, adjusted for net gains on extinguishment of debt of $14.2 million, partially offset by changes in the fair value of our derivative liabilities of $5.2 million and $19.5 million of other non-cash items and changes in operating assets and liabilities.
Selling and Marketing Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ December 31, ​ Increase ​ ​ 2022 2021 (Decrease) ​ ​ (in thousands) Personnel related (including stock-based compensation) ​ $ 26,679 ​ $ 22,862 ​ $ 3,817 ​ Professional fees ​ 9,077 ​ 8,074 ​ 1,003 ​ Facility related and other ​ 4,166 ​ 4,254 ​ (88) ​ Total selling and marketing expenses ​ $ 39,922 ​ $ 35,190 ​ $ 4,732 ​ ​ 109 Table of Contents Selling and marketing expenses were $39.9 million for the year ended December 31, 2022, compared to $35.2 million for the year ended December 31, 2021.
Selling and Marketing Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ Increase ​ 2023 2022 (Decrease) ​ ​ (in thousands) Personnel related (including stock-based compensation) ​ $ 27,434 ​ $ 26,679 ​ $ 755 Professional fees ​ 8,287 ​ 9,077 ​ (790) Facility related and other ​ 4,828 ​ 4,166 ​ 662 Total selling and marketing expenses ​ $ 40,549 ​ $ 39,922 ​ $ 627 ​ Selling and marketing expenses were $40.5 million and $39.9 million for the years ended December 31, 2023 and 2022, respectively, reflecting an increase of $0.6 million year-over-year.
We expect our selling and marketing expenses to increase in 2023 and beyond as we continue to support the commercialization of DEXTENZA. ​ General and Administrative Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ December 31, ​ Increase ​ ​ 2022 2021 (Decrease) ​ ​ (in thousands) Personnel related (including stock-based compensation) ​ $ 18,227 ​ $ 16,929 ​ $ 1,298 ​ Professional fees ​ 11,634 ​ 12,402 ​ (768) ​ Facility related and other ​ 2,363 ​ 2,549 ​ (186) ​ Total general and administrative expenses ​ $ 32,224 ​ $ 31,880 ​ $ 344 ​ ​ ​ General and administrative expenses were $32.2 million for the year ended December 31, 2022, compared to $31.9 million for the year ended December 31, 2021.
The increase was primarily due to an increase of $0.8 million in personnel costs, including stock-based compensation, as we expanded our field-based team to support the commercialization of DEXTENZA, and an increase in facility-related and other costs of $0.7 million, partially offset by a decrease in professional fees, including consulting, trade shows, and conferences, of $0.8 million. 112 Table of Contents We expect our selling and marketing expenses to continue to increase for the remainder of 2024 and beyond as we continue to support the commercialization of DEXTENZA. ​ General and Administrative Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ Increase ​ 2023 2022 (Decrease) ​ ​ (in thousands) Personnel related (including stock-based compensation) ​ $ 21,356 ​ $ 18,227 ​ $ 3,129 Professional fees ​ 10,821 ​ 11,634 ​ (813) Facility related and other ​ 1,763 ​ 2,363 ​ (600) Total general and administrative expenses ​ $ 33,940 ​ $ 32,224 ​ $ 1,716 ​ General and administrative expenses were $33.9 million and $32.2 million for the years ended December 31, 2023 and 2022, respectively, reflecting an increase of $1.7 million year-over-year.
Operating lease commitments represent payments due under our leases of office, laboratory and manufacturing space in Bedford, Massachusetts and certain office equipment under operating leases that expire in March 2024, July 2027, and July 2028. We expect lease costs under these commitments to total $2.7 million in 2023 and increase annually.
These contracts generally provide for termination on notice, and therefore are cancelable contracts which are not included in contractual obligations and commitments. 119 Table of Contents Operating lease commitments represent payments due under our leases of office, laboratory and manufacturing space in Bedford, Massachusetts and certain office equipment under operating leases that expire in March 2024, July 2027, and July 2028.
Overview We are a biopharmaceutical company focused on the formulation, development, and commercialization of innovative therapies for diseases and conditions of the eye using our proprietary bioresorbable hydrogel-based formulation technology.
Overview Our Company We are a biopharmaceutical company committed to enhancing people’s vision and quality of life through the development and commercialization of innovative therapies for diseases and conditions of the eye, with a specific focus on retinal disease.
Our net non-cash charges during the year ended December 31, 2020 primarily consisted of the change in fair value of the derivative liability of $86.2 million, $7.5 million of stock-based compensation expense, $4.4 million of non-cash interest expense and $2.8 million of depreciation expense.
Our other non-cash items during the year ended December 31, 2023 consisted primarily of $17.8 million of stock-based compensation expense, $6.1 million in non-cash interest expense, and $3.0 million in depreciation and amortization expense, partially offset by $7.4 million unfavorable changes in our operating assets and liabilities.
Net cash provided by financing activities for the year ended December 31, 2020 was $228.0 million and consisted primarily of proceeds from the May 2020 Offering, the October 2020 Offering and the December 2020 Offering of an aggregate of $210.0 million, net of underwriting discounts and commissions and offering expenses; proceeds from sales under the 2019 Sales Agreement of $14.4 million, net of commissions and other offering expenses; proceeds from the exercise of stock options of $2.6 million; and proceeds from the issuance of common stock pursuant to our employee stock purchase plan of $0.8 million.
Net cash provided by financing activities for the year ended December 31, 2023 was $169.8 million and consisted of proceeds from the issuance of common stock in public offerings of $117.3 million, drawings under the Barings Credit Facility of $77.3 million, net of issuance costs, proceeds from the issuance of common stock pursuant to our employee stock purchase plan of $0.9 million and proceeds from the exercise of stock options of $0.6 million, partially offset by repayment of the MidCap Credit Facility of $26.1 million.
In the fourth quarter of 2021, we received a $1 million milestone payment upon the approval by the FDA of an sNDA for DEXTENZA to include the treatment of ocular itching associated with allergic conjunctivitis as an additional indication; in the second quarter of 2022, we received a $2 million clinical support payment in connection with dosing the first subject in a Phase 2 clinical trial evaluating OTX-TIC for the treatment of open-angle glaucoma or ocular hypertension.
In the second quarter of 2022, we received a $2 million clinical support payment in connection with dosing the first subject in a Phase 2 clinical trial evaluating PAXTRAVA for the treatment of OAG or OHT.
The changes in fair value are recorded through the statement of operations and comprehensive loss and are presented under the caption change in fair value of derivative liability. Our derivative liability calculations are further described under the heading “—Critical Accounting Policies and Significant Judgments and Estimates—Derivative Liability” below.
The changes in fair value of these derivative liabilities are recorded through the consolidated statement of operations and comprehensive loss and are presented under the caption change in fair value of derivative liabilities. Gains and Losses from Debt Extinguishment .
Net cash provided by changes in our operating assets and liabilities during the year ended December 31, 2020 consisted primarily of a $12.0 million increase in deferred revenue partially offset by a $9.7 million increase in accounts receivable. Investing activities.
Net cash used by unfavorable changes in our operating assets and liabilities during the year ended December 31, 2023 consisted primarily of net increases of prepaid expenses and other current assets of $5.0 million, net increases in accounts receivable of $4.9 million, partially offset by increases of accounts payable, excluding accounts payable related to additions to property and equipment, of $1.8 million, and increases in accrued expenses and other current liabilities, excluding accrued non-cash interest, of $0.8 million.
The successful development and commercialization of our products or product candidates is highly uncertain.
These employees work across multiple development programs and, therefore, we do not track their costs by program. 109 Table of Contents The successful development and commercialization of our products or product candidates is highly uncertain.
Cash Flows Based on our current plans and forecasted expenses, which includes estimates related to anticipated cash inflows from DEXTENZA product sales and cash outflows from operating expenses, we believe that our existing cash and cash equivalents, as of December 31, 2022, will enable us to fund our planned operating expenses, debt service obligations and capital expenditure requirements into the middle of 2024, excluding our planned pivotal clinical trials for OTX-TKI as we do not intend to initiate such trials without receipt of additional funding .
Based on our current operating plan, which includes estimates of anticipated cash inflows from DEXTENZA product sales and cash outflows from operating expenses and capital expenditures and reflects our observance of the minimum liquidity covenant of $20.0 million under the Barings Credit Agreement, we believe that our existing cash and cash equivalents as of December 31, 2023, plus the cash received from the 2024 Private Placement of our common stock in February 2024 of $325.0 million before deducting placement agent fees and other offering expenses, will enable us to fund our planned operating expenses, debt service obligations and capital expenditure requirements at least into 2028.
Results of Operations Comparison of the Years Ended December 31, 2022 and December 31, 2021 The following table summarizes our results of operations for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ December 31, ​ Increase ​ 2022 2021 (Decrease) ​ ​ (in thousands) Revenue: ​ ​ ​ ​ Product revenue, net ​ $ 50,457 ​ $ 43,522 ​ $ 6,935 ​ Collaboration revenue ​ 1,037 ​ — ​ 1,037 ​ Total revenue, net ​ 51,494 ​ 43,522 ​ 7,972 ​ Costs and operating expenses: ​ ​ ​ ​ Cost of product revenue ​ 4,540 ​ 4,406 ​ 134 ​ Research and development ​ 53,462 ​ 50,083 ​ 3,379 ​ Selling and marketing ​ 39,922 ​ 35,190 ​ 4,732 ​ General and administrative ​ 32,224 ​ 31,880 ​ 344 ​ Total costs and operating expenses ​ 130,148 ​ 121,559 ​ 8,589 ​ Loss from operations ​ (78,654) ​ (78,037) ​ (617) ​ Other income (expense): ​ ​ ​ ​ Interest income ​ 798 ​ 33 ​ 765 ​ Interest expense ​ (7,022) ​ (6,671) ​ (351) ​ Change in fair value of derivative liability ​ ​ 13,841 ​ 78,121 ​ ​ (64,280) ​ Other income (expense), net ​ (1) ​ 1 ​ (2) ​ Total other income (expense), net ​ 7,616 ​ 71,484 ​ (63,868) ​ Net loss ​ $ (71,038) ​ $ (6,553) ​ $ (64,485) ​ ​ Gross-to-Net Deductions ​ We record DEXTENZA product sales net of estimated chargebacks, rebates, distribution fees and product returns.
In August 2023, we also extinguished our obligations under the MidCap Credit Facility, resulting in a loss on extinguishment. 110 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2023 and December 31, 2022 The following table summarizes our results of operations for the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ Increase ​ 2023 2022 (Decrease) ​ ​ (in thousands) Revenue: ​ ​ ​ Product revenue, net ​ $ 57,870 ​ $ 50,457 ​ $ 7,413 Collaboration revenue ​ 573 ​ 1,037 ​ (464) Total revenue, net ​ 58,443 ​ 51,494 ​ 6,949 Costs and operating expenses: ​ ​ ​ Cost of product revenue ​ 5,281 ​ 4,540 ​ 741 Research and development ​ 61,055 ​ 53,462 ​ 7,593 Selling and marketing ​ 40,549 ​ 39,922 ​ 627 General and administrative ​ 33,940 ​ 32,224 ​ 1,716 Total costs and operating expenses ​ 140,825 ​ 130,148 ​ 10,677 Loss from operations ​ (82,382) ​ (78,654) ​ (3,728) Other income (expense): ​ ​ ​ Interest income ​ 3,983 ​ 798 ​ 3,185 Interest expense ​ (11,338) ​ (7,022) ​ (4,316) Change in fair value of derivative liabilities ​ ​ (5,188) ​ 13,841 ​ ​ (19,029) Gains and losses on extinguishment of debt, net ​ ​ 14,190 ​ — ​ ​ 14,190 Other expense, net ​ (1) ​ (1) ​ — Total other income, net ​ 1,646 ​ 7,616 ​ (5,970) Net loss ​ $ (80,736) ​ $ (71,038) ​ $ (9,698) ​ Product Revenue, net ​ Our product revenue, net was $57.9 million and $50.5 million for the years ended December 31, 2023 and 2022, respectively, reflecting an increase of $7.4 million year-over-year.
Since inception, we have incurred significant operating losses. Our net losses were $71.0 million, $6.6 million and $155.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Each pre-funded warrant has an exercise price of $0.001 per share, is currently exercisable and will remain exercisable until exercised in full. ​ ​ Funding Requirements We have a history of incurring significant operating losses. Our net losses were $80.7 million, $71.0 million, and $6.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.
We are currently commercializing DEXTENZA, an intracanalicular insert for the treatment of both post-surgical ocular inflammation and pain and ocular itching associated with allergic conjunctivitis, in the United States.
Food and Drug Administration, or FDA, for the treatment of ocular inflammation and pain following ophthalmic surgery and ocular itching associated with allergic conjunctivitis.
Our net losses were $71.0 million, $6.6 million, and $155.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, we had an accumulated deficit of $616.8 million.
As of December 31, 2023, we had an accumulated deficit of $697.6 million.
Other Income (Expense), Net Other income, net was $7.6 million for the year ended December 31, 2022, compared to other income, net of $71.5 million for the year ended December 31, 2021.
Interest expense was $11.3 million and $7.0 million for the years ended December 31, 2023 and 2022, respectively, reflecting an increase of $4.3 million year-over-year.
On June 4, 2021, which we refer to as the Closing Date, we entered into a Fourth Amended and Restated Credit and Security Agreement, or the Fourth Amendment, with MidCap Financial Trust, as administrative agent, or the Administrative Agent, and the lenders party thereto, or the Lenders, which amended and restated our Credit Agreement to refinance our Credit Facility. 110 Table of Contents ​ Under our Credit Agreement, we have a term loan in the aggregate principal amount of approximately $20.8 million, which was rolled over from our prior borrowings under our Credit Facility, and an additional term loan in the principal amount of approximately $4.2 million.
In connection with entering the Barings Credit Facility, in August 2023, we paid MidCap Financial Trust, as administrative agent, and our other lenders an aggregate of $26.2 million in satisfaction of our obligations under our prior credit facility, which we refer to as the MidCap Credit Facility.
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Our mission is to build an ophthalmology-focused biopharmaceutical company that capitalizes on the gaps that we believe increasingly exist in the ophthalmology sector between single product companies and large, multi-product pharmaceutical companies. Our current products and product candidates in clinical development incorporate therapeutic agents that have previously received regulatory approval from the U.S.
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Our program for retinal disease is led by AXPAXLI (axitinib intravitreal implant, also known as OTX-TKI), which is based on our ELUTYX proprietary bioresorbable hydrogel-based formulation technology.
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Food and Drug Administration, or FDA, including small molecules, into our proprietary bioresorbable hydrogel-based formulation technology, with the goal of providing local programmed release to tailor the duration and amount of drug to be delivered to the eye.
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We are currently conducting a pivotal Phase 3 clinical trial to evaluate AXPAXLI for the treatment of wet age-related macular degeneration, or wet AMD, which we refer to as the SOL-1 trial, and a Phase 1 clinical trial for the treatment of diabetic retinopathy.
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We believe that our local programmed-release drug delivery technology has the potential to treat conditions and diseases of both the front and the back of the eye and can be administered through a range of different modalities including intravitreal implants, intracameral implants and intracanalicular inserts.
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Our clinical portfolio also includes PAXTRAVA (travoprost intracameral implant, also known as OTX-TIC), which is currently in Phase 2 clinical development for the treatment of primary open-angle glaucoma, or OAG, or ocular hypertension, or OHT. ​ Our expertise in the formulation, development and commercialization of innovative therapies and our ELUTYX platform supported the development and launch of our first commercial drug product, DEXTENZA, a corticosteroid approved by the U.S.
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We also have product candidates in preclinical and clinical development: ● OTX-TKI, an axitinib intravitreal implant being developed for the treatment of wet AMD, diabetic retinopathy and other retinal diseases; ​ ● OTX-TIC, a travoprost intracameral implant being developed for the reduction of intraocular pressure, or IOP, in patients with primary open-angle glaucoma or ocular hypertension; ​ ● OTX-DED, a dexamethasone intracanalicular insert being developed for the short-term treatment of the signs and symptoms of dry eye disease; and ​ ● OTX-CSI, a cyclosporine intracanalicular insert being developed for the chronic treatment of dry eye disease; ​ ● A complement inhibitor program in preclinical development for the treatment of dry age-related macular degeneration, or dry AMD; and ​ ● A gene delivery program in preclinical development using our hydrogel technology to control the release of vectors such as adeno-associated virus to ocular tissues for the treatment of inherited and acquired ocular diseases, including dry or wet AMD. ​ AffaMed License Agreement In October 2020, we entered into a license agreement and collaboration with AffaMed Therapeutics Limited, or AffaMed, for the development and commercialization of DEXTENZA and OTX-TIC in mainland China , Hong Kong , Macau , and Taiwan ; South Korea and the countries of the Association of Southeast Asian Nations.
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We are also developing two other clinical-stage assets, OTX-DED (dexamethasone intracanalicular insert) for the short-term treatment of the signs and symptoms of dry eye disease, and OTX-CSI (cyclosporine intracanalicular insert) for the chronic treatment of dry eye disease, which we collectively refer to as our Dry Eye Programs, and several preclinical programs. ​ Key Business and Financial Developments Board of Directors and Leadership Updates In February 2024, we expanded our leadership team and added Pravin Dugal, M.D. as Executive Chairman on a full-time basis.
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Under the terms of the agreement, we received an upfront payment of $12 million and became eligible to receive development, regulatory and commercial milestone payments and clinical development support payments of up to $91 million in the aggregate, as 100 Table of Contents well as royalties from future product sales.

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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 changeChanges of the fair value of the Derivative Liability have no impact on anticipated cash outflows. ​ As of December 31, 2022, we had a variable interest rate-based note payable with a principal amount of $25.0 million.
Biggest changeAs of December 31, 2023, a 10% increase or decrease of the interest rate used in the valuation model would not have a material effect on the fair value of the Royalty Fee Derivative Liability. Changes of the fair value of the Royalty Fee Derivative Liability have no impact on anticipated cash outflows.
We have policies requiring us to invest in high-quality issuers, limit our exposure to any individual issuer, and ensure adequate liquidity. Our primary exposure to market risk is interest rate sensitivity, which is 116 Table of Contents affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities.
We have policies requiring us to invest in high-quality issuers, limit our exposure to any individual issuer, and ensure adequate liquidity. Our primary exposure to market risk related to our cash and cash equivalents is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk related to changes in interest rates. As of December 31, 2022, we had cash and cash equivalents of $102.3 million, which includes cash in operating bank accounts, investments in money market accounts, and money market funds.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk related to changes in interest rates. As of December 31, 2023, we had cash and cash equivalents of $195.8 million, which includes cash in operating bank accounts, and investments in money market funds.
Expected cash outflows from this financial instrument fluctuate based on changes in the U.S. dollar-denominated LIBOR index which is, among other factors, affected by the general level of U.S. and international central bank interest rates.
Expected cash outflows from this financial instrument fluctuate based on changes in the Secured Overnight Financing Rate, or SOFR, which is, among other factors, affected by the general level of U.S. and international central bank interest rates.
As of December 31, 2022, an immediate 100 basis point increase or decrease in the U.S. dollar-denominated LIBOR index would not have a material effect on the anticipated cash outflows from this instrument. ​
As of December 31, 2023, an immediate 100 basis point increase or decrease in the SOFR would not have a material effect on the anticipated cash outflows from this instrument.
Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio. ​ We do not enter into financial instruments for trading or speculative purposes. ​ We account for the conversion option embedded in our 2026 Convertible Notes as a separate financial instrument, measured at fair value, using a binomial lattice model, which we refer to as the Derivative Liability.
Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio. We do not enter into financial instruments for trading or speculative purposes.
As of December 31, 2022, the Derivative Liability was valued at $6.4 million. As of December 31, 2022, a 10% increase or decrease of the main inputs to the valuation model would not have a material effect on the fair value of the Derivative Liability.
As of December 31, 2023, a 10% increase or decrease of the main inputs to the valuation model would not have a material effect on the fair value of the Conversion Option Derivative Liability. Changes of the fair value of the Conversion Option Derivative Liability have no impact on anticipated cash outflows. ​
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As of December 31, 2023, we had a secured term loan facility with a principal amount of $82.5 million under a credit and security agreement with Barings Finance LLC and the lenders party thereto, or the Barings Credit Agreement.
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We account for the obligation to pay royalty fees embedded in the Barings Credit Agreement as a separate financial instrument, measured at fair value, using a Monte Carlo simulation, which we refer to as the Royalty Fee 123 Table of Contents Derivative Liability. As of December 31, 2023, the Royalty Fee Derivative Liability was valued at $12.4 million.
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We account for the conversion option embedded in our unsecured senior subordinated convertible notes, or the Convertible Notes, as a separate financial instrument, measured at fair value, using a binomial lattice model, which we refer to as the Conversion Option Derivative Liability. As of December 31, 2023, the Conversion Option Derivative Liability was valued at $17.6 million.

Other OCUL 10-K year-over-year comparisons