UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
Alimera Sciences, Inc.
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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| (Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | | The (Nasdaq Global Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| | ☒ | Smaller reporting company | | |
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 2, 2024, there were
QUARTERLY REPORT ON FORM 10-Q
INDEX
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND PROJECTIONS
Various statements in this report of Alimera Sciences, Inc. (“we,” “our,” “Alimera” or the “Company”) are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this report, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. These statements are subject to risks and uncertainties (some of which are beyond our control) and are based on information currently available to our management. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “forecast,” “outlook,” “contemplates,” “predict,” “project,” “aim,” “seek,” “target,” “likely,” “remain,” “potential,” “continue,” “ongoing,” “will,” “will likely result,” “will continue,” “would,” “should,” “could,” or the variation or the negative of these terms and similar expressions or words, identify forward-looking statements. The events and circumstances reflected in our forward-looking statements may not occur and actual results could differ materially from those projected in our forward-looking statements.
All written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We caution investors not to rely on the forward-looking statements we make or that are made on our behalf as predictions of future events. We undertake no obligation and specifically decline any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
We encourage you to read management’s discussion and analysis of our financial condition and results of operations and our accompanying unaudited interim condensed consolidated financial statements and notes thereto (“Interim Financial Statements”) contained in this Quarterly Report on Form 10-Q and our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. There can be no assurance that we will in fact achieve the actual results or developments we anticipate or, even if we do substantially realize them, that they will have the expected consequences to, or effects on, us. Therefore, we can give no assurances that we will achieve the outcomes stated in those forward-looking statements, projections and estimates.
ITEM 1. Financial Statements
ALIMERA SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (In thousands, except share and per share data) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Inventory | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets, net | ||||||||
| Intangible assets, net | ||||||||
| Deferred tax asset | ||||||||
| Warrant asset | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued licensor payment | ||||||||
| Finance lease obligations | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Notes payable, net of discount | ||||||||
| Accrued licensor payments | ||||||||
| Other non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (note 8) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value — shares authorized at June 30, 2024 and December 31, 2023, issued | ||||||||
| Common stock, $ par value — shares authorized, shares issued and outstanding at June 30, 2024 and shares issued and outstanding at December 31, 2023 | ||||||||
| Common stock warrants | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See Notes to Unaudited Interim Condensed Consolidated Financial Statements (“Interim Financial Statements”)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended |
Six Months Ended |
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| June 30, |
June 30, |
|||||||||||||||
| 2024 |
2023 |
2024 |
2023 |
|||||||||||||
| (In thousands, except share and per share data) |
||||||||||||||||
| Net revenue |
$ | $ | $ | $ | ||||||||||||
| Cost of goods sold, excluding depreciation and amortization |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Gross profit |
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| Operating expenses: |
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| Research, development and medical affairs expenses |
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| General and administrative expenses |
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| Sales and marketing expenses |
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| Depreciation and amortization |
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| Total operating expenses |
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| Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Interest expense and other, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Unrealized foreign currency loss, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss on extinguishment of debt |
( |
) | ( |
) | ||||||||||||
| Change in fair value of common stock warrant |
( |
) | ( |
) | ||||||||||||
| Change in fair value of warrant asset |
( |
) | ( |
) | ( |
) | ||||||||||
| Net loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax benefit (provision) |
( |
) | ( |
) | ||||||||||||
| Net loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Preferred stock dividends |
( |
) | ( |
) | ||||||||||||
| Net loss applicable to common stockholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net loss per share — basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average shares outstanding — basic and diluted |
||||||||||||||||
See Notes to Interim Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
| Three Months Ended |
Six Months Ended |
|||||||||||||||
| June 30, |
June 30, |
|||||||||||||||
| 2024 |
2023 |
2024 |
2023 |
|||||||||||||
| (In thousands) |
||||||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Other comprehensive (loss) income: |
||||||||||||||||
| Foreign currency translation adjustments |
( |
) | ( |
) | ||||||||||||
| Total other comprehensive (loss) income |
( |
) | ( |
) | ||||||||||||
| Comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
See Notes to Interim Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Six Months Ended |
||||||||
| June 30, |
||||||||
| 2024 |
2023 |
|||||||
| (In thousands) |
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| Cash flows from operating activities: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Depreciation and amortization |
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| Loss on extinguishment of debt |
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| Provision for credit losses |
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| Unrealized foreign currency transaction loss, net |
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| Amortization of debt discount and deferred financing costs |
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| Stock-based compensation expense |
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| Change in fair value of warrant asset |
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| Change in fair value of warrant liability |
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| Changes in assets and liabilities: |
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| Accounts receivable |
( |
) | ( |
) | ||||
| Prepaid expenses and other current assets |
( |
) | ( |
) | ||||
| Inventory |
( |
) | ||||||
| Accounts payable |
( |
) | ||||||
| Accrued expenses and other current liabilities |
( |
) | ||||||
| Other non-current liabilities |
||||||||
| Net cash provided by (used in) operating activities |
( |
) | ||||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Purchase of intangible assets |
( |
) | ||||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities: |
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| Repurchase of Series A Preferred Stock |
( |
) | ||||||
| Proceeds from issuance of Series B Convertible Preferred Stock |
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| Series B Convertible Preferred Stock issuance costs |
( |
) | ||||||
| Proceeds from issuance of common stock |
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| Proceeds from exercise of stock options |
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| Repurchase of common stock |
( |
) | ||||||
| Issuance of debt |
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| Payment of debt costs |
( |
) | ( |
) | ||||
| Payment of accrued licensor obligations |
( |
) | ||||||
| Payment of SLR exit fee agreements |
( |
) | ||||||
| Payment of finance lease obligations |
( |
) | ( |
) | ||||
| Net cash (used in) provided by financing activities |
( |
) | ||||||
| Effect of exchange rates on cash and cash equivalents and restricted cash |
( |
) | ||||||
| Net change in cash and cash equivalents and restricted cash |
( |
) | ||||||
| Cash and cash equivalents and restricted cash — beginning of period |
||||||||
| Cash and cash equivalents and restricted cash — end of period |
$ | $ | ||||||
| Supplemental cash flow information: |
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| Cash paid for interest |
$ | $ | ||||||
| Cash paid for income taxes |
$ | $ | ||||||
| Supplemental noncash investing and financing activities: |
||||||||
| Note payable end of term payment accrued but unpaid |
$ | $ | ||||||
See Notes to Interim Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
| Series A |
Series B |
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| Convertible |
Convertible |
Accumulated |
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| Common Stock |
Preferred Stock |
Preferred Stock |
Additional |
Common |
Other |
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| Paid-In |
Stock |
Accumulated |
Comprehensive |
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| Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Capital |
Warrants |
Deficit |
Loss |
Total |
||||||||||||||||||||||||||||||||||
| 2023 |
(In thousands, except share data) |
|||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||
| Issuance of common stock, net of issuance costs |
( |
) | ||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||||||||||||||||
| Repurchase of Preferred Stock - Series A |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||
| Issuance of Preferred Stock - Series B |
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| Preferred stock dividends |
— | — | — | ( |
) | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments |
— | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of issuance costs |
||||||||||||||||||||||||||||||||||||||||||||
| Forfeitures of restricted stock |
( |
) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of Preferred Stock - Series B |
||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends |
— | — | — | ( |
) | |||||||||||||||||||||||||||||||||||||||
| Forfeiture of common stock warrants |
— | — | — | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||
| 2024 |
||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||
| Issuance of common stock, net of issuance costs |
||||||||||||||||||||||||||||||||||||||||||||
| Stock option exercises |
||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of issuance costs |
||||||||||||||||||||||||||||||||||||||||||||
| Forfeitures of restricted stock |
( |
) | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||
See Notes to Interim Financial Statements.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
1. NATURE OF OPERATIONS
Alimera Sciences, Inc., together with its wholly-owned subsidiaries (the “Company”), is a global pharmaceutical company that specializes in the commercialization and development of ophthalmic retinal pharmaceuticals. The Company was formed on June 4, 2003, under the laws of the State of Delaware.
The Company presently focuses on diseases affecting the retina, because the Company believes these diseases are not well treated with current therapies and affect millions of people globally. The Company’s commercialized products are ILUVIEN® (fluocinolone acetonide intravitreal implant) 0.19 mg, which has received marketing authorization and reimbursement in the United States (“U.S.”) and
In the U.S. and certain other countries outside Europe, ILUVIEN is indicated for the treatment of DME in patients who have been previously treated with a course of corticosteroids and did not have a clinically significant rise in intraocular pressure. In
The Company markets ILUVIEN directly in the U.S., Germany, the United Kingdom (“U.K.”), Portugal and Ireland. In addition, the Company has entered into various agreements under which distributors are providing or will provide regulatory, reimbursement and sales and marketing support for ILUVIEN in Austria, Belgium, the Czech Republic, Denmark, Finland, France, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden, Switzerland, Australia, New Zealand and several countries in the Middle East. In addition, the Company has granted an exclusive license to Ocumension Therapeutics (“Ocumension”) for the development and commercialization of the Company’s 0.19 mg fluocinolone acetonide intravitreal injection in China, East Asia and the Western Pacific. As of June 30, 2024, the Company has recognized sales of ILUVIEN to its international distributors in the Middle East, China, Austria, Belgium, Czech Republic, France, Italy, Luxembourg, Spain, the Netherlands, and certain Nordic countries.
In the U.S., YUTIQ is indicated for the treatment and prevention of chronic NIU-PS of the eye. The Company has the rights to commercialize YUTIQ under a product rights agreement dated May 17, 2023 (the “Product Rights Agreement”) with EyePoint Pharmaceuticals, Inc. (“EyePoint Parent”) in the entire world, except Europe, the Middle East and Africa, as the Company had previously licensed from EyePoint Pharmaceuticals US, Inc. (“EyePoint”) rights in those territories to certain products, which included YUTIQ (known as ILUVIEN in Europe, the Middle East and Africa) for the prevention of relapse in recurrent NIU-PS (see Note 4). The Product Rights Agreement also excludes any rights to YUTIQ for the treatment and prevention of chronic NIU-PS in China and certain other countries and regions in Asia, which rights are subject to a pre-existing exclusive license between EyePoint Parent and Ocumension.
Agreement and Plan of Merger with ANI Pharmaceuticals, Inc. and ANIP Merger Sub INC.
On June 21, 2024, the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with ANI Pharmaceuticals, Inc., a Delaware corporation (“ANI”), and ANIP Merger Sub INC., a Delaware corporation and a wholly owned indirect subsidiary of ANI (“Merger Subsidiary”), providing for the merger of Merger Subsidiary with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned indirect subsidiary of ANI (the “Surviving Corporation”). At the effective time of the Merger (the “Effective Time”), each share of common stock, par value $
Consummation of the Merger is subject to customary closing conditions, including, without limitation, the absence of certain legal impediments, the expiration or termination of the required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and approval by the holders of a majority of the voting power of the outstanding shares of Company Common Stock entitled to vote on the Merger. Consummation of the Merger by ANI and Merger Subsidiary is further subject to satisfaction of customary closing conditions on the part of the Company, including, without limitation, the Company having performed, or complied with, in all material respects its agreements, covenants and other obligations required to be performed or complied with by the Merger Agreement at or prior to the Closing Date, the representations and warranties of the Company being true and correct (subject in certain instances to materiality qualifiers as specified within the respective agreement), and no continuing Company Material Adverse Effect.
Consummation of the Merger by the Company is further subject to satisfaction of customary closing conditions on the part of ANI and the Merger Subsidiary, including, without limitation, ANI and Merger Subsidiary having performed, or complied with, in all material respects all of their respective agreements, covenants and obligations required to be performed or complied with by each of them under the Merger Agreement at or prior to the Closing Date, the representations and warranties of ANI and Merger Subsidiary being true and correct (subject in certain instances to materiality qualifiers as specified within the respective agreement), and the CVR Agreement being in full force and effect.
The Merger Agreement includes covenants requiring the Company not to (i) initiate, solicit or knowingly encourage or facilitate any inquiries or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, any Acquisition Proposal, (ii) engage in, continue or otherwise participate in any discussions or negotiations regarding, or provide any non-public information or data to any person, in each case relating to, any Acquisition Proposal or any proposal or offer that would reasonably be expected to lead to an Acquisition Proposal, (iii) amend or grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of the Company or any of the Company Subsidiaries (as defined in the Merger Agreement) (subject to the Company Board’s (as defined in the Merger Agreement) ability to exercise its fiduciary duties), (iv) approve any transaction under, or any third party becoming an “interested stockholder” under, Section 203 of the Delaware General Corporation Law, (v) otherwise knowingly facilitate any effort or attempt by any third party (or its potential sources of financing) to make any proposal or offer that constitutes an Acquisition Proposal, (vi) approve, endorse, recommend or execute or enter into any letter of intent, agreement in principle, term sheet, memorandum of understanding, merger agreement, acquisition agreement or other similar contract relating to an Acquisition Proposal or (vii) approve, authorize, agree or publicly announce any intention to do any of the foregoing, with customary exceptions for superior proposals. The Merger Agreement also includes covenants customary for a transaction of this nature regarding the operation of the business of the Company and its subsidiaries between signing of the Merger Agreement and the Effective Time.
The Merger Agreement requires the Company, as promptly as reasonably practicable, and in any event within
The Merger Agreement contains certain termination rights for the Company and ANI. Upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay ANI a termination fee of approximately $
At the Effective Time, outstanding awards of restricted stock with respect to shares of Company Common Stock (each, a “Company RSA”), whether vested or unvested as of immediately prior to the Effective Time, for which the holder thereof made a timely and valid election (an “83(b) Election”) under Section 83(b) of the Internal Revenue Code of 1986, as amended, shall be canceled and cease to exist, and shall be converted into the right to receive the Merger Consideration. At the Effective Time, each Company RSA for which the holder thereof did not make a timely and valid 83(b) Election shall be canceled and converted into the right to receive (i) an amount in cash (without interest and subject to deduction for any required withholding as contemplated by the Merger Agreement) equal to: (A) the total number of shares of such Company RSAs multiplied by (B) the Closing Cash Consideration, without any interest thereon, and (ii) CVRs in an amount equal to the total number of shares of such Company RSAs.
At the Effective Time, each stock option granted by the Company to purchase Company Common Stock (each, a “Company Option”) that is outstanding and unvested immediately prior to the Effective Time will vest in full, and (i) each Company Option that is then outstanding and unexercised and which has a per share exercise price that is less than the Closing Cash Consideration shall be canceled and converted into the right to receive the sum of an amount in cash (without interest and subject to deduction for any required withholding as contemplated in the Merger Agreement) equal to: (a) the excess, if any, of the Closing Cash Consideration over the exercise price per share of such Company Option; multiplied by the number of shares of Company Common Stock underlying such Company Option and (b) one (1) CVR, (ii) each Company Option that is then outstanding and unexercised, and which has a per share exercise price that equals or exceeds the Closing Cash Consideration, but is less than the Maximum Total Consideration (as defined in the Merger Agreement) (each, an “Eligible Option”) shall be canceled and converted into the right to receive a cash payment equal to (a) the excess, if any, of (A) the Total Consideration (as defined in the Merger Agreement) over (B) the per share exercise price of such Eligible Option, multiplied by (b) the total number of shares of Company Common Stock subject to such Eligible Option immediately prior to the Effective Time, and (iii) each Company Option that is then outstanding and unexercised and that has a per share exercise price that is equal or greater than the Maximum Total Consideration shall be canceled with no consideration payable in respect thereof.
At the Effective Time, each Company performance stock unit (“Company PSU”) that is then outstanding shall automatically be canceled and converted into the right to receive (i) from the Surviving Corporation an amount of cash equal to the product of (A) the total number of shares of Company Common Stock then underlying such Company PSUs pursuant to the applicable Company PSU grant terms, with, for the avoidance of doubt, all performance metrics deemed achieved at
At the Effective Time, each Company restricted stock unit (“Company RSU”) that is then outstanding shall automatically be canceled and converted into the right to receive (i) from the Surviving Corporation an amount of cash equal to the product of (A) the number of shares of Company Common Stock then underlying such Company RSU multiplied by (B) the Closing Cash Consideration, without any interest thereon and (ii) CVRs in an amount equal to the total number of shares of Company Common Stock then underlying such Company RSUs.
At the Effective Time, each Company warrant (“Company Warrant”) that is outstanding as of immediately prior to the Effective Time shall, upon the Effective Time, convert into the right to receive, upon exercise of such Company Warrant, the same Merger Consideration as such holder would have been entitled to receive following the Effective Time if such holder had been, immediately prior to the Effective Time, the holder of the number of shares of Company Common Stock then issuable upon exercise in full of such Company Warrant without regard to any limitations on exercise contained therein.
Voting Agreement
In connection with the execution of the Merger Agreement, ANI and the Company entered into a voting agreement (the “Voting Agreement”) with Caligan Partners LP, Caligan Partners Master Fund LP and Caligan Partners CV VI LP (collectively, “Caligan”). Pursuant to the Voting Agreement, Caligan has agreed, among other things, to (i) vote or cause to be voted all of its shares of Company Common Stock in favor of the Merger and the transactions contemplated by the Merger Agreement and (ii) prior to the Expiration Time (as defined in the Voting Agreement) and subject to limited exceptions, not to sell or otherwise transfer any of its shares of Company Common Stock other than with the consent of ANI and the Company. The shares of Company Common Stock owned by Caligan represented approximately
Contingent Value Rights Agreement
At or immediately prior to the Effective Time, ANI will enter into a contingent value rights agreement (the “CVR Agreement”) with a rights agent (the “Rights Agent”), pursuant to which each holder of Company Common Stock, as well as holders of Company Warrants, Company Options, Company PSUs, Company RSAs and Company RSUs, may become entitled to contingent cash payments per CVR (each, a “Milestone Payment”), such payments being contingent upon, and subject to, the achievement of: (i) $
When issued, each CVR will entitle the holder (the “Holder”) to receive a Milestone Payment upon satisfaction of the applicable Milestones. The Milestone Payment for each CVR will equal the product (rounded to the nearest of $
If a Milestone is attained, the distributions in respect of the CVRs will be made on or prior to the date that is fifteen (
Under the CVR Agreement, the Rights Agent will have, and Holders of at least
Costs incurred associated with the Merger Agreement totaled $
2. BASIS OF PRESENTATION
The Company has prepared the accompanying unaudited interim condensed consolidated financial statements and notes thereto (“Interim Financial Statements”) in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X of the SEC. Accordingly, these Interim Financial Statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying Interim Financial Statements reflect all adjustments, which include normal recurring adjustments, necessary to present fairly the Company’s interim financial information.
The accompanying Interim Financial Statements and related notes should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2023, and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 8, 2024 (the “2023 Form 10-K”). The financial results for any interim period are not necessarily indicative of the expected financial results for the full year.
As of June 30, 2024 and December 31, 2023, the Company had approximately $
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed for quarterly financial reporting are the same as those disclosed in the Notes to Financial Statements included in the 2023 Form 10-K. Certain of the Company’s more significant accounting policies adopted in the current year are as follows:
Acquisition of Intangible Assets
The Company accounts for the acquisition of pharmaceutical product licenses as an asset acquisition in accordance with Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASC 805”). ASC 805 specifies that if substantially all of the fair value of the gross assets acquired in a transaction are concentrated in a single identifiable asset or group of similar identifiable assets, then the set is not a business and is recorded as an asset acquisition. Under this model, the Company assigns the cost of the transaction to the acquired tangible assets, to the identified intangible assets and liabilities, and to any above or below-market contracts. The purchase price, including the direct amounts paid for the net assets in the transaction and any acquisition costs incurred that relate directly to the acquisition, is assigned based on the relative fair values of the assets acquired and liabilities assumed. The fair value of any identified intangible assets is determined at the acquisition date based on inputs and other factors based on market participants.
Foreign Currency Translation
The financial statements of each of the Company’s subsidiaries with a functional currency other than the U.S. dollar are translated into U.S. dollars using period-end exchange rates for assets and liabilities, historical exchange rates for stockholders’ equity and weighted average exchange rates for operating results. Translation gains and losses are included in accumulated other comprehensive income (loss) in stockholders’ equity. Foreign currency transaction gains and losses are included in other (expense) income, net in the results of operations.
Adoption of New Accounting Standards
In June 2022, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2022-03, Fair Value Measurement (Topic 820) – Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This standard clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This standard became effective for the Company on January 1, 2024. The adoption of this ASU did not have a material impact on the Company’s financial statements.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures. This standard requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss and the title and position of the entity’s CODM. The amendments in this update also expand the interim segment disclosure requirements. All disclosure requirements under this standard are also required for public entities with a single reportable segment. This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis. This standard became effective for the Company on January 1, 2024. The adoption of this ASU did not have a material impact on the Company’s financial statements and related disclosures.
Accounting Standards Issued but Not Yet Effective
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). This standard provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The standard is available until December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extended the period of time preparers can utilize the reference rate reform relief guidance in ASU 2020-04. The guidance ensures the relief in ASU 2020-04 covers the period of time during which a significant number of modifications may take place and the ASU defers the sunset date of ASU 2020-04 from December 31, 2022, to December 31, 2024. The Company does not anticipate the adoption of this ASU will have a material impact on its financial statements.
In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). This standard modifies the disclosure or presentation requirements of a variety of topics and aligns requirements with the SEC’s existing disclosure requirements. ASU 2023-06 is effective on the date each amendment is removed from Regulation S-X or Regulation S-K with early adoption prohibited. The amendments in ASU 2023-06 will be applied prospectively in the consolidated financial statements. The Company is currently evaluating the timing of its adoption of this standard and the impact on its financial statements.
In December 2023, ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) requires public business entities to disclose on an annual basis additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. In addition, ASU 2023-09 requires disclosure pertaining to taxes paid, net of refunds received, to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. ASU 2023-09 is effective for the Company for the annual period beginning on January 1, 2025. Early adoption is permitted. ASU 2023-09 should be applied on a prospective basis. However, companies have the option to apply the standard retrospectively. The Company is currently evaluating the potential impact that this new standard will have on its financial statements and related disclosures.
4. REVENUE RECOGNITION
Overview
The Company recognizes revenue when a customer obtains control of the related good or service pursuant to ASC 606, Revenue from Contracts with Customers. The amount recognized reflects the consideration the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following steps as outlined in the guidance: (1) identify the contract with the customer, (2) identify the performance obligations within the contract, (3) determine the net sales price (“transaction price”), (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when the entity satisfies a performance obligation. At the inception of a contract, the contract is evaluated to determine if it falls within the scope of ASC 606, followed by the Company’s assessment of the goods or services promised within each contract, assessment of whether the promised good or service is distinct and determination of the performance obligations. The Company then recognizes revenue based on the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied.
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions related to the performance obligations.
Product Revenue
The Company sells its products to major pharmaceutical distributors, pharmacies, hospitals and wholesalers (collectively, its “Customer(s)”). In addition to distribution agreements with Customers, the Company enters into arrangements with healthcare providers and payors that provide for government-mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s products. The Company recognizes revenues from product sales at a point in time when the Customer obtains control, typically upon delivery. The Company accrues fulfillment costs when the related revenue is recognized. Taxes collected from Customers relating to product sales and remitted to governmental authorities are excluded from revenues.
Estimates of Variable Consideration
Revenues from product sales are recorded at the transaction price, which includes estimates of variable consideration for reserves related to statutory rebates to State Medicaid and other government agencies; commercial rebates and fees to Managed Care Organizations, Group Purchasing Organizations, distributors, and specialty pharmacies; product returns; sales discounts (including trade discounts); distributor costs; wholesaler chargebacks; and allowances for patient assistance programs relating to the Company’s sales of its products.
These reserves are based on estimates of the amounts earned or to be claimed on the related sales. Management’s estimates take into consideration historical experience, current contractual and statutory requirements, specific known market events and trends, industry data, and Customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration included in the net sales price is limited to the amount that is probable not to result in a significant reversal in the amount of the cumulative revenue recognized in a future period. If actual results vary, the Company may adjust these estimates, which could have an effect on earnings in the period of adjustment.
With respect to the Company’s international contracts with third-party distributors, certain contracts have elements of variable consideration, and management reviews those contracts on a regular basis and makes estimates of revenue based on historical ordering patterns and known market events and data. The amount of variable consideration included in net sales in each period could vary depending on the terms of these contracts and the probability of reversal in future periods.
Consideration Payable to Customers
Distribution service fees are payments issued to distributors for compliance with various contractually defined inventory management practices or services provided to support patient access to a product. Distribution service fees reserves are based on the terms of each individual contract and are classified within accrued expenses and are recorded as a reduction of revenue.
Product Returns
The Company’s policies provide for product returns in the following circumstances: (a) expiration of shelf life on certain products; (b) product damaged while in the Customer’s possession; and (c) following product recalls. Generally, returns for expired product are accepted three months before and up to one year after the expiration date of the related product, and the related product is destroyed after it is returned. The Company may, at its option, either refund the sales price paid by the Customer by issuing a credit or exchange of the returned product for replacement inventory. The Company typically does not provide cash refunds. The Company estimates the proportion of recorded revenue that will result in a return by considering relevant factors, including historical returns experience, the estimated level of inventory in the distribution channel, the shelf life of products, and product recalls, if any.
The estimation process for product returns involves, in each case, several interrelating assumptions, which vary for each Customer. The Company estimates the amount of its product sales that may be returned by its Customers and records this estimate as a reduction of revenue from product sales in the period the related revenue is recognized, and because this returned product cannot be resold, there is no corresponding asset for product returns. Through the date of the Interim Financial Statements, product returns have been minimal.
Collaboration and License Revenue
The Company enters into agreements in which it licenses certain rights to its products to partner companies that act as distributors. The terms of these agreements may include payment to the Company of one or more of the following: non-refundable up-front license fees, milestone payments if specified objectives are achieved, and/or royalties on product sales. The Company recognizes revenue from upfront payments at a point in time, typically upon fulfilling the delivery of the associated intellectual property to the customer.
Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions related to the performance obligations.
The Company will recognize sales-based milestone payments as revenue upon the achievement of the cumulative sales amount specified in the contract in accordance with ASC 606. For those milestone payments which are contingent on the occurrence of particular future events, the Company determines that these need to be considered for inclusion in the calculation of total consideration from the contract as a component of variable consideration using the expected value method. As such, the Company assesses each milestone to determine the probability of and substance behind achieving each milestone. Given the inherent uncertainty associated with these future events, the Company will not recognize revenue from such milestones until there is a high probability of occurrence, which typically occurs near or upon achievement of the event.
Customer Payment Obligations
The Company receives payments from its Customers based on billing schedules established in each contract, which vary across the Company’s locations, but generally range between 30 to 120 days. Occasionally, the Company offers extended payment terms or payment term discounts to certain Customers. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation is that the Customer will pay for the product or services within one year or less of receiving those products or services.
Accounts Receivable, net
Accounts receivable are generated through sales primarily to major pharmaceutical distributors, pharmacies, hospitals and wholesalers. The Company does not require collateral from its customers for accounts receivable. The carrying amount of accounts receivable is reduced by an allowance for expected credit losses that reflects management’s best estimate of the amounts that will not be collected. Management considers many factors in assessing the need for an allowance for expected credit losses, including the length of time trade accounts receivable are past due, the customer’s ability to pay its obligation, customer types, credit worthiness and the condition of the general economy and the industry as a whole. From time to time, management may adjust its assumptions for anticipated changes in any of those or other factors expected to affect collectability.
The Company writes off accounts receivable when management determines they are uncollectable and credits payments subsequently received on such receivables to bad debt expense in the period received. As of June 30, 2024 and 2023, the Company had $
Allowance for credit losses consisted of the following for the three and six months ended June 30, 2024 and 2023:
| Three Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (In thousands) | ||||||||
| Beginning balance | $ | $ | ||||||
| Provision for credit losses | ||||||||
| Write-off of bad debt | ( | ) | ||||||
| Ending Balance | $ | $ | ||||||
| For the Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (In thousands) | ||||||||
| Beginning balance | $ | $ | ||||||
| Provision for credit losses | ||||||||
| Write-off of bad debt | ( | ) | ( | ) | ||||
| Ending Balance | $ | $ | ||||||
5. LEASES
The Company evaluates all of its contracts to determine whether it is or contains a lease component under FASB ASC 842 – Leases (“ASC 842”). Upon adoption of ASC 842, the Company elected the transition package of three practical expedients permitted within the standard. In accordance with the package of practical expedients, the Company did not reassess initial direct costs, lease determination and classification for existing leases. The Company made an accounting policy election not to recognize right of use assets and liabilities for leases with a term of 12 months or less, or those that do not meet the Company’s capitalization threshold, unless the leases include options to renew or purchase the underlying asset that are reasonably certain to be exercised. Lease costs associated with those leases are recognized as incurred. The Company has also chosen the practical expedient that allows it to combine lease and non-lease components as a single lease component.
Lease renewal options are not recognized as part of the lease liability until the Company determines it is reasonably certain it will exercise any applicable renewal options. The Company has determined that it is not reasonably certain it will exercise any applicable renewal options. Accordingly, the Company has not recorded any liability for renewal options in these consolidated financial statements. The useful lives of leased assets as well as leasehold improvements, if any, are limited by the expected lease term.
Operating Leases
The Company’s operating lease activities primarily consist of leases for office space in the U.S., the U.K., and Ireland. Most of these leases include options to renew, with renewal terms generally ranging from to years. The exercise of lease renewal options is at the Company’s sole discretion. Certain of the Company’s operating lease agreements include variable lease costs that are based on common area maintenance and property taxes. The Company expenses these payments as incurred. The Company’s operating lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Supplemental balance sheet information as of June 30, 2024 and December 31, 2023 for the Company’s operating leases is as follows:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (In thousands) | ||||||||
| Non-current assets: | ||||||||
| Right-of-use assets, net | $ | $ | ||||||
| Total lease assets | $ | $ | ||||||
| Current liabilities: | ||||||||
| Accrued expenses | $ | $ | ||||||
| Non-current liabilities: | ||||||||
| Other non-current liabilities | ||||||||
| Total lease liabilities | $ | $ | ||||||
The Company’s operating lease cost for the three and six months ended June 30, 2024 was $
As of June 30, 2024, a schedule of maturity of lease liabilities under all of the Company’s operating leases is as follows:
| Years Ending December 31 | (In thousands) | |||
| 2024 (remaining) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | ||||
| Less amount representing interest | ( | ) | ||
| Present value of minimum lease payments | ||||
| Less current portion (as a portion of accrued expenses) | ( | ) | ||
| Non-current portion (as a portion of other non-current liabilities) | $ | |||
For the three months ended June 30, 2024 and 2023, cash paid for operating leases was $
As of June 30, 2024, the weighted average remaining lease terms of the Company’s operating leases was
Finance Leases
The Company’s finance lease activities primarily consist of leases for automobiles. Property and equipment leases are capitalized at the lesser of fair market value or the present value of the minimum lease payments at the inception of the leases using the Company’s incremental borrowing rate. The Company’s finance lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Supplemental balance sheet information as of June 30, 2024 and December 31, 2023 for the Company’s finance leases is as follows:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (In thousands) | ||||||||
| Non-current assets: | ||||||||
| Property and equipment, net | $ | $ | ||||||
| Total lease assets | $ | $ | ||||||
| Current liabilities: | ||||||||
| Finance lease obligations | $ | $ | ||||||
| Non-current liabilities: | ||||||||
| Finance lease obligations - less current portion | ||||||||
| Total lease liabilities | $ | $ | ||||||
Depreciation expense associated with property and equipment under finance leases was $
As of June 30, 2024, a schedule of maturity of lease liabilities under finance leases, together with the present value of minimum lease payments, is as follows:
| Years Ending December 31 | (In thousands) | |||
| 2024 (remaining) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total | ||||
| Less amount representing interest | ( | ) | ||
| Present value of minimum lease payments | ||||
| Less current portion | ( | ) | ||
| Non-current portion | $ | |||
Cash paid for finance leases was $
As of June 30, 2024, the weighted average remaining lease terms of the Company’s finance leases was
6. INVENTORY
Inventories are stated at the lower of cost or net realizable value with cost determined under the first in, first out (“FIFO”) method. Included in inventory costs are component parts, work-in-progress and finished goods. The Company relies on third-party manufacturers for the production of all inventory and does not capitalize any internal costs. The Company periodically reviews inventories for excess, obsolete or expiring inventory and writes down obsolete or otherwise unmarketable inventory to its estimated net realizable value in the period in which the impairment is identified.
As of June 30, 2024 and December 31, 2023, inventory consisted of the following:
| June 30, |
December 31, |
|||||||
| 2024 |
2023 |
|||||||
| (In thousands) |
||||||||
| Component parts (1) |
$ | $ | ||||||
| Work-in-process (2) |
||||||||
| Finished goods |
||||||||
| Total Inventory |
$ | $ | ||||||
| (1) |
Component parts inventory consists of manufactured components of the ILUVIEN applicator. |
| (2) |
Work-in-process consists of completed units of ILUVIEN that are undergoing, but have not completed, quality assurance testing as required by U.S. or European Economic Area regulatory authorities. |
7. INTANGIBLE ASSETS
ILUVIEN Intangible Asset
As a result of the U.S. Food and Drug Administration’s approval of ILUVIEN in September 2014, the Company was required to pay a milestone payment of $
The gross carrying amount of the ILUVIEN intangible asset is $
The estimated remaining amortization of the ILUVIEN intangible asset as of June 30, 2024, is denoted in the following:
| Years Ending December 31 | (In thousands) | |||
| 2024 (remaining) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total | $ | |||