10-Q 1 eypt-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

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 000-51122

 

EyePoint Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

26-2774444

(I.R.S. Employer

Identification No.)

 

 

 

480 Pleasant Street

Watertown, MA

(Address of principal executive offices)

 

02472

(Zip Code)

(617) 926-5000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001

EYPT

The Nasdaq Stock Market LLC

 

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. Yes No

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). Yes No

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

Non-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 No

There were 52,084,375 shares of the registrant’s common stock, $0.001 par value, outstanding as of May 2, 2024.

 

 

 


 

 

 

EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

 

 

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Unaudited Financial Statements

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets – March 31, 2024 and December 31, 2023

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss – Three months ended March 31, 2024 and 2023

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity – Three months ended March 31, 2024 and 2023

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows – Three months ended March 31, 2024 and 2023

 

6

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

27

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

27

 

 

 

 

 

PART II: OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

28

 

 

 

 

 

Item 1A.

 

Risk Factors

 

28

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

29

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

29

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

30

 

 

 

 

 

Item 5.

 

Other Information

 

30

 

 

 

 

 

Item 6.

 

Exhibits

 

31

 

 

 

 

 

Signatures

 

33

 

 

 

 

 

Certifications

 

 

 

2


 

 

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands except share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

271,013

 

 

$

281,263

 

Marketable securities

 

 

28,335

 

 

 

49,787

 

Accounts and other receivables, net

 

 

3,015

 

 

 

805

 

Prepaid expenses and other current assets

 

 

11,089

 

 

 

9,039

 

Inventory

 

 

4,257

 

 

 

3,906

 

Total current assets

 

 

317,709

 

 

 

344,800

 

Property and equipment, net

 

 

6,677

 

 

 

5,251

 

Operating lease right-of-use assets

 

 

4,711

 

 

 

4,983

 

Restricted cash

 

 

150

 

 

 

150

 

Total assets

 

$

329,247

 

 

$

355,184

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

7,082

 

 

$

6,504

 

Accrued expenses

 

 

15,940

 

 

 

17,521

 

Deferred revenue

 

 

38,377

 

 

 

38,592

 

Other current liabilities

 

 

1,181

 

 

 

646

 

Total current liabilities

 

 

62,580

 

 

 

63,263

 

Deferred revenue – noncurrent

 

 

12,109

 

 

 

20,692

 

Operating lease liabilities – noncurrent

 

 

4,624

 

 

 

4,906

 

Total liabilities

 

 

79,313

 

 

 

88,861

 

Contingencies (Note 12)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares
   issued and outstanding

 

 

 

 

 

 

Common stock, $.001 par value, 300,000,000 shares authorized at March 31, 2024
   and December 31, 2023;
49,885,701 and 49,043,074 shares issued and outstanding at
  March 31, 2024 and December 31, 2023, respectively

 

 

50

 

 

 

49

 

Additional paid-in capital

 

 

1,020,478

 

 

 

1,007,556

 

Accumulated deficit

 

 

(771,430

)

 

 

(742,146

)

Accumulated other comprehensive income

 

 

836

 

 

 

864

 

Total stockholders' equity

 

 

249,934

 

 

 

266,323

 

Total liabilities and stockholders' equity

 

$

329,247

 

 

$

355,184

 

 

See notes to condensed consolidated financial statements.

3


 

 

EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands except per share data)

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

Product sales, net

 

$

658

 

 

$

7,394

 

License and collaboration agreements

 

 

10,563

 

 

 

34

 

Royalty income

 

 

463

 

 

 

255

 

Total revenues

 

 

11,684

 

 

 

7,683

 

Operating expenses:

 

 

 

 

 

 

Cost of sales

 

 

759

 

 

 

640

 

Research and development

 

 

30,139

 

 

 

13,618

 

Sales and marketing

 

 

6

 

 

 

5,737

 

General and administrative

 

 

14,101

 

 

 

9,242

 

Total operating expenses

 

 

45,005

 

 

 

29,237

 

Loss from operations

 

 

(33,321

)

 

 

(21,554

)

Other (expense) income:

 

 

 

 

 

 

Interest and other income, net

 

 

4,037

 

 

 

1,202

 

Interest expense

 

 

 

 

 

(812

)

Total other (expense) income, net

 

 

4,037

 

 

 

390

 

              Net loss

 

$

(29,284

)

 

$

(21,164

)

Net loss per share:

 

 

 

 

 

 

              Basic and diluted

 

$

(0.55

)

 

$

(0.56

)

Weighted average shares outstanding:

 

 

 

 

 

 

              Basic and diluted

 

 

52,913

 

 

 

37,486

 

 

 

 

 

 

 

 

Net loss

 

$

(29,284

)

 

$

(21,164

)

Other comprehensive loss:

 

 

 

 

 

 

Unrealized (loss) gain on available-for-sale
   securities, net of tax of $
0 for periods presented

 

 

(28

)

 

 

57

 

Comprehensive loss

 

$

(29,312

)

 

$

(21,107

)

 

See notes to condensed consolidated financial statements.

4


 

 

EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(In thousands except share data)

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Accumulated
Other

 

 

Total

 

 

 

Number of
Shares

 

 

Par Value
Amount

 

 

Paid-In
Capital

 

 

Accumulated
Deficit

 

 

Comprehensive
Income

 

 

Stockholders’
Equity

 

Balance at January 1, 2023

 

 

34,082,934

 

 

$

34

 

 

$

766,899

 

 

$

(671,351

)

 

$

786

 

 

$

96,368

 

Net loss

 

 

 

 

 

 

 

 

(21,164

)

 

 

 

 

 

(21,164

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

57

 

 

 

57

 

Employee stock purchase plan

 

 

63,721

 

 

 

 

 

248

 

 

 

 

 

 

 

248

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of stock units

 

 

155,271

 

 

 

 

 

(169

)

 

 

 

 

 

 

(169

)

Stock-based compensation

 

 

 

 

 

 

3,050

 

 

 

 

 

 

 

3,050

 

Balance at March 31, 2023

 

 

34,301,926

 

 

$

34

 

 

$

770,028

 

 

$

(692,515

)

 

$

843

 

 

$

78,390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2024

 

 

49,043,074

 

 

$

49

 

 

$

1,007,556

 

 

$

(742,146

)

 

$

864

 

 

$

266,323

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(29,284

)

 

 

 

 

 

(29,284

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28

)

 

 

(28

)

Issuance of stock, net of issue costs

 

 

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

18

 

Cashless exercise of warrants

 

 

25,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee stock purchase plan

 

 

25,015

 

 

 

 

 

 

268

 

 

 

 

 

 

 

 

 

268

 

Exercise of stock options

 

 

444,184

 

 

 

1

 

 

 

4,293

 

 

 

 

 

 

 

 

 

4,294

 

Vesting of stock units

 

 

347,762

 

 

 

 

 

 

(4,356

)

 

 

 

 

 

 

 

 

(4,356

)

Stock-based compensation

 

 

 

 

 

 

 

 

12,699

 

 

 

 

 

 

 

 

 

12,699

 

Balance at March 1, 2024

 

 

49,885,701

 

 

$

50

 

 

$

1,020,478

 

 

$

(771,430

)

 

$

836

 

 

$

249,934

 

 

See notes to condensed consolidated financial statements.

5


 

 

EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(29,284

)

 

$

(21,164

)

Adjustments to reconcile net loss to cash flows used in
   operating activities:

 

 

 

 

 

 

Depreciation of property and equipment

 

 

303

 

 

 

105

 

Amortization of debt discount and premium and discount on
   available-for-sale marketable securities

 

 

(575

)

 

 

(244

)

Stock-based compensation

 

 

12,699

 

 

 

3,050

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable and other current assets

 

 

(4,260

)

 

 

4,932

 

Inventory

 

 

(351

)

 

 

(1,185

)

Accounts payable and accrued expenses

 

 

(1,430

)

 

 

(2,267

)

Right-of-use assets and operating lease liabilities

 

 

524

 

 

 

193

 

Deferred revenue

 

 

(8,797

)

 

 

(255

)

Net cash provided by (used in) operating activities

 

 

(31,171

)

 

 

(16,835

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities

 

 

 

 

 

(2,930

)

Sales and maturities of marketable securities

 

 

22,000

 

 

 

35,500

 

Purchases of property and equipment

 

 

(1,194

)

 

 

(484

)

Net cash provided by (used in) investing activities

 

 

20,806

 

 

 

32,086

 

Cash flows from financing activities:

 

 

 

 

 

 

Payment of equity issue costs

 

 

(89

)

 

 

 

Borrowings under revolving facility

 

 

 

 

 

5,300

 

Repayment under revolving facility

 

 

 

 

 

(10,480

)

Net settlement of stock units to satisfy statutory tax withholding

 

 

(4,356

)

 

 

(169

)

Proceeds from exercise of stock options

 

 

4,560

 

 

 

248

 

Principal payments on finance lease obligations

 

 

 

 

 

(18

)

Net cash used in financing activities

 

 

115

 

 

 

(5,119

)

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

 

 

(10,250

)

 

 

10,132

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

281,413

 

 

 

95,783

 

Cash, cash equivalents and restricted cash at end of period

 

$

271,163

 

 

$

105,915

 

Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

271,013

 

 

$

105,765

 

Restricted cash

 

 

150

 

 

$

150

 

Total cash, cash equivalents and restricted cash at end of period

 

$

271,163

 

 

$

105,915

 

Supplemental cash flow information:

 

 

 

 

 

 

Cash interest paid

 

$

 

 

$

740

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Property and equipment additions in accounts payable and accrued expenses

 

$

535

 

 

$

 

Stock issuance costs

 

$

218

 

 

$

 

 

See notes to condensed consolidated financial statements.

6


 

 

EYEPOINT PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.
Operations

The accompanying condensed consolidated financial statements of EyePoint Pharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, the Company), as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 are unaudited. Certain information in the footnote disclosures of these financial statements has been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. In the opinion of management, these statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2023, and include all adjustments, consisting only of normal recurring adjustments, that are necessary for the fair presentation of the Company’s financial position, results of operations, and cash flows for the periods indicated. The preparation of financial statements in accordance with United States (U.S.) generally accepted accounting principles requires management to make assumptions and estimates that affect, among other things, (i) reported amounts of assets and liabilities; (ii) disclosure of contingent assets and liabilities at the date of the consolidated financial statements; and (iii) reported amounts of revenues and expenses during the reporting period. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the entire 2024 fiscal year or any future period.

The Company is committed to developing and commercializing therapeutics to help improve the lives of patients with serious eye disorders. The Company’s pipeline leverages its proprietary bioerodible Durasert E technology (Durasert E) for sustained intraocular drug delivery. The Company’s lead product candidate, DURAVYU, previously EYP-1901, is an investigational sustained delivery treatment for anti-vascular endothelial growth factor (anti-VEGF) mediated retinal diseases combining vorolanib, a selective and patent-protected tyrosine kinase inhibitor with Durasert E, DURAVYU is currently in Phase 2 clinical trials for wet age-related macular degeneration (wet AMD), the leading cause of vision loss among people 50 years of age and older in the United States and non-proliferative diabetic retinopathy (NPDR), a largely untreated disease due to limitations of available therapies, and diabetic macular edema (DME). The Company is also advancing EYP-2301, a promising TIE-2 agonist, razuprotafib, formulated in Durasert E to potentially improve outcomes in serious retinal diseases.

The Company plans to identify and advance additional product candidates through clinical and regulatory development for its pipeline. This may be accomplished through internal discovery efforts, research collaborations, and/or in-licensing arrangements with partner molecules and potential acquisitions of additional products, product candidates or technologies.

Liquidity

The Company had cash, cash equivalents, and investments in marketable securities of $299.3 million at March 31, 2024. The Company has a history of operating losses and has not had significant recurring cash inflows from revenue. The Company’s operations have been financed primarily from sales of its equity securities, issuance of debt, and a combination of license fees, milestone payments, royalty income, and other fees received from its collaboration partners. The Company anticipates that it will continue to incur losses as it continues the research and development of its product candidates, and the Company does not expect revenues to generate sufficient funding to sustain its operations in the near-term. The Company expects to continue fulfilling its funding needs through cash inflows from revenues, licensing and research collaboration transactions, additional equity capital raises, and other arrangements. The Company believes that its cash, cash equivalents, and investments in marketable securities of $299.3 million at March 31, 2024 will enable the Company to fund its current and planned operations for at least the next twelve months from the date these condensed consolidated financial statements were issued. Actual cash requirements could differ from management’s projections due to many factors, including the timing and results of the Company’s clinical trials for DURAVYU, additional investments in research and development programs, competing technological, and market developments and the costs of any strategic acquisitions and/or development of complementary business opportunities.

2.
Summary of Significant Accounting Policies

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which 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, Revenue from Contracts with Customers (ASC 606), the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v)

7


 

 

recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within the contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales, value-add, and other taxes collected on behalf of third parties are excluded from revenue.

Product sales, net — Effective January 2023, commercial sales of DEXYCU® were no longer supported by the Company, remaining available only through specialty distributors. Effective May 2023, YUTIQ® has been and continues to be sold under commercial supply agreements with Alimera Sciences, Inc. (Alimera) and Ocumension Therapeutics (Ocumension) (see Note 3).

Prior to the above dates, the Company sold YUTIQ® and DEXYCU® to a limited number of specialty distributors and specialty pharmacies (collectively the Distributors) in the U.S., with whom the Company had entered into formal agreements, for delivery to physician practices for YUTIQ® and to hospital outpatient departments and ambulatory surgical centers (ASCs) for DEXYCU®. The Company recognized revenue on sales of its products when Distributors obtained control of the products, which occurred at a point in time, typically upon delivery. In addition to agreements with Distributors, the Company also entered into arrangements with healthcare providers, ASCs, and payors that provided for government mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to their purchase of the Company's products from Distributors.

Reserves for variable consideration — Product sales were recorded at the wholesale acquisition costs, net of applicable reserves for variable consideration. Components of variable consideration included trade discounts and allowances, provider chargebacks and discounts, payor rebates, product returns, and other allowances that were offered within contracts between the Company and its Distributors, payors, and other contracted purchasers relating to the Company's product sales. These reserves were based on the amounts earned, or to be claimed on the related sales, and were classified either as reductions of product revenue and accounts receivable or a current liability, depending on how the amount was to be settled. Overall, these reserves reflected the Company's best estimates of the amount of consideration to which it was entitled based on the terms of the respective underlying contracts. The actual amounts of consideration ultimately received may differ from the Company's estimates. If actual results in the future vary from the estimates, the Company adjusts these estimates, which would affect product revenue and earnings in the period such variances become known.

Distribution fees — The Company compensated its Distributors for services explicitly stated in the Company’s contracts and were recorded as a reduction of revenue in the period the related product sale was recognized.

Provider chargebacks and discounts — Chargebacks were discounts that represented the estimated obligations resulting from contractual commitments to sell products at prices lower than the list prices charged to the Company’s Distributors. These Distributors charged the Company for the difference between what they paid for the product and the Company’s contracted selling price. These reserves were established in the same period that the related revenue was recognized, resulting in a reduction of product revenue and the establishment of a current liability. Reserves for chargebacks consisted of amounts that the Company expected to pay for units that remained in the distribution channel inventories at each reporting period-end that the Company expected to be sold under a contracted selling price, and chargebacks that Distributors had claimed, but for which the Company had not yet settled.

Government rebates — The Company was subject to discount obligations under state Medicaid programs and Medicare. These reserves were recorded in the same period the related revenue was recognized, resulting in a reduction of product revenue and the establishment of a current liability which was included in accrued expenses and other current liabilities on the consolidated balance sheets. The Company’s liability for these rebates consisted of invoices received for claims from prior quarters that had not been paid or for which an invoice had not yet been received, estimates of claims for the current quarter, and estimated future claims that would be made for product that had been recognized as revenue, but which remained in the distribution channel inventories at the end of each reporting period.

Payor rebates — The Company contracted with certain private payor organizations, primarily insurance companies, for the payment of rebates with respect to utilization of its products. The Company estimated these rebates and recorded such estimates in the same period the related revenue was recognized, resulting in a reduction of product revenue and the establishment of a current liability.

Co-Payment assistance — The Company offered co-payment assistance to commercially insured patients meeting certain eligibility requirements. The calculation of the accrual for co-pay assistance was based on an estimate of claims and the cost per claim that the Company expected to receive associated with product that had been recognized as revenue.

8


 

 

Product returns — The Company generally offered a limited right of return based on its returned goods policy, which included damaged product and remaining shelf life. The Company estimated the amount of its product sales that may be returned and recorded

License and collaboration agreement revenue — The Company analyzes each element of its license and collaboration arrangements to determine the appropriate revenue recognition. The terms of the license agreement may include payment to the Company of non-refundable upfront 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. For licenses that are combined with other promises, the Company determines whether the combined performance obligation is satisfied over time or at a point in time, when (or as) the associated performance obligation in the contract 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 and internally approved pricing guidelines related to the performance obligations.

The Company recognizes sales-based milestone payments as revenue upon the achievement of the cumulative sales amount specified in the contract in accordance with ASC 606-10-55-65. 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 most-likely amount method. As such, the Company assesses each milestone to determine the probability 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.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component as of March 31, 2024.

Royalties — The Company recognizes revenue from license arrangements with its commercial partners’ net sales of products. Such revenues are included as royalty income. In accordance with ASC 606-10-55-65, royalties are recognized when the subsequent sale of the commercial partner’s products occurs. The Company’s commercial partners are obligated to report their net product sales and the resulting royalty due to the Company typically within 60-days from the end of each quarter. Based on historical product sales, royalty receipts and other relevant information, the Company recognizes royalty income each quarter and subsequently determines a true-up when it receives royalty reports and payment from its commercial partners. Historically, these true-up adjustments have been immaterial.

Sale of Future Royalties — The Company has sold its rights to receive certain royalties on product sales. In the circumstance where the Company has sold its rights to future royalties under a royalty purchase agreement (RPA) and also maintains limited continuing involvement in the arrangement (but not significant continuing involvement in the generation of the cash flows that are due to the purchaser), the Company defers recognition of the proceeds it receives for the sale of royalty streams and recognizes such unearned revenue as revenue under the units-of-revenue method over the life of the underlying license agreement. Under the units-of-revenue method, amortization for a reporting period is calculated by computing a ratio of the proceeds received from the purchaser to the total payments expected to be made to the purchaser over the term of the agreement, and then applying that ratio to the period’s cash payment.

Estimating the total payments expected to be received by the purchaser over the term of such arrangements requires management to use subjective estimates and assumptions. Changes to the Company’s estimate of the payments expected to be made to the purchaser over the term of such arrangements could have a material effect on the amount of revenues recognized in any particular period.

Research Collaborations — The Company recognizes revenue over the term of the statements of work under any funded research collaborations. Revenue recognition for consideration, if any, related to a license option right is assessed based on the terms of any such future license agreement or is otherwise recognized at the completion of the research collaborations.

9


 

 

Please refer to Note 3 for further details on the license and collaboration agreements into which the Company has entered and corresponding amounts of revenue recognized during the current and prior year periods.

Cost of sales — Cost of sales consist of costs associated with the manufacture of YUTIQ® and DEXYCU®, certain period costs for DEXYCU® product revenue, product shipping and, as applicable, royalty expense. The inventory costs for YUTIQ® include purchases of various components, the active pharmaceutical ingredient (API), and direct labor and overhead for the product manufactured in the Company’s Watertown, Massachusetts facility. The inventory costs for DEXYCU® include purchased components, the API and third-party manufacturing, and assembly.

For the three months ended March 31, 2024 and 2023, product revenue-based royalty expense as a component of cost of sales was immaterial.

Recently Adopted and Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07—Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU was issued to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU applies to all public entities that are required to report segment information in accordance with Topic 280, Segment Reporting. ASU 2023-07 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 standard should be applied retrospectively. ASU 2023-07 will be effective for the Company for the annual period of its fiscal year ending December 31, 2024. The Company does not anticipate the adoption of this ASU will have a material impact on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU was issued to address investor requests for more transparency about income tax information through improvements to income tax disclosure primarily related to the rate reconciliation and income taxes paid information, and to improve the effectiveness of income tax disclosures. This ASU is effective for public entities for annual periods beginning after December 15, 2024. Early adoption is permitted. ASU 2023-09 will be effective for the Company in the first quarter of its fiscal year ending December 31, 2025. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

3.
Revenue

Product Revenue Reserves and Allowances

From January 1, 2023 through May 17, 2023 (the date the Company entered into the product rights agreement (PRA) with Alimera, pursuant to which the Company granted an exclusive license and rights to its YUTIQ® (fluocinolone acetonide intravitreal implant) 0.18 mg (YUTIQ®) product to Alimera, the Company’s product revenues were primarily from sales of YUTIQ® in the U.S. For the three months ended March 31, 2024, the Company’s product revenues were primarily from the Company’s existing commercial supply agreements with Alimera. For the three months ended March 31, 2024 and 2023, the Company’s product revenues were made up primarily of $0.7 million and $7.4 million from the sales of YUTIQ®. Sales of DEXYCU® for the three months ended March 31, 2024 and 2023 were immaterial.

The following table summarizes activity in each of the product revenue allowance and reserve categories for the three months ended March 31, 2024 and 2023 (in thousands):

 

 

 

Chargebacks,
Discounts

 

 

Government
and Other

 

 

 

 

 

 

 

 

 

and Fees

 

 

Rebates

 

 

Returns

 

 

Total

 

Beginning balance at January 1, 2024

 

$

83

 

 

$

 

 

$

677

 

 

$

760

 

Provision related to sales in the current year

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments related to prior period sales

 

 

70

 

 

 

 

 

 

 

 

 

70

 

Deductions applied and payments made

 

 

(112

)

 

 

 

 

 

(54

)

 

 

(166

)

Ending balance at March 31, 2024

 

$

41

 

 

$

 

 

$

623

 

 

$

664

 

 

10


 

 

 

 

 

Chargebacks,
Discounts

 

 

Government
and Other

 

 

 

 

 

 

 

 

 

and Fees

 

 

Rebates

 

 

Returns

 

 

Total

 

Beginning balance at January 1, 2023

 

$

859

 

 

$

158

 

 

$

871

 

 

$

1,888

 

Provision related to sales in the current year

 

 

823

 

 

 

 

 

 

 

 

 

823

 

Adjustments related to prior period sales

 

 

40

 

 

 

(40

)

 

 

(18

)

 

 

(18

)

Deductions applied and payments made

 

 

(846

)

 

 

(103

)

 

 

(32

)

 

 

(981

)

Ending balance at March 31, 2023

 

$

876

 

 

$

15

 

 

$

821

 

 

$

1,712

 

 

 

Returns are recorded as a reduction of accounts receivable on the condensed consolidated balance sheets. Chargebacks, discounts and fees and rebates are recorded as a component of accrued expenses on the condensed consolidated balance sheets (See Note 6).

License and Collaboration Agreements and Royalty Income

Alimera Product Rights Agreement and Commercial Supply Agreement

On May 17, 2023 (the Closing Date), the Company entered into a PRA with Alimera. Under the PRA, the Company granted to Alimera an exclusive and sublicensable right and license (the License) under the Company’s and its affiliates’ interest in certain of the Company’s and its affiliates’ intellectual property to develop, manufacture, sell, commercialize, and otherwise exploit certain products, including YUTIQ®, for the treatment and prevention of uveitis in the entire world except Europe, the Middle East and Africa (EMEA).

Additionally, pursuant to the PRA, the Company transferred and assigned to Alimera certain assets (the Transferred Assets) and certain contracts with third parties related to YUTIQ®, including the new drug application for YUTIQ® (collectively, the Asset Transfer). Pursuant to the PRA, Alimera paid the Company a $75.0 million upfront payment. Alimera will also make four quarterly payments of $1.875 million to the Company totaling $7.5 million during 2024. Alimera will also pay royalties to the Company from 2025 to 2028 at a percentage of low-to-mid double digits of Alimera’s related U.S. annual net sales of certain products (including YUTIQ®) in excess of certain thresholds, beginning at $70 million in 2025, and increasing annually thereafter. Upon Alimera’s payment of the Upfront Payment and the 2024 quarterly payments, the licenses and rights granted to Alimera will automatically become perpetual and irrevocable. Payments received from Alimera are non-refundable.

On the Closing Date, the Company and Alimera also entered into a commercial supply agreement (CSA), pursuant to which, during the term of the PRA, the Company agreed to manufacture and exclusively supply to Alimera agreed-upon quantities of YUTIQ® necessary for Alimera to commercialize YUTIQ® in the United States at certain cost plus amounts, subject to adjustments and potential extensions and terminations set forth in the CSA (the Supply Transaction and together with the License and the Asset Transfer, the Transaction).

The Company classified the cash proceeds of the $75.0 million Upfront Payment received from Alimera as deferred revenue at the Closing Date, pursuant to the PRA and the CSA because the License and supply units to be delivered under both agreements comprise a single, combined performance obligation as Alimera will not have the right or ability to manufacture YUTIQ® (or have YUTIQ® manufactured by a third-party contract manufacturing organization) over the initial two-year term pursuant to the CSA. The combined performance obligation is satisfied over time using the units delivered output method to measure progress based on initial estimated supply units of YUTIQ® over the two-year term for purposes of recognizing revenue, such that revenue is recognized based on the value transferred in the form of units of product in the satisfaction of a performance obligation. Through this method, the Company compares the actual units delivered to date with the current estimated total to be delivered in the contractual term to measure the satisfaction of the performance obligation and recognize revenue. The Company will monitor its estimate of total units to be delivered to determine if an adjustment is needed to ensure that revenue is recognized proportionally for units delivered to date relative to the total units expected to be delivered for the combined performance obligation. Such estimates of the total delivery will be reassessed on an ongoing basis. If the Company determines that a change in estimate is necessary, it will adjust revenue using a cumulative catch-up method.

During the three months ended March 31 2024, the Company recognized $0.7 million of revenue from sales of product supply to Alimera under the CSA and recorded this amount in product sales, net on the consolidated statements of comprehensive loss. The Company recognized $10.4 million of license and collaboration revenue related to the PRA for the three months ended March 31, 2024. As of March 31, 2024, the Company had $37.0 million as current and no non-current deferred revenue recognized under the PRA, respectively.

11


 

 

SWK Royalty Purchase Agreement

Pursuant to a royalty purchase agreement (RPA) with SWK Funding LLC (SWK), the Company sold its right to receive royalty payments on future sales of products subject to a licensing and development agreement, as amended, with Alimera (the Amended Alimera Agreement) for an upfront cash payment of $16.5 million. The Company classified the proceeds received from SWK as deferred revenue at inception of the RPA and is recognizing revenue as royalty payments are made from Alimera to SWK. The Company recognized $0.3 million and $0.3 million of royalty revenue related to the RPA for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the Company had $1.4 million and $12.1 million as current and non-current deferred revenue recognized under the RPA, respectively. As of December 31, 2023, the Company classified $1.4 million and $12.4 million as current and non-current deferred revenue recognized under the RPA, respectively.

Ocumension Therapeutics

Pursuant to license agreements and a Memorandum of Understanding signed with the Company, Ocumension has:

1.
An exclusive license for the development and commercialization of its three-year micro insert using the Durasert technology for the treatment of posterior segment uveitis of the eye (YUTIQ® in the U.S.) in Mainland China, Hong Kong, Macau, and Taiwan at its own cost and expense in return for royalties based on sales with the Company supplying products for clinical trials and commercial sale;
2.
An exclusive license for the development and commercialization in Mainland China, Hong Kong, Macau, and Taiwan of DEXYCU® for the treatment of post-operative inflammation following ocular surgery at its own cost and expense in return for royalties based on sales with the Company supplying product for clinical trials and commercial sale; and
3.
Exclusive rights to develop and commercialize YUTIQ® and DEXYCU® products under its own brand names in South Korea and other jurisdictions across Southeast Asia in Brunei, Burma (Myanmar), Cambodia, Timor-Leste, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, and Vietnam, at its own cost and expense in return for royalties based on sales with the Company supplying product for clinical trials and commercial sale.

The Chief Executive Officer of Ocumension is a member of the Company's board of directors (the Board).

During the three months ended March 31, 2024, the Company recognized $0.2 million, in royalty income from Ocumension. There were no sales to Ocumension under the supply agreement for the three months ended March 31, 2024. License and collaboration revenue related to additional technical assistance during the three months ended March 31, 2024 and 2023 was immaterial.

Exclusive License Agreement with Betta Pharmaceuticals, Co., Ltd.

On May 2, 2022, the Company entered into an exclusive license agreement (the Betta License Agreement) with Betta Pharmaceuticals Co., Ltd. (Betta), an affiliate of Equinox Sciences, LLC (Equinox) (see Note 13). Under the Betta License Agreement, the Company granted to Betta an exclusive, sublicensable, royalty-bearing license under certain of the Company’s intellectual property to develop, use (but not make or have made), sell, offer for sale, and import the Company’s product candidate, DURAVYU, an investigational sustained delivery treatment for anti-VEGF-mediated retinal diseases combining vorolanib, a selective and patent-protected tyrosine kinase inhibitor (TKI) with Durasert E™ (the Licensed Product), in the field of ophthalmology (the Betta Field) in the greater area of China, including China, the Hong Kong Special Administrative Region, the Macau Special Administrative Region, and Taiwan (the Betta Territory). The Company retained rights under the Company’s intellectual property to, among other things, conduct clinical trials on the Licensed Product in the Betta Field in the Betta Territory.

In consideration for the rights granted by the Company, Betta agreed to pay the Company tiered, mid-to-high single-digit royalties based upon annual net sales of Licensed Products in the Betta Territory. The royalties are payable on a Licensed Product-by-Licensed Product and region-by-region basis commencing on the first commercial sale of a Licensed Product in a region and continuing until the later of (i) the date that is twelve (12) years after first commercial sale of such Licensed Product in such region, and (ii) the first day of the month following the month in which a generic product corresponding to such Licensed Product is launched in the relevant region. The royalty rate is subject to reduction under certain circumstances, including when there is no valid claim of a licensed patent that covers a Licensed Product in a particular region.

Betta is responsible for all costs relating to development, registration, manufacturing, marketing, advertising, promotional, launch, and sales activities in connection with the Licensed Products in the Betta Field in the Betta Territory. Betta is required to use commercially reasonable efforts to develop, seek regulatory approval for, and commercialize at least one Licensed Product in the Betta Field in the Betta Territory. The Betta License Agreement also requires Betta to achieve certain diligence milestones relating to regulatory filings, patient dosing, and regulatory approval by certain specified deadlines set forth in the Betta License Agreement, subject to certain exceptions and extensions as set forth in the Betta License Agreement. Betta’s development activities will be

12


 

 

conducted pursuant to a development plan subject to periodic updates. In the event that the Company conducts a global registrational clinical trial for a Licensed Product in the Betta Field, Betta will have the right to participate in such clinical trial by including clinical trial sites in the Betta Territory in accordance with the terms of the Betta License Agreement. The Company has also agreed to provide certain technology transfer and other support services to Betta subject to certain conditions and limitations set forth in the Betta License Agreement.

The revenue the Company recognized for the three months ended March 31, 2024 and 2023, related to this agreement was immaterial.

4.
Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Prepaid expenses

 

$

2,908

 

 

$

1,695

 

Prepaid clinical trials

 

 

6,698

 

 

 

6,335

 

Other

 

 

1,483

 

 

 

1,009

 

Total prepaid expenses and other current assets

 

$

11,089

 

 

$

9,039

 

 

5.
Inventory

Inventory consisted of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Raw materials

 

$

1,448

 

 

$

1,303

 

Work in process

 

 

1,085

 

 

 

882

 

Finished goods

 

 

1,724

 

 

 

1,721

 

Total inventory

 

$

4,257

 

 

$

3,906

 

 

6.
Accrued Expenses

Accrued expenses consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Personnel costs

 

$

5,499

 

 

$

12,631

 

Clinical trial costs

 

 

8,736

 

 

 

3,305

 

Professional fees

 

 

813

 

 

 

666

 

Sales chargebacks, rebates and other revenue reserves

 

 

664

 

 

 

760

 

Other

 

 

228

 

 

 

159

 

Total accrued expenses

 

$

15,940

 

 

$

17,521

 

 

7.
Leases

On March 8, 2022, the Company amended the lease for its headquarters in Watertown, Massachusetts totaling 21,649 square feet (i) to extend the term to May 31, 2028, for 13,650 square feet of laboratory and manufacturing operations space, with the landlord agreeing to provide the Company a construction allowance of up to $0.7 million to be applied toward upgrades and improvements within the space; (ii) to rent an additional 11,999 square feet of office space within the building through May 31, 2028 (New Premises); and (iii) to terminate a portion of the lease comprising 7,999 square feet of office space in the building in accordance with its existing contractual term on May 31, 2025. The amendment also reinstated the Company’s right to extend the lease for the space it occupies after May 31, 2025, for one additional period of five years. Rent for the extension period would be at the fair market rent for comparable space in comparable properties in the Watertown area. During the second quarter of 2022, the Company recognized a $2.9

13


 

 

million increase to its lease liabilities and right-of-use (ROU) assets resulting from the lease amendment for the term extension of the laboratory and manufacturing operations space.

The lease for the New Premises commenced during the third quarter of 2022. The Company occupied the New Premises when the landlord substantially completed its construction for the space, after which the Company’s obligation to pay base rent began. The Company recognized an increase of $1.6 million to its lease liabilities and $1.7 million to its ROU assets resulting from the lease for the New Premises.

The Company previously provided a cash-collateralized $0.2 million irrevocable standby letter of credit as security for the Company’s obligations under the lease, which will remain in effect through the period that is four months beyond the expiration date of the amended lease. The Company will also be required to pay its proportionate share of certain operating costs and property taxes applicable to the leased premises in excess of new base year amounts.

On January 23, 2023, the Company entered into a lease agreement for its new standalone manufacturing facility, including office and lab space located at 600 Commerce Drive, Northbridge, Massachusetts. The new leased premises will consist of approximately 40,000 square feet. The lease includes a non-cancellable lease term of fifteen years and four months, with two options to extend the lease term for two additional terms of either five years or ten years at 95% of the then-prevailing fair market rent. The lease term will commence upon the substantial completion of construction of the facility and related leasehold improvements, which are owned by the lessor, to prepare the premises for the Company’s intended use, which is currently expected to occur during the second half of 2024. The Company’s obligation to pay base rent will begin four months following the commencement of the lease term. The lease will create significant rights and obligations for the Company, including the payment of base rent on monthly basis, of which the Company estimates will total approximately $40.8 million during the initial non-cancellable term of the lease (i.e., fifteen years and four months). The Company will be responsible for real estate taxes, maintenance, and other operating expenses applicable to the leased premises. As of March 31, 2024, a lease commencement date in accordance with ASC 842, Leases, had not occurred, as such, no ROU or lease liability has been recorded as of March 31, 2024.

Since the Company elected to account for each lease component and its associated non-lease components as a single combined component, all contract consideration was allocated to the respective lease components. The expected lease terms include non-cancellable lease periods. Renewal option periods have not been included in the determination of the lease terms as they are not deemed reasonably certain of exercise. Variable lease payments, such as common area maintenance, real estate taxes, and property insurance are not included in the determination of the lease’s ROU asset or lease liability.

As of March 31, 2024, the weighted average remaining term of the Company’s operating leases was 4.0 years and the weighted average discount rate was 5.84%.

Supplemental balance sheet information related to operating leases as of March 31, 2024 and December 31, 2023 are as follows (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Other current liabilities – operating lease current portion

 

$

1,098

 

 

$

563

 

Operating lease liabilities – noncurrent portion

 

 

4,624

 

 

 

4,906

 

Total operating lease liabilities

 

$

5,722

 

$

5,469

 

 

Operating lease expense recognized was $0.4 million and $0.4 million, excluding $0.1 million and $0.05 million of variable lease costs, for the three months ended March 31, 2024 and 2023, respectively, and was included in the accompanying consolidated statements of comprehensive loss.

14


 

 

The Company’s total future minimum lease payments under non-cancellable leases at March 31, 2024 were as follows (in thousands):

 

 

 

Operating Leases

 

Remainder of 2024

 

$

1,045

 

2025

 

 

1,494

 

2026

 

 

1,589

 

2027

 

 

1,637

 

Thereafter

 

 

693

 

Total lease payments

 

$

6,458

 

Less imputed interest

 

 

(736

)

Total

 

$

5,722

 

 

8.
Stockholders’ Equity

ATM Facility

In August 2020, the Company entered into an at-the-market facility (the ATM Facility) with Cantor Fitzgerald & Co (Cantor). Pursuant to the ATM Facility, the Company may, at its option, offer and sell shares of its common stock from time to time, through or to Cantor, acting as sales agent. The Company will pay Cantor a commission of 3.0% of the gross proceeds from any future sales of such shares.

During the three months ended March 31, 2024 and 2023, the Company did not sell any shares of its common stock under the ATM Facility.

Warrants to Purchase Common Shares

Pursuant to a credit agreement, the Company issued a warrant to SWK to purchase (i) 40,910 shares of the Company’s common stock on March 28, 2018 at an exercise price of $11.00 per share with a seven-year term and (ii) 7,773 shares of the Company’s common stock on June 26, 2018 at an exercise price of $19.30 per share with a seven-year term.

In January 2024, SWK exercised their warrants in full via cashless exercise resulting in the net share issuance of 25,666 shares.

9.
Share-Based Payment Awards

Equity Incentive Plan

Prior to June 20, 2023, the Company had authorized the issuance of 5,900,000 shares of the Company's common stock under the 2016 Long-Term Incentive Plan (the 2016 Plan), of which 184,904 shares remained available for future grants.

At the Company’s Annual Meeting of Stockholders held on June 20, 2023, the Company’s stockholders approved the adoption of the 2023 Long Term Incentive Plan (the 2023 Plan) and authorized up to 3,500,000 shares of common stock reserved for issuance to participating employees plus the 184,904 shares that remained available for grant under the 2016 Plan upon adoption of the 2023 Plan plus any shares that would have otherwise have become available for grant under the Company's 2008 Plan or the 2016 Plan as a result of termination or forfeiture of awards under such plan. The 2023 Plan replaced the 2008 Plan and the 2016 Plan. At March 31, 2024, a total of approximately 176,000 shares were available for new awards under the 2023 Plan.

Starting March 2022, the Company granted non-statutory stock options to new employees as inducement awards to enter into employment with the Company. The grants were approved by the Compensation Committee of the board of directors and awarded in accordance with Nasdaq Listing Rule 5635(c)(4). Although not awarded under the 2023 Plan or the 2016 Plan, the grants are subject to and governed by the terms and conditions of the plan in effect at the time of the grant.

Stock Options

The following table provides a reconciliation of stock option activity under the Company’s equity incentive plan and for inducement awards for the three months ended March 31, 2024:

15


 

 

 

 

 

Number of
Options

 

 

Weighted
Average
Exercise
Price

 

 

Weighted
Average
Remaining
Contractual
Life

 

 

Aggregate
Intrinsic
Value

 

 

 

 

 

 

 

 

 

(in years)

 

 

(in thousands)

 

Outstanding at January 1, 2024

 

 

6,304,767

 

 

$

9.98

 

 

 

 

 

 

 

Granted

 

 

1,706,582

 

 

 

21.27

 

 

 

 

 

 

 

Exercised

 

 

(444,184

)

 

 

9.66

 

 

 

 

 

 

 

Forfeited

 

 

(136,148

)

 

 

7.31

 

 

 

 

 

 

 

Outstanding at March 31, 2024

 

 

7,431,017

 

 

$

12.64

 

 

 

7.95

 

 

$

64,740

 

Exercisable at March 31, 2024

 

 

2,976,446

 

 

$

12.73

 

 

 

6.35

 

 

$

27,295

 

 

The Company's stock options generally vest over four years with 25% vesting after one year of service followed by ratable monthly vesting over the remaining three years. Nonemployee awards are granted similar to the Company’s employee awards. All option grants have a 10-year term. Options to purchase a total of 1,086,001 shares of the Company’s common stock vested during the three months ended March 31, 2024.

In determining the grant date fair value of option awards granted during the three months ended March 31, 2024, the Company applied the Black-Scholes option pricing model based on the following key assumptions:

 

Option life (in years)

 

5.5 - 6.08

Stock volatility

 

97% - 99%

Risk-free interest rate

 

3.84% - 4.28%

Expected dividends

 

0.0%

 

The following table summarizes information about employee, non-executive director and external consultant stock options for the three months ended March 31, 2024 (in thousands except per share amount):

 

Three Months

 

 

 

Ended

 

March 31, 2024

 

Weighted average grant date fair value per share

$

16.91

 

Total cash received from exercise of stock options

$

4,294

 

Total intrinsic value of stock options exercised

$

6,802

 

 

Time-Vested Restricted Stock Units

Time-vested restricted stock units (RSUs) issued to date under the 2016 Plan and the 2023 Plan generally vest on a ratable annual basis over 3 years. The related stock-based compensation expense is recorded over the requisite service period, which is the vesting period. The fair value of all time-vested RSUs is based on the closing share price of the Company’s common stock on the date of grant.

The following table provides a reconciliation of RSU activity under the 2016 Plan and the 2023 Plan for the three months ended March 31, 2024:

 

 

 

Number of Restricted Stock Units

 

 

Weighted Average Grant Date Fair Value

 

Nonvested at January 1, 2024

 

 

1,333,192

 

 

$

5.31

 

Granted

 

 

636,100

 

 

 

20.40

 

Vested

 

 

(533,688

)

 

 

6.23

 

Forfeited

 

 

(32,452

)

 

 

7.31

 

Nonvested at March 31, 2024

 

 

1,403,152

 

 

$

11.76

 

 

At March 31, 2024, the weighted average remaining vesting term of the RSUs was 1.74 years.

16


 

 

Employee Stock Purchase Plan

The Company’s Employee Stock Purchase Plan (the ESPP) allows qualified participants to purchase the Company’s common stock twice a year at 85% of the lesser of the average of the high and low sales price of the Company’s common stock on (i) the first trading day of the relevant offering period and (ii) the last trading day of the relevant offering period. The number of shares of the Company’s common stock each employee may purchase under this plan, when combined with all other employee stock purchase plans, is limited to the lower of an aggregate fair market value of $25,000 during each calendar year, or 5,000 shares of the Company’s common stock in any one offering period. The Company has maintained consecutive six-month offering periods since August 1, 2019. During the three months ended March 31, 2024, 25,015 shares of the Company’s common stock were issued pursuant to the ESPP.

The Company estimated the fair value of the option component of the ESPP shares at the date of grant using a Black-Scholes valuation model. During the three months ended March 31, 2024, the compensation expense from ESPP shares was $0.1 million. During the three months ended March 31, 2023, the compensation expense from ESPP shares was immaterial.

Stock-Based Compensation Expense

The Company’s consolidated statements of comprehensive loss included total compensation expense from stock-based payment awards as follows (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Compensation expense included in:

 

 

 

 

 

 

Research and development

 

$

7,827

 

 

$

1,240

 

Sales and marketing

 

 

 

 

 

430

 

General and administrative

 

 

4,872

 

 

 

1,380

 

 

 

$

12,699

 

 

$

3,050

 

 

During the three months ended March 31, 2024, the Company modified certain stock option and restricted stock awards in connection with the termination of two executives resulting in incremental compensation expense of $5.6 million.

At March 31, 2024, there was approximately $43.3 million of unrecognized compensation expense related to outstanding equity awards under the 2023 Plan, the 2016 Plan, the inducement awards and the ESPP that is expected to be recognized as expense over a weighted average period of approximately 1.8 years.

10.
License and Asset Purchase Agreements

Equinox Science, LLC

In February 2020, the Company entered into an Exclusive License Agreement (the Equinox License Agreement) with Equinox, pursuant to which Equinox granted the Company an exclusive, sublicensable, royalty-bearing right and license to certain patents, and other Equinox intellectual property to research, develop, make, have made, use, sell, offer for sale, and import the compound vorolanib and any pharmaceutical products comprising the compound for local delivery to the eye for the prevention or treatment of age-related macular degeneration, diabetic retinopathy and retinal vein occlusion using the Company’s proprietary localized delivery technologies (the Original Field), in each case, throughout the world except China, Hong Kong, Taiwan, and Macau (the Company Territory).

In consideration for the rights granted by Equinox, the Company (i) made a one time, non-refundable, non-creditable upfront cash payment of $1.0 million to Equinox in February 2020, and (ii) agreed to pay milestone payments totaling up to $50 million upon the achievement of certain development and regulatory milestones, consisting of (a) completion of a Phase II clinical trial for the compound or a licensed product, (b) the filing of a new drug application or foreign equivalent for the compound or a licensed product in the United States, European Union, or United Kingdom and (c) regulatory approval of the compound or a licensed product in the United States, European Union, or United Kingdom.

The Company also agreed to pay Equinox tiered royalties based upon annual net sales of licensed products in the Company Territory. The royalties are payable with respect to a licensed product in a particular country in the Company Territory on a country-by-country and licensed product-by-licensed product basis until the later of (i) twelve years after the first commercial sale of such licensed product in such country and (ii) the first day of the month following the month in which a generic product corresponding to

17


 

 

such licensed product is launched in such country. The royalty rates range from the high-single digits to low-double digits depending on the level of annual net sales. The royalty rates are subject to reduction during certain periods when there is no valid patent claim that covers a licensed product in a particular country.

On May 2, 2022, concurrent with the Company entering into the Betta License Agreement (see Note 3), the Company entered into Amendment #1 to the Equinox License Agreement, pursuant to which the Original Field was expanded to cover the prevention or treatment of ophthalmology indications using the Company’s proprietary localized delivery technologies, and certain conforming changes were made to the Equinox License Agreement in connection therewith.

No R&D expense was recorded for the three months ended March 31, 2024 and 2023, respectively, related to the Equinox License Agreement as no milestones were achieved.

11.
Fair Value Measurements

The following tables summarize the Company’s assets by significant categories carried at fair value measured on a recurring basis by valuation hierarchy (in thousands):

 

 

 

March 31, 2024

 

 

 

Carrying
Value

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair Value

 

 

Cash
Equivalents

 

 

Marketable Securities

 

Level 1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

261,712

 

 

$

 

 

$

 

 

$

261,712

 

 

$

261,712

 

 

$

 

Subtotal

 

$