~~of latanoprost include hyperemia, irreversible change in iris color, discoloration of the skin around the eyes and droopiness of eyelids caused by the loss of orbital fat.~~

~~Any undesirable adverse effects that may be caused by our product candidates could interrupt, delay~~We have no experience developing manufacturing facilities or ~~halt clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications, and in turn prevent us from commercializing~~manufacturing our product candidates, and ~~generating revenues~~we cannot assure you that we will be able to develop our manufacturing plant or manufacture our product candidates in compliance with regulations at a cost or in quantities necessary to make them commercially viable.

We have entered into a lease agreement for a new manufacturing plant in Athlone, Ireland. The building shell was constructed by the Industrial Development Agency of Ireland and we are in the early stages of building out the plant for the future commercial production of our current product candidates. We have no experience in developing manufacturing facilities or manufacturing drug products. The build-out of this manufacturing plant will require substantial additional funds and we will need to hire and train significant numbers of qualified employees to staff this facility. There can be no assurance that we will develop a manufacturing plant that is adequate to produce materials for commercial use on our expected timing or at all.

The development of manufacturing facilities and the manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. The equipment and facilities employed in the manufacture of pharmaceuticals are subject to stringent qualification requirements by regulatory agencies, including validation of facility, equipment, systems, processes and analytics. We may be subject to lengthy delays and expense in conducting validation studies, if we can meet the requirements at all. Although we expect to complete internal construction of the plant to meet these qualification requirements, there can be no assurance that we will obtain certification from ~~their sale.~~ the FDA and other regulatory authorities to allow the plant to manufacture Rhopressa^TM and Roclatan^TM for export to the United States and other markets. If we are unable to obtain such certification in a timely manner, our ability to successfully manufacture and commercialize our potential products may be harmed.

In addition, we will be subject to customary risks associated with the construction of manufacturing plants, including, design defects, construction cost overruns (including labor and materials) and other factors that may delay build-out of the manufacturing plant. Our manufacturing operations and those of our third-party suppliers are subject to environmental, health and safety laws and regulations concerning, among other things, the use, storage, generation, handling, transportation and disposal of hazardous substances or wastes, the cleanup of hazardous substance releases, exposure to hazardous substances and emissions or discharges into the air or water. Violations of these laws and regulations can result in significant business interruptions and/or civil and criminal penalties. New laws and regulations, violations of or amendments to existing laws or regulations, or stricter enforcement of existing requirements, could require us to incur material costs, subject us to new or increased liabilities, and cause disruptions to our manufacturing activities that could be material. If the cost of funding the build-out of our manufacturing plant exceeds budgeted amounts and/or the time period for construction is longer than initially anticipated, our business, results of operations and financial condition could be materially adversely affected. Similarly, if ~~any~~we cannot access the capital we need to fund our operations, we may need to postpone or cancel the construction of the manufacturing plant or other components of our business strategy, which could impair our ability to compete effectively and harm our business, financial condition and results of operations.

Manufacturers of pharmaceutical products often encounter difficulties in production, especially in scaling up initial production. These problems include difficulties with production costs and yields, quality control and assurance and shortages of qualified personnel, as well as compliance with strictly enforced regulations. If we are unable to obtain certification from the FDA and other regulatory authorities or effectively produce commercial supplies of our product candidates, ~~receives regulatory approval and~~ we ~~or others later identify undesirable adverse effects caused by the product, we could face one or more of the following consequences:~~

~~regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication, or other labeling changes;~~

~~regulatory authorities may withdraw their approval of the product;~~

~~regulatory authorities may seize the product;~~

~~we may~~will be required to ~~change~~rely on a third-party manufacturer to meet our commercial manufacturing needs, which may materially adversely affect our business, results of operations and financial condition. See “-Risks Related to Our Reliance on Third Parties-We currently have no manufacturing capacity and anticipate continued reliance on third-party manufacturers for the ~~way that the~~development and commercialization of our product ~~is administered, conduct additional clinical trials or recall the product;~~candidates in accordance with manufacturing regulations until such a time when we can develop internal manufacturing capabilities, if at all.”

~~we may be subject to litigation or product liability claims fines, injunctions, or criminal penalties; and~~

~~our reputation may suffer.~~

Any of these ~~events~~risks could ~~prevent~~entail higher costs, cause us ~~from achieving or maintaining market acceptance~~to delay production and may result in our being unable to effectively support commercialization of our potential products. Furthermore, if we obtain regulatory approval and fail to deliver the ~~affected~~required commercial quantities of product ~~or could substantially increase the costs~~on a timely basis, and ~~expenses~~at commercially reasonable prices and acceptable quality, we would likely be unable to meet demand, if any, for our potential products and we would lose potential revenues.

Table of ~~commercializing such product, which in turn could delay or prevent us from generating revenues from its sale.~~Contents

We face competition from established branded and generic pharmaceutical companies and if our competitors are able to develop and market products that are preferred over our products, our commercial opportunity will be reduced or eliminated.

The development and commercialization of new drug products is highly competitive. We face competition from established branded and generic pharmaceutical companies and smaller biotechnology and pharmaceutical companies, as well as from academic institutions, government agencies and private and public research institutions, which may in the future develop products to treat patients with glaucoma or other diseases of the eye. Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. In July 2015, Bausch + Lomb Inc., a wholly owned subsidiary of Valeant Pharmaceuticals International, Inc., filed an NDA for a nitric oxide-donating latanoprost, which is currently under review by the FDA for the treatment of open angle glaucoma and ocular hypertension. Additionally, early-stage companies are also developing treatments for glaucoma and other diseases of the eye and may prove to be significant competitors, including Inotek Pharmaceuticals, which is developing an adenosine receptor agonist. We expect that our competitors will continue to develop new treatments for glaucoma and other diseases of the eye, which may include eye drops, oral treatments, surgical procedures, implantable devices or laser treatments. Alternative treatments beyond eye drops continue to develop. For example, although surgical procedures are currently used in severe cases, less invasive procedures are currently under development and we expect that we will compete with other companies that develop implantable devices or other products or procedures for use in the treatment of glaucoma or other diseases of the eye.

Other early-stage companies may also compete through collaborative arrangements with large and established companies. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Our commercial opportunity will be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer adverse effects, are more convenient or are less expensive than our potential products. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours.

In addition, our ability to compete may be affected because in many cases insurers or other third-party payors encourage the use of generic products. Our industry is currently dominated by generic drugs, such as latanoprost and timolol, in the case of glaucoma treatment, and additional products are expected to become available on a generic basis over the coming years. If any of our product candidates are approved, we expect that they will be priced at a premium over competitive generic products and consistent with other branded glaucoma drugs.

We expect that our ability to compete effectively will depend upon, among other things, our ability to:

successfully complete clinical trials and obtain all requisite regulatory approvals in a timely and cost- effective manner;

obtain and maintain patent protection and non-patent exclusivity for our products and otherwise prevent the introduction of generics of our products;

attract and retain key personnel;

develop effective manufacturing capabilities and build an effective selling and marketing infrastructure;

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demonstrate the advantages of our product candidates compared to alternative therapies, including currently marketed PGA and non-PGA products;

compete against other products with fewer contraindications; and

obtain and sustain adequate reimbursement from third-party payors.

If our competitors market products that are more effective, safer, have fewer side effects or are less expensive than our potential products or that reach the market sooner than our ~~future~~potential products, if any, we may not achieve commercial success.

The commercial success of our potential products will depend on the degree of market acceptance among eye-care professionals, patients, patient advocacy groups, healthcare payors and the medical community.

Our potential products may not gain market acceptance among eye-care professionals, patients, patient advocacy groups, healthcare payors and the medical community. There are a number of available therapies marketed for the treatment of glaucoma and other diseases of the eye. Some of these drugs are branded and subject to patent protection, but most others, including latanoprost and many beta blockers, in the case of glaucoma treatment, are available on a generic basis. Many of these approved drugs are well established therapies and are widely accepted by eye-care professionals, patients and third-party

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payors. Insurers and other third-party payors may also encourage the use of generic products. The degree of market acceptance of our potential products will depend on a number of factors, including:

the market price, affordability and patient out-of-pocket costs of our potential products relative to other available products, which are predominantly generics;

the possibility that third-party payors will not give our products favorable positions on their formularies or will place restrictions on the use of our products, including through use of step therapy or prior authorization programs;

the effectiveness of our potential products as compared with currently available products;

patient willingness to adopt our potential products in place of current therapies;

varying patient characteristics including demographic factors such as age, health, race and economic status;

changes in the standard of care for the targeted indications for any of our product candidates;

the prevalence and severity of any adverse effects;

limitations or warnings contained in a product candidate’s FDA-approved labeling;

limitations in the approved clinical indications and MOAs for our product candidates;

relative convenience and ease of administration;

the strength of our selling, marketing and distribution capabilities;

the quality of our relationships with eye-care professionals, patient advocacy groups, third-party payors and the medical community;

sufficient third-party coverage or reimbursement; and

potential product liability claims.

In addition, ~~the~~it is possible that we may find it necessary or desirable to provide rebates on our products to customers or third party payors or to implement patient assistance programs, including co-pay assistance programs, which could affect our profitability.

The potential market opportunity for our potential products is difficult to precisely estimate. Our estimates of the potential market opportunity for our potential products include several key assumptions based on our industry knowledge, industry publications, third-party research reports and other surveys. While we believe that our internal assumptions are reasonable, independent sources have not verified all of our assumptions. If any of these assumptions ~~proves~~prove to be inaccurate ~~then the actual market for our potential products could be smaller than our estimates of our potential market opportunity. If~~and the actual market for our potential products is smaller than we expect or if we fail to achieve market acceptance of our potential products in the United States and abroad, our potential product revenue may be limited, and it may be more difficult for us to achieve or maintain ~~profitability. If we fail to achieve market acceptance of our potential products in the United States and abroad, our revenue will be more limited and it will be more difficult to achieve~~ profitability.

If we fail to obtain and sustain an adequate level of reimbursement for our potential products by third-party payors, potential future sales would be materially adversely affected.

The course of treatment for glaucoma patients includes primarily older drugs, and the leading products for the treatment of glaucoma currently in the market, including latanoprost and timolol, are available as generic brands. There will be no commercially viable market for our potential products without reimbursement from third-party payors, and any reimbursement policy may be affected by future healthcare reform measures. We cannot be certain that reimbursement will be available for our potential products or any other product candidate we develop for glaucoma or other diseases of the eye. Additionally, even if

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there is a commercially viable market, if the level of reimbursement is below our expectations, our anticipated revenue and gross margins will be adversely affected.

Third-party payors, such as government or private healthcare insurers, carefully review and increasingly question and challenge the coverage of and the prices charged for drugs. Reimbursement rates from private health insurance companies vary depending on the company, the insurance plan and other factors. Reimbursement rates may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. A current trend in the United States healthcare industry is toward cost containment. Large public and private payors, managed care organizations, group purchasing organizations and similar organizations are exerting increasing influence on decisions regarding the use of, and reimbursement levels for, particular treatments. Such third-party payors, including Medicare, may question the coverage of, and challenge the

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prices charged for, medical products and services, and many third-party payors limit coverage of or reimbursement for newly approved healthcare products. In particular, third-party payors may limit the covered indications. Cost-control initiatives could decrease the price we might establish for products, which could result in product revenues being lower than anticipated. We believe our drugs will be priced significantly higher than existing generic drugs and consistently with current branded drugs. If we are unable to show a significant benefit relative to existing generic drugs, Medicare, Medicaid and private payors may not be willing to reimburse for our drugs, which would significantly reduce the likelihood of them gaining market acceptance. Reimbursement systems in international markets vary significantly by country and by region, and reimbursement approvals must be obtained on a country-by-country basis. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.

We expect that private insurers will consider the efficacy, cost effectiveness, safety and tolerability of our potential products in determining whether to approve reimbursement for such products and at what level. Obtaining these approvals can be a time consuming and expensive process. Our business would be materially adversely affected if we do not receive approval for reimbursement of our potential products from private insurers on a timely or satisfactory basis. Limitations on coverage could also be imposed at the local Medicare carrier level or by fiscal intermediaries. Medicare Part D, which provides a pharmacy benefit to Medicare patients as discussed below, does not require participating prescription drug plans to cover all drugs within a class of products. Our business could be materially adversely affected if Part D prescription drug plans were to limit access to, or deny or limit reimbursement of, our product candidates or other potential products.

Reimbursement in the European Union must be negotiated on a country-by-country basis and in many countries the product cannot be commercially launched until reimbursement is approved. The negotiation process in some countries can exceed 12 months. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our products to other available therapies. If the prices for our potential products decrease or if governmental and other third-party payors do not provide adequate coverage and reimbursement levels, our revenue, potential for future cash flows and prospects for profitability will suffer.

If we are found in violation of federal or state “fraud and abuse” laws or other healthcare laws and regulations, we may be required to pay a penalty and/or be suspended from participation in federal or state healthcare programs, which may adversely affect our business, financial condition and results of operation.

In the United States, we are subject to various federal and state healthcare “fraud and abuse” laws, including anti-kickback laws, false claims laws and other laws intended, among other things, to reduce fraud and abuse in federal and state healthcare programs. The Federal Anti-Kickback Statute makes it illegal for any person, including a prescription drug manufacturer (or a party acting on its behalf), to knowingly and willfully solicit, receive, offer or pay any remuneration that is intended to induce the referral of business, including the purchase, order or prescription of a particular drug for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. Although we seek to structure our business arrangements in compliance with all applicable requirements, these laws are broadly written, and it is often difficult to determine precisely how the law will be applied in specific circumstances. Accordingly, it is possible that our practices may be challenged under the Federal Anti-Kickback Statute. The Federal False Claims Act prohibits anyone from, among other things, knowingly presenting or causing to be presented for payment to the government, including the federal healthcare programs, claims for reimbursed drugs or services that are false or fraudulent, claims for items or services that were not provided as claimed, or claims for medically unnecessary items or services. Many states have similar false claims laws. Cases have been brought under false claims laws alleging that off-label promotion of pharmaceutical products or the provision of kickbacks have resulted in the submission of false claims to governmental healthcare programs. Under the Health Insurance Portability and Accountability Act of 1996, we are prohibited from knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services to obtain money or property of any healthcare benefit program. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including penalties, fines and/or exclusion or suspension from federal and state

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healthcare programs such as Medicare and Medicaid and debarment from contracting with the U.S. government. In addition, private individuals have the ability to bring actions on behalf of the government under the Federal False Claims Act as well as under the false claims laws of several states.

Many states have adopted laws similar to the Federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental payors. In addition, some states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and Manufacturers of America’s Code on Interactions with Healthcare Professionals. Several states also impose other marketing restrictions or require pharmaceutical companies to

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make marketing or price disclosures to the state. There are ambiguities as to what is required to comply with these state requirements and if we fail to comply with an applicable state law requirement we could be subject to penalties.

Neither the government nor the courts have provided definitive guidance on the application of fraud and abuse laws to our business. Law enforcement authorities are increasingly focused on enforcing these laws, and it is possible that some of our practices may be challenged under these laws. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. While we believe we have structured our business arrangements to comply with these laws, it is possible that the government could allege violations of, or convict us of violating, these laws. If we are found in violation of one of these laws, we could be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from governmental funded federal or state healthcare programs and the curtailment or restructuring of our operations. Were this to occur, our business, financial condition and results of operations and cash flows may be materially adversely affected.

Recently enacted and future legislation may increase the difficulty and cost of commercializing our potential products and may affect the prices we may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay regulatory approval of our potential products, restrict or regulate post-marketing activities and affect our ability to profitably sell our potential products for which we obtain regulatory approval.

In the United States, the MMA changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly by establishing Medicare Part D and introduced a reimbursement methodology based on average sales prices for physician-administered drugs under Medicare Part B. In addition, this legislation provided authority for limiting the number of drugs that are covered in any therapeutic class under the Part D program. Cost reduction initiatives and other provisions of this legislation could decrease the coverage and reimbursement rate that we receive for any of our approved products. While the MMA only applies to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors.

In March 2010, President Obama signed into law the PPACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against healthcare fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. PPACA increased manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate amount for both branded and generic drugs and revised the definition of “average manufacturer price,” or AMP, which may also increase the amount of Medicaid drug rebates manufacturers are required to pay to states. The legislation also expanded Medicaid drug rebates, which previously had been payable only on fee-for-service utilization, to Medicaid managed care utilization, and created an alternative rebate formula for certain new formulations of certain existing products that is intended to increase the rebates due on those drugs. The Centers for Medicare & Medicaid Services, which administers the Medicaid Drug Rebate Program, also expanded Medicaid rebates to the utilization that occurs in the territories of the United States, such as Puerto Rico and the Virgin Islands, effective April 1, ~~2017.~~2020. Further, beginning in 2011, PPACA imposed a significant annual fee on companies that manufacture or import branded prescription drug products and requires manufacturers to provide a 50% discount off the negotiated price of prescriptions filled by beneficiaries in the Medicare Part D coverage gap, referred to as the “donut hole.” Substantial new provisions affecting compliance have also been enacted, which may require us to modify our business practices with healthcare practitioners. For example, pharmaceutical companies are required to track certain payments made to physicians and teaching hospitals, and the first reports were due in 2014 and the reported information was made publicly available on a searchable website in September 2014. We will not know the full effects of PPACA until applicable federal and state agencies issue regulations or guidance under the new law. Although it is too early to determine the full effect of PPACA, the new law appears likely to continue the downward pressure on

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pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs. In addition, recently, President Donald Trump has made statements that suggest he plans to seek to repeal of all or portions of PPACA, and has stated that he will ask Congress to replace PPACA with new legislation. There is uncertainty with respect to the impact these changes, if any, may have, and any changes likely will take time to unfold.

Legislative and regulatory proposals have been introduced at both the state and federal level to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We are not sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by

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the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing approval testing and other requirements.

If we face allegations of noncompliance with the law and encounter sanctions, our reputation, revenues and liquidity may suffer, and our potential products could be subject to restrictions or withdrawal from the market.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenues from our potential products. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected. Additionally, if we are unable to generate revenues from our product sales, our potential for achieving profitability will be diminished and the capital necessary to fund our operations will be increased.

If our product candidates receive regulatory approval, we will be subject to ongoing regulatory requirements and we may face future development, manufacturing and regulatory difficulties.

Our product candidates, if approved, will also be subject to ongoing regulatory requirements for labeling, packaging, storage, advertising, promotion, sampling, record-keeping, submission of safety and other post- market approval information, importation and exportation. In addition, approved products, manufacturers and manufacturing facilities are required to comply with extensive FDA and EMA requirements and the requirements of other similar agencies, including ensuring that quality control and manufacturing procedures conform to cGMP requirements. As such, if our product candidates receive approval, we and our ~~potential future~~ contract manufacturers will be subject to continual review and periodic inspections to assess compliance with cGMPs. Accordingly, we and others with whom we work will be required to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control. We will also be required to report certain adverse reactions and production problems, if any, to the FDA and EMA and other similar agencies and to comply with certain requirements concerning advertising and promotion for our potential products. Promotional communications with respect to prescription drugs also are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Accordingly, once approved, we may not promote our products, if any, for indications, uses or claims for which they are not ~~approved.~~approved, even though physicians may prescribe them for those uses.

If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, it may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If our potential products fail to comply with applicable regulatory requirements, a regulatory agency may:

issue warning letters or untitled letters;

require product recalls;

mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners;

require us or our potential future collaborators to enter into a consent decree or permanent injunction, which can include shutdown of manufacturing facilities, imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;

impose other administrative or judicial civil or criminal penalties or pursue criminal prosecution;

withdraw regulatory approval;

refuse to approve pending applications or supplements to approved applications filed by us or by our potential future collaborators;

impose restrictions on operations, including costly new manufacturing requirements; or

seize or detain products.

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We may not be able to identify additional therapeutic opportunities for our potential product candidates or to expand our portfolio of product candidates.

We ~~may~~continue to explore other therapeutic opportunities in ophthalmology through internal research programs and from time to time we may explore such opportunities through research collaboration arrangements, and may seek to commercialize a portfolio of new ophthalmic drugs or drug delivery technologies in addition to our product candidates that we are currently developing. All of our preclinical studies to identify potential new indications for our current product candidates and potential future product candidates will require additional research and development and, in some cases, significant preclinical, clinical and other testing prior to seeking regulatory approval to market such new indications and/or product candidates. Accordingly, these additional indications and product candidates will not be commercially available for a number of years, if at all.

Research programs, including through collaboration arrangements, to pursue the development of our product candidates for additional indications and to identify new product candidates, drug delivery technologies and disease targets require substantial technical, financial and human resources whether or not we ultimately are successful. Our research programs may initially show promise in identifying potential additional indications and/or product candidates, yet fail to yield results for clinical development for a number of reasons, including:

the research methodology used may not be successful in identifying potential additional indications and/or product candidates;

potential additional indications may, after further study, fail to demonstrate efficacy sufficient to warrant further clinical development;

potential product candidates may, after further study, be shown to be ineffective or have harmful adverse effects or other characteristics that indicate they are unlikely to be effective drugs; or

it may take greater human and financial resources to identify additional therapeutic opportunities for our product candidates or to develop suitable potential product candidates or drug delivery technologies through internal research programs than we ~~will~~ possess, thereby limiting our ability to diversify and expand our product portfolio.

~~Because~~

The decision whether to pursue, and the timing of, any additional preclinical research programs is subject to a number factors and we may suspend or discontinue research programs at any time. For example, in 2015, we decided to no longer actively pursue further development of AR-13533, a second generation ROCK/NET inhibitor, for strategic business purposes.

In addition, because we have limited financial and managerial resources, we focus on research programs and product candidates for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential or a greater likelihood of success. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.

Accordingly, there can be no assurance that we will ever be able to identify additional therapeutic opportunities for our product candidates or any uses for our existing proprietary compounds beyond glaucoma or to develop suitable potential product candidates or drug delivery technologies through internal research programs or research collaboration arrangements, which could materially adversely affect our future growth and prospects.

Our current product candidates are all designed to treat patients with glaucoma, and the success or failure of any one of our product candidates could impact sales of our other potential products in the future.

Our current product candidates are designed to be once-daily dosed ROCK inhibitor eye drops to be applied topically to lower IOP for the treatment of glaucoma through various MOAs. Accordingly, increased sales for one of our potential products may negatively impact sales for our other potential products. Our commercialization strategy is unique for each of our product candidates. However, we cannot guarantee that cannibalization of sales among our potential product lines will not occur in the future. Because each of our current product candidates are ROCK inhibitor eye drops designed to treat patients with glaucoma, any challenges or failures with respect to any of these potential products could negatively impact sales or the public perception of our other potential products.

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Risks Related to Our Financial Position and Need for Additional Capital

We currently have no source of revenue and may never become profitable.

We are a clinical-stage pharmaceutical company with a limited operating history. Our ability to generate revenue and become profitable depends upon our ability to successfully complete the development of our product candidates for the management of glaucoma and obtain the necessary regulatory approvals for our product candidates. We have never been profitable, have no products approved for commercial sale and to date have not generated any revenue from product sales. Even if we receive regulatory approval for our product candidates for commercial sale, we do not know when such potential products will generate revenue, if at all. Our ability to generate product revenue depends on a number of factors, including our ability to:

successfully complete clinical development, and receive regulatory approval, for our product candidates;

set an acceptable price for our potential products and obtain adequate reimbursement from third-party payors;

~~obtain~~manufacture or ~~manufacture~~obtain commercial quantities of our potential products at acceptable cost levels; and

successfully market and sell our potential products in the United States and abroad.

In addition, because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses, or when, or if, we will be able to achieve or maintain profitability. In addition, our expenses could increase beyond expectations for a number of reasons, including if we are required by the FDA or other regulatory authorities to perform studies in

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addition to those that we currently anticipate. Even if our product candidates are approved for commercial sale, we anticipate incurring significant costs associated with the commercial launch of these product candidates.

Our ability to become and remain profitable depends on our ability to generate revenue. Even if we are able to generate revenues from the sale of our potential products, we may not become profitable and may need to obtain additional funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business or continue our operations.

We have incurred net losses since inception and anticipate that we will continue to incur net losses ~~for the foreseeable future.~~until such a time when our product candidates are commercially successful, if at all.

We have incurred losses in each year since our inception in June 2005. Our net losses were $99.1 million, $74.4 million ~~$48.1 million~~ and ~~$31.1~~$48.1 million for the years ended December 31, 2016, 2015 ~~2014~~ and ~~2013,~~2014, respectively. As of December 31, ~~2015,~~2016, we had an accumulated deficit of ~~$217.6~~$316.6 million.

Investment in pharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to gain regulatory approval or become commercially viable. We have devoted the majority of our financial resources to research and development, including our non-clinical development activities and clinical trials. To date, we have financed our operations primarily through the sale of equity securities and issuance of convertible debt, including the completion of our IPO in October 2013, the issuance of the 2014 Convertible Notes in September 2014 and the issuance and sale of common stock pursuant to our registration statements on Form S-3 and former “at-the-market” sales agreements. Our product candidates will require the completion of regulatory review, significant marketing efforts and substantial investment before they can provide us with any revenue.

We expect our research and development expenses to continue to be significant in connection with our ongoing and planned Phase 3 registration trials. In addition, if we obtain regulatory approval for our product candidates, we expect to incur increased manufacturing, sales and marketing expenses. As a result, we expect to continue to incur significant and increasing operating losses and negative cash flows ~~for the foreseeable future.~~until such a time when our product candidates are commercially successful, if at all. These losses have had and will continue to have a material adverse effect on our stockholders’ equity, ~~(deficit),~~ financial position, cash flows and working capital.

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We may need to obtain additional financing to fund our operations and, if we are unable to obtain such financing, we may be unable to complete the development and commercialization of our primary product ~~candidates.~~candidates and construction of our new manufacturing plant.

Our operations have consumed substantial amounts of cash since inception. In October 2013, we received net proceeds from our IPO of approximately $68.3 million, after deducting underwriting discounts and commissions and expenses. Since our IPO, we have raised additional net proceeds of approximately $122.9 million from the issuance of the 2014 Convertible Notes and approximately ~~$50.5~~$217.6 million through the issuance and sale of common stock under our shelf registration statements on Form S-3 and former “at-the-market” sales ~~during 2015.~~agreements. We may need to obtain additional financing to fund our future ~~operations.~~operations, including construction of our new manufacturing plant. Additionally, we may need to obtain additional financing to conduct additional trials for the approval of our drug candidates if requested by regulatory bodies, and completing the development of any additional product candidates ~~we might acquire.~~or drug delivery technologies. Moreover, our fixed expenses, such as rent and other contractual commitments, are substantial and are expected to increase in the ~~future.~~future, and we also expect to incur increased expenses as we expand our employment base.

Our future funding requirements will depend on many factors, including, but not limited to:

the progress, timing, scope and costs of our clinical trials, including the ability to timely enroll patients in our planned and potential future clinical trials;

the time and cost necessary to obtain regulatory approvals that may be required by regulatory authorities;

the time and cost necessary to establish internal manufacturing capabilities ~~if any,~~ or arrangements with third-party manufacturers;

our ability to successfully commercialize our product candidates;

the amount of sales and other revenues from product candidates that we may commercialize, if any, including the selling prices for such potential products and the availability of adequate third-party reimbursement;

selling and marketing costs associated with our potential products, including the cost and timing of expanding our marketing and sales capabilities;

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the terms and timing of any collaborations, licensing or other arrangements that we may establish;

cash requirements of any future acquisitions and/or the development of other product candidates;

the costs of operating as a public company;

the time and cost necessary to respond to technological and market developments; and

the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

We believe that our existing cash and cash equivalents and investments will be sufficient to complete all currently known non-clinical and clinical requirements for our development programs advancing Rhopressa^TM and Roclatan^TM, approval by the FDA and product commercialization, pending successful outcome of the trials. We also intend to use these funds for general corporate purposes and for strategic growth opportunities, including the execution of clinical trials in Japan, the commencement of construction of our manufacturing plant in Ireland and the continuation of preclinical activity in support of our product pipeline.

Until we can generate a sufficient amount of revenue, we may finance future cash needs through public or private equity offerings, license agreements, debt financings, collaborations, strategic alliances and marketing or distribution arrangements. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay or reduce the scope of or eliminate one or more of our research or development programs or our commercialization or manufacturing efforts. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. In addition, if we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us.

We believe that our existing cash and cash equivalents and investments and any future sales under our current “at-the-market” sales agreements will be sufficient to complete all currently known non-clinical and clinical requirements for our development programs advancing Rhopressa^TM ~~and Roclatan~~^TM, approval by the FDA and product commercialization, pending successful outcome of the trials. However, until we can generate a sufficient amount of revenue, we may be required to obtain further funding through other public or private offerings, debt financing, collaboration and licensing arrangements or other sources. Adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. Our forecast of the period of time through which our financial resources will be adequate to support our operating requirements is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this “Risk Factors” section. We have based this estimate on a number of assumptions that may prove to be wrong, and changing circumstances beyond our control may cause us to consume capital

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more rapidly than we currently anticipate. Our inability to obtain additional funding when we need it could seriously harm our business.

Our substantial leverage and related obligations could adversely affect our financial condition and restrict our operating flexibility.

We have substantial debt and related obligations. As of December 31, ~~2015,~~2016, our total indebtedness consisted of our $125.0 million aggregate principal amount of 2014 Convertible ~~Notes.~~Notes which bear interest at a rate of 1.75% per annum and mature on the seventh anniversary from the date of issuance, unless earlier converted. Our substantial level of debt and related obligations, including interest payments, covenants and restrictions, could have important consequences, including the following:

impairing our ability to successfully complete the development of our product candidates, which would prevent us from generating a source of revenue and becoming profitable;

making it more difficult for us to satisfy our obligations with respect to our indebtedness, which could result in an event of default under the agreement governing the 2014 Convertible Notes;

limiting our ability to obtain additional financing on satisfactory terms to fund our working capital requirements, capital expenditures, potential acquisitions, debt obligations and other general corporate requirements;

increasing our vulnerability to general economic downturns, competition and industry conditions, which could place us at a competitive disadvantage compared to our competitors that are less leveraged and therefore we may be unable to take advantage of opportunities that our leverage prevents us from exploiting; and

imposing additional restrictions on the manner in which we conduct our business, including restrictions on our ability to pay dividends, incur additional debt and sell assets.

The occurrence of any one of these events could have an adverse effect on our business, financial condition, operating results or cash flows and ability to satisfy our obligations under our indebtedness.

Although the agreement governing the 2014 Convertible Notes contains restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and any indebtedness

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incurred in compliance with these restrictions could be substantial. In addition, the agreement governing the 2014 Convertible Notes allows us to incur a significant amount of indebtedness in connection with acquisitions and a significant amount of purchase money debt. If new debt is added to current debt levels, the related risks that we and noteholders face would be increased.

The terms of the agreement governing the 2014 Convertible Notes may restrict our current and future operations, particularly our ability to respond to changes in our business or to take certain actions.

The agreement governing the 2014 Convertible Notes contains, and the terms of any future indebtedness of ours would likely contain, a number of restrictive covenants that impose significant operating restrictions, including restrictions on our ability to engage in acts that may be in our best long-term interests. The agreement governing the 2014 Convertible Notes includes covenants that, among other things, restrict or otherwise limit our ability to:

incur additional indebtedness and create liens;

pay dividends on capital stock and make other restricted payments;

enter into any merger, partnership, joint venture, syndicate, pool, profit-sharing or royalty agreement, or engage in any transactions with our affiliates;

sell or transfer assets;

merge; and

issue equity securities senior to our common stock or convertible or exercisable for equity securities senior to our common stock.

If not cured, as applicable, a breach of any of these provisions could result in a default under the agreement governing the 2014 Convertible Notes that would allow noteholders to declare the outstanding debt immediately due and payable. In addition, the 2014 Convertible Notes are secured by substantially all of our existing and hereafter created or acquired assets, including our intellectual property, accounts receivable, equipment, general intangibles, inventory and investment property, and all of the

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proceeds and products of the foregoing. If we are unable to pay those amounts because we do not have sufficient cash on hand or are unable to obtain alternative financing on acceptable terms, the noteholders could initiate a bankruptcy proceeding or proceed against any assets that serve as collateral to secure the 2014 Convertible Notes.

These restrictions could limit our ability to obtain future financings, make needed capital expenditures, withstand future downturns in the economy or otherwise conduct necessary corporate activities. We may also be prevented from taking advantage of business opportunities that arise because of limitations imposed on us by the restrictive covenants under the 2014 Convertible Notes.

We may sell additional equity or debt securities ~~to fund our operations,~~at any time, which may result in dilution to our stockholders and impose restrictions on our business.

In order to raise additional funds to support our operations, business strategies and growth, we may sell additional equity or debt securities, which would result in dilution to all of our stockholders or impose restrictive covenants that adversely impact our business. The incurrence of indebtedness would result in increased fixed payment obligations and could also result in restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we are unable to expand our operations or otherwise capitalize on our business opportunities, our business, financial condition and results of operations could be materially adversely affected.

Our relatively short operating history may make it difficult for investors to evaluate the success of our business to date and to assess our future viability.

We are a clinical-stage company. We were incorporated and commenced active operations in the second quarter of 2005. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital and developing our product candidates. We have not yet demonstrated our ability to successfully complete a Phase 3 program, obtain regulatory approval, develop a manufacturing plant, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history.

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In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from a company with a product development focus to a company capable of supporting commercial and manufacturing activities. We may not be successful in such a transition.

Determining our income tax rate is complex and subject to uncertainty.

The computation of income tax provisions is complex, as it is based on the laws of ~~numerous~~federal, state, local and non-U.S. taxing jurisdictions and requires significant judgment on the application of complicated rules governing accounting for tax provisions under U.S. GAAP. Our provision for income tax can be materially impacted, for example, by the geographical mix of our profits and losses, changes in our business, such as internal restructuring and acquisitions, changes in tax laws and accounting guidance and other regulatory, legislative or judicial developments, transfer pricing policies, tax audit determinations, changes in our uncertain tax positions, changes in our intent and capacity to permanently reinvest foreign earnings, changes to our transfer pricing practices, tax deductions attributed to equity compensation and changes in our need for a valuation allowance for deferred tax assets. In addition, relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates and reduced cash flows than otherwise would be expected. For these reasons, our actual income taxes may be materially different than our provision for income tax.

Our ability to use our net operating loss carry-forwards may be limited.

If we experience an “ownership change” for purposes of Section 382 of the Internal Revenue Code of 1986, as amended (Section 382), or similar state provisions, we may be subject to annual limits on our ability to utilize net operating loss carry-forwards. An ownership change is, as a general matter, triggered by sales or acquisitions of our stock in excess of 50% on a cumulative basis during a three-year period by persons owning 5% or more of our total equity value. As of December 31, ~~2015,~~2016, we had federal and state net operating losses of approximately ~~$61.1~~$104.1 million and $122.5 million, respectively, which begin to expire at various dates beginning in 2024, if not utilized. Certain transactions occurred in 2015 and prior years that resulted in ownership changes as defined under Section 382 and similar state provisions, which will limit the future use of certain federal

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and state net operating loss carry-forwards. Those federal and state net operating losses that are not limited are included as deferred tax assets and have been fully offset by a valuation allowance as of December 31, ~~2015.~~2016.

The enactment of legislation implementing changes in the U.S. taxation of international business activities or the adoption of other tax reform policies could materially impact our financial position and results of operations.

Recent changes to U.S. tax laws, including limitations on the ability of taxpayers to claim and utilize foreign tax credits, as well as changes to U.S. tax laws that may be enacted in the future, could impact the tax treatment of our potential future foreign earnings. ~~Due~~In particular, the tax reform proposals being considered by the new U.S. presidential administration and being considered in the U.S. Congress create uncertainty with respect to the future tax impact on our business operations and potential profitability. For example, certain of the proposals may result in changes to the taxation of cross-border transactions and certain business tax credits or deductions. Other proposals could limit or eliminate the deduction for interest expense. It is unclear whether, when, how and to what extent any of these (or other proposals) will be adopted. Further, due to the expansion of our international business activities, any changes in the U.S. taxation of such activities may increase our worldwide effective tax rate and adversely affect our financial position and results of operations.

Our international operations subject us to potentially adverse tax consequences.

We generally conduct our international operations through wholly-owned subsidiaries and report our taxable income, if any, in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates and reduced cash flows.

Risks Related to Our Reliance on Third Parties

We currently have no manufacturing capacity and anticipate continued reliance on third-party manufacturers for the development and commercialization of our product candidates in accordance with manufacturing regulations until such a time when we can develop internal manufacturing capabilities, if at all.

We do not currently operate manufacturing facilities for clinical or commercial production of our product candidates. We have no experience in drug formulation, and we currently lack the resources and the capabilities to manufacture our product candidates and potential products on a clinical or commercial scale. We currently rely on third-party manufacturers to produce the active pharmaceutical ingredient and final drug product for our clinical trials. We manage such production with all our vendors on a purchase order basis in accordance with applicable master service and supply agreements. We do not have long-term agreements with any of these or any other third-party suppliers to support our clinical trials. To the extent we terminate our existing supplier arrangements in the future and seek to enter into arrangements with alternative suppliers, we might experience a delay in our ability to obtain our commercial supplies.

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With respect to production of our potential commercial products in the future, if and when our product candidates are approved for marketing by the applicable regulatory authorities, we plan to outsource the production of the active pharmaceutical ingredients and final product manufacturing until such a time when we can develop internal manufacturing capabilities, if at all. We ~~have entered into a contractual relationship for the final commercial drug product manufacturing. However, we do not have any current~~are working to establish contractual relationships for the commercial production of the active pharmaceutical ~~ingredients.~~ingredients with our vendors and currently manage any such production on a purchase order basis. This process is difficult and time consuming and we can give no assurance that we will enter any future commercial supply agreements with any manufacturers on favorable terms or at all.

We have entered into a contractual relationship for the final commercial drug product manufacturing and in January 2017, we entered into a lease agreement for a new manufacturing plant in Athlone, Ireland. If approved, commercial product supply of Rhopressa^TM from the plant is expected to be available by 2020. However, there can be no assurance that we will be able to develop the manufacturing capabilities required to produce our final drug product on a commercial scale or in accordance with manufacturing regulations. See “-Risks Related to Development, Regulatory Approval and Commercialization-We have no experience manufacturing our product candidates, and we cannot assure you that we will be able to manufacture our product candidates in compliance with regulations at a cost or in quantities necessary to make them commercially viable.” If our manufacturing operations fail to achieve regulatory approval or to effectively produce commercial supplies of our product candidates, or until such time we are capable of developing internal manufacturing capabilities, we will be required to rely solely on third-party manufacturers to meet our commercial manufacturing needs, which may materially adversely affect our business, results of operations or financial condition.

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Reliance on third-party manufacturers entails risks, including:

manufacturing delays if our third-party manufacturers give greater priority to the supply of other products over our product candidates or otherwise do not satisfactorily perform according to the terms of their agreements with us;

delays in obtaining regulatory approval for our product candidates, if our third-party manufacturers fail to satisfy or comply with regulatory requirements;

the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us;

the possible breach of the manufacturing agreement by the third party;

product loss due to contamination, equipment failure or improper installation or operation of equipment or operator error;

the failure of the third-party manufacturer to comply with applicable regulatory requirements; and

the possible misappropriation of our proprietary information, including our trade secrets and know-how.

~~Our~~For example, in October 2016, we were required to withdraw the initial submission of our NDA filing for Rhopressa^TM due to a contract manufacturer of our drug product not being prepared for pre-approval inspection by the FDA. We resubmitted the Rhopressa^TM NDA on February 28, 2017 upon receiving confirmation from the contract manufacturer that it is prepared for FDA inspection. Although we have been advised that the contract manufacturer is prepared for FDA inspection, there can be no assurance that the contract manufacturer’s facility will meet FDA standards.

In addition, our manufacturers may not perform as agreed or may not remain in the contract manufacturing business. In the event of a natural disaster, business failure, strike or other difficulty, we may be unable to replace a third-party manufacturer in a timely manner and the production of our product candidates and potential products could be interrupted, resulting in delays and additional costs. We may also have to incur other charges and expenses for products that fail to meet specifications and undertake remediation efforts.

If we or third-party manufacturers fail to comply with manufacturing regulations, our financial results and financial condition will be adversely affected.

Before we or a third party can begin commercial manufacture of our product candidates and potential products, we or the third party must obtain regulatory approval of our or their manufacturing facilities, processes and quality systems. If our third party manufacturers do not have a cGMP compliance status acceptable to the FDA, approval of any NDA that includes those third party manufacturers will be delayed.

Due to the complexity of the processes used to manufacture pharmaceutical products and product candidates, we or any potential third-party manufacturer may be unable to initially pass federal, state or international regulatory inspections in a cost effective manner. We or certain of our contract manufacturers may fail to satisfy or comply with manufacturing regulations. If we or our contract manufacturers are not approved by the FDA, regulatory approval of our product candidates and/or commercial supply of ~~drug substance~~active pharmaceutical ingredients will be significantly delayed and may result in significant additional costs.

In addition, pharmaceutical manufacturing facilities are continuously subject to inspection by the FDA and foreign regulatory authorities, before and after product approval, and must comply with cGMP. We or our contract manufacturers may encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel. In addition, failure to achieve and maintain high manufacturing standards in accordance with applicable regulatory requirements, or the incidence of manufacturing errors, could result in patient injury, product liability claims, product shortages, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously harm our business. If we or a third-party manufacturer with whom we contract is unable to comply with manufacturing regulations, we may be subject to fines, unanticipated compliance expenses, recall or seizure of our products, product liability claims, total or partial suspension of production and/or enforcement actions, including injunctions, and criminal or civil prosecution. These possible sanctions could materially adversely affect our financial results and financial condition.

Furthermore, changes in the manufacturing process or procedure, including a change in the location where the product is manufactured or a change of a third-party manufacturer, will require prior FDA review and/or approval of the manufacturing process and procedures in accordance with the FDA’s regulations, or comparable foreign requirements. This review may be costly and time consuming and could delay or prevent the launch of a product. The new facility will also be subject to ~~pre-approval~~pre-

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approval inspection. In addition, we have to demonstrate that the product made at the new facility is equivalent to the product made at the former facility by physical and chemical methods, which are costly and time consuming. It is also possible that the FDA may require clinical testing as a way to prove equivalency, which would result in additional costs and delay.

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Any ~~current collaboration arrangement or~~ collaboration arrangement that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our current and potential future product candidates.

We continually explore and discuss additional opportunities for new ophthalmic products, delivery alternatives and new therapeutic areas with potential partners. We may seek collaboration arrangements with pharmaceutical or biotechnology companies or universities for the development or commercialization of our current and potential future product candidates. We will face, to the extent that we decide to enter into ~~additional~~ collaboration agreements, significant competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time consuming to negotiate, document and implement. We may not be successful in our efforts to establish, implement and ~~implement~~maintain collaborations or other alternative arrangements and the terms of such arrangements may not be favorable to us. If and when we collaborate with a third party for development and commercialization of a product candidate and/or technology, we can expect to relinquish some or all of the control over the future success of that product candidate and/or technology to the third party. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations. Accordingly, there can be no assurance that any collaboration or licensing arrangement or similar strategic transaction we enter into will result in the benefits that we anticipate.

Disagreements between parties to a collaboration arrangement regarding research, clinical development and commercialization matters can lead to delays in the development process or commercializing the applicable product candidate or technology and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve if neither of the parties has final decision making authority. In addition, collaborators may not pursue development and commercialization of our preclinical molecules or product candidates or may elect not to continue or renew development or commercialization programs based on our results, changes in their strategic focus due to the acquisition of competitive products or technologies, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities. Collaborations with pharmaceutical or biotechnology companies and other third parties often are terminated or allowed to expire by the other party. For example, in 2016, we terminated our collaboration and licensing arrangements with GrayBug, Inc. for drug delivery technology and elected not to extend our collaboration agreement with Ramot at Tel Aviv University, Ltd. for a preclinical anti-beta amyloid molecule. Any such termination or expiration ~~would~~may adversely affect us financially and could harm our business reputation.

We currently depend on third parties to conduct some of the operations of our clinical trials and other portions of our operations, and we may not be able to control their work as effectively as if we performed these functions ourselves.

We rely on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators, to oversee and conduct our clinical trials, and to perform data collection and analysis of our product candidates. We expect to rely on these third parties to conduct clinical trials of any other potential products that we develop. These parties are not our employees and we cannot control the amount or timing of resources that they devote to our program. In addition, any CRO that we retain will be subject to the FDA’s regulatory requirements or similar foreign standards and we do not have control over compliance with these regulations by these providers. Our agreements with third-party service providers are on a trial-by-trial and project-by-project bases. Typically, we may terminate the agreements with notice and are responsible for the third party’s incurred costs. If any of our relationships with our third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. We also rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or regulatory approval of our product candidates or commercialization of our potential products, producing additional losses and depriving us of potential product revenue.

Our reliance on these third parties for clinical development activities reduces our control over these activities but does not relieve us of our responsibilities, and we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan, the protocols for the trial and the FDA’s regulations and international standards, referred to as GCP requirements, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate, and that the rights, integrity and confidentiality of trial participants are protected. Preclinical studies must also be conducted in compliance with the Animal Welfare Act requirements. Managing performance of third-party service providers can be difficult, time consuming and cause delays in our development programs. We currently have a small number of employees, which limits the internal resources we have available to identify and monitor our third-party providers.

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Furthermore, these third parties may produce or manufacture competing drugs or may have relationships with other entities, some of which may be our competitors. The use of third-party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated.

If these third parties do not successfully carry out their contractual duties or obligations and meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols according to regulatory requirements or for other reasons, our financial results and the commercial prospects for our current product candidates or our other potential product candidates could be harmed, our costs could increase and our ability to obtain regulatory approval and commence product sales could be delayed.

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If we fail to establish an effective distribution process our business may be adversely affected.

We do not currently have the infrastructure necessary for distributing pharmaceutical ~~products to patients.~~products. We intend to contract with third-party logistics wholesalers to warehouse these products and distribute them to pharmacies. This distribution network will require significant coordination with our sales and marketing and finance organizations. Failure to secure contracts with wholesalers could negatively impact the distribution of our potential products, and failure to coordinate financial systems could negatively impact our ability to accurately report product revenue. If we are unable to effectively establish and manage the distribution process, the commercial launch and sales of our potential products will be delayed or severely compromised and our results of operations may be harmed.

Risks Related to Intellectual Property

We may not be able to protect our proprietary technology in the marketplace.

We depend on our ability to protect our proprietary technology. We rely on trade secret, patent, copyright and trademark laws, and confidentiality, licensing and other agreements with employees and third parties, all of which offer only limited protection. Our success depends in large part on our ability and any future licensee’s ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and products. We believe we will be able to obtain, through prosecution of our current pending patent applications, adequate patent protection for our proprietary drug technology. If we are compelled to spend significant time and money protecting or enforcing our patents, designing around patents held by others or licensing or acquiring, potentially for large fees, patents or other proprietary rights held by others, our business and financial prospects may be harmed. If we are unable to effectively protect the intellectual property that we own, other companies may be able to offer the same or similar products for sale, which could materially adversely affect our competitive business position and harm our business prospects. Our patents may be challenged, narrowed, invalidated, or circumvented, which could limit our ability to stop competitors from marketing the same or similar products or limit the length of term of patent protection that we may have for our products.

The patent positions of pharmaceutical products are often complex and uncertain. The breadth of claims allowed in pharmaceutical patents in the United States and many jurisdictions outside of the United States is not consistent. For example, in many jurisdictions the support standards for pharmaceutical patents are becoming increasingly strict. Some countries prohibit method of treatment claims in patents. Changes in either the patent laws or interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or create uncertainty. In addition, publication of information related to our current product candidates and potential products may prevent us from obtaining or enforcing patents relating to these product candidates and potential products, including without limitation composition-of-matter patents, which are generally believed to offer the strongest patent protection.

Our intellectual property includes issued patents and pending patent applications for compositions of matter, ~~and~~pharmaceutical formulations, methods of ~~use.~~use, and synthetic methods. As of December 31, ~~2015,~~2016, we own 1821 patents and have 1612 pending patent applications in the United States and certain foreign jurisdictions for our primary product candidates Rhopressa™ and Roclatan™. Patent protection for Roclatan™ arises from the U.S. patents that cover Rhopressa™. The patents cover composition of matter and method of use. We own 4049 patents and have 1113 pending patent applications in the United States and certain foreign jurisdictions relating to our previously discontinued product candidates and other proprietary technology. See “Business—Intellectual Property” included elsewhere in this report for further information about our issued patents and patent applications.

Patents that we own or may license in the future do not necessarily ensure the protection of our intellectual property for a number of reasons, including without limitation the following:

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our patents may not be broad or strong enough to prevent competition from other products that are identical or similar to our product candidates;

there can be no assurance that the term of a patent can be extended under the provisions of patent term extension afforded by U.S. law or similar provisions in foreign countries, where available;

our issued patents and patents that we may obtain in the future may not prevent generic entry into the market for our Rhopressa™ and Roclatan™ product candidates;

we do not at this time own or control issued foreign patents outside of Australia, Canada, and Europe that would prevent generic entry into those markets for our product candidates;

we may be required to disclaim part of the term of one or more patents;

there may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim;

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there may be prior art of which we are aware, which we do not believe affects the validity or enforceability of a patent claim, but which, nonetheless, ultimately may be found to affect the validity or enforceability of a patent claim;

there may be other patents issued to others that will affect our freedom to operate;

if our patents are challenged, a court could determine that they are invalid or unenforceable;

there might be a significant change in the law that governs patentability, validity and infringement of our patents that adversely affects the scope of our patent rights;

a court could determine that a competitor’s technology or product does not infringe our patents; and

our patents could irretrievably lapse due to failure to pay fees or otherwise comply with regulations or could be subject to compulsory licensing.

If we encounter delays in our development or clinical trials, the period of time during which we could market our potential products under patent protection would be reduced.

Our competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner. Our competitors may seek to market generic versions of any approved products by submitting ANDAs to the FDA in which our competitors claim that our patents are invalid, unenforceable and/or not infringed.

Alternatively, our competitors may seek approval to market their own products similar to or otherwise competitive with our products. In these circumstances, we may need to defend and/or assert our patents, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid and/or unenforceable. We may also fail to identify patentable aspects of our research and development before it is too late to obtain patent protection. Even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives.

The issuance of a patent is not conclusive as to its inventorship, scope, ownership, priority, validity or enforceability. In that regard, third parties may challenge our patents in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and potential products. In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.

A significant portion of our intellectual property portfolio currently comprises pending patent applications that have not yet been issued as granted patents. If our pending patent applications fail to issue our business will be adversely affected.

Our commercial success will depend significantly on maintaining and expanding patent protection for our product candidates, as well as successfully defending our current and future patents against third-party challenges. As of December 31, ~~2015,~~2016, we own 5870 patents and have 2725 pending patent applications in the United States and certain foreign jurisdictions relating to our current and previously discontinued product candidates and proprietary technology. See “Business—Intellectual Property” included elsewhere in this report for further information about our issued patents and patent applications. Our issued patents include 1821 patents for composition of matter and method of use covering our lead product candidate, Rhopressa™ in the United States and certain foreign jurisdictions. These patents also cover our other primary product candidate Roclatan™ to the extent

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that Rhopressa™ forms a part of Roclatan™. The remainder of our portfolio is made up of patents covering previously discontinued product candidates and other proprietary technology and pending patent applications that have not yet been issued by the USPTO, or any other jurisdiction that ~~cover~~covers our current and previously discontinued product candidates or other proprietary technology.

There can be no assurance that our pending patent applications will result in issued patents in the United States or foreign jurisdictions in which such applications are pending. Even if patents do issue on any of these applications, there can be no assurance that a third party will not challenge their validity or that we will obtain sufficient claim scope in those patents to prevent a third party from competing successfully with our products.

We may not be able to enforce our intellectual property rights throughout the world.

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in

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certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to life sciences. It may be difficult for us to stop the infringement of our patents or the misappropriation of these intellectual property rights in any foreign jurisdictions. For example, some foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement of intellectual property.

We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing or increase the costs of commercializing our products.

Our commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights of third parties. For example, there could be issued patents of which we are not aware that our product candidates or potential products infringe. There also could be patents that we believe we do not infringe, but that we may ultimately be found to infringe.

Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our product candidates or potential products infringe. For example, pending applications may exist that claim or can be amended to claim subject matter that our product candidates or potential products infringe. Competitors may file continuing patent applications claiming priority to already issued patents in the form of continuation, divisional, or continuation-in-part applications, in order to maintain the pendency of a patent family and attempt to cover our product candidates.

Third parties may assert that we are employing their proprietary technology without authorization and may sue us for patent or other intellectual property infringement. These lawsuits are costly and could adversely affect our results of operations and divert the attention of managerial and scientific personnel. If we are sued for patent infringement, we would need to demonstrate that our product candidates, potential products or methods either do not infringe the claims of the relevant patent or that the patent claims are invalid, and we may not be able to do this. Proving invalidity is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could have a material adverse effect on us. In addition, we may not have sufficient resources to bring these actions to a successful conclusion. If a court holds that any third-party patents are valid, enforceable and cover our products or their use, the holders of any of these patents may be able to block our ability to commercialize our products unless we acquire or obtain a license under the applicable patents or until the patents expire. We may not be able to enter into licensing arrangements or make other arrangements at a reasonable cost or on reasonable terms. Any inability to secure licenses or alternative technology could result in delays in the introduction of our products or lead to prohibition of the manufacture or sale of products by us. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, in

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any such proceeding or litigation, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Any claims by third parties that we have misappropriated their confidential information or trade secrets could have a similar negative impact on our business. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.

We may be subject to claims that we or our employees have misappropriated the intellectual property, including trade secrets, of a third party, or claiming ownership of what we regard as our own intellectual property.

Many of our employees were previously employed at universities, biotechnology companies or other pharmaceutical companies, including our competitors or potential competitors. Some of these employees, including each member of our senior management, executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our employees do not use the intellectual property and other proprietary

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information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed such intellectual property, including trade secrets or other proprietary information. Litigation may be necessary to defend against these claims. We are not aware of any threatened or pending claims related to these matters or concerning the agreements with our senior management, but litigation may be necessary in the future to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and scientific personnel.

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.

We rely on trade secrets to protect our proprietary know-how and technological advances, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to protect our trade secrets and other proprietary information. However, any party with whom we have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets. Accordingly, these agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. In addition, others may independently discover our trade secrets and proprietary information. Further, the FDA, as part of its Transparency Initiative, a proposal by the FDA to increase disclosure and make data more accessible to the public, is currently considering whether to make additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future, if at all. Failure to obtain or maintain trade secret protection could enable competitors to use our proprietary information to develop products that compete with our products or cause additional, material adverse effects upon our competitive business position and financial results.

Any lawsuits relating to infringement of intellectual property rights brought by or against us will be costly and time consuming and may adversely impact the price of our common stock.

We may be required to initiate litigation to enforce or defend our intellectual property. These lawsuits can be very time consuming and costly. There is a substantial amount of litigation involving patent and other intellectual property rights in the pharmaceutical industry generally. Such litigation or proceedings could substantially increase our operating expenses and reduce the resources available for development activities or any future sales, marketing or distribution activities.

In any infringement litigation, any award of monetary damages we receive may not be commercially valuable. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically

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last for years before they are resolved. Further, any claims we assert against a perceived infringer could provoke these parties to assert counterclaims against us alleging that we have infringed their patents. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

In addition, our patents and patent applications could face other challenges, such as interference proceedings, opposition proceedings, re-examination proceedings, and other forms of post-grant review. In the United States, for example, post-grant review has recently been expanded. Any of these challenges, if successful, could result in the invalidation of, or in a narrowing of the scope of, any of our patents and patent applications subject to challenge. Any of these challenges, regardless of their success, would likely be time consuming and expensive to defend and resolve and would divert our management and scientific personnel’s time and attention. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the market price of our common stock.

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We will need to obtain FDA approval of any proposed product names, and any failure or delay associated with such approval may adversely affect our business.

We assigned the trade names Rhopressa^TM and Roclatan^TM to our lead product candidates in 2014, with trademark applications for registration pending from the USPTO. These and any other names we intend to use for our product candidates will require approval from the FDA regardless of whether we have secured a formal trademark registration from the USPTO. The FDA typically conducts a review of proposed product names, including an evaluation of the potential for confusion with other product names. The FDA may also object to a product name if it believes the name inappropriately implies medical claims or contributes to an overstatement of efficacy. If the FDA objects to any of our proposed product names, we may be required to adopt an alternative name for our product candidates. If we adopt an alternative name, we would lose the benefit of our existing trademark applications for such product candidate and may be required to expend significant additional resources in an effort to identify a suitable product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercialize our product candidates.

If we do not obtain additional protection under the Hatch-Waxman Amendments and similar foreign legislation extending the terms of our patents and obtaining data exclusivity for our product candidates, our business may be materially harmed.

Depending upon the timing, duration and specifics of FDA regulatory approval for our product candidates, one or more of our U.S. patents may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. Patent term restorations, however, cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval by the FDA.

The application for patent term extension is subject to approval by the USPTO, in conjunction with the FDA. It takes at least six months to obtain approval of the application for patent term extension. We may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or restoration or the term of any such extension is less than we request, the period during which we will have the right to exclusively market our product will be shortened and our competitors may obtain earlier approval of competing products, and our ability to generate revenues could be materially adversely affected.

Risks Related to Our Business Operations and Industry

We depend upon our key personnel and our ability to attract and retain employees.

Our future growth and success depend on our ability to recruit, retain, manage and motivate our employees. We are highly dependent on our senior management team and our scientific founders, as well as the other principal members of our management and scientific teams. Although we have formal employment agreements with our executive officers, these agreements do not prevent them from terminating their employment with us at any time. The loss of the services of any member of our senior management or scientific team or the inability to hire or retain experienced management personnel could adversely affect our ability to execute our business plan and harm our operating results.

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Because of the specialized scientific and managerial nature of our business, we rely heavily on our ability to attract and retain qualified scientific, technical and managerial personnel. In particular, the loss of Vicente Anido, Jr., our Chairman of the Board of Directors and Chief Executive Officer, Thomas A. Mitro, our President and Chief Operating Officer, Richard J. Rubino, our Chief Financial Officer or Casey C. Kopczynski, our Chief Scientific Officer, could be detrimental to us if we cannot recruit suitable replacements in a timely manner. We do not currently carry “key person” insurance on the lives of members of executive management. The competition for qualified personnel in the pharmaceutical field is intense. Due to this intense competition, we may be unable to continue to attract and retain qualified personnel necessary for the development of our business or to recruit suitable replacement personnel. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

We will need to continue to significantly increase the size of our organization, and we may experience difficulties in managing growth.

We are currently a small company with 7095 full-time employees as of December 31, ~~2015.~~2016. In order to commercialize and manufacture our potential products, we will need to substantially increase our operations. We plan to continue to build our compliance, financial

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and operating infrastructure to ensure the maintenance of a well-managed company. We expect to expand our employment base to approximately 300 when we are in the full commercial stages of our current potential products’ life cycle.

Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees. Our management, personnel and systems currently in place may not be adequate to support our future growth. Our future financial performance and our ability to commercialize our potential products and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to:

manage our clinical trials and the regulatory process effectively;

manage the development of our manufacturing plant and the manufacturing of product candidates and potential products for clinical and commercial use;

integrate current and additional management, administrative, financial, manufacturing and sales and marketing personnel;

develop a marketing and sales infrastructure;

hire new personnel necessary to effectively commercialize and manufacture our product candidates;

continue to develop and maintain our administrative, accounting and management information systems and controls; and

hire and train additional qualified personnel.

Product candidates that we may acquire or develop in the future may be intended for patient populations that are large. In order to continue development and marketing of these product candidates, if approved, we would need to significantly expand our operations. Our staff, financial resources, systems, procedures or controls may be inadequate to support our operations and our management may be unable to manage successfully future market opportunities or our relationships with customers and other third parties.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading, which could significantly harm our business.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with the regulations of the FDA and non-U.S. regulators, provide accurate information to the FDA and non-U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We adopted a code of conduct, but it is not always possible to

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identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

Our business is affected by macroeconomic conditions.

Various macroeconomic factors could adversely affect our business and the results of our operations and financial condition, including changes in inflation, interest rates and foreign currency exchange rates and overall economic conditions and uncertainties, including those resulting from the current and future conditions in the global financial markets. For instance, if and when our product candidates are approved, if inflation or other factors were to significantly increase our business costs, it may not be feasible to pass through price increases to patients. Interest rates, the liquidity of the credit markets and the volatility of the capital markets could also affect the value of our investments and our ability to liquidate our investments in order to fund our operations.

Interest rates and the ability to access credit markets could also adversely affect the ability of patients, payors and distributors to purchase, pay for and effectively distribute our potential products. Similarly, these macroeconomic factors could affect the ability of our potential future contract manufacturers, sole-source or single-source suppliers, collaboration partners or licensees

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to remain in business or otherwise develop, manufacture or supply product. Failure by any of them to remain in business could affect our ability to manufacture potential products.

If we engage in acquisitions or licenses in the future, we will incur a variety of costs and we may never realize the anticipated benefits of such acquisitions or licenses.

We may attempt to acquire or license businesses, technologies, services, products or product candidates in the future that we believe are a strategic fit with our business. We have no present agreement regarding any material acquisitions or licenses. However, if we do undertake any acquisitions or licenses, the process of integrating an acquired or licensed business, technology, service, product or product candidate into our business may result in unforeseen operating difficulties and expenditures, including diversion of resources and management’s attention from our core business. In addition, we may fail to retain key executives and employees of the companies we acquire, which may reduce the value of the acquisition or give rise to additional integration costs. Future acquisitions or licenses could result in additional issuances of equity securities that would dilute the ownership of existing stockholders. Future acquisitions or licenses could also result in the incurrence of debt, actual or contingent liabilities or the amortization of expenses related to intangible assets, any of which could adversely affect our operating results.

We have limited experience identifying, negotiating and implementing acquisitions or licenses of additional businesses, technologies, services, products or product candidates, which is a lengthy and complex process. The market for acquiring or licensing businesses, technologies, services, products or product candidates is intensely competitive, and other companies, including some with substantially greater financial, marketing and sales resources, may also pursue strategies to acquire or license businesses, technologies, products or product candidates that we may consider attractive. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us.

We have limited resources to identify and execute the acquisition or licensing of additional businesses, technologies, services, products, or product candidates and integrate them into our current infrastructure. Moreover, we may devote resources to potential acquisitions or licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts. We may not be able to acquire or license the rights to additional businesses, technologies, services, products or product candidates on terms that we find acceptable, or at all. In particular, any product candidate that we acquire or license may require additional development efforts prior to commercial sale, including extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities.

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Business interruptions could delay ~~us in~~ the ~~process~~development of ~~developing~~ our potential products and our manufacturing acitivies, and could disrupt our potential sales.

Our business and operations would suffer in the event of system failures.

Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development ~~programs.~~programs, manufacturing activities and/or potential commercialization efforts. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development or commercialization of our current and potential future product candidates could be delayed.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

As a public company, we are subject to the periodic reporting requirements of the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within

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the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

If product liability lawsuits are successfully brought against us, our insurance may be inadequate and we may incur substantial liability.

We face an inherent risk of product liability claims as a result of the clinical testing of our product candidates. We will face an even greater risk if we commercially sell our potential products or any other product candidate that we develop. We maintain primary product liability insurance and excess product liability insurance that cover our clinical trials, and we plan to maintain insurance against product liability lawsuits for commercial sale of our potential products. Historically, the potential liability associated with product liability lawsuits for pharmaceutical products has been unpredictable. Although we believe that our current insurance is a reasonable estimate of our potential liability and represents a commercially reasonable balancing of the level of coverage as compared to the cost of the insurance, we may be subject to claims in connection with our clinical trials and, in the future, commercial use of our potential products, for which our insurance coverage may not be adequate, and the cost of any product liability litigation or other proceeding, even if resolved in our favor, could be substantial.

For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Regardless of the merits or eventual outcome, liability claims may result in:

reduced resources of our management to pursue our business strategy;

decreased demand for our product candidates or products that we may develop;

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injury to our reputation and significant negative media attention;

withdrawal of clinical trial participants;

termination of clinical trial sites or entire trial programs;

initiation of investigations by regulators;

product recalls, withdrawals or labeling, marketing or promotional restrictions;

significant costs to defend resulting litigation;

diversion of management and scientific resources from our business operations;

substantial monetary awards to trial participants or patients;

loss of revenue; and

the inability to commercialize any products that we may develop.

We will need to increase our insurance coverage if and when we begin selling our product candidates if and when they receive marketing approval. However, the product liability insurance we will need to obtain in connection with the commercial sales of our product candidates if and when they receive regulatory approval may be unavailable in meaningful amounts or at a reasonable cost. In addition, insurance coverage is becoming increasingly expensive. If we are unable to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims, it could prevent or inhibit the development and commercial production and sale of our product candidates if and when they obtain regulatory approval, which could materially adversely affect our business, financial condition, results of operations, cash flows and prospects.

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Additionally, we do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include general liability, employment practices liability, property, auto, workers’ compensation, products liability and directors’ and officers’ insurance. We do not know, however, if we will be able to maintain insurance with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would materially adversely affect our financial position, cash flows and results of operations.

Risks Related to Ownership of Our Common Stock

The market price of our common stock has been, and may continue to be, highly volatile.

Our stock price has been volatile and is likely to continue to be volatile. The following factors, in addition to other factors described in this “Risk Factors” section, may have a significant impact on the market price of our common stock:


•	the results of our testing and clinical trials, including the results of our Phase 3 registration trials for Rhopressa^TMand Roclatan^TM;

announcements of regulatory approval or a complete response letter, or specific label indications or patient populations for its use, or changes or delays in the regulatory review process;

announcements of therapeutic innovations or new products by us or our competitors;

adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;

any adverse changes to our relationships with manufacturers, suppliers, licensees or collaboration partners;

the results of our efforts to develop, acquire or license additional product ~~candidates;~~candidates or technologies;

variations in the level of expenses related to our existing product candidates or preclinical and clinical development programs;

any intellectual property infringement actions in which we may become involved;

announcements concerning our competitors or the pharmaceutical industry in general;

achievement of expected product sales and profitability;

manufacture, supply or distribution shortages;

actual or anticipated fluctuations in our quarterly or annual operating results;

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changes in financial estimates or recommendations by securities analysts;

trading volume of our common stock;

sales of our common stock by us, our executive officers and directors or our stockholders in the future;

general economic and market conditions and overall fluctuations in the capital markets;

changes in accounting principles; and

the loss of any of our key scientific or management personnel.

In addition, the stock market, in general, and small pharmaceutical and biotechnology companies have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. Further, ~~the current~~any decline in the financial markets and related factors beyond our control may cause our stock price to decline rapidly and unexpectedly.

We ~~have~~previously had been named a defendant in a purported securities class action lawsuit. This, and any additional securities litigation, could result in substantial damages and may divert management’s time and attention from our business.

~~On April 23, 2015, we announced that Rocket 1 did not meet its primary efficacy endpoint.~~

A putative securities class action lawsuit captioned Kelley et al. v. Aerie Pharmaceuticals, Inc., et al., Case No. 3:15-cv-03007, was filed against us and certain of our officers and directors in the United States District Court for the District of New Jersey on April 29, 2015. An amended complaint was filed on September 28, 2015 on behalf of a purported class of persons and entities who purchased or otherwise acquired our publicly traded securities between June 25, 2014 and April 23, 2015. The amended complaint ~~asserts~~asserted claims under

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the Securities Exchange Act of 1934, as amended, and ~~alleges~~alleged that the defendants made materially false and misleading statements or omitted allegedly material information during that period related to, among other things, the prospects of ~~Rocket~~our initial Phase 3 registration trial of Rhopressa^TM, named “Rocket 1,” and Rhopressa^TM. On November 30, 2015, the defendants filed a motion to dismiss the amended complaint. On June 20, 2016, the United States District Court for the District of New Jersey granted the defendants’ motion to dismiss the amended complaint. The time for a motion for reconsideration and/or appeal has expired. The matter has now concluded.

We believe that we have meritorious defenses and intend to defend the lawsuit vigorously. The outcome of this lawsuit is necessarily uncertain, we could be forced to expend significant resources in the defense of this suit and we may not prevail. We are not currently able to estimate the possible cost to us from this matter, as this lawsuit is currently at an early stage and we cannot be certain how long it may take to resolve this matter or the possible amount of any damages that we may be required to pay. It is possible that we could, in the future, incur judgments or enter into settlements of claims for monetary damages. A decision adverse to our interests on this action could result in the payment of substantial damages, or possibly fines, and could have a material adverse effect on our business, financial condition and results of operations. In addition, the uncertainty of the currently pending litigation could lead to volatility in our stock price.

If our stock price experiences volatility, we may be the subject of additional securities litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could adversely impact our business. Monitoring and defending against legal actions is time-consuming for our management and detracts from our ability to fully focus on our business activities. Any adverse determination in litigation could also subject us to significant liabilities.

Certain of our existing stockholders, executive officers and directors own a significant percentage of our common stock and may be able to influence or control matters submitted to our stockholders for approval.

Our officers and directors, and stockholders who own more than 5% of our outstanding common stock, beneficially own approximately ~~66.1%~~51.7% of our common stock as of December 31, ~~2015.~~2016. This significant concentration of share ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with ownership concentration. Some or all of our stockholders may be able to influence or determine matters requiring stockholder approval. The interests of these stockholders may not always coincide with our interests or the interests of other stockholders.

This may also prevent or discourage unsolicited acquisition proposals or offers for our common stock that other stockholders may feel are in their best interest, and certain of our existing stockholders may act in a manner that advances their best interests and not necessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.

Additionally, under certain circumstances, our amended and restated certificate of incorporation renounces any interest or expectancy that we have in, or in being offered an opportunity to participate in, corporate opportunities that are presented to certain of our existing stockholders or their affiliates and certain other related parties (whether or not any such person is our director). These provisions will apply even if the opportunity is one that we might reasonably have pursued or had the ability or desire to pursue if granted the opportunity to do so.

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Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.

Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or our stock, our stock price and trading volume could decline.

The trading market for our common stock may be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not have any control over these analysts and we cannot provide any assurance that analysts will continue to cover us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our stock, or provide more favorable relative recommendations about our competitors, our stock price could decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Because we do not intend to declare cash dividends on our shares of common stock in the foreseeable future, stockholders must rely on appreciation of the value of our common stock for any return on their investment.

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We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends in the foreseeable future. In addition, the terms of the 2014 Convertible Notes and any future debt agreements may preclude us from paying dividends. As a result, we expect that only appreciation of the price of our common stock, if any, will provide a return to investors for the foreseeable future.

The requirements associated with being a public company require significant company resources and management attention.

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, the listing requirements of the securities exchange on which our common stock is traded, and other applicable securities rules and regulations. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition and maintain effective disclosure controls and procedures and internal control over financial reporting. In addition, subsequent rules implemented by the SEC and NASDAQ may also impose various additional requirements on public companies. As a result, we have incurred, and we will continue to incur, additional legal, accounting and other expenses that we did not incur as a nonpublic company, particularly after we are no longer an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Further, the need to establish the corporate infrastructure demanded of a public company may divert management’s attention from implementing our growth strategy. We have made, and will continue to make, changes to our corporate governance standards, disclosure controls and financial reporting and accounting systems to meet our reporting obligations. However, the measures we take may not be sufficient to satisfy our obligations as a public company, which could subject us to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

The JOBS Act allows us to postpone the date by which we must comply with some of the laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC, which could undermine investor confidence in our company and adversely affect the market price of our common stock.

For so long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various requirements that are applicable to public companies that are not “emerging growth companies” including:

the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting;

the “say on pay” provisions (requiring a non-binding stockholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding stockholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Act and some of the disclosure requirements of the Dodd-Frank Act relating to compensation of its chief executive officer; and

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the requirement to provide detailed compensation discussion and analysis in proxy statements and reports filed under the Exchange Act, and instead provide a reduced level of disclosure concerning executive compensation.

We may take advantage of these exemptions until we are no longer an “emerging growth company.” We would cease to be an “emerging growth company” upon the earliest of: (i) December 31, 2018; (ii) the last day of the first fiscal year in which our annual gross revenues are $1 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or (iv) as of the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year.

We currently take advantage of some, but not all, of the reduced regulatory and reporting requirements that are available to us so long as we qualify as an “emerging growth company.” For example, we have irrevocably elected under Section 107 of the JOBS Act not to take advantage of the extension of time to comply with new or revised financial accounting standards available under Section 102(b) of the JOBS Act. Our independent registered public accounting firm is not required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an “emerging growth company,” which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected. Likewise, so long as we qualify as an “emerging growth company,” we may elect not to provide investors with certain information, including certain financial information and certain information regarding compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the SEC, which may make it more difficult for investors and securities analysts to evaluate our company. We cannot predict if investors will find our common

~~Table of Contents~~

stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile and may decline.

If the market value of our common stock held by non-affiliates continues to exceed $700 million as of June 30, 2017, as of the end of the year ending December 31, 2017, we would cease to be an “emerging growth company.” If we cease to be an “emerging growth company,” beginning with our annual report on Form 10-K for the year ending December 31, 2017, we will be subject to Section 404(b) of the Sarbanes-Oxley Act, which requires that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting. Compliance with Section 404 will be expensive and time consuming for management and could result in the detection of internal control deficiencies of which we are currently unaware. Moreover, if we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis, and our financial statements may be materially misstated. We or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading price of our common stock to fall. In addition, as a public company we are required to file accurate and timely quarterly and annual reports with the SEC under the Exchange Act. Any failure to report our results of operations on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from The Nasdaq Global Market or other adverse consequences that would materially harm our business.

Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our restated certificate of incorporation and our bylaws, as well as provisions of the Delaware General Corporation Law, or DGCL, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions include:

establishing a classified board of directors such that not all members of the board are elected at one time;

allowing the authorized number of our directors to be changed only by resolution of our board of directors;

limiting the removal of directors by the stockholders;

authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;

prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;

eliminating the ability of stockholders to call a special meeting of stockholders;

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establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings; and

requiring the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal our bylaws.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are subject to Section 203 of the DGCL, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by our board of directors. This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or beneficial to our stockholders.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal executive offices are located in Irvine, California, our clinical and finance operations are located in Bedminster, New Jersey and our research and development facility is located in Durham, North Carolina. We also have offices in Malta and Ireland and recently signed a lease for a new manufacturing plant in Athlone, Ireland. Our Irvine, California location consists of approximately 14,500 square feet of office space under a lease that expires in January 2021 and our Bedminster, New Jersey location consists of approximately ~~14,000~~16,000 square feet of office space under a lease that expires in August 2020. Our Durham, North Carolina research and development facility consists of approximately 19,500 square feet of laboratory and office space under a lease ~~agreement~~ that expires in January 2022. Our new manufacturing plant in Ireland consists of approximately 30,000 square feet of interior floor space for future build-out and is under lease through at least September of 2027. We may require additional space and facilities as our business expands.

ITEM 3. LEGAL PROCEEDINGS

We may periodically become subject to legal proceedings and claims arising in connection with our business. Except as set forth below, we are not a party to any known litigation, are not aware of any unasserted claims and do not have contingency reserves established for any litigation liabilities.

~~Table of Contents~~

who purchased or otherwise acquired our publicly traded securities between June 25, 2014 and April 23, 2015. The amended complaint ~~asserts~~asserted claims under the Securities Exchange Act of 1934, as amended, and ~~alleges~~alleged that the defendants made materially false and misleading statements or omitted allegedly material information during that period related to, among other things, the prospects of ~~Rocket~~our initial Phase 3 registration trial of Rhopressa^TM, named “Rocket 1,” and Rhopressa^TM. On November 30, 2015, the defendants filed a motion to dismiss the amended complaint. On June 20, 2016, the United States District Court for the District of New Jersey granted the defendants’ motion to dismiss the amended complaint. The time for a motion for reconsideration and/or appeal has expired. The matter has now concluded.

We believe that the claims in the asserted action are without merit and intend to defend the lawsuit vigorously, and we expect to incur costs associated with defending the action. In addition, we have various insurance policies related to the risks associated with our business, including directors’ and officers’ liability insurance policies. However, there is no assurance that we will be successful in our defense of the action, and there is no assurance that our insurance coverage, which contains a self-insured retention, will be sufficient or that our insurance carriers will cover all claims or litigation costs. At this time, we cannot accurately predict the ultimate outcome of this matter. Due to the inherent uncertainties of litigation, we cannot reasonably predict the timing or outcomes, or estimate the amount of loss, or range of loss, if any, or their effect, if any, on our financial statements.



Delaware		20-3109565
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)



Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $0.001 par value per share		NASDAQ Global Market




		Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		ii

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	2628
Item 1B.	Unresolved Staff Comments	5561
Item 2.	Properties	5561
Item 3.	Legal Proceedings	5561
Item 4.	Mine Safety Disclosures	5661

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	5762
Item 6.	Selected Financial Data	6065
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6166
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	7480
Item 8.	Financial Statements and Supplementary Data	7480
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	7480
Item 9A.	Controls and Procedures	7480
Item 9B.	Other Information	7581

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	7682
Item 11.	Executive Compensation	7682
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	7682
Item 13.	Certain Relationships and Related Transactions, and Director Independence	7682
Item 14.	Principal Accountant Fees and Services	7682

PART IV
Item 15.	Exhibits, Financial Statement Schedules	7783
Item 16.	Form 10-K Summary	83



Product Candidate and Mechanism		Phase of Development	Intellectual Property Rights

Rhopressa^TM	~~Triple-action—~~ROCK/NET inhibitor	~~Phase 3~~Submitted NDA	Wholly-Owned

Roclatan^TM	~~Quadruple-action—~~ROCK/NET inhibitor and latanoprost, a PGA	Phase 3	Wholly-Owned



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



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



New MOAs
Brand	MOA / Dosing	Trial Stage
Rhopressa^TM (Aerie AR-13324)	ROCK/NET inhibitor (qd)	~~Phase 3~~Submitted NDA
Roclatan^TM (Aerie PG324)	ROCK/NET inhibitor + PGA (qd)	Phase 3
~~INO-8875~~ Trabodenoson/Trabodenoson Fixed-Dose Combination(Inotek)	Adenosine-A1 agonist (bid or qd)/Adenosine-A1 agonist + PGA	Phase 2/3
~~OPA-6566~~ ~~(Acucela)~~	~~Adenosine-A2a agonist (bid)~~	~~Phase 1/2~~
SYL040012 (Sylentis)	RNAi beta blocker (qd)	Phase 2

New PGAs¹
Brand	MOA / Dosing	Trial Stage
~~Vesneo~~ Vyzulta~~(Bausch + Lomb )~~^TM(Valeant)	NO donating latanoprost (qd)	Filed NDA
DE-117 (Santen)	EP2 agonist (qd)	Phase 2
~~ONO-9054~~DE-126 ~~(Ono)~~(Santen)	FP/EP3 agonist (qd)	Phase 2


					High		Low
2016
Fourth Quarter					$	43.40	$	32.05
Third Quarter					41.72		16.61
Second Quarter					19.99		11.89
First Quarter					24.08		10.82
	High		Low
2015
Fourth Quarter	$	28.21	$	16.52	$	28.21	$	16.52
Third Quarter	33.25		14.29		33.25		14.29
Second Quarter	35.89		8.84		35.89		8.84
First Quarter	32.07		22.36		32.07		22.36

2014
Fourth Quarter	$	32.50	$	19.46
Third Quarter	27.25		16.05
Second Quarter	29.71		13.66
First Quarter	27.15		15.03


	YEAR ENDED DECEMBER 31,															YEAR ENDED DECEMBER 31,
	2015			2014			2013			2012			2011			2016			2015			2014			2013			2012
	(in thousands)															(in thousands)
Statement of Operations Data:
General and administrative	$	(30,635	)	$	(20,103	)	$	(10,287	)	$	(5,020	)	$	(3,521	)	$	(44,478	)	$	(30,635	)	$	(20,103	)	$	(10,287	)	$	(5,020	)
Research and development	(44,451		)	(29,869		)	(11,883		)	(9,273		)	(10,695		)	(52,394		)	(44,451		)	(29,869		)	(11,883		)	(9,273		)
Loss from operations	(75,086		)	(49,972		)	(22,170		)	(14,293		)	(14,216		)	(96,872		)	(75,086		)	(49,972		)	(22,170		)	(14,293		)
Other income (expense), net	862			1,839			(8,978		)	(685		)	1,249			(1,994		)	862			1,839			(8,978		)	(685		)
Net loss before income taxes	$	(74,224	)	$	(48,133	)	$	(31,148	)	$	(14,978	)	$	(12,967	)	$	(98,866	)	$	(74,224	)	$	(48,133	)	$	(31,148	)	$	(14,978	)
Income tax expense	(139		)	—			—			—			—			(193		)	(139		)	—			—			—
Net loss	$	(74,363	)	$	(48,133	)	$	(31,148	)	$	(14,978	)	$	(12,967	)	$	(99,059	)	$	(74,363	)	$	(48,133	)	$	(31,148	)	$	(14,978	)
Net loss attributable to common stockholders—basic and diluted⁽¹⁾	$	(74,363	)	$	(48,133	)	$	(31,598	)	$	(15,643	)	$	(13,419	)	$	(99,059	)	$	(74,363	)	$	(48,133	)	$	(31,598	)	$	(15,643	)
Net loss per share attributable to common stockholders—basic and diluted⁽¹⁾	$	(2.88	)	$	(2.00	)	$	(6.38	)	$	(16.39	)	$	(14.50	)	$	(3.40	)	$	(2.88	)	$	(2.00	)	$	(6.38	)	$	(16.39	)
Weighted average number of common shares outstanding—basic and diluted⁽¹⁾	25,781,230			24,086,651			4,955,760			954,695			925,625			29,135,583			25,781,230			24,086,651			4,955,760			954,695


	AS OF DECEMBER 31,												AS OF DECEMBER 31,
	2015		2014		2013		2012			2011			2016		2015		2014		2013		2012
	(in thousands)												(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	91,060	$	85,586	$	69,649	$	2,925		$	15,068		$	197,945	$	91,060	$	85,586	$	69,649	$	2,925
Short-term investments	45,502		54,339		—		—			—			35,717		45,502		54,339		—		—
Long-term investments	13,808		18,275		—		—			—			—		13,808		18,275		—		—
Total assets	159,127		159,835		70,458		3,219			15,458			248,254		159,127		159,835		70,458		3,219
Notes payable, net of discount, and accrued interest thereon	—		—		—		2,347			—			—		—		—		—		2,347
Warrants liability—related parties	—		—		—		2,456			1,098			—		—		—		—		2,456
Convertible notes, net of discounts	123,236		122,906		—		—			—			123,539		123,236		122,906		—		—
Convertible preferred stock	—		—		—		60,898			60,348			—		—		—		—		60,898
Total stockholders’ equity (deficit)	18,775		28,042		66,976		(63,919		)	(48,697		)	105,344		18,775		28,042		66,976		(63,919		)


(1)	Prior to 2014, net loss attributable to common stockholders reflects the accretion on convertible preferred stock and, where applicable, preferred stock dividends. See Note 2 to our audited consolidated financial statements appearing elsewhere in this report for an explanation of the method used to calculate the basic and diluted net loss per share attributable to common stockholders.



	YEAR ENDED DECEMBER 31,						INCREASE (DECREASE)			% INCREASE (DECREASE)
	2016			2015			INCREASE (DECREASE)			% INCREASE (DECREASE)
	(in thousands)
Expenses
General and administrative	$	(44,478	)	$	(30,635	)	$	13,843		45	%
Research and development	(52,394		)	(44,451		)	7,943			18	%
Other income (expense), net	(1,994		)	862			(2,856		)	N/A
Net loss before income taxes	$	(98,866	)	$	(74,224	)



	YEAR ENDED DECEMBER 31,						INCREASE (DECREASE)			% INCREASE (DECREASE)
	2015			2014			INCREASE (DECREASE)			% INCREASE (DECREASE)
	(in thousands)
General and administrative expenses	$	(30,635	)	$	(20,103	)	$	10,532		52	%
Research and development expenses	(44,451		)	(29,869		)	14,582			49	%
Other income (expense), net	862			1,839			(977		)	N/A
Net loss before income taxes	$	(74,224	)	$	(48,133	)


	TOTAL		LESS THAN 1 YEAR		1 TO 3 YEARS		3 TO 5 YEARS		MORE THAN 5 YEARS		TOTAL		LESS THAN 1 YEAR		1 TO 3 YEARS		3 TO 5 YEARS		MORE THAN 5 YEARS
	(in thousands)										(in thousands)
Operating lease and other obligations⁽¹⁾	$	8,428	$	1,933	$	3,199	$	2,685	$	611	$	6,540	$	1,759	$	2,830	$	1,906	$	45
Convertible Notes⁽²⁾	125,000		—		—		—		125,000		125,000		—		—		—		125,000
	133,428		1,933		3,199		2,685		125,611		$	131,540	$	1,759	$	2,830	$	1,906	$	125,045



ITEM 1A.	RISK FACTORS



	YEAR ENDED DECEMBER 31,
	2015		2014		2013
	(in thousands)
Rhopressa^TM
Direct non-clinical	$	6,958	$	8,765	$	3,410
Direct clinical	15,635		10,994		1,607
Total	$	22,593	$	19,759	$	5,017
Roclatan^TM
Direct non-clinical	$	2,151	$	690	$	481
Direct clinical	4,240		1,869		234
Total	$	6,391	$	2,559	$	715
Discontinued product candidates
Direct non-clinical	$	56	$	89	$	596
Direct clinical	—		1		2,965
Total	$	56	$	90	$	3,561
Unallocated	15,411		7,461		2,590
Total research and development expense	$	44,451	$	29,869	$	11,883



	YEAR ENDED DECEMBER 31,
	2016		2015		2014
	(in thousands)
Rhopressa^TM
Direct non-clinical	$	2,631	$	6,958	$	8,765
Direct clinical	9,944		15,635		10,994
Total	$	12,575	$	22,593	$	19,759
Roclatan^TM
Direct non-clinical	$	2,640	$	2,151	$	690
Direct clinical	15,366		4,240		1,869
Total	$	18,006	$	6,391	$	2,559
Other research and development activities	$	1,955	$	1,110	$	90
Unallocated	$	19,858	$	14,357	$	7,461
Total research and development expense	$	52,394	$	44,451	$	29,869



ITEM 11.	EXECUTIVE COMPENSATION


(1)	Our operating lease and other obligations are primarily related to our principal executive office in Irvine, California, corporate office in Bedminster, New Jersey and new research facility in Durham, North Carolina.




	AERIE PHARMACEUTICALS, INC.

Date: March ~~2, 2016~~9, 2017	By:	/S/ VICENTE ANIDO, JR., PHH.DD.
		Vicente Anido, Jr., ~~PhD~~Ph.D.
		Chief Executive Officer, Chairman of the Board




SIGNATURE	TITLE	DATE

/S/ VICENTE ANIDO, JR., PHH.DD.	Chief Executive Officer, Chairman of the Board (Principal Executive Officer)	March ~~2, 2016~~9, 2017
Vicente Anido, Jr., ~~PhD~~Ph.D.

/S/ RICHARD J. RUBINO	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	March ~~2, 2016~~9, 2017
Richard J. Rubino

/S/ GERALD D. CAGLE, PHH.DD.	Director	March ~~2, 2016~~9, 2017
Gerald D. Cagle, ~~PhD~~Ph.D.

/S/ RICHARD CROARKIN	Director	March ~~2, 2016~~9, 2017
Richard Croarkin

/S/ MICHAEL M. DU TOIT	Director	March ~~2, 2016~~9, 2017
Michael M. du Toit

/S/ GEOFFREY DUYK, ~~MD,~~M.D., PHH.DD.	Director	March ~~2, 2016~~9, 2017
Geoffrey Duyk, ~~MD, PhD~~M.D., Ph.D.

/S/ MURRAY A. GOLDBERG	Director	March ~~2, 2016~~9, 2017
Murray A. Goldberg

/S/ BENJAMIN F. MCGRAW III, PHARM. D.	Director	March ~~2, 2016~~9, 2017
Benjamin F. McGraw III, Pharm. D.

/S/ JULIE MCHUGH	Director	March ~~2, 2016~~9, 2017
Julie McHugh




	PAGE
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Financial Statements
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations and Comprehensive Loss	F-4
Consolidated Statements of Stockholders’ Equity ~~(Deficit)~~	F-5
Consolidated Statements of Cash Flows	F-6
Notes to the Consolidated Financial Statements	F-7


	DECEMBER 31,						DECEMBER 31,
	2015			2014			2016			2015
Assets
Current assets
Cash and cash equivalents	$	91,060		$	85,586		$	197,945		$	91,060
Short-term investments	45,502			54,339			35,717			45,502
Prepaid expenses and other current assets	1,865			1,122			4,028			1,865
Total current assets	138,427			141,047			237,690			138,427
Long-term investments	13,808			18,275			—			13,808
Furniture, fixtures and equipment, net	3,816			240			7,857			3,816
Other assets, net	3,076			273			2,707			3,076
Total assets	$	159,127		$	159,835		$	248,254		$	159,127
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and other current liabilities	$	16,565		$	8,336		$	18,820		$	16,565
Interest payable	551			551			551			551
Total current liabilities	17,116			8,887			19,371			17,116
Convertible notes, net of discounts and debt issuance costs	123,236			122,906
Convertible notes, net of discounts							123,539			123,236
Total liabilities	140,352			131,793			142,910			140,352
Commitments and contingencies (Note 14)
Commitments and contingencies (Note 13)
Stockholders’ equity
Preferred stock, $0.001 par value; 15,000,000 shares authorized as of December 31, 2015 and December 31, 2014; None issued and outstanding	—			—
Common stock, $0.001 par value; 150,000,000 shares authorized as of December 31, 2015 and December 31, 2014; 26,458,495 and 24,018,577 shares issued and outstanding as of December 31, 2015 and December 31, 2014, respectively	26			24
Preferred stock, $0.001 par value; 15,000,000 shares authorized as of December 31, 2016 and December 31, 2015; None issued and outstanding							—			—
Common stock, $0.001 par value; 150,000,000 shares authorized as of December 31, 2016 and December 31, 2015; 33,458,607 and 26,458,495 shares issued and outstanding as of December 31, 2016 and December 31, 2015, respectively							33			26
Additional paid-in capital	236,492			171,326			422,002			236,492
Accumulated other comprehensive loss	(179		)	(107		)	(68		)	(179		)
Accumulated deficit	(217,564		)	(143,201		)	(316,623		)	(217,564		)
Total stockholders’ equity	18,775			28,042			105,344			18,775
Total liabilities and stockholders’ equity	$	159,127		$	159,835		$	248,254		$	159,127


	CONVERTIBLE PREFERRED STOCK					COMMON STOCK			ADDITIONAL PAID-IN CAPITAL			ACCUMULATED OTHER COMPREHENSIVE LOSS			ACCUMULATED DEFICIT			TOTAL			COMMON STOCK			ADDITIONAL PAID-IN CAPITAL			ACCUMULATED OTHER COMPREHENSIVE LOSS			ACCUMULATED DEFICIT			TOTAL
	SHARES		AMOUNT			SHARES	AMOUNT		ADDITIONAL PAID-IN CAPITAL			ACCUMULATED OTHER COMPREHENSIVE LOSS			ACCUMULATED DEFICIT			TOTAL			SHARES	AMOUNT		ADDITIONAL PAID-IN CAPITAL			ACCUMULATED OTHER COMPREHENSIVE LOSS			ACCUMULATED DEFICIT			TOTAL
Balances at December 31, 2012	12,120,531		$	60,898		964,880	$	1	$	—		$	—		$	(63,920	)	$	(63,919	)
Exercise of stock options	—		—			3,195	—		1			—			—			1
Vesting of restricted stock	—		—			124,966	—		—			—			—			—
Stock-based compensation	—		—			—	—		2,858			—			—			2,858
Accretion from conversion of note payable to related parties	—		240			—	—		(240		)	—			—			(240		)
Accretion of stock issuance costs	—		210			—	—		(210		)	—			—			(210		)
Conversion of convertible preferred stock to common stock	(12,120,531	)	(61,348		)	12,120,531	12		61,336			—			—			61,348
Conversion of convertible notes payable and accrued interest to common stock	—		—			1,860,363	2		18,602			—			—			18,604
Proceeds from issuance of common stock in initial public offering, net of underwriting discounts and commissions of $5,410 and offering costs of $3,644	—		—			7,728,000	8		68,218			—			—			68,226
Issuance of common stock upon net exercise of warrants	—		—			483,614	—		4,896			—			—			4,896
Reclassification of warrants from liabilities to equity	—		—			—	—		6,560			—			—			6,560
Net loss	—		—			—	—		—			—			(31,148		)	(31,148		)
Balances at December 31, 2013	—		—			23,285,549	23		162,021			—			(95,068		)	66,976			23,285,549	$	23	$	162,021		$	—		$	(95,068	)	$	66,976
Issuance of common stock upon exercise of stock purchase rights	—		—			10,941	—		119			—			—			119			10,941	—		119			—			—			119
Exercise of stock options	—		—			579,083	1		8			—			—			9			579,083	1		8			—			—			9
Vesting of restricted stock	—		—			143,004	—		—			—			—			—			143,004	—		—			—			—			—
Stock-based compensation	—		—			—	—		9,178			—			—			9,178			—	—		9,178			—			—			9,178
Unrealized loss on available-for-sale investments	—		—			—	—		—			(107		)	—			(107		)	—	—		—			(107		)	—			(107		)
Net loss	—		—			—	—		—			—			(48,133		)	(48,133		)	—	—		—			—			(48,133		)	(48,133		)
Balances at December 31, 2014	—		—			24,018,577	24		171,326			(107		)	(143,201		)	28,042			24,018,577	24		171,326			(107		)	(143,201		)	28,042
Proceeds from issuance of common stock, net of commissions and expenses of $1,496	—		—			1,754,556	2		50,371			—			—			50,373			1,754,556	2		50,371			—			—			50,373
Issuance of common stock upon exercise of stock purchase rights	—		—			5,029	—		96			—			—			96			5,029	—		96			—			—			96
Exercise of stock options	—		—			296,716	—		1,282			—			—			1,282			296,716	—		1,282			—			—			1,282
Issuance of common stock upon exercise of warrants	—		—			314,368	—		9			—			—			9			314,368	—		9			—			—			9
Vesting of restricted stock	—		—			69,249	—		—			—			—			—			69,249	—		—			—			—			—
Stock-based compensation	—		—			—	—		12,945			—			—			12,945			—	—		12,945			—			—			12,945
Excess tax benefit	—		—			—	—		463			—			—			463			—	—		463			—			—			463
Unrealized Gain/(Loss)	—		—			—	—		—			(72		)	—			(72		)
Unrealized loss on available-for-sale investments																					—	—		—			(72		)	—			(72		)
Net loss	—		—			—	—		—			—			(74,363		)	(74,363		)	—	—		—			—			(74,363		)	(74,363		)
Balances at December 31, 2015	—		$	—		26,458,495	$	26	$	236,492		$	(179	)	$	(217,564	)	$	18,775		26,458,495	26		236,492			(179		)	(217,564		)	18,775
Proceeds from issuance of common stock, net of underwriting discounts, commissions and expenses of $5,963																					6,721,529	7		167,158			—			—			167,165
Issuance of common stock upon exercise of stock purchase rights																					75,205	—		1,120			—			—			1,120
Exercise of stock options																					149,186	—		591			—			—			591
Vesting of restricted stock																					54,192	—		(153		)	—			—			(153		)
Stock-based compensation																					—	—		16,794			—			—			16,794
Unrealized gain on available-for-sale investments																					—	—		—			111			—			111
Net loss																					—	—		—			—			(99,059		)	(99,059		)
Balances at December 31, 2016																					33,458,607	$	33	$	422,002		$	(68	)	$	(316,623	)	$	105,344


(1)	Conversion is limited to a 9.985% ownership cap in shares of common stock by the holder. In addition to the common stock equivalents presented above, the 2014 Convertible Notes provide for an increase in the conversion rate if conversion is elected in connection with a significant corporate transaction. Refer to Note 8 for further information regarding the 2014 Convertible Notes.



			GROSS		GROSS
	AMORTIZED		UNREALIZED		UNREALIZED			FAIR
(in thousands)	COST		GAINS		LOSSES			VALUE
Cash and cash equivalents:
Cash and money market accounts	$	196,445	$	—	$	—		$	196,445
Commercial paper	1,500		—		—			1,500
Total cash and cash equivalents	$	197,945	$	—	$	—		$	197,945
Investments:
Certificates of deposit (due within 1 year)	$	6,920	$	4	$	(1	)	$	6,923
Corporate bonds (due within 1 year)	27,615		4		(75		)	27,544
Government agencies (due within 1 year)	1,250		—		—			1,250
Total investments	$	35,785	$	8	$	(76	)	$	35,717
Total cash, cash equivalents, and investments	$	233,730	$	8	$	(76	)	$	233,662


	FAIR VALUE MEASUREMENTS AS OF								FAIR VALUE MEASUREMENTS AS OF
	DECEMEBER 31, 2015								DECEMBER 31, 2016
(in thousands)	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL		LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Cash and cash equivalents:
Cash and money market accounts	$	91,060	$	—	$	—	$	91,060	$	196,445	$	—	$	—	$	196,445
Commercial paper									—		1,500		—		1,500
Total cash and cash equivalents:	$	91,060	$	—	$	—	$	91,060	$	196,445	$	1,500	$	—	$	197,945
Investments:
Certificates of deposit	$	—	$	18,355	$	—	$	18,355	$	—	$	6,923	$	—	$	6,923
Commercial paper	—		5,966		—		5,966
Corporate bonds	—		32,995		—		32,995		—		27,544		—		27,544
Government agencies	—		1,994		—		1,994		—		1,250		—		1,250
Total investments	$	—	$	59,310	$	—	$	59,310	$	—	$	35,717	$	—	$	35,717
Total cash, cash equivalents, and investments:	$	91,060	$	59,310	$	—	$	150,370	$	196,445	$	37,217	$	—	$	233,662


	FAIR VALUE MEASUREMENTS AS OF								FAIR VALUE MEASUREMENTS AS OF
	DECEMEBER 31, 2014								DECEMBER 31, 2015
(in thousands)	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL		LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Cash and cash equivalents:
Cash and money market accounts	$	84,613	$	—	$	—	$	84,613	$	91,060	$	—	$	—	$	91,060
Certificates of deposit	—		472		—		472
Corporate bonds	—		501		—		501
Total cash and cash equivalents:	$	84,613	$	973	$	—	$	85,586	$	91,060	$	—	$	—	$	91,060
Investments:
Certificates of deposit	$	—	$	30,241	$	—	$	30,241	$	—	$	18,355	$	—	$	18,355
Commercial paper	—		5,986		—		5,986		—		5,966		—		5,966
Corporate bonds	—		30,311		—		30,311		—		32,995		—		32,995
Government agencies	—		6,076		—		6,076		—		1,994		—		1,994
Total investments	$	—	$	72,614	$	—	$	72,614	$	—	$	59,310	$	—	$	59,310
Total cash, cash equivalents, and investments:	$	84,613	$	73,587	$	—	$	158,200	$	91,060	$	59,310	$	—	$	150,370



(in thousands)	ESTIMATED USEFUL LIVES (YEARS)	DECEMBER 31,
		DECEMBER 31,
		2015			2014
Manufacturing equipment	10	$	988		$	—
Laboratory equipment	7	1,619			830
Software and computer equipment	3	1,695			195
Furniture and fixtures	5	491			238
Leasehold improvements	Term of lease	298			—
		$	5,091		$	1,263
Less: Accumulated depreciation		(1,275		)	(1,023		)
		$	3,816		$	240


(1)	Comprised of accrued bonus, accrued vacation ~~accrued severance liabilities~~and other employee related expenses, and liabilities under the Company’s employee stock purchase plan.


(2)	Comprised of accruals such as outside professional fees and other business related expenses.


(3)	Comprised of accruals such as fees for investigative sites, ~~CROs,~~contract research organizations, contract manufacturing organizations and other service providers that assist in conducting preclinical research studies and clinical trials.


(4)	Accrued income taxes ~~are~~were the result of the taxable gain ~~from~~associated with the IP ~~Assignment.~~Assignment that occurred in March 2015 and were paid in the three months ended March 31, 2016. Refer to Note 9 for a description of the tax impact of the IP Assignment.



NUMBER OF UNDERLYING SHARES	EXERCISE PRICE PER SHARE		WARRANT EXPIRATION DATE	TYPE OF EQUITY SECURITY
75,000	$	5.00	February 2019	Common Stock
75,000	$	5.00	November 2019	Common Stock
7,500	$	5.00	August 2020	Common Stock
223,482	$	0.05	December 2019	Common Stock



	~~OCTOBER 30, 2013~~
~~Expected term (years)~~	~~5.32-6.84~~
~~Volatility~~	~~65.00~~	%
~~Risk-free interest rate~~	~~1.51%-2.00%~~
~~Dividend yield~~	—	%


	YEAR ENDED DECEMBER 31,						YEAR ENDED DECEMBER 31,
(in thousands)	2015		2014		2013		2016		2015		2014
Research and development	$	2,500	$	1,339	$	222	$	3,781	$	2,500	$	1,339
General and administrative	10,445		7,839		2,636		13,013		10,445		7,839
Total	$	12,945	$	9,178	$	2,858	$	16,794	$	12,945	$	9,178


	NUMBER OF SHARES		WEIGHTED AVERAGE EXERCISE PRICE		WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS)	AGGREGATE INTRINSIC VALUE (000’s)		NUMBER OF SHARES		WEIGHTED AVERAGE EXERCISE PRICE		WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS)	AGGREGATE INTRINSIC VALUE (000’s)
Options outstanding at December 31, 2014	3,826,459		$	8.39
Options outstanding at December 31, 2015								4,583,586		$	12.86
Granted	1,328,400		24.83					993,836		20.51
Exercised	(297,763	)	4.38					(166,295	)	5.71
Canceled	(273,510	)	17.00					(155,197	)	19.33
Options outstanding at December 31, 2015	4,583,586		$	12.86	8.0	$	55,918
Options vested and expected to vest at December 31, 2015	4,511,052		$	12.75	8.0	$	55,478
Options exercisable at December 31, 2015	2,237,663		$	7.92	7.3	$	37,308
Options outstanding at December 31, 2016								5,255,930		$	14.34	7.4	$	123,649
Options vested or expected to vest⁽¹⁾								5,198,266		$	14.25	7.4	$	122,751
Options exercisable at December 31, 2016								3,276,694		$	10.77	6.8	$	88,745


EXERCISE PRICE	OPTIONS OUTSTANDING	WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS)	OPTIONS EXERCISABLE	OPTIONS OUTSTANDING	WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS)	OPTIONS EXERCISABLE

$0.20 - $3.15	2,251,290	7.1	1,606,555	2,116,127	6.2	1,898,863
$10.44 - $15.97	148,770	9.6	4,737	419,188	8.9	105,380
$16.21 - $21.08	1,239,250	8.5	477,675
$16.05 - $21.08				1,590,359	8.0	845,903
$22.31 - $26.76	336,701	9.2	54,138	317,781	8.3	125,372
$27.44 - $32.30	607,575	9.1	94,558
$26.77 - $40.91				812,475	8.6	301,176
	4,583,586		2,237,663	5,255,930		3,276,694

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