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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 20222023

OR

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

For the transition period from                     to                     

Commission file number: 001-36554

Ocular Therapeutix, Inc.Inc.

(Exact name of registrant as specified in its charter)

Delaware

20-5560161

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification Number)

24 Crosby Drive

Bedford, MA

01730

(Address of principal executive offices)

(Zip Code)

(781) 357-4000

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

OCUL

The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of August 5, 2022,3, 2023, there were 76,966,88979,384,994 shares of Common Stock, $0.0001 par value per share, outstanding.

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Ocular Therapeutix, Inc.

INDEX

    

Page

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

3

Condensed Consolidated Balance Sheets as of June 30, 20222023 and December 31, 20212022

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 20222023 and 20212022

4

Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 20222023 and 20212022

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 20222023 and 20212022

6

Notes to Condensed Consolidated Financial Statements

8

Item 2.

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

2019

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

3938

Item 4.

Controls and Procedures

39

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

40

Item 1A.

Risk Factors

40

Item 5.

Other Information

41

Item 6.

Exhibits

4043

SIGNATURES

4246

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “target,” “potential,” “goals,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

our ongoing and planned clinical trials, including our Phase 1 clinical trials of OTX-TKI for the treatment of wet age-related macular degeneration, or wet AMD,AMD; our Phase 1 clinical trial of OTX-TKI for the treatment of non-proliferative diabetic retinopathy, or NPDR; our Phase 2 clinical trial of OTX-TIC for the reduction of intraocular pressure in patients with primary open-angle glaucoma or ocular hypertension,hypertension; our Phase 2 clinical trial of OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease; our clinical trial to evaluate DEXTENZA® in pediatric subjects following cataract surgery in accordance withsurgery; and our planned pivotal clinical trials of OTX-TKI for the U.S. Foodtreatment of wet AMD and Drug Administration’s post-approval requirement;NPDR;
our commercialization efforts for our product DEXTENZA;
our plans to develop, seek regulatory approval for and commercialize OTX-TKI, OTX-TIC, OTX-DED, OTX-CSI, and our other product candidates based on our proprietary bioresorbable hydrogel technology platform;ELUTYX™;
our ability to manufacture DEXTENZA and our product candidates in compliance with Current Good Manufacturing Practices and in sufficient quantities for our clinical trials and commercial use;
the timing of and our ability to submit applications and obtain and maintain regulatory approvals for DEXTENZA and our product candidates;
our estimates regarding future revenue; expenses; the sufficiency of our cash resources; our ability to fund our operating expenses, debt service obligations and capital expenditure requirements; and our needs for additional financing;
our plans to raise additional capital, including through equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, royalty agreements and marketing and distribution arrangements;
the potential advantages of DEXTENZA ReSure Sealant, and our product candidates;
the rate and degree of market acceptance and clinical utility of our products;
our ability to secure and maintain reimbursement for our products as well as the associated procedures to insert, implant or inject our products;
our estimates regarding the market opportunity for DEXTENZA and our product candidates;
our license agreement and collaboration with AffaMed Therapeutics Limited under which we are collaborating on the development and commercialization of DEXTENZA and our product candidate OTX-TIC in mainland China, Taiwan, Hong Kong, Macau, South Korea, and the countries of the Association of Southeast Asian Nations;

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our capabilities and strategy, and the costs and timing of manufacturing, sales, marketing, distribution and other commercialization efforts with respect to DEXTENZA ReSure Sealant and any additional products for which we may obtain marketing approval in the future;
our intellectual property position;

1

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our ability to identify additional products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;
the impact of government laws and regulations;
the costs and outcomes of legal actions and proceedings;
uncertainty regarding the extent to which the COVID-19 pandemic and related response measures will adversely affect our business, results of operations and financial condition; and
our competitive position.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in Part II, Item 1A — Risk Factors section, and in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, filed with the Securities and Exchange Commission, or the SEC, on February 28, 2022,March 6, 2023, and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, filed with the SEC on May 8, 2023, in each case particularly in the section captioned “Risk Factors”, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, licensing agreements collaborations, or investments we may make.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q, and our other periodic reports, completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements included in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q. We do not assume, and we expressly disclaim, any obligation or undertaking to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. All of the market data used in this Quarterly Report on Form 10-Q involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. While we believe that the information from these industry publications, surveys and studies is reliable, we have not independently verified such data. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of important factors, including those described in the section titled “Risk Factors.”

This Quarterly Report on Form 10-Q contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q and the documents incorporated by reference herein may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

2

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PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

Ocular Therapeutix, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

June 30, 

December 31, 

    

2022

    

2021

Assets

 

  

 

  

Current assets:

 

 

  

Cash and cash equivalents

$

134,539

$

164,164

Accounts receivable, net

 

20,482

 

21,135

Inventory

 

1,500

 

1,250

Prepaid expenses and other current assets

 

3,801

 

4,751

Total current assets

 

160,322

 

191,300

Property and equipment, net

 

6,680

 

6,956

Restricted cash

 

1,764

 

1,764

Operating lease assets

4,305

4,867

Total assets

$

173,071

$

204,887

Liabilities and Stockholders’ Equity

 

 

  

Current liabilities:

 

 

  

Accounts payable

$

3,703

$

4,592

Accrued expenses and other current liabilities

 

19,450

 

20,121

Deferred revenue

 

1,189

 

Operating lease liabilities

1,771

1,624

Total current liabilities

 

26,113

 

26,337

Other liabilities:

 

 

Operating lease liabilities, net of current portion

4,999

5,924

Derivative liability

10,461

20,192

Deferred revenue, net of current portion

13,000

13,000

Notes payable, net of discount

 

25,128

 

25,000

2026 convertible notes, net

 

27,567

 

26,435

Total liabilities

 

107,268

 

116,888

Commitments and contingencies

 

 

Stockholders’ equity:

 

 

  

Preferred stock, $0.0001 par value; 5,000,000 shares authorized and 0 shares issued or outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

Common stock, $0.0001 par value; 200,000,000 shares authorized and 76,910,026 and 76,731,940 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

8

 

8

Additional paid-in capital

 

642,907

 

633,795

Accumulated deficit

 

(577,112)

 

(545,804)

Total stockholders’ equity

 

65,803

 

87,999

Total liabilities and stockholders’ equity

$

173,071

$

204,887

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Ocular Therapeutix, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

  

2022

    

2021

    

2022

    

2021

Revenue:

 

  

 

  

 

  

 

  

Product revenue, net

$

12,144

$

11,718

$

24,642

$

19,061

Collaboration revenue

 

122

 

 

811

 

Total revenue, net

 

12,266

 

11,718

 

25,453

19,061

Costs and operating expenses:

 

  

 

  

 

  

  

Cost of product revenue

 

1,155

 

1,096

 

2,454

1,988

Research and development

 

13,100

 

13,859

 

26,200

24,786

Selling and marketing

 

10,140

 

8,391

 

19,203

16,477

General and administrative

 

7,787

 

8,603

 

15,344

16,268

Total costs and operating expenses

 

32,182

 

31,949

 

63,201

59,519

Loss from operations

 

(19,916)

 

(20,231)

 

(37,748)

(40,458)

Other income:

 

  

 

  

 

  

  

Interest income

 

73

 

8

 

89

20

Interest expense

 

(1,696)

 

(1,655)

 

(3,378)

(3,335)

Change in fair value of derivative liability

2,773

13,396

9,731

38,412

Other income (expense), net

 

 

1

 

(2)

1

Total other income, net

 

1,150

 

11,750

 

6,440

35,098

Net loss

$

(18,766)

$

(8,481)

$

(31,308)

$

(5,360)

Net loss per share, basic

$

(0.24)

$

(0.11)

$

(0.41)

$

(0.07)

Weighted average common shares outstanding, basic

 

76,764,296

 

76,324,367

 

76,755,028

 

76,198,384

Net loss per share, diluted

$

(0.25)

$

(0.25)

$

(0.47)

$

(0.51)

Weighted average common shares outstanding, diluted

 

82,533,528

 

82,093,599

 

82,524,260

 

81,967,616

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

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Ocular Therapeutix, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six Months Ended

June 30, 

  

2022

    

2021

Cash flows from operating activities:

 

 

  

Net loss

$

(31,308)

$

(5,360)

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

 

 

Stock-based compensation expense

 

8,490

 

7,378

Non-cash interest expense

 

2,391

 

2,282

Change in fair value of derivative liability

(9,731)

(38,412)

Depreciation and amortization expense

 

1,109

 

1,257

Loss on disposal of property and equipment

 

2

 

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

653

 

(6,482)

Prepaid expenses and other current assets

 

950

 

(167)

Inventory

 

(250)

 

89

Operating lease assets

562

466

Accounts payable

 

(809)

 

1,255

Accrued expenses

 

(1,946)

 

928

Deferred revenue

1,189

Operating lease liabilities

 

(778)

 

(649)

Net cash used in operating activities

 

(29,476)

 

(37,415)

Cash flows from investing activities:

 

  

 

Purchases of property and equipment

 

(771)

 

(287)

Net cash used in investing activities

 

(771)

 

(287)

Cash flows from financing activities:

 

  

 

Proceeds from issuance of notes payable, net

 

 

3,722

Proceeds from exercise of stock options

 

140

 

1,735

Proceeds from issuance of common stock pursuant to employee stock purchase plan

 

482

 

490

Issuance costs from the issuance of common stock upon public offering

 

 

(275)

Repayment of notes payable

 

(4,167)

Net cash provided by financing activities

 

622

 

1,505

Net decrease in cash, cash equivalents and restricted cash

 

(29,625)

 

(36,197)

Cash, cash equivalents and restricted cash at beginning of period

 

165,928

 

229,821

Cash, cash equivalents and restricted cash at end of period

$

136,303

$

193,624

Supplemental disclosure of cash flow information:

 

  

 

Cash paid for interest

$

990

$

1,065

Supplemental disclosure of non-cash investing and financing activities:

 

  

 

Additions to property and equipment included in accounts payable and accrued expenses

$

245

$

8

June 30, 

December 31, 

    

2023

    

2022

Assets

 

  

 

  

Current assets:

 

 

  

Cash and cash equivalents

$

66,606

$

102,300

Accounts receivable, net

 

27,309

 

21,325

Inventory

 

2,204

 

1,974

Prepaid expenses and other current assets

 

4,593

 

4,028

Total current assets

 

100,712

 

129,627

Property and equipment, net

 

12,830

 

9,856

Restricted cash

 

1,764

 

1,764

Operating lease assets

7,252

8,042

Total assets

$

122,558

$

149,289

Liabilities and Stockholders’ Equity

 

 

  

Current liabilities:

 

 

  

Accounts payable

$

3,572

$

5,123

Accrued expenses and other current liabilities

 

24,598

 

24,097

Deferred revenue

 

391

 

576

Operating lease liabilities

1,713

1,599

Notes payable, net of discount, current

 

2,083

 

Total current liabilities

 

32,357

 

31,395

Other liabilities:

 

 

Operating lease liabilities, net of current portion

7,689

8,678

Derivative liability

11,783

6,351

Deferred revenue, net of current portion

14,254

13,387

Notes payable, net of discount, net of current portion

 

23,303

 

25,257

Other non-current liabilities

104

93

Convertible Notes, net

 

29,981

 

28,749

Total liabilities

 

119,471

 

113,910

Commitments and contingencies (Note 14)

 

 

Stockholders’ equity:

 

 

  

Preferred stock, $0.0001 par value; 5,000,000 shares authorized and no shares issued or outstanding at June 30, 2023 and December 31, 2022, respectively

 

 

Common stock, $0.0001 par value; 200,000,000 shares authorized and 79,233,804 and 77,201,819 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

 

8

 

8

Additional paid-in capital

 

670,921

 

652,213

Accumulated deficit

 

(667,842)

 

(616,842)

Total stockholders’ equity

 

3,087

 

35,379

Total liabilities and stockholders’ equity

$

122,558

$

149,289

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Ocular Therapeutix, Inc.

Condensed Consolidated Statements of Stockholders’ EquityOperations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

  

2023

    

2022

    

2023

    

2022

Revenue:

 

  

 

  

 

  

 

  

Product revenue, net

$

15,029

$

12,144

$

28,243

$

24,642

Collaboration revenue

 

157

 

122

 

318

 

811

Total revenue, net

 

15,186

 

12,266

 

28,561

25,453

Costs and operating expenses:

 

  

 

  

 

  

  

Cost of product revenue

 

1,304

 

1,155

 

2,517

2,454

Research and development

 

15,094

 

13,100

 

29,842

26,200

Selling and marketing

 

11,153

 

10,140

 

21,989

19,203

General and administrative

 

8,205

 

7,787

 

17,332

15,344

Total costs and operating expenses

 

35,756

 

32,182

 

71,680

63,201

Loss from operations

 

(20,570)

 

(19,916)

 

(43,119)

(37,748)

Other income (expense):

 

  

 

  

 

  

  

Interest income

 

748

 

73

 

1,312

89

Interest expense

 

(1,991)

 

(1,696)

 

(3,760)

(3,378)

Change in fair value of derivative liability

1,131

2,773

(5,432)

9,731

Other expense, net

 

 

 

(1)

(2)

Total other (expense) income, net

 

(112)

 

1,150

 

(7,881)

6,440

Net loss

$

(20,682)

$

(18,766)

$

(51,000)

$

(31,308)

Net loss per share, basic

$

(0.26)

$

(0.24)

$

(0.66)

$

(0.41)

Weighted average common shares outstanding, basic

 

78,047,705

 

76,764,296

 

77,718,823

 

76,755,028

Net loss per share, diluted

$

(0.26)

$

(0.25)

$

(0.66)

$

(0.47)

Weighted average common shares outstanding, diluted

 

78,047,705

 

82,533,528

 

77,718,823

 

82,524,260

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Ocular Therapeutix, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Additional

Total

Six Months Ended

Common Stock

Paid-in

Accumulated

Stockholders’

June 30, 

    

Shares

    

Par Value

    

Capital

    

Deficit

    

Equity

  

2023

    

2022

Balances at December 31, 2021

76,731,940

$

8

$

633,795

$

(545,804)

$

87,999

Issuance of common stock upon exercise of stock options

 

27,674

 

 

129

 

 

129

Cash flows from operating activities:

 

 

  

Net loss

$

(51,000)

$

(31,308)

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

 

 

Stock-based compensation expense

 

 

 

4,209

 

 

4,209

 

8,985

 

8,490

Net loss

 

 

 

 

(12,542)

 

(12,542)

Balances at March 31, 2022

 

76,759,614

$

8

$

638,133

$

(558,346)

$

79,795

Issuance of common stock upon exercise of stock options

 

9,469

11

 

11

Issuance of common stock in connection with employee stock purchase plan

 

140,943

482

 

482

Stock-based compensation expense

 

4,281

 

4,281

Net loss

 

(18,766)

 

(18,766)

Balances at June 30, 2022

 

76,910,026

$

8

$

642,907

$

(577,112)

$

65,803

Non-cash interest expense

 

2,481

 

2,391

Change in fair value of derivative liability

5,432

(9,731)

Depreciation and amortization expense

 

1,135

 

1,109

Gain (loss) on disposal of property and equipment

 

(1)

 

2

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

(5,984)

 

653

Prepaid expenses and other current assets

 

(565)

 

950

Inventory

 

(230)

 

(250)

Accounts payable

 

(320)

 

(809)

Operating lease assets and liabilities

(85)

(216)

Accrued expenses

 

(578)

 

(1,946)

Deferred revenue

682

1,189

Net cash used in operating activities

 

(40,048)

 

(29,476)

Cash flows from investing activities:

 

  

 

Purchases of property and equipment

 

(5,369)

 

(771)

Net cash used in investing activities

 

(5,369)

 

(771)

Cash flows from financing activities:

 

  

 

Proceeds from issuance of short-term bridge loan

 

2,000

 

Proceeds from exercise of stock options

 

481

 

140

Proceeds from issuance of common stock pursuant to employee stock purchase plan

 

418

 

482

Proceeds from issuance of common stock upon public offering, net of issuance costs

 

8,824

 

Repayment of short-term bridge loan

 

(2,000)

Net cash provided by financing activities

 

9,723

 

622

Net decrease in cash, cash equivalents and restricted cash

 

(35,694)

 

(29,625)

Cash, cash equivalents and restricted cash at beginning of period

 

104,064

 

165,928

Cash, cash equivalents and restricted cash at end of period

$

68,370

$

136,303

Supplemental disclosure of cash flow information:

 

  

 

Cash paid for interest

$

1,521

$

990

Supplemental disclosure of non-cash investing and financing activities:

 

  

 

Additions to property and equipment included in accounts payable and accrued expenses

$

116

$

245

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Ocular Therapeutix, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

Additional

Total

Common Stock

Paid-in

Accumulated

Stockholders’

    

Shares

    

Par Value

    

Capital

    

Deficit

    

Equity

Balances at December 31, 2020

 

75,996,732

$

8

$

615,338

$

(539,251)

$

76,095

Issuance of common stock upon exercise of stock options

 

228,241

 

 

1,197

 

 

1,197

Issuance of common stock upon cashless exercise of warrant

11,737

 

 

 

 

Issuance costs associated with common stock public offering

 

 

 

(91)

 

 

(91)

Stock-based compensation expense

 

 

 

3,086

 

 

3,086

Net income

 

 

 

 

3,121

 

3,121

Balances at March 31, 2021

 

76,236,710

$

8

$

619,530

$

(536,130)

$

83,408

Issuance of common stock upon exercise of stock options

 

177,256

 

 

538

 

 

538

Issuance of common stock in connection with employee stock purchase plan

 

40,631

 

 

490

 

 

490

Stock-based compensation expense

 

 

 

4,292

 

 

4,292

Net loss

 

 

 

 

(8,481)

 

(8,481)

Balances at June 30, 2021

 

76,454,597

$

8

$

624,850

$

(544,611)

$

80,247

Additional

Total

Common Stock

Paid-in

Accumulated

Stockholders’

    

Shares

    

Par Value

    

Capital

    

Deficit

    

Equity

Balances at December 31, 2022

77,201,819

$

8

$

652,213

$

(616,842)

$

35,379

Issuance of common stock upon exercise of stock options

 

26,443

 

 

78

 

 

78

Issuance of common stock upon vesting of restricted stock units

288,376

 

 

 

Stock-based compensation expense

 

 

 

4,572

 

 

4,572

Net loss

 

 

 

 

(30,318)

 

(30,318)

Balances at March 31, 2023

 

77,516,638

$

8

$

656,863

$

(647,160)

$

9,711

Issuance of common stock upon exercise of stock options

 

97,435

403

 

403

Issuance of common stock in connection with employee stock purchase plan

 

176,406

418

 

418

Issuance of common stock upon vesting of restricted stock units

73,117

 

Issuance of common stock upon public offering, net of issuance costs

 

1,370,208

8,824

 

8,824

Stock-based compensation expense

 

4,413

 

4,413

Net loss

 

(20,682)

 

(20,682)

Balances at June 30, 2023

 

79,233,804

$

8

$

670,921

$

(667,842)

$

3,087

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Ocular Therapeutix, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

Additional

Total

Common Stock

Paid-in

Accumulated

Stockholders’

    

Shares

    

Par Value

    

Capital

    

Deficit

    

Equity

Balances at December 31, 2021

 

76,731,940

$

8

$

633,795

$

(545,804)

$

87,999

Issuance of common stock upon exercise of stock options

 

27,674

 

 

129

 

 

129

Stock-based compensation expense

 

 

 

4,209

 

 

4,209

Net loss

 

 

 

 

(12,542)

 

(12,542)

Balances at March 31, 2022

 

76,759,614

$

8

$

638,133

$

(558,346)

$

79,795

Issuance of common stock upon exercise of stock options

 

9,469

 

 

11

 

 

11

Issuance of common stock in connection with employee stock purchase plan

 

140,943

 

 

482

 

 

482

Stock-based compensation expense

 

 

 

4,281

 

 

4,281

Net loss

 

 

 

 

(18,766)

 

(18,766)

Balances at June 30, 2022

 

76,910,026

$

8

$

642,907

$

(577,112)

$

65,803

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Ocular Therapeutix, Inc.

Notes to the Condensed Consolidated Financial Statements

(Amounts in thousands, except share and per share data)

(Unaudited)

1.1. Nature of the Business and Basis of Presentation

Ocular Therapeutix, Inc. (the “Company”) was incorporated on September 12, 2006 under the laws of the State of Delaware. The Company is a biopharmaceutical company focused on the formulation, development and commercialization of innovative therapies for diseases and conditions of the eye using its proprietary bioresorbable hydrogel platform technology.hydrogel-based formulation technology ELUTYX. The Company’s product candidates are designedmission is to provide differentiated drug delivery solutionsbuild an ophthalmology-focused biopharmaceutical company that reducecapitalizes on the complexity and burden of the current standard of care by creating local programmed-release alternatives. Since inception, the Company’s operations have been primarily focused on organizing and staffinggaps that the Company acquiring rights to intellectual property, business planning, raising capital, developing its technology, identifying product candidates, undertaking preclinical studiesbelieves increasingly exist in the ophthalmology sector between single-product companies and clinical trials, manufacturing its products and product candidates, building its sales and marketing infrastructure for the commercialization of the Company’s approved products and product candidates, and commercializing its approved products.

large, multi-product pharmaceutical companies.

The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations, regulatory approval and compliance, reimbursement, uncertainty of market acceptance of products and the need to obtain additional financing. Newly-approvedRecently approved products will require significant sales, marketing and distribution support up to and including upon their launch. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization.

As of June 30, 2022, theThe Company had two U.S. Food and Drug Administration (“FDA”)-approved products in commercialization in the United States:is currently commercializing DEXTENZA® (dexamethasone insert) 0.4mg, an intracanalicular insert for the treatment of post-surgical ocular inflammation and pain and for the treatment of ocular itching associated with allergic conjunctivitis, and ReSure® Sealant, an ophthalmic device designed to prevent wound leaks in corneal incisions following cataract surgery. While ReSure Sealant is commercially available in the United States, it does not receive sales support, is not currently being manufactured by the Company, and has not in the past generated, nor is it anticipated to in the future to generate, material revenues.States. The Company’s most advanced product candidates are in either Phase 1 or Phase 2 of clinical stage development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval and adequate reimbursement or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapidly changing technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants. The Company may not be able to generate significant revenue from sales of any product for several years, if at all. Accordingly, the Company will need to obtain additional capital to finance its operations.

The Company has incurred losses and negative cash flows from operations since its inception, and the Company expects to continue to generate operating losses and negative cash flows from operations in the foreseeable future. As of June 30, 2022,2023, the Company had an accumulated deficit of $577,112.$667,842. As of June 30, 2023, the Company had existing cash and cash equivalents of $66,606. Subsequent to this date, on August 2, 2023, the Company entered into a new credit facility for $82,474, borrowed the full amount of $82,474 at closing, and received proceeds of $77,790, after the application of a discount and fees (Note 16). In connection with entering the new credit facility, the Company repaid its existing credit facility in August 2023 (Note 16), resulting in cash outflows of $26,157. Based on itsthe Company’s current plans and forecasted expenses,operating plan which includeincludes estimates related toof anticipated cash inflows from DEXTENZA product sales and cash outflows from operating expenses, and capital expenditures, the Company believes that its existing cash and cash equivalents of $134,539, as of June 30, 2022,2023, plus the net cash received under the new credit facility after the repayment of the existing credit facility and reflecting a minimum liquidity covenant in the new credit facility, will enable it to fund its planned operating expenses, debt service obligations and capital expenditure requirements throughexpenditures at least through the next 12 months from the issuance date of these unaudited condensed consolidated financial statements. The future viability of the Company beyond that point is dependent on itsthe Company’s ability to generate cash flows from the sale of DEXTENZA and raise additional capital to finance its operations. The Company will need to finance its operations through public or private securities offerings, debt financings, collaborations, strategic alliances, licensing agreements, royalty financingsagreements, or other sources, which may include licensing, collaborations or other strategic transactions or arrangements.marketing and distribution agreements. Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing on terms acceptable to the Company, if at all. If the Company is unable to obtain funding, the Company could be forced to delay,

8

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reduce or eliminate some or all of its research and development programs for product candidates, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.

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On June 30, 2023, the Company entered into an amendment to the Company's lease for its 20,445 square feet of manufacturing space located at 36 Crosby Drive in Bedford, Massachusetts. Under the amendment, the term of the lease was extended through July 31, 2028. The Company had reflected the obligations under the lease extension in its consolidated financial statements for 2022 as set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements are consistent with those described in Note 2 - Summary of Significant Accounting Policies in our 2021the Company’s Annual Report on Form 10-K.10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on March 6, 2023.

Use of Estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of these unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to, the measurement and recognition of reserves for variable consideration related to product sales, revenue recognition related to a collaboration agreement that contains multiple promises, the fair value of derivatives, stock-based compensation, and realizability of net deferred tax assets. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates.

Unaudited Interim Financial Information

The balance sheet at December 31, 20212022 was derived from audited consolidated financial statements but does not include all disclosures required by GAAP.  The accompanying unaudited condensed consolidated financial statements as of June 30, 20222023 and for the three and six months ended June 30, 20222023 and 20212022 have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”)SEC for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 20212022 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021,2022, filed with the SEC on February 28, 2022.March 6, 2023.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of June 30, 20222023 and results of operations and cash flows for the three and six months ended June 30, 20222023 and 20212022 have been made.  The results of operations for the three and six months ended June 30, 20222023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.2023.

Recently Issued Accounting Pronouncements

Effects of COVID-19

The pandemic causedFrom time to time, new accounting pronouncements are issued by an outbreak of a new strain of coronavirus, ( the “COVID-19 pandemic”) that is affecting the U.S.FASB and global economy and financial markets and the related responses of government, businesses and individuals are impacting our employees, patients, customers, communities and business operations. The implementation of travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders and shutdowns, for example, affected our business in 2020 and 2021. During the first half of 2022, the COVID-19 pandemic and related employee recruitment and retention challenges for ambulatory surgical centers (“ASCs”), and hospital out-patient departments (“HOPDs”) slowed the overall pace of cataract procedures performed in the United States, thereby reducing the number of opportunities for ophthalmologists to use DEXTENZAadopted by us as a treatment for post-surgical ocular inflammation and pain. In addition, recruitment and retention challenges with regards to the Company’s own sales force have adversely affected its ability to market DEXTENZA to ophthalmologists and in the office setting. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact the Company’s business, results of operations and financial condition and those of the Company’s customers, vendors, suppliers, and collaboration partners will depend on future developmentsspecified effective date. The Company believes that recently issued accounting pronouncements that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economicnot yet effective will not have a material impact on local, regional, nationalour consolidated financial statements and international markets. Management continues to actively monitor this situation and the possible effects on the Company’s financial condition, liquidity, operations, suppliers, industry, and workforce. For additional information on risks posed by the COVID-19 pandemic, please see “Item 1A — Risk Factors — Risks Related to the Coronavirus Pandemic,” included our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 28, 2022.disclosures.

2. Summary of Significant Accounting Policies3. Licensing Agreements and Deferred Revenue

Incept License Agreement (in-licensing)

Use of Estimates

The preparation of financial statements in conformityOn September 13, 2018, the Company entered into a second amended and restated license agreement with GAAP requires managementIncept, LLC (“Incept”) to make estimatesuse and assumptions that affectdevelop certain intellectual property (the “Incept License”). Under the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are notIncept License, as

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limitedamended and restated, the Company was granted a worldwide, perpetual, exclusive license to revenue recognition,use specific Incept technology to develop and commercialize products that are delivered to or around the human eye for diagnostic, therapeutic or prophylactic purposes relating to ophthalmic diseases or conditions. The Company is obligated to pay low single-digit royalties on net sales of commercial products developed using the licensed technology, commencing with the date of the first commercial sale of such products and until the expiration of the last to expire of the patents covered by the license.

The terms and conditions of the Incept License are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023.

Royalties paid under this agreement related to product sales were $396 and $813 for the three and six months ended June 30, 2023, respectively, and $375 and $744 for the three and six months ended June 30, 2022, respectively. Royalties have been charged to cost of product revenue.

AffaMed License Agreement (out-licensing)

On October 29, 2020, the Company entered into license agreement (“License Agreement”) with AffaMed Therapeutic Limited (“AffaMed”) for the development and commercialization of the Company’s DEXTENZA product regarding ocular inflammation and pain following cataract surgery and allergic conjunctivitis and for the Company’s OTX-TIC product candidate regarding open-angle glaucoma or ocular hypertension, in each case in mainland China, Taiwan, Hong Kong, Macau, South Korea, and the countries of the Association of Southeast Asian Nations. The Company retains development and commercialization rights for the AffaMed Licensed Products in the rest of the world.

The terms and conditions of the License Agreement are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023.

In June 2023, the Company received a milestone payment of $1,000 from AffaMed in connection with AffaMed receiving approval of its Clinical Trial Application to initiate a Phase 3 registrational study in China to investigate the efficacy and safety of DEXTENZA in subjects following ophthalmic surgery by China’s National Medical Products Administration. The Company has allocated the amount to the DEXTENZA Field performance obligation as an addition to deferred revenue.

In March 2022, the Company invoiced AffaMed $2,000 for a clinical trial accrualssupport payment in connection with the initiation by the Company of the OTX-TIC Phase 2 clinical trial and allocated the amount to the Phase 2 Clinical Trial of OTX-TIC performance obligation as an addition to deferred revenue. Payment was received by the Company during the three months ended June 30, 2022.

The Company recognized collaboration revenue related to the Phase 2 Clinical Trial of OTX-TIC performance obligation of $157 and $318 for the three and six months ended June 30, 2023, respectively, and $122 and $811 for the three and six months ended June 30, 2022, respectively.

As of June 30, 2023, the aggregate amount of the transaction price allocated to the partially unsatisfied Phase 2 Clinical Trial of OTX-TIC performance obligation was $645. This amount is expected to be recognized as this performance obligation is satisfied through June 2025. 

Deferred revenue activity for the three and six months ended June 30, 2023 was as follows:

    

Deferred Revenue

Deferred revenue at December 31, 2022

$

13,963

Additions

1,000

Amounts recognized into revenue

(318)

Deferred revenue at June 30, 2023

$

14,645

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4. Cash Equivalents and Restricted Cash

As of June 30, 2023 and December 31, 2022, the Company held restricted cash of $1,764, respectively, on its unaudited condensed consolidated balance sheets. The Company held restricted cash as security deposits for its real estate leases.

The Company’s unaudited condensed consolidated statements of cash flows include restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on such statements. A reconciliation of the cash, cash equivalents, and restricted cash reported within the balance sheets that sum to the total of the same amounts shown in the unaudited condensed consolidated statement of cash flows is as follows:

June 30, 

June 30, 

    

2023

    

2022

Cash and cash equivalents

$

66,606

$

134,539

Restricted cash

1,764

1,764

Total cash, cash equivalents and restricted cash

$

68,370

$

136,303

5. Inventory

Inventory consisted of the following:

June 30, 

December 31, 

    

2023

    

2022

 

Raw materials

$

341

$

309

Work-in-process

682

899

Finished goods

 

1,181

 

766

$

2,204

$

1,974

6. Expenses

Accrued expenses and other current liabilities consisted of the following:

June 30, 

December 31, 

    

2023

    

2022

Accrued payroll and related expenses

$

6,236

$

7,509

Accrued rebates and programs

4,513

3,560

Accrued professional fees

 

1,387

 

1,228

Accrued research and development expenses

 

1,523

 

1,816

Accrued interest payable on Convertible Notes

 

9,752

 

8,756

Accrued other

 

1,187

 

1,228

$

24,598

$

24,097

7. Financial Liabilities

Convertible Notes

On March 1, 2019, the Company issued $37,500 of convertible notes, which accrue interest at an annual rate of 6% of their outstanding principal amount, which is payable, along with the principal amount at maturity, on March 1, 2026, unless earlier converted, repurchased or redeemed (the “Convertible Notes”). The Company presents accrued interest in accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheets because the Convertible Notes are currently convertible and the interest is payable in cash. The effective annual interest rate for the Convertible Notes was 14.8% through June 30, 2023.

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The terms and conditions of the Convertible Notes were amended on August 2, 2023 (Note 16). The terms and conditions of the Convertible Notes prior to the amendment are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023.

The Company determined that the embedded conversion option is required to be separated from the Convertible Notes and accounted for as a freestanding derivative instrument subject to derivative accounting. The allocation of proceeds to the conversion option results in a discount on the Convertible Notes. The Company is amortizing the discount to interest expense over the term of the Convertible Notes using the effective interest method.

A summary of the Convertible Notes at June 30, 2023 and December 31, 2022 is as follows:

   

June 30, 

December 31, 

    

2023

    

2022

Convertible Notes

$

37,500

$

37,500

Less: unamortized discount

(7,519)

(8,751)

Total

$

29,981

$

28,749

Notes Payable

The Company entered into a credit and security agreement in 2014 (as amended to date, the “MidCap Credit Agreement”) establishing a credit facility (the “MidCap Credit Facility”). The terms and conditions of the MidCap Credit Agreement and the MidCap Credit Facility are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023, except with respect to Amendments No. 1 and 2 to the MidCap Credit Agreement as described below. The MidCap Credit Facility was paid off in full in August 2023 (Note 16).

Under the MidCap Credit Facility, the Company had a total borrowing capacity of $25,000, which was fully drawn down as of June 30, 2023. The carrying value of the Company’s variable interest rate notes payable under the MidCap Credit Facility are recorded at amortized cost, which approximates fair value due to their short-term nature.

On March 12, 2023, the Company requested, and received, a protective advance of $2,000 under the MidCap Credit Agreement as a short-term bridge loan in response to the closure of Silicon Valley Bank by the California Department of Financial Protection and Innovation. This protective advance was deemed a credit extension. The Company repaid the full principal amount of $2,000 in March 2023.

On March 31, 2023, the Company entered into Amendment No. 1 to the MidCap Credit Agreement (“Amendment No. 1”) to replace the LIBOR-based interest rate provisions of the MidCap Credit Agreement with interest rate provisions based on the Secured Overnight Financing Rate (“SOFR”), establish a benchmark replacement mechanism and make additional administrative updates. The Company accounted for Amendment No. 1 as a modification in accordance with the guidance in ASC 470-50 Debt. Application of the modification accounting guidance did not have a material effect on the carrying amount of the long-term notes payable.

On May 4, 2023, the Company entered into Amendment No. 2 to the MidCap Credit Agreement (“Amendment No. 2”). Amendment No. 2 provided that the Company may maintain up to 50% of its consolidated cash and cash equivalents with banks or financial institutions other than Silicon Valley Bank and made additional administrative updates.

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Borrowings outstanding are as follows:

   

June 30, 

   

December 31, 

    

2023

    

2022

Borrowings outstanding

$

25,000

$

25,000

Accrued exit fee

448

335

Unamortized discount

(62)

(78)

25,386

25,257

Less: current portion

(2,083)

Long-term notes payable

$

23,303

$

25,257

As of June 30, 2023, the annual requirement for the repayment of principal for the MidCap Credit Facility, inclusive of the final payment of $875 due at expiration, was as follows:

Year Ending December 31,

    

Principal

    

Final Payment

    

Total

2024

8,333

8,333

2025

16,667

875

17,542

$

25,000

$

875

$

25,875

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Table of Contents

8. Derivative Liability

The Convertible Notes (Note 7) contain an embedded conversion option that meets the criteria to be bifurcated and accounted for separately from the Convertible Notes (the "Derivative Liability"). The Derivative Liability was recorded at fair value upon the issuance of the Convertible Notes and is subsequently remeasured to fair value at each reporting period. The Convertible Notes were initially valued and are remeasured using a "with-and-without" method. The "with-and-without" methodology involves valuing the whole instrument on an as-is basis with the embedded conversion option and then valuing the Convertible Notes without the embedded conversion option. The difference between the entire instrument with the embedded conversion option compared to the instrument without the embedded conversion option is the fair value of derivatives.  Estimates are periodically reviewed in lightthe derivative, recorded as the Derivative Liability. Refer to Note 9 for details regarding the determination of changes in circumstances, facts and experience. Actual results may differ from these estimates.  fair value.

9. Risks and Fair Value

Concentration of Credit Risk and of Significant Suppliers and Customers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company has its cash and cash equivalents balances at two accredited financial institutions, in amounts that exceed federally insured limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is dependent on a small number of third-party manufacturers to supply products for research and development activities in its preclinical and clinical programs and for sales of its products. The Company’s development programs as well as revenue from future product sales could be adversely affected by a significant interruption in the supply of any of the components of these products.

For the three and six months ended June 30, 2022, 42023, three specialty distributor customers accounted for 41%58%, 26%, 17%,21% and 10%, and 355%, 23%, and 11%, respectively, of the Company’s gross product revenue, and at June 30, 2023, three specialty distributor customers accounted for 41%59%, 25% and 20%22%, respectively, of the Company’s total product revenue, and no other customer accounted for more than 10% of the Company’s total product revenue. At June 30, 2022, 4 specialty distributor customers accounted for 46%, 25%, 16% and 10% of the Company’s total accounts receivable and no other customer accounted for more than 10% of the Company’s total accounts receivable at June 30, 2022.

For the three and six months ended June 30, 2021, 3 specialty distributor customers accounted for 45%, 28%, and 15%, and 45%, 25% and 14%, respectively, of the Company’s total product revenue, and no other customer accounted for more than 10% of the Company’s total product revenue.

At December 31, 2021, 3 specialty distributor customers accounted for 42%, 26% and 21% of the Company’s total accounts receivable. No other customer accounted for more than 10% of total revenue for the three and six months ended June 30, 2023, or accounts receivable at June 30, 2023.

For the three and six months ended June 30, 2022, four specialty distributor customers accounted for 41%, 26%, 17%, and 10%, and three specialty distributors accounted for 41%, 25% and 20%, respectively, of the Company’s gross product revenue. At December 31, 2022, three specialty distributor customers accounted for 52%, 24%, and 15% of the Company’s total accounts receivable. No other customer accounted for more than 10% of total revenue for the three and six months ended June 30, 2022, or accounts receivable at December 31, 2022.

Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 and indicate the level of the fair value hierarchy utilized to determine such fair value:

Fair Value Measurements as of

June 30, 2023 Using:

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

 

  

 

  

 

  

 

  

Cash equivalents:

 

  

 

  

 

  

 

  

Money market funds

$

56,550

$

$

$

56,550

Liability:

Derivative liability

$

$

$

11,783

$

11,783

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Fair Value Measurements as of

December 31, 2022 Using:

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

 

  

 

  

 

  

 

  

Cash equivalents:

 

  

 

  

 

  

 

  

Money market funds

$

30,188

$

$

$

30,188

Liability:

 

  

 

  

 

  

 

  

Derivative liability

$

$

$

6,351

$

6,351

At June 30, 2023, the Convertible Notes, net of the Derivative Liability, were carried at amortized cost totaling $39,733, comprised of the $29,981 non-current liability (Note 7) and $9,752 accrued interest (Note 6). At December 31, 2022, the Convertible Notes, net of the Derivative Liability, were carried at amortized cost totaling $37,505, comprised of the $28,749 non-current liability (Note 7) and $8,756 accrued interest (Note 6). The estimated fair value of the Convertible Notes, without the Derivative Liability, was $36,816 and $33,177 at June 30, 2023 and December 31, 2022, respectively.

The fair value of the Convertible Notes with and without the conversion option is estimated using a binomial lattice approach. The use of this approach requires the use of Level 3 unobservable inputs. The main input when determining the fair value of the Convertible Notes is the bond yield that pertains to the host instrument without the conversion option. The significant assumption used in determining the bond yield is the market yield movements of a comparable instrument issued as of the valuation date, which is assessed and updated each period. The main input when determining the fair value for disclosure purposes is the bond yield which is updated each period to reflect the yield of a comparable instrument issued as of the valuation date. The estimated fair value presented is not necessarily indicative of an amount that could be realized in a current market exchange. The use of alternative inputs and estimation methodologies could have a material effect on these estimates of fair value.

The main inputs to valuing the Convertible Notes with the conversion option are as follows:

As of

June 30, 

December 31, 

2023

2022

Company's stock price

$

5.16

$

2.81

Volatility

78.9

%

93.8

%

Bond yield

14.8

%

16.2

%

A roll-forward of the derivative liability is as follows:

As of

Balance at December 31, 2022

$

6,351

Change in fair value

5,432

Balance at June 30, 2023

$

11,783

10. Equity

On August 9, 2021, the Company and Jefferies LLC (“Jefferies”) entered into an Open Market Sale Agreement (the “2021 Sales Agreement”) under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $100,000 from time to time through Jefferies, acting as agent. During the three and six months ended June 30, 2023, the Company sold 1,370,208 shares of common stock under the 2021 Sales Agreement, resulting in gross proceeds to the Company of $9,162, and net proceeds, after accounting for issuance costs, of $8,824. The Company did not offer or sell shares of its common stock under the 2021 Sales Agreement during the three and six months ended June 30, 2022.

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11. Stock-Based Awards

For the three and six months ended June 30, 2023, the Company had three stock-based compensation plans under which it was able to grant stock-based awards, the 2021 Stock Incentive Plan, as amended (the “2021 Plan”), the 2019 Inducement Stock Incentive Plan, as amended (the “2019 Inducement Plan”), and the 2014 Employee Stock Purchase Plan (the “ESPP”), collectively the “Stock Plans”. The terms and conditions of the Stock Plans are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022, filed with the SEC on March 6, 2023.

During the three and six months ended June 30, 2023, the Company granted options to purchase 249,600 and 3,240,741 shares of common stock, respectively at a weighted exercise price of $5.46 and $4.01 per share, respectively, all under the 2021 Plan.

During the three and six months ended June 30, 2023, the Company granted 83,198 and 1,030,831 restricted stock units, or RSUs, respectively, all under the 2021 Plan. Each RSU is equivalent to one share of common stock upon vesting.

During the three and six months ended June 30, 2023, a total of 428,860 and 560,207, respectively, stock options and RSUs expired or were forfeited.

At the Company’s Annual Meeting of Stockholders held on June 14, 2023, the Company’s stockholders approved an amendment of the Company’s 2021 Plan which increased the number of shares of common stock of the Company issuable under the 2021 Plan by 3,900,000 shares. As of June 30, 2023, 6,051,809, 545,375, and 513,069 shares of common stock remained available for issuance under the 2021 Plan, the 2019 Inducement Plan, and the ESPP, respectively.

The Company recorded stock-based compensation expense related to stock options and RSUs in the following expense categories of its unaudited condensed consolidated statements of operations and comprehensive loss:

Three Months Ended

Six Months Ended

 

June 30, 

June 30, 

    

2023

    

2022

    

2023

    

2022

 

Research and development

$

1,133

$

1,036

$

2,274

$

2,098

Selling and marketing

 

970

 

1,191

 

2,014

 

2,329

General and administrative

 

2,310

 

2,054

 

4,697

 

4,063

$

4,413

$

4,281

$

8,985

$

8,490

As of June 30, 2023, the Company had an aggregate of $23,528 of unrecognized stock-based compensation cost, which is expected to be recognized over a weighted average period of 2.32 years.

12. Income Taxes

The Company did not provide for any income taxes in its unaudited condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023 and 2022, respectively. The Company has provided a valuation allowance for the full amount of its net deferred tax assets because, at June 30, 2023 and December 31, 2022, it was more likely than not that any future benefit from deductible temporary differences and net operating loss and tax credit carryforwards would not be realized.

Recently Adopted Accounting Pronouncements

Effective January 1, 2022, the Company adopted ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), which amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related earnings per share guidance for both Subtopics. The adoption of this standard did not have any impact on the Company’s condensed consolidated financial statements.

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3. Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 and indicate the level of the fair value hierarchy utilized to determine such fair value:

Fair Value Measurements as of

June 30, 2022 Using:

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

 

  

 

  

 

  

 

  

Cash equivalents:

 

  

 

  

 

  

 

  

Money market funds

$

32,424

$

$

$

32,424

Liability:

Derivative liability (Note 7)

$

$

$

10,461

$

10,461

Fair Value Measurements as of

December 31, 2021 Using:

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

 

  

 

  

 

  

 

  

Cash equivalents:

 

  

 

  

 

  

 

  

Money market funds

$

62,392

$

$

$

62,392

Liability:

 

  

 

  

 

  

 

  

Derivative liability (Note 7)

$

$

$

20,192

$

20,192

4. Restricted Cash

The Company held restricted cash of $1,764 at June 30, 2022 and December 31, 2021, on its condensed consolidated balance sheet. The Company held restricted cash as security deposits for the lease of its research and development space, manufacturing space and corporate headquarters.

The Company’s condensed consolidated statements of cash flows include restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on such statements. A reconciliation of the cash, cash equivalents, and restricted cash reported within the balance sheet that sum to the total of the same amounts shown in the condensed consolidated statement of cash flows is as follows:

June 30, 

June 30, 

    

2022

    

2021

Cash and cash equivalents

$

134,539

$

191,860

Restricted cash

1,764

1,764

Total cash, cash equivalents and restricted cash

$

136,303

$

193,624

5. Inventory

The Company values its inventories at the lower of cost or estimated net realizable value.

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Inventory consisted of the following:

June 30, 

December 31, 

    

2022

    

2021

 

Raw materials

$

325

$

388

Work-in-process

662

605

Finished goods

 

513

 

257

$

1,500

$

1,250

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities as of June 30, 2022 and December 31, 2021 consisted of the following:

June 30, 

December 31, 

    

2022

    

2021

Accrued payroll and related expenses

$

4,747

$

6,597

Accrued rebates and programs

3,260

3,615

Accrued professional fees

 

1,081

 

1,227

Accrued research and development expenses

 

1,683

 

1,102

Accrued interest payable on 2026 convertible notes

 

7,606

 

6,475

Accrued other

 

1,073

 

1,105

$

19,450

$

20,121

7. Derivative Liability

The unsecured senior subordinated convertible notes (the “2026 Convertible Notes”) (Note 8) contains an embedded conversion option that meets the criteria to be bifurcated and accounted for separately (the “Derivative Liability”) from the 2026 Convertible Notes. The Derivative Liability was recorded at fair value upon the issuance of the 2026 Convertible Notes and is subsequently remeasured to fair value at each reporting period.  The Derivative Liability was initially valued and remeasured using a “with-and-without” method. The “with-and-without” methodology involves valuing the whole instrument on an as-is basis and then valuing the instrument without the embedded conversion option. The difference between the entire instrument with the embedded conversion option compared to the instrument without the embedded conversion option is the fair value of the derivative, recorded as the Derivative Liability in the Company’s condensed consolidated balance sheet.

The estimated fair value of the 2026 Convertible Notes was $41,092 at June 30, 2022. The fair value of the 2026 Convertible Notes was estimated utilizing a binomial lattice model which requires the use of Level 3 unobservable inputs. The main inputs when determining the fair value for disclosure purposes are the common stock price and bond yield which are updated each period to reflect the yield of a comparable instrument issued as of the valuation date. The estimated fair value presented is not necessarily indicative of an amount that could be realized in a current market exchange. The use of alternative inputs and estimation methodologies could have a material effect on these estimates of fair value. The main inputs to valuing the 2026 Convertible Notes with the conversion option are as follows:

As of

June 30, 

December 31, 

2022

2021

Company's stock price

$

4.02

$

6.97

Expected annual volatility

80.7

%

82.6

%

Bond yield

16.4

%

12.6

%

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A roll-forward of the derivative liability is as follows:

As of

    

June 30, 2022

Balance at December 31, 2021

$

20,192

Change in fair value

(9,731)

Balance at June 30, 2022

$

10,461

8. Convertible Notes

On March 1, 2019, the Company issued $37,500 of 2026 Convertible Notes. Each 2026 Convertible Note accrues interest at an annual rate of 6% of its outstanding principal amount, which is payable, along with the principal amount at maturity, on March 1, 2026, unless earlier converted, repurchased or redeemed. The Company presents accrued interest in accrued current liabilities because the 2026 Convertible Notes are currently convertible and the interest is payable in cash. The effective annual interest rate for the 2026 Convertible Notes was 14.8% through June 30, 2022.

The holders of the 2026 Convertible Notes may convert all or part of the outstanding principal amount of their 2026 Convertible Notes into shares of the Company’s common stock, par value $0.0001 per share, prior to maturity and provided that no conversion results in a holder beneficially owning more than 19.99% of the issued and outstanding common stock of the Company. The conversion rate is 153.8462 shares of the Company’s common stock per $1,000 principal amount of the 2026 Convertible Notes, which is equivalent to an initial conversion price of $6.50 per share. The conversion rate is subject to adjustment in customary circumstances such as stock splits or similar changes to the Company’s capitalization.

At its election, the Company may choose to make such conversion payment in cash, in shares of common stock, or a combination thereof. Upon any conversion of any 2026 Convertible Note, the Company is obligated to make a cash payment to the holder of such 2026 Convertible Note for any interest accrued but unpaid on the principal amount converted. Upon the occurrence of a Corporate Transaction (as defined below), each holder has the option to require the Company to repurchase all or part of the outstanding principal amount of such note at a repurchase price equal to 100% of the outstanding principal amount of the 2026 Convertible Note to be repurchased, plus accrued and unpaid interest to but excluding the repurchase date. In addition, each holder is entitled to receive an additional make-whole cash payment in accordance with a table set forth in each 2026 Convertible Note.

Upon conversion by the holder, the Company has the right to select the settlement of the conversion in shares of common stock, cash, or in a combination thereof. In addition, the Company is obligated to make a cash payment to the holder of such 2026 Convertible Note for any interest accrued but unpaid on the principal amount converted.

If the Company elects to satisfy such conversion by shares of common stock, the Company shall deliver to the converting holder in respect of each $1,000 principal amount of 2026 Convertible Notes being converted a number of common shares equal to the conversion rate in effect on the conversion date;
If the Company elects to satisfy such conversion by cash settlement, the Company shall pay to the converting holder in respect of each $1,000 principal amount of 2026 Convertible Notes being converted cash in an amount equal to the sum of the Daily Conversion Values (as defined below) for each of the 20 (20) consecutive trading days during a specified period. The “Daily Conversion Values” is defined as each of the 20 consecutive trading days during the specified period, 5.0% of the product of (a) the conversion rate on such trading day and (b) the Daily VWAP on such trading day. The Daily VWAP is defined as each of the 20 consecutive trading days during the applicable observation period, the per share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on the Bloomberg page for the Company.
If the Company elects to satisfy such conversion by combination, the Company shall pay or deliver, as the case may be, in respect of each $1,000 principal amount of 2026 Convertible Notes being converted, a settlement amount equal to the sum of the Daily Settlement Amounts (as defined below) for each of the 20 (20) consecutive trading days during the specified period. The “Daily Settlement Amount” is defined as, for each of the 20 consecutive trading days during the specified period: (a) cash

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in an amount equal to the lesser of (i) the Daily Measurement Value (as defined below) and (ii) the Daily Conversion Value on such Trading Day; and (b) if the Daily Conversion Value on such trading day exceeds the Daily Measurement Value, a number of shares equal to (i) the difference between the Daily Conversion Value and the Daily Measurement Value, divided by (ii) the Daily VWAP for such Trading Day. The “Daily Measurement Value” is defined as the Specified Dollar Amount (as defined below), if any, divided by 20. The “Specified Dollar Amount” is defined as the maximum cash amount per $1,000 principal amount of Notes to be received upon conversion as specified in the notice specifying the Company’s chosen settlement method.

In the event of a Corporate Transaction, the noteholder shall have the right to either (a) convert all of the unpaid principal at the conversion rate and receive a cash payment equal to (i) the outstanding accrued but unpaid interest under the 2026 Convertible Note to, but excluding, the corporate transaction conversion date (to the extent such date occurs prior to March 1, 2026, the maturity date of the 2026 Convertible Notes) plus (ii) an additional amount of consideration based on a sliding scale depending on the date of such as Corporate transaction or (b) require the Company to repurchase all or part of the outstanding principal amount of such 2026 Convertible Note at a repurchase price equal to 100% of the outstanding principal amount of the 2026 Convertible Note to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.

A corporate transaction includes (i) a merger or consolidation executed through a tender offer or change of control (other than one in which stockholders of the Company own a majority by voting power of the outstanding shares of the surviving or acquiring corporation); (ii) a sale, lease, transfer, of all or substantially all of the assets of the Company; or (iii) if the Company’s common stock ceases to be listed or quoted on any of the New York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market (the “Corporate Transaction”).

On or after March 1, 2022, if the last reported sale price of the common stock has been at least 130% of the conversion rate then in effect for 20 of the preceding 30 trading days (including the last trading day of such period), the Company is entitled, at its option, to redeem all or part of the outstanding principal amount of the 2026 Convertible Notes, on a pro rata basis, at an optional redemption price equal to 100% of the outstanding principal amount of the 2026 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the optional redemption date.

The 2026 Convertible Notes are subject to acceleration upon the occurrence of specified events of default, including a default or breach of certain contracts material to the Company and the delisting and deregistration of the Company’s common stock.

As discussed in Note 7, the Company determined that the embedded conversion option is required to be separated from the 2026 Convertible Notes and accounted for as a freestanding derivative instrument subject to derivative accounting. The allocation of proceeds to the conversion option results in a discount on the 2026 Convertible Notes. The Company is amortizing the discount to interest expense over the term of the 2026 Convertible Notes using the effective interest method.

The terms and conditions of the 2026 Convertible Notes are described in the Company’s periodic reports including its Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 28, 2022.

A summary of the 2026 Convertible Notes at June 30, 2022 and December 31, 2021 is as follows:

   

June 30, 

December 31, 

    

2022

    

2021

2026 Convertible Notes

$

37,500

$

37,500

Less: unamortized discount

(9,933)

(11,065)

Total

$

27,567

$

26,435

Accrued interest related to the 2026 Convertible Notes amounted to $7,606 and $6,475 at June 30, 2022 and December 31, 2021, respectively.

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Table of Contents

9. Income Taxes

The Company did not provide for any income taxes in its condensed consolidated statement of operations and comprehensive income (loss) for the three and six month periods ended June 30, 2022 or 2021. The Company has provided a valuation allowance for the full amount of its net deferred tax assets because, at June 30, 2022 and December 31, 2021, it was more likely than not that any future benefit from deductible temporary differences and net operating loss and tax credit carryforwards would not be realized.

10. Collaboration Agreements

AffaMed License Agreement

In October 2020, the Company entered into a license agreement with AffaMed Therapeutics Limited (“AffaMed”) for the development and commercialization of the Company’s DEXTENZA product regarding ocular inflammation and pain following cataract surgery and ocular itching associated with allergic conjunctivitis and for the Company’s OTX-TIC product candidate (collectively with DEXTENZA, the “AffaMed Licensed Products”) regarding open-angle glaucoma or ocular hypertension, in each case in mainland China, Taiwan, Hong Kong, Macau, South Korea, and the countries of the Association of Southeast Asian Nations. The Company and AffaMed subsequently amended the license agreement in October 2021 (as amended, the “License Agreement”). The Company retains development and commercialization rights for the AffaMed Licensed Products in the rest of the world.

The terms and conditions of the License Agreement are described in the Company’s periodic reports including its Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022.

The Company recognized $122 and $811 of collaboration revenue related to the performance obligation to conduct a Phase 2 clinical trial of OTX-TIC under the License Agreement for the three and six months ended June 30, 2022. During the three months ended March 31, 2022, the Company invoiced AffaMed $2,000 for a clinical trial support payment, under the License Agreement, in connection with the initiation of the OTX-TIC Phase 2 clinical trial. The Company concluded this clinical support payment was no longer constrained and has allocated the amount to the performance obligation to conduct a Phase 2 clinical trial of OTX-TIC. As of June 30, 2022, the aggregate amount of the transaction price allocated to performance obligations that are partially unsatisfied was $1,189. This amount is expected to be recognized as performance obligations are satisfied through June 2023. 

For the Phase 2 clinical trial of OTX-TIC, performance obligation revenue is recognized under an input method using the ratio of effort incurred to date compared to the total estimated effort required to complete the performance obligation. The calculation of the total estimated effort includes the total amount of forecasted costs associated with the completion of the Phase 2 clinical trial, as well as the assumed timing of this activity. Such cost estimates include forecasted direct labor and material costs, subcontractor costs, and external contract research organization, or CRO, costs.

Deferred revenue activity for the six months ended June 30, 2022 was as follows:

    

Deferred Revenue

Deferred revenue at December 31, 2021

$

13,000

Additions

2,000

Amounts recognized into revenue

(811)

Deferred revenue at June 30, 2022

$

14,189

As of June 30, 2022, the aggregate amount of the transaction price allocated to DEXTENZA product and OTX-TIC product performance obligations that are partially unsatisfied was $13,000. This amount is expected to be recognized as performance obligations are satisfied. The Company recognizes revenue related to the amounts allocated to the combined performance obligations for the development and commercialization of the Company’s DEXTENZA product regarding ocular inflammation and pain following cataract surgery and allergic conjunctivitis and the Company’s OTX-TIC product candidate based on the point in time upon which control of supply is transferred to

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AffaMed for each delivery of the associated supply. The Company currently expects to recognize the revenue over a period of approximately seven to eight years commencing on the date the Company begins delivering product to AffaMed. This estimate of this period considers the timing of development and commercial activities under the License Agreement and may be reduced or increased based on the various activities as directed by the joint committees, decisions made by AffaMed, regulatory feedback or other factors not currently known.

11. Notes Payable

The Company entered into a credit and security agreement in 2014 (as amended to date, the “Credit Agreement”) establishing the Company’s credit facility (the “Credit Facility”). Under the Credit Facility, the Company has a total borrowing capacity of $25,000, which was fully drawn down as of June 30, 2022. The carrying value of the Company’s variable interest rate notes payable are recorded at amortized cost, which approximates fair value due to their short-term nature.

The terms and conditions of the Credit Agreement and the Credit Facility are described in the Company’s periodic reports including its Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022.

Borrowings outstanding are as follows:

   

June 30, 

   

December 31, 

    

2022

    

2021

Borrowings outstanding

$

25,000

$

25,000

Accrued exit fee

222

110

Unamortized discount

(94)

(110)

Long-term notes payable

$

25,128

$

25,000

As of June 30, 2022, the annual requirement for the repayment of principal for the Credit Facility, inclusive of the final payment of $875 due at expiration, was as follows:

Year Ending December 31,

    

Principal

    

Final Payment

    

Total

2022 (July 1 to December 31)

2023

2024

8,333

8,333

2025

16,667

875

17,542

$

25,000

$

875

$

25,875

12.13. Net Loss Per Share

Basic net loss per share was calculated as follows for the three and six months ended June 30, 20222023 and 2021.2022:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

2023

    

2022

Numerator:

 

Net loss attributable to common stockholders

$

(20,682)

$

(18,766)

$

(51,000)

$

(31,308)

Denominator:

 

  

 

 

  

 

Weighted average common shares outstanding, basic

 

78,047,705

 

76,764,296

 

77,718,823

 

76,755,028

Net loss per share - basic

$

(0.26)

$

(0.24)

$

(0.66)

$

(0.41)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

2022

    

2021

Numerator:

 

Net loss attributable to common stockholders

$

(18,766)

$

(8,481)

$

(31,308)

$

(5,360)

Denominator:

 

  

 

 

  

 

Weighted average common shares outstanding, basic

 

76,764,296

 

76,324,367

 

76,755,028

 

76,198,384

Net loss per share - basic

$

(0.24)

$

(0.11)

$

(0.41)

$

(0.07)

For the three and six months ended June 30, 2023 there was no dilutive impact from potentially issuable common shares. Therefore, diluted net loss per share was the same as basic net loss per share.

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Diluted net loss per share was calculated as follows for the three and six months ended June 30, 2022 and 2021:2022:

Three Months Ended June 30, 

Six Months Ended June 30, 

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

2022

    

2021

    

    

2022

2022

Net loss attributable to common stockholders, basic

$

(18,766)

$

(8,481)

$

(31,308)

$

(5,360)

$

(18,766)

$

(31,308)

Interest expense on 2026 Convertible Notes

 

1,141

 

1,095

 

2,264

 

2,173

Interest expense on Convertible Notes

 

1,141

 

2,264

Change in fair value of derivative liability

(2,773)

(13,396)

(9,731)

(38,412)

(2,773)

(9,731)

Net loss attributable to common stockholders, diluted

$

(20,398)

$

(20,782)

$

(38,775)

$

(41,599)

$

(20,398)

$

(38,775)

Weighted average common shares outstanding, basic

76,764,296

76,324,367

76,755,028

76,198,384

76,764,296

76,755,028

Shares issuable upon conversion of 2026 Convertible Notes, as if converted

5,769,232

5,769,232

5,769,232

5,769,232

Shares issuable upon conversion of Convertible Notes, as if converted

5,769,232

5,769,232

Weighted average common shares outstanding, diluted

 

82,533,528

 

82,093,599

 

82,524,260

 

81,967,616

 

82,533,528

 

82,524,260

Net loss per share attributable to common stockholders, diluted

$

(0.25)

$

(0.25)

$

(0.47)

$

(0.51)

$

(0.25)

$

(0.47)

The Company excluded the following potentially issuable common stock equivalents and restricted stock units,shares, outstanding as of June 30, 20222023 and 2021,2022, from the computation of diluted net loss per share for the three and six months ended June 30, 20222023 and 20212022 because they had an anti-dilutive impact.

Six Months Ended June 30, 

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2023

    

2022

2023

    

2022

Options to purchase common stock

13,892,884

11,049,287

16,333,870

13,892,884

16,333,870

13,892,884

Restricted stock units

1,017,111

1,654,517

1,017,111

1,654,517

1,017,111

Shares issuable upon conversion of Convertible Notes, if converted

5,769,232

5,769,232

14,909,995

11,049,287

23,757,619

14,909,995

23,757,619

14,909,995

14. Commitments and Contingencies

Indemnification Agreements

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend indemnified parties for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum

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potential amount of future payments the Company could be required to make under these provisions is not determinable. To date, the Company has not incurred any material costs as a result of such indemnifications.

13. Stock-Based Awards

2021 Stock Incentive Plan

The 2021 Stock Incentive Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock-based awards. Upon its adoption, the number of shares of common stock authorized for issuance under the 2021 Stock Incentive Plan equaled the total of 6,000,000 shares of common stock plus up to the sum of 456,334 shares remaining available for grant under the 2014 Stock Incentive Plan (the “2014 Plan”) as of immediately prior to the effective date of the 2021 Plan and 9,766,336 shares subject to awards granted under the 2014 Plan or the Company’s 2006 Stock Incentive Plan, which awards expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right (subject to certain limitations).

At the Company’s 2022 Annual Meeting of Stockholders held on June 16, 2022, the Company’s stockholders approved an amendment to the 2021 Stock Incentive Plan (as amended, the “2021 Plan”) to increase the number of shares of common stock authorized for issuance under the 2021 Plan by 3,600,000 shares. As of June 30, 2022, 5,837,806 shares of common stock remained available for issuance under the 2021 Plan.

Stock Option Awards for the Three and Six months Ended June 30, 2022

During the three and six months ended June 30, 2022, the Company granted options to purchase 557,050 and 3,419,253 shares of common stock, at a weighted exercise price of $3.69 and $5.02, respectively, per share under the 2021 Plan.

Restricted Stock Units (RSU) Awards for the Three and Six months Ended June 30, 2022

During the three and six months ended June 30, 2022, the Company granted 120,404 and 1,054,883 restricted stock units (“RSUs”), respectively, under the 2021 Plan. Each RSU is equivalent to one share of common stock upon vesting. Each RSU award vests on an annual basis over a three-year period. Holders of RSUs are not entitled to vote on any matters and are not entitled to dividends. The Company has determined the fair value of each RSU based on the closing price of the Company’s common stock on the date of grant and recognizes the compensation expense using the straight-line method over the service period, which coincides with the vesting period.

Stock-based Compensation Expense

The Company recorded stock-based compensation expense related to stock options and RSUs in the following expense categories of its condensed consolidated statements of operations:

Three Months Ended

Six Months Ended

 

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

 

Research and development

$

1,036

$

1,206

$

2,098

$

1,883

Selling and marketing

 

1,191

 

1,129

 

2,329

 

1,883

General and administrative

 

2,054

 

1,957

 

4,063

 

3,612

$

4,281

$

4,292

$

8,490

$

7,378

As of June 30, 2022, the Company had an aggregate of $25,612 of unrecognized stock-based compensation cost, which is expected to be recognized over a weighted average period of 2.7 years.

14.15. Related Party Transactions

In November 2020, the Company engaged Specialty Pharma Consulting, LLC (“Specialty Pharma”), an entity affiliated with Kevin Coughenour, to provide services for quality engineering and validation activities in the ordinary course of business. Mr. Coughenour is married to the Company’s former Chief Operating Officer Patricia Kitchen. The

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Company incurred fees for quality engineering and validation activities rendered by Specialty Pharma of $29 and $155, for the three and six months ended June 30, 2021, respectively. On April 26, 2021, the Company and Specialty Pharma terminated their relationship.

The Company has engaged Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) to provide certain legal services to the Company. The Company's Chief Business Officer’s sister is a managing partner at WilmerHale, who has not participated in providing legal services to the Company. The Company incurred fees for legal services rendered by WilmerHale of approximately $239 and $633 for the three and six months ended June 30, 2023, respectively, and approximately $211 and $535 for the three and six months ended June 30, 2022, respectively. As of June 30, 20222023 and December 31, 2021,2022, there was $153$95 and $119$0 recorded in accounts payable for WilmerHale. As of June 30, 20222023 and December 31, 2021,2022, there was $58$122 and $68$24 recorded in accrued expenses for WilmerHale.

15. Common Stock16. Subsequent Events

On August 9, 2021, theThe Company and Jefferies LLC (“Jefferies”) mutually terminatedsold an Open Market Sale Agreement and entered into another Open Market Sale Agreement (the “2021 Sales Agreement”) under which the Company may offer and selladditional 144,718 shares of its common stock having an aggregate offering price of up to $100,000 from time to time through Jefferies, acting as agent. As of August 5, 2022, the Company has 0t sold any shares of common stock under the 2021 Sales Agreement.Agreement through August 4, 2023, resulting in gross proceeds to the Company of $734, and net proceeds, after accounting for issuance costs, of $712.

On August 2, 2023 (the “Closing Date”), the Company entered into a credit and security agreement (the “Barings Credit Agreement”) with Barings Finance LLC (“Barings”), as administrative agent, and the lenders party thereto, providing for a secured term loan facility for the Company (the “Barings Credit Facility”) in the aggregate principal amount of $82,474 (the “Total Credit Facility Amount). The Company borrowed the full amount of $82,474 at closing and received proceeds of $77,790, after the application of a discount and fees. Indebtedness under the Barings Credit Facility matures on the earlier to occur of (i) the six-year anniversary of the Closing Date and (ii) the date that is 91 days prior to the maturity date for the Company’s Convertible Notes. Indebtedness under the Barings Credit Facility incurs interest at a SOFR-based rate, subject to a minimum 1.50% floor, plus 6.75%. The Company is obligated to make interest payments on its indebtedness under the Barings Credit Facility on a monthly basis, commencing on the Closing Date; to pay annual administration fees; and to pay, on the maturity date, any principal and accrued interest that remains outstanding as of such date. In addition, the Company is obligated to pay a fee in an amount equal to the Total Credit Facility Amount, which amount shall be reduced by the total amount of interest and principal prepayment fees paid under the Barings Credit Agreement (such fee, the “Royalty Fee”). The Company is required to pay the Royalty Fee in installments to Barings, for the benefit of the lenders, on a quarterly basis in an amount equal to three and one-half percent (3.5%) of the net sales of DEXTENZA occurring during such quarter, subject to the terms, conditions and limitations specified in the Barings Credit Agreement, until the Royalty Fee is paid in full. The Royalty Fee is due and payable upon a change of control of the Company. In the event the Company completes a change of control transaction on or prior to the twelve-month anniversary of the Closing Date, the Royalty Fee is subject to a reduction to an amount that is equal to (i) 20% of the Total Credit Facility Amount, in the event that a signed letter of intent evidencing such change of control transaction was entered into by the Company on or prior to the date that is six months after the Closing Date and (ii) 30% of the Total Credit Facility Amount, in the event that a signed letter of intent evidencing such change of control transaction was entered into by the Company after the date that is six months, but before the date that is twelve months, after the Closing Date. The Company may, at its option, prepay any or all of the Royalty Fee at any time without penalty. In connection with the Barings Credit Agreement, the Company granted the lenders thereto a first-priority security interest in all assets of the Company, including its intellectual property, subject to certain agreed-upon exceptions. The Barings Credit Agreement includes negative covenants restricting the Company from making payments to the holders of the Convertible Notes except in connection with a proposed conversion to equity and with respect to certain permitted expenses and requiring the Company to maintain a minimum liquidity amount of $20,000. The Barings Credit Agreement also includes customary affirmative and negative covenants.

Concurrently with entering into the Barings Credit Agreement, on August 2, 2023, the Company and the holders of the Convertible Notes (Note 7) extended the maturity of the Convertible Notes, which would otherwise have matured on March 1, 2026, to a date 91 days following the maturity of the indebtedness under the Barings Credit Facility.

An estimate of the impact of entering into the Barings Credit Agreement and extending the maturity of the Convertible Notes on the Company’s consolidated financial statements, including the impact on the Derivative Liability

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(Note 8), cannot be made at this time, as the Company continues to determine the accounting for these transactions. The Company expects to finalize its accounting for these transactions during the third quarter of 2023.

In August 2023, in connection with the Company’s establishment of the Barings Credit Facility, the Company paid an aggregate of $26,157 to MidCap Financial Trust and the other lenders party to the MidCap Credit Agreement (Note 7), comprised of $25,017 in principal and interest accrued thereunder and $1,140 in exit and prepayment fees, in satisfaction of the Company’s obligations under the MidCap Credit Agreement. Upon the payment, all liens and security interests securing the indebtedness under the MidCap Credit Agreement were released. The prepayment of the MidCap Credit Facility has resulted in incremental expenses, including accrued interest, of $771, which will be charged to interest expense on the consolidated statements of operations and comprehensive loss for the third quarter of 2023.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021,2022, filed with the SEC on February 28, 2022.March 6, 2023. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties and should be read together with the “Risk Factors” section of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Overview

We are a biopharmaceutical company focused on the formulation, development, and commercialization of innovative therapies for diseases and conditions of the eye using our proprietary bioresorbable hydrogel-based formulation technology. Coretechnology which we refer to our strategyas ELUTYX. Our mission is to continue to (i) build upon our experience commercializing ophthalmology productsan ophthalmology-focused biopharmaceutical company that can be administered primarilycapitalizes on the gaps that we believe increasingly exist in the surgical and/or office settingsophthalmology sector between single-product companies and (ii) develop a clinical pipeline of innovative ophthalmology products that address large, areas of unmet need.

We currently have one FDA-approved product in commercialization in the United States, DEXTENZA®, an intracanalicular insert for the treatment of both post-surgical ocular inflammation and pain and ocular itching associated with allergic conjunctivitis. We also have an additional FDA-approved product, ReSure Sealant, an ophthalmic device designed to prevent wound leaks in corneal incisions following cataract surgery that is not commercially available in the United States and that we are not currently manufacturing. We also have product candidates in preclinical and clinical development designed to utilize our proprietary, bioresorbable hydrogel technology to treat retinal diseases including wet age-related macular degeneration, or wet AMD, and other retinal diseases; glaucoma or ocular hypertension; and ocular surface diseases and conditions, including dry eye disease.multi-product pharmaceutical companies.

Our current products and product candidates in clinical development generally incorporate therapeutic agents that have previously received regulatory approval from the U.S. Food and Drug Administration, or FDA, including small molecules, and proteins, into our proprietary bioresorbable hydrogel-based formulation technology in our internal drug development activities,ELUTYX, with the goal of providing local programmed-releaseprogrammed release to tailor the duration and amount of drugthe therapeutic agent to be delivered to the eye. We believe that our local programmed-release drug delivery technology has the potential to treatenable the treatment of conditions and diseases of both the front and the back of the eye and can be administered through a range of different modalities including intravitreal implants, suprachoroidal implants, intracameral implants and intracanalicular inserts. We are also developing alternative formulations of certain of our products and product candidates that may include the same FDA-approved therapeutic agents or a different form thereof, or a different form of the bioresorbable hydrogel-based formulation technology.

The hydrogel technology that underpins ELUTYX has been used in the human body since 1992 and has demonstrated its safety and effectiveness in over 5 million patients across five FDA-approved devices since that time. Our own approved product, DEXTENZA, has been used in nearly 300,000 eyes since launch with reported adverse events in less than 1 in 10,000 patients. As a result, we believe that the ELUTYX technology is well tolerated and enables the ideal polymer for a product candidate like OTX-TKI. The only factors that regulate the bioresorption of our ELUTYX polymer are temperature and pH of the aqueous environment. As human body temperature and pH of the human aqueous environment are within a typical range for each human, and since water levels in essentially all retinas are generally sufficient to saturate our polymer matrix, we believe we can program the time to bioresorption so the polymer will be intact long-enough to deliver the active pharmaceutical ingredient and then be fully bio-resorbed when re-dosing is required. The added benefits of not creating an acidic micro-environment, its easy elimination from the vitreous leaving behind no harmful byproducts, and its soft gel properties give added comfort to the safety profile. This technology would potentially provide solutions not only for the durable therapies for wet age-related macular

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degeneration, or wet AMD, to decrease the injection burden, but also for the other retinal indications which need frequent injections, like geographic atrophy.

Our core pipeline assets include four programsWe are currently commercializing DEXTENZA, an intracanalicular insert for the treatment of both post-surgical ocular inflammation and pain and ocular itching associated with allergic conjunctivitis, in the United States. We also have product candidates in clinical and preclinical development:

OTX-TKI, an axitinib intravitreal implant being developed for the treatment of wet age-related macular degeneration, or wet AMD, non-proliferative diabetic retinopathy, or NPDR, and other retinal diseases;

OTX-TIC, a travoprost intracameral implant being developed for the reduction of intraocular pressure, or IOP, in patients with primary open-angle glaucoma, or OAG, or ocular hypertension;hypertension, or OHT;

OTX-DED, a dexamethasone intracanalicular insert being developed for the short-term treatment of the signs and symptoms of dry eye disease; and

OTX-CSI, a cyclosporine intracanalicular insert being developed for the chronic treatment of dry eye disease.

disease;

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Commercial Portfolio

Post-Surgical Ocular Inflammation and Pain

Ocular Itching Associated with Allergic Conjunctivitis

DEXTENZA (dexamethasone ophthalmic insert) 0.4mg for intracanalicular use for the Treatment of Post-Surgical Ocular Inflammation and Pain or Ocular Itching Associated with Allergic Conjunctivitis

DEXTENZA incorporates the FDA-approved corticosteroid dexamethasone as a preservative-free active pharmaceutical ingredient into a hydrogel, drug-eluting intracanalicular insertA complement inhibitor program in preclinical development for the treatment of post-surgicaldry age-related macular degeneration, or dry AMD; and

A gene delivery program in preclinical development using our proprietary bioresorbable hydrogel technology ELUTYX to control the release of vectors such as adeno-associated virus to ocular inflammation and pain. The FDA approved a new drug application, or NDA, for DEXTENZAtissues for the treatment of post-surgicalinherited and acquired ocular pain in November 2018 and approved a supplemental new drug application,diseases, including dry or sNDA, for DEXTENZA for the treatment of post-surgical ocular inflammation in June 2019. In July 2019, we commercially launched DEXTENZA in the United States. DEXTENZA is the first FDA-approved, physician-administered intracanalicular insert delivering dexamethasone to treat post-surgical ocular inflammation and pain for up to 30 days with a single administration.wet AMD.

Clinical Portfolio

In October 2021, the FDA approved an sNDA for DEXTENZA to include the treatment of ocular itching associated with allergic conjunctivitis as an additional indication. With the approval, DEXTENZA is the first FDA-approved, physician-administered intracanalicular insert for the delivery of a preservative-free drug for the treatment of ocular itching associated with allergic conjunctivitis with a single administration for up to 30 days. DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis also represents our first indication approved to be administered in an ophthalmology or optometric office during a routine, non-surgical appointment. In the first quarter of 2022, we commercially launched DEXTENZA in the United States for the treatment of ocular itching associated with allergic conjunctivitis. We have established a separate, smaller office sales force team, dedicated to calling on ophthalmology and optometric offices which is comprised of Key Account Managers and supported by the field reimbursement team. This dedicated in-office sales force could also support our broader pipeline of product candidates in the future, as we believe certain other product candidates would be primarily used, if approved, in the office setting.Retinal Diseases

In July 2022, the Centers for Medicare & Medicaid Services issued its proposed rule for the 2023 Outpatient Prospective Payment System rulemaking cycle recommending that DEXTENZA continue to be separately reimbursed under the non-opioid pain management supply provision through 2023. The final rule regarding the recommendation is anticipated in November 2022. In addition, physician reimbursement for the insertion of DEXTENZA remains available under the product’s Category 1 code, which became effective January 1, 2022, ensuring more reliable payment to physicians for DEXTENZA placement across all payer types and in all settings of care.

We are currently conducting one clinical trial as a post-approval requirement of the FDA in accordance with the Pediatric Research Equity Act of 2003, in connection with the FDA’s approval of DEXTENZA. In September 2020, we announced that we had dosed the first pediatric subjects in a U.S.-based, randomized, multicenter Phase 3 clinical trial evaluating DEXTENZA for the treatment of post-surgical ocular inflammation and pain in children following cataract surgery. We intend to enroll approximately 60 subjects in this clinical trial. It is designed to evaluate the safety and biological activity of DEXTENZA compared to an active control, prednisolone acetate suspension eye drops, for the treatment of inflammation and pain following ocular surgery for pediatric cataract in children between zero and five years of age. The primary endpoint is the absence of pain at day eight post-treatment as measured by a FLACC (Face, Legs, Activity, Cry, Consolability) score of zero. Enrollment is ongoing. The FDA has agreed that this Phase 3 clinical trial evaluating DEXTENZA for the treatment of post-surgical ocular inflammation and pain in children following cataract surgery will also satisfy the post-approval requirement for a pediatric trial as it relates to the approval for ocular itching associated with allergic conjunctivitis.

Prevention of Wound Leaks Following Cataract Surgery

ReSure Sealant

In 2014, we commercially launched ReSure Sealant in the United States as a device approved to prevent wound leaks in corneal incisions following cataract surgery. In the pivotal clinical trials that formed the basis for FDA approval, ReSure Sealant provided superior wound closure and a better safety profile than sutured closure.

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We have received only limited revenues from ReSure Sealant to date as the product is only used in a minority of cataract surgeries and, currently, there is no direct separate reimbursement for the product—meaning ReSure Sealant is only reimbursed as part of a bundled payment for the associated surgery. As of the fourth quarter of 2021, we suspended the production of ReSure Sealant in order to focus our manufacturing resources on the commercialization of DEXTENZA. Currently, ReSure Sealant is not commercially available in the United States.

Clinical Portfolio

Our clinical portfolio is comprised of our development efforts in our retinal disease program, glaucoma program and ocular surface disease programs.

Retinal Disease Program

OTX-TKI (axitinib intravitreal implant)

Our product candidate OTX-TKI is a preformed, bioresorbable hydrogel fiber implant based on our ELUTYX technology incorporating axitinib, a small molecule tyrosine kinase inhibitor, or TKI with anti-angiogenic properties delivered by intravitreal injection and designed for a duration of six months or longer. We are conducting a Phase 1 clinical trial of OTX-TKI in Australia and a Phase 1 clinical trial in the United States.States to evaluate OTX-TKI for the treatment of wet AMD. Our implants have delivered anti-VEGF compounds in vitro over a targeted nine to twelve month period. We are delivering the implant through a 25 gauge or narrower needle and designed OTX-TKI to create a re-treatment window when an effective dose of axitinib is still getting to the target tissues after full bioresorption of the initial implant. This would ensure that the vitreous would never have more than one implant at any one time and that the patient would have some leeway in scheduling an appointment to be re-dosed. We are also conducting a Phase 1 clinical trial in the United States to evaluate OTX-TKI for the treatment of NPDR, which we refer to as the HELIOS clinical trial.

We are conducting our two Phase 1 trials of OTX-TKI for the treatment of wet AMD with different formulations of axitinib. We currently intend to move forward into pivotal trials with our single 600 µg axitinib implant formulation of OTX-TKI for both the treatment of wet AMD and the treatment of NPDR. We are also developing a second formulation of OTX-TKI that could be used in future trials of retinal indications.

Wet Age-Related Macular Degeneration (wet AMD)

OurIn February 2023, we announced interim 10-month data from the ongoing Phase 1 clinical trial of OTX-TKI in Australia is comprised of four cohorts consisting of subjects with pre-existing intraretinal and/or subretinal fluid: a lower dose cohort of 200 µg with six subjects; a higher dose cohort of 400 µg with seven subjects; a third cohort with two parallel arms, one arm of six subjects receiving a concomitant anti-VEGF injection with 400 µg of OTX-TKI and the other arm of six subjects receiving a 600 µg of OTX-TKI with no anti-VEGF injection; and a fourth cohort with two parallel arms, one arm of six subjects receiving a 600 µg single implant of OTX-TKI and the other arm of six subjects receiving a 600 µg single implant of OTX-TKI with anti-VEGF injection. In this trial, we are evaluating whether a TKI could reduce existing fluid levels. This trial’s enrollment is complete.

AtUnited States at the Angiogenesis, Exudation, and Degeneration 2023 Annual Meeting. The trial enrolled a total of 21 subjects at six clinical sites, comprising two arms consisting of subjects previously treated with, and responsive to, standard of care anti-VEGF therapy: a 16-subject arm receiving OTX-TKI in combination with a single anti-VEGF injection at month one and a five-subject arm receiving on-label aflibercept at eight-week intervals. The trial is designed to assess the safety, durability and tolerability of OTX-TKI as well as to assess preliminary biological activity in subjects by measuring anatomical and functional changes. As of the December 12, 2022 Meeting heldcut-off date, the interim data showed that

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the single 600 µg OTX-TKI implant was generally well tolerated with no drug-related ocular or systemic serious adverse events, or SAEs, observed through 10 months. One SAE of endophthalmitis was observed in February 2022,the OTX-TKI arm which occurred following the aflibercept injection required by the clinical trial protocol at month one and was assessed by the investigator as related to the injection procedure. There were no instances of elevated IOP, retinal detachment, retinal vasculitis, or implant migration into the anterior chamber observed in the OTX-TKI arm, and no subjects had dropped out of either arm as of the data cutoff.

The interim results showed subjects treated with a single OTX-TKI implant demonstrated stable and sustained best corrected visual acuity, or BCVA, (mean change from baseline of -0.3 letters) and central subfield thickness, or CSFT, (mean change from baseline of -1.3 µm) in the OTX-TKI arm at 10 months, which was comparable with the aflibercept arm (mean change from BCVA baseline of -0.8 letters; mean change from CSFT baseline of -4.5 µm). Up to Month 10, 73% of subjects remained rescue-free. One subject, the subject who experienced endophthalmitis, was rescued twice. Overall, a 92% reduction in treatment burden (average percent decrease in monthly injections over the period compared to the subjects’ historical injection regimen) was observed in OTX-TKI treated subjects for up to 10 months. Four subjects were rescued in the OTX-TKI arm up to Month 10. One additional subject was rescued at that subject’s Month 10 visit.

In April 2023, we presented an update on OTX-TKI at the 2023 Association for Research in Vision and Ophthalmology (ARVO) Annual Meeting that covered preclinical pharmacokinetics, or PK, and a review of the 10-month interim data from the ongoing Phase 1 clinical trial of OTX-TKI in the United States, including OTX-TKI implant resorption data to date. We augmented the results from our ongoing clinical trial with PK data in two animal models showing the uptake of axitinib from our hydrogel implant in the choroid and retinal pigment epithelium, or RPE, cells, where axitinib acts intra-cellularly to exert its VEGF receptor inhibiting effect. That data showed that clinically representative formulations of OTX-TKI delivered sustained axitinib concentrations through 12 months that were well above the IC50 for VEGFR-2 (vascular endothelial growth factor receptor) in cynomolgus monkey retina tissue and choroid/RPE tissues. This preclinical PK data aligns with the pharmacodynamics data we have observed to date in our ongoing U.S. clinical trial, namely the high proportion of rescue-free subjects up to Month 10 and suggests that OTX-TKI may provide continuous VEGF receptor inhibition, which, in turn, may support this new treatment ofparadigm, Treat to Maintain, in wet AMD conducted in Australia. care.

In subjects with subretinal and/or intraretinal fluid due to wet AMD, OTX-TKI was observed to be generally well tolerated with a favorable safety profile to date. ThisJune 2023, we presented 12-month data also showed a preliminary signal of biological activity as observed by a clinically meaningful decrease in intraretinal and/or subretinal fluid. We observed extended duration of activity of six months or more for over 60% of subjects across all cohorts and for over 80% of subjects in cohort 3a, in which we administered a 600μg dose. We believe that a six-month duration of activity could represent a compelling drug product profile.

Ourfrom the ongoing Phase 1 clinical trial of OTX-TKI in the United States is comprisedat the Clinical Trials at the Summit 2023 conference sponsored by the American Society of Retina Specialists. As of the April 14, 2023 cut-off date, there were no drug-related ocular or systemic SAEs observed in the OTX-TKI arm except for the one SAE of endophthalmitis that we announced at the 10-month data readout February 2023 that was observed in the OTK-TKI arm and was assessed by the investigator as related to the injection procedure. There were no retinal detachment, retinal vasculitis, or implant migration into the anterior chamber adverse events observed in the OTX-TKI arm, and no subjects had dropped out of either arm as of the data cut-off. The results showed subjects treated with a single OTX-TKI implant continued to demonstrate sustained BCVA (mean change from baseline of -1.0 letters) and CSFT (mean change from baseline of +20.2 μm) in the OTX-TKI arm at 12 months, which was comparable with the aflibercept arm (mean change from BCVA baseline of +2.0 letters; mean change from CSFT baseline of -2.2 μm). Sixty percent of OTX-TKI subjects were rescue-free up to Month 12. At the Month 12 visit, an additional four of the subjects were rescued. Overall, an 89% reduction in treatment burden was observed in OTX-TKI treated subjects at 12 months. These results align with our expectation that we would see a reactivation of disease in some patients, which we believe indicates that OTX-TKI continues to function as designed with axitinib concentrations beginning to fall below therapeutic levels after the implant bioresorbs.

We intend to initiate our first of two arms consistingplanned pivotal trials in wet AMD in the third quarter of 2023. This pivotal clinical trial will be a prospective, multi-center, randomized, parallel-group trial that will be run primarily at sites in the United States. The pivotal clinical trial will be a superiority trial that is designed after extensive discussions with the key opinion leaders and is within the FDA’s current wet AMD draft guidelines. We plan to enroll approximately 300 wet AMD subjects previously treated with, and responsivewho are treatment naïve in the study eye in this clinical trial. It will compare a single implant of OTX-TKI to a standardsingle injection of care anti-VEGF therapy: a sixteen-subject arm receivingaflibercept and assess the safety and efficacy of OTX-TKI in combinationsubjects with an anti-VEGF injectionwet AMD by measuring BCVA and a five-subject arm receiving aflibercept at eight-week intervals.CSFT.

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Non-Proliferative Diabetic Retinopathy (NPDR)

Given our belief in the potential applicability of OTX-TKI to other retinal diseases, we initiated the HELIOS clinical trial to evaluate OTX-TKI for the treatment of NPDR in the fourth quarter of 2022 and dosed our first patient in February 2023. In this trial,June 2023, we announced completion of enrollment in the HELIOS clinical trial. We are evaluating how long we are able to maintain subjects withoutconducting the need for retreatment. This trial was fully enrolled as of February 2022. We expect to report 28-week interim data from our U.S.-basedHELIOS Phase 1 clinical trial atinitially under an exploratory Investigational New Drug Application, or eIND. In the American AcademyHELIOS clinical trial, we have enrolled 22 subjects with diabetic retinopathy secondary to type 1 or type 2 diabetes who had not had an anti-VEGF injection in the prior 12 months or diabetic macular edema, or DME, in the prior six months, randomized 2:1 to either a single 600 µg implant of Ophthalmology Meeting, Retina Subspecialty Day: Late Breaking Developments,OTX-TKI or sham control across approximately 10 sites. We anticipate disclosing interim 6-month data from the HELIOS clinical trial in the first quarter of 2024.

We have been in discussions with the FDA for the clinical development of OTX-TKI for the treatment of NPDR and have a potential pivotal clinical trial design that is consistent with guidance from the FDA. Subject to favorable interim data from the ongoing HELIOS clinical trial and obtaining the necessary financing to fund the trial, we expect to be held on September 30, 2022.prepared to initiate a pivotal clinical trial for NPDR as early as the first quarter of 2024.

Glaucoma Program

Glaucoma Program

OTX-TIC (travoprost intracameral implant)

Our product candidate OTX-TIC is a bioresorbable hydrogel implant based on our ELUTYX technology incorporating travoprost, an FDA-approved prostaglandin analog designed to lower elevated IOP, that is designed to be administered by a physician as an intracameral injection with an initial target duration of drug release of four to six months. months with a single treatment.

In February 2022, we presented interim data from a Phase 1 clinical trial evaluating OTX-TIC for the treatment of OAG or OHT. The clinical trial is designed to evaluate the safety, biological activity, durability and tolerability of OTX-TIC in subjects with controlled OAG or OHT. The clinical trial consisted of four patient cohorts: cohort 1 included five subjects who received a 15 μg dose, cohort 2 included four subjects who received a 26 μg dose, cohort 3 included five subjects who received a 15 μg dose with a fast-degrading implant, and cohort 4 included five subjects who received a 5 μg dose with a fast-degrading implant.

In the Phase 1 clinical trial, at least one subject in each of the four cohorts receiving OTX-TIC were observed to experience a mean change in IOP from baseline as measured at 8:00 am, 10:00 a.m. and 4:00 p.m. as early as two days following injection. We believe these results were comparable to the decrease in IOP achieved with topical travoprost administered via daily eye drops, the current standard of care. IOP lowering effects lasted more than six months in most of the subjects in cohorts 1 and 2 and approximately three to six months in subjects in cohorts 3 and 4. We believe, based on these results, that OTX-TIC shows potential as a sustained-release therapy with a long duration of action.

We initiated a Phase 2 clinical trial evaluating the safety, tolerability and efficacy of OTX-TIC for the treatment of patients with primary OAG or OHT in the fourth quarter of 2021 we initiated a randomized, double-masked, controlledand dosed the first subject in the first quarter of 2022. The Phase 2 clinical trial in which we planwas designed to enrollinclude approximately 105 subjects with open-angle glaucoma at 15 to 20 sites between three arms of approximately 35 subjects each to evaluate two formulations of OTX-TIC for the treatment of open-angle glaucomaOAG or ocular hypertensionOHT in patientssubjects compared to DURYSTA. We dosed the first patientDURYSTA. The non-study eye of each subject will receive a topical prostaglandin daily. The primary efficacy endpoint is measured by diurnal IOP mean change from baseline (8 a.m., 10 a.m. and 4 p.m.) at two, six and 12 weeks. One arm in the firstPhase 2 clinical trial is receiving the same formulation used in cohort 2 of the Phase 1 clinical trial, containing a 26 µg dose of drug and utilizing a standard implant. The second arm was receiving the same formulation used in cohort 4 of the Phase 1 clinical trial, containing a 5 µg dose of drug and utilizing a fast-degrading implant. The active comparator control arm will receive one injection of DURYSTA in one eye and a topical prostaglandin daily in the non-study eye.Due to elevations in IOP observed in six subjects in the OTX-TIC 5 µg arm of the trial approximately 12 weeks after enrollment, we terminated enrollment in the 5 µg arm of the trial in the fourth quarter of 2022.2022 and are continuing forward with the OTX-TIC 26 µg and DURYSTA arms of the trial. We expect that the Phase 2 clinical trial will consist of approximately 86 patients: approximately 35 patients in the OTX-TIC 26 µg treatment arm, 35 patients in the DURYSTA arm and approximately 16 patients that were previously enrolled in the OTX-TIC 5 µg treatment arm. Enrollment of the Phase 2 clinical trial was completed in July 2023. We have started a pilot repeat-dose sub-study in the Phase 2 clinical trial that to evaluate the safety of a repeat, sustained release dose of OTX-TIC 26 μg, in a small subset of subjects with OAG or OHT. These subjects will be followed for at least 6 months

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Atafter their enrollment in the Glaucoma 360 Meetingsub-study to monitor and evaluate their endothelial cell health. We plan to provide topline data from the single-dose portion of the Phase 2 clinical trial, assessing the efficacy and durability of OTX-TIC and the preservation of endothelial cell health that could make the drug suitable for chronic dosing, in February 2022,the first quarter of 2024.

If our Phase 2 clinical trial is successful and subject to obtaining the necessary financing, we would then plan to conduct two well-controlled pivotal clinical trials under an Investigational New Drug Application, or IND.

In April 2023, we presented interima poster on OTX-TIC at the 2023 Association for Research in Vision and Ophthalmology (ARVO) Annual Meeting that covered data from a Phase 1 clinical trial evaluating OTX-TIC foraround the treatmentpreclinical safety and tolerability of open-angle glaucoma or ocular hypertension. In this clinical trial, OTX-TIC was observed to cause a clinically meaningful decrease in IOP for six months or longer in patients while preserving corneal health. We believe these results are comparable to the decrease in IOP seen with topicalrepeated intracameral travoprost the current standard of care, and represent OTX-TIC’s potential for a unique and differentiated drug product profile. OTX-TIC was observed to be generally well tolerated with a favorable safety profile to date and endothelial cell counts, pachymetry assessments, and slit lamp examinations in subjects indicated no changes from baseline. As a result, we are developing OTX-TIC for potential chronic or repeat dosing.implant (OTX-TIC) administrations.

Ocular Surface Disease Programs

Dry Eye Disease

OTX-DED (dexamethasone intracanalicular insert)

Our product candidate OTX-DED incorporates the FDA-approved corticosteroid dexamethasone as a preservative-free active pharmaceutical ingredient in a hydrogel, drug-eluting intracanalicular insert.insert based on our ELUTYX technology. OTX-DED incorporates the same active drug as DEXTENZA but includes a lower dose of the drug, is administered in the office setting as a smaller insert and is designed to release dexamethasone over a period of two to three weeks, compared with up to thirty days in the case of DEXTENZA.

We announced the topline clinical results forfrom a Phase 2 clinical trial evaluating two different-strength formulations of OTX-DED (0.2 mg and 0.3 mg of dexamethasone) versus a hydrogel implant in a total of 166 subjects with dry eye disease, with more than 50 subjects per arm, in December 2021. The subjects were followed for approximately two months after randomization. This trial was designed to assess the safety and efficacy of these two formulations of OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease in December 2021.disease. The clinical trial achieved its pre-specified primary endpoint. WhileAlthough the clinical trial was not powered to show statistical significance, the topline results demonstrated a statistically significant change of bulbar conjunctival hyperemia from baseline to day 15 compared to the vehicle hydrogel using a central reading photographic assessment in the modified ITT population. Both formulations of OTX-DED were generally observed to have a favorable safety profile and to be generally well tolerated.

Based on the data from the Phase 2 clinical trial, we intend to conductinitiated a small trial in connection with our efforts to develop an appropriate placebo comparator that may be used in both the OTX-DED and OTX-CSI programs. Specifically, we intend to evaluateprograms in the second quarter of 2023. This trial evaluates the performance of OTX-DED versus short-duration,placebo inserts, namely fast-dissolving, biodegradable collagen plugs, and no inserts at all, to explain the placebo performance seen in the Phase 2 clinical trials evaluating both the OTX-DED and the OTX-CSI Phase 2 trials in which the vehicle hydrogel placebo insert or placebo comparator vehicle remained in the canaliculus longer than anticipated, performing more like an active comparator than a placebo. We currently expectplan to beginuse the results of this trial into inform the first half of 2023.

next steps for both the OTX-DED and OTX-CSI programs.

OTX-CSI (cyclosporine intracanalicular insert)

Our product candidate OTX-CSI incorporates the FDA-approved immunomodulator cyclosporine as a preservative-free active pharmaceutical ingredient into a hydrogel, drug-eluting, intracanalicular insert.insert based on our ELUTYX technology. The product candidate is designed for a duration of three to four months for patientssubjects suffering from moderate to severe dry eye and to be administered in the office settingby a physician as a bioresorbable intracanalicular insert. OTX-CSI is designed to release cyclosporine to the ocular surface for approximately three to four months in order to increase tear production for the chronic treatment of dry eye disease.

WeIn October 2021, we announced topline results from a Phase 2 clinical trial evaluating two different formulationsdesigned to assess the safety, tolerability and durability and to evaluate the efficacy of OTX-CSI forin the chronic treatment of dry eye diseasedisease. The Phase 2 clinical trial evaluated two different formulations of OTX-CSI compared with a hydrogel vehicle insert in October 2021.approximately 140 subjects who were followed for a period of 16 weeks (12-week study period, with an additional 4-week safety follow-up). The study did not show separation between the subjects receiving OTX-CSI treated subjects (both(two formulations) and the subjects receiving the vehicle hydrogel placebo insert treated subjects(both formulations) for the primary endpoint of increased tear production at 12 weeks. The study did show an improvement compared with baseline in signs of dry eye disease as measured by total corneal fluorescein staining, or CFS, and symptoms of dry eye diseaseweeks as measured by the Visual Analog Score, or VAS, eye dryness in subjects treated with the OTX-CSI insert (both formulations) starting as early as two weeks after insertion and continuing over the 12 week study period. However, these improvements in OTX-CSI treated subjects were not statistically significant compared with the results of the vehicle insert in subjects with respect to either the signs of dry eye disease as measured by CFS or the symptoms of dry eye disease as measured by VAS eye dryness. Also, the trial results indicated that the durability of the OTX-CSI inserts was shorter than expected.Schirmer’s Test. Overall, the OTX-CSI insert (both formulations) was generally observed to be generally well tolerated withhave a favorable safety profile to date.and be well tolerated.

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We are continuing formulation work to extend the durability of the OTX-CSI insert and select the most appropriate formulations to move forward. If we determine to advance the program, we believe we could advance the program to pivotal trials subject to discussions with the FDA.

23Commercial Portfolio

Post-Surgical Ocular Inflammation and Pain

Ocular Itching Associated with Allergic Conjunctivitis

TableDEXTENZA (dexamethasone intracanalicular insert)

DEXTENZA incorporates the FDA-approved corticosteroid dexamethasone as a preservative-free active pharmaceutical ingredient into a hydrogel, drug-eluting intracanalicular insert based on our ELUTYX technology. Following FDA approval, we commercially launched DEXTENZA for the treatment of Contents

post-surgical ocular inflammation and pain in July 2019. DEXTENZA is the first FDA-approved intracanalicular insert delivering dexamethasone to treat post-surgical ocular inflammation and pain for up to 30 days with a single administration.

In October 2021, the FDA approved our supplemental New Drug Application, or sNDA, for DEXTENZA to include the treatment of ocular itching associated with allergic conjunctivitis as an additional indication. We commercially launched DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis in the first quarter of 2022 utilizing a small, dedicated and highly focused sales force. In the fourth quarter of 2022, we redeployed this small sales force to join the DEXTENZA sales force focused on the ophthalmic surgery market, specifically cataract surgery, in ambulatory surgery centers, or ASCs, and hospital outpatient departments, or HOPDs, as we believe that DEXTENZA is currently used in less than 5% of cataract procedures. We believe that cataract surgeries represent a larger, near-term market opportunity and a faster return-on investment.

In September 2020, we announced that we had dosed the first pediatric subjects in a U.S.-based, randomized, multicenter Phase 3 clinical trial evaluating DEXTENZA for the treatment of post-surgical ocular inflammation and pain in children following cataract surgery. This clinical trial is a post-approval requirement of the FDA in accordance with the Pediatric Research Equity Act of 2003, in connection with the FDA’s prior approval of DEXTENZA for the treatment of inflammation and pain following ophthalmic surgery in adults.

AffaMed License Agreement

In October 2020, we entered into a license agreement and collaboration with AffaMed Therapeutics Limited, or AffaMed, for the development and commercialization of DEXTENZA and OTX-TIC in mainland China, Taiwan, Hong Kong, Macau, South Korea, and the countries of the Association of Southeast Asian Nations.Nations. Under the terms of the agreement, we received an upfront payment of $12 million and became eligible to receive development, regulatory and commercial milestone payments and clinical development support payments of up to $91 million in the aggregate, as well as royalties from future product sales. In the fourth quarter of 2021, we received a $1 million milestone payment;payment upon the approval by the FDA of an sNDA for DEXTENZA to include the treatment of ocular itching associated with allergic conjunctivitis as an additional indication; and in the second quarter of 2022, we received anothera $2 million clinical support payment in connection with dosing the first subject in a Phase 2 clinical trial evaluating OTX-TIC for the treatment of open-angle glaucomaOAG or ocular hypertension.OHT. In April 2023, AffaMed announced that China’s National Medical Products Administration, or NMPA, had approved AffaMed’s Clinical Trial Application to initiate a Phase 3 registrational study in China to investigate the efficacy and safety of DEXTENZA in subjects following ophthalmic surgery. The approval triggered a $1 million milestone payment that we received in June 2023. Royalties are tiered and will range from the low teens to low twenty percent range. In return, we agreed to grant AffaMed exclusive rights to develop and commercialize DEXTENZA for the treatment of post-surgicalpostsurgical inflammation and pain following ophthalmic surgery and ocular itching in patients with allergic conjunctivitis, and OTX-TIC for the reduction of elevated IOP in patients with primary open-angle glaucomaOAG or ocular hypertensionOHT in specified Asian markets. We retain the right to develop and commercialize DEXTENZA and OTX-TIC in all other global markets.

In January 2022, AffaMed announced that it had dosed its first patient in a real-world setting study conducted in China evaluating the safety and efficacy of DEXTENZA® (0.4mg dexamethasone ophthalmic insert) for the treatment of ocular inflammation and pain post-cataract surgery. This prospective, single-arm, real-world trial is designed to assess the safety and efficacy of DEXTENZA for the treatment of ocular inflammation and pain following cataract surgery in approximately 120 patients at the Bo’ao Super Hospital. The trial’s primary efficacy endpoint is the absence of anterior chamber cells in the study eye at Day 14, and the key secondary endpoint is the absence of pain in the study eye at Day 8.

In April 2022, AffaMed announced that DEXTENZA has been approved in Macau, China for the treatment of ocular inflammation and pain following ophthalmic surgery. We do not expect that DEXTENZA sales in Macau will result in material revenues to us.

Mosaic Biosciences Agreement

In June 2021, we entered into an agreement with Mosaic Biosciences, Inc., or Mosaic, to identify new targets and discover novel therapeutic agents aimed at the treatment of dry age-related degeneration, or dAMD. Our collaboration with Mosaic has yielded a lead compound that Mosaic is now humanizing and optimizing for our preclinical complement inhibitor program for the treatment of dAMD. We believe that a product candidate with this compound has the potential to be best-in-class in the complement space with targeted dosing every three to four months.

Business Update Regarding COVID-19

The pandemic caused by an outbreak of a new strain of coronavirus, or the COVID-19 pandemic, that is affecting the U.S. and global economy and financial markets and the related responses of government, businesses and individuals are impacting our employees, patients, customers, communities and business operations. The implementation of travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders and shutdowns, for example, affected our business in 2020 and 2021. During the first half of 2022, the COVID-19 pandemic and related employee recruitment and retention challenges for ambulatory surgical centers, or ASCs, and hospital out-patient departments, or HOPDs, slowed the overall pace of cataract procedures performed in the United States, thereby reducing the number of opportunities for ophthalmologists to use DEXTENZA as a treatment for post-surgical ocular inflammation and pain. In addition, recruitment and retention challenges with regards to our own sales force have adversely affected our ability to market DEXTENZA to ophthalmologists and in the office setting. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact our business, results of operations and financial condition and those of our customers, vendors, suppliers, and collaboration partners will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets. Management continues to actively monitor this situation and the possible effects on our financial condition, liquidity, operations, suppliers, industry, and workforce. For additional information on risks posed by the COVID-19 pandemic, please see “Item 1A — Risk Factors — Risks Related to the Coronavirus

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Pandemic,” included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022.

Financial Position

Our ability to generate product revenues sufficient to achieve profitability will depend heavily on our continued commercialization of DEXTENZA for the treatment of ocular inflammation and pain following ophthalmic surgery and for the treatment of ocular itching associated with allergic conjunctivitis, and our obtaining marketing approval fordevelopment and commercializingcommercialization of other products with significant market potential, including OTX-TKI for the treatment of wet AMD, NPDR, and other retinal diseases, OTX-TIC for the treatment of open-angle glaucomaOAG or ocular hypertension,OHT, OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease, and OTX-CSI for the chronic treatment of dry eye disease. Our net loss was $20.7 million and $51.0 million for the three and six months ended June 30, 2023, respectively. Our net loss was $18.8 million and $31.3 million for the three and six months ended June 30, 2022, respectively. As of June 30, 2023, we had an accumulated deficit of $667.8 million.

Our net loss was $8.5total costs and operating expenses were $35.8 million and $5.4$71.7 million for the three and six months ended June 30, 2021,2023 including $5.1 million and $10.1 million in non-cash stock-based compensation expense and depreciation and amortization expense, respectively. As of June 30, 2022, we had an accumulated deficit of $577.1 million.

Our total costs and operating expenses were $32.2 million and $63.2 million for the three and six months ended June 30, 2022 including $4.8 million and $9.6 million in non-cash stock-based compensation expense and depreciation and amortization expense, respectively. Our total costs and operating expenses were $31.9 million and $59.5 million for the three and six months ended June 30, 2021, including $4.9 million and $8.7 million in non-cash stock-based compensation expense and depreciation and amortization expense, respectively. Our operating expenses have grown as we continue to commercialize DEXTENZA following its entry into the market in July 2019;DEXTENZA; pursue the clinical development of OTX-TKI, OTX-TIC, OTX-DED, and OTX-CSI; and research and develop other product candidates; and seek marketing approval for any product candidate for which we obtain favorable pivotal clinical trial results.candidates. We expect to incur substantial sales and marketing expenses in connection with the ongoing commercialization of DEXTENZA and that ofany commercialization efforts for any other product candidate for which we may receive approval. In addition, we will continueWe expect to incur costs associatedsubstantial research and development expenses in connection with operating as a public company.

our planned pivotal clinical trial for OTX-TKI for the treatment of wet AMD and any other planned clinical trials that we may initiate for OTX-TKI or other product candidates.

Although we expect to continue to generate revenue from sales of DEXTENZA, we will need to obtain substantial additional funding to support our continuing operations, including the commercialization of DEXTENZA and the ongoing commercializationclinical development of DEXTENZA.our product candidates. If we are unable to raise capital through equity offerings, debt financings, government or other third-party funding, collaborations, strategic alliances, licensing arrangements, royalty agreements, and marketing and distribution arrangementsaccess our borrowing capacity when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts or to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.

Through June 30, 2022, we have financed our operations primarily through sales of our products, public offerings of our common stock, private placements of our convertible notes, borrowings under credit facilities and private placements of our preferred stock, which has resulted in net proceeds of $641.4 million to us.

In August 2021, we and Jefferies LLC, or Jefferies, entered into an Open Market Sale Agreement, or the 2021 Sales Agreement, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time through Jefferies, acting as agent. In connection with entering into the 2021 Sales Agreement, we and Jefferies terminated our prior Open Market Sale Agreement which we had entered into in 2019. As of August 5, 2022, we have not sold any shares of our common stock under the 2021 Sales Agreement.

DEXTENZA and allAll of our product candidates are designed to be medical-benefit “buy-and-bill” products with associated procedure codes. Products with these characteristics are designed to be attractive not only to physicians, optometrists, and patients but also to the sites of care that participate in utilization. We primarily derive our product revenues from the sale of DEXTENZA in the United States to a network of specialty distributors, who then sell DEXTENZA to ambulatory surgery centers, or ASCs, hospital out-patient departments, or HOPDs, and ophthalmology and optometricphysicians’ offices. We also sell directly to a small population of ASCs. In addition to distribution agreements with specialty distributors, we enter into arrangements with government payors that provide for government-mandated rebates and chargebacks with respect to the purchase of DEXTENZA. During 2022, we adjusted our discounting strategy to meet the demands of the market. In the third quarter of 2022, we implemented an off-invoice discount program whereby providers receive the discounted price immediately upon purchase, rather than having to wait until the end of the quarter for a rebate payment. We renewed our focus on sales to ASCs and specifically strategic accounts that own and control multiple ASCs. In the first quarter of 2023, we launched a Commercial Assurance Program to provide assistance with patients’ out of pocket costs, supporting the expansion of DEXTENZA for commercially insured patients not covered by government payors.

In-market unit sales figures—unit sales from specialty distributors to ASCs and HOPDs—for April, May and Junein the second quarter of 2023 were in excess of 36,000 billable units, compared to more than 25,000 billable units in the second quarter of 2022, were 8,111, 8,828 and 10,187 units, respectively. The third month of each quarter typically reflectsrepresenting an increase of approximately 40%, and compared to more than 34,000 billable units in the first quarter of 2023, representing an increase of approximately 6%. As of June 30, 2023, we have achieved market access coverage of 100% coverage in Medicare Part B, over 90% coverage in Medicare Advantage, and over 70% coverage on the commercial payor side. In-market unit sales for July 2023 were approximately 10,800 billable units. Differences between the growth in DEXTENZA’s product revenue, net as recognized in our unaudited condensed consolidated financial statements and the in-market unit sales figures are attributable to ASCs due todistributor stocking patterns. In November 2022, as part of the impactannual CMS rule-making cycle, the CY 2023 OPPS rule was finalized and provided that DEXTENZA would qualify under the criteria established for non-opioid pain management drugs as a surgical supply provision. This provision allows for continued separate payment of our rebate program.

DEXTENZA in the ASC setting for 2023 but does not require separate payment for DEXTENZA in the HOPD setting. The changes resulting from this provision have

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Basedresulted in an increase in the relative share of sales of DEXTENZA to ASCs as a percentage of our total product revenue, net. In its draft recommendation for the CY 2024 OPPS rule published in July 2023, CMS recommended to continue separate payment of DEXTENZA in the ASC setting for 2024.

Currently, the billing code that describes the insertion procedure for DEXTENZA does not provide for a separate facility payment to the provider for the actual procedure to insert DEXTENZA. We, as well as large ophthalmic societies, surgeons, ASC administrators and other parties, have requested that CMS assign a status indicator to the billing code that would provide a separate facility payment in the ASC, so that the facilities are compensated for the additional time and resources required to administer DEXTENZA. We expect that CMS will issue a final ruling late in 2023.

In August 2021, we and Jefferies LLC, or Jefferies, entered into an Open Market Sale Agreement, or the 2021 Sales Agreement, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time through Jefferies, acting as agent. During the three and six months ended June 30, 2023, we sold 1,370,208 shares of common stock under the 2021 Sales Agreement, resulting in gross proceeds to us of $9.2 million, and net proceeds, after accounting for issuance costs, of $8.8 million.

On August 2, 2023, or the Closing Date, we entered into a credit and security agreement, or the Barings Credit Agreement, with Barings Finance LLC, or Barings, as administrative agent, and the lenders party thereto, providing for a secured term loan facility for us, or the Barings Credit Facility, in the aggregate principal amount of $82.5 million, or the Total Credit Facility Amount. We borrowed the full amount of $82.5 million at closing and received proceeds of $77.8 million, after the application of a discount and fees. Indebtedness under the Barings Credit Facility matures on the earlier to occur of (i) the six-year anniversary of the Closing Date and (ii) the date that is 91 days prior to the maturity date for our Convertible Notes.

Indebtedness under the Barings Credit Facility incurs interest at a SOFR-based rate, subject to a minimum 1.50% floor, plus 6.75%. We are obligated to make interest payments on our current plansindebtedness under the Barings Credit Facility on a monthly basis, commencing on the Closing Date; to pay annual administration fees; and forecastedto pay, on the maturity date, any principal and accrued interest that remains outstanding as of such date. In addition, we are obligated to pay a fee, which we refer to as the Royalty Fee, in an amount equal to the Total Credit Facility Amount, which amount shall be reduced by the total amount of interest and principal prepayment fees paid under the Barings Credit Agreement. We are required to pay the Royalty Fee in installments to Barings, for the benefit of the lenders, on a quarterly basis in an amount equal to three and one-half percent (3.5%) of the net sales of DEXTENZA occurring during such quarter, subject to the terms, conditions and limitations specified in the Barings Credit Agreement, until the Royalty Fee is paid in full. The Royalty Fee is due and payable upon a change of control of the company. In the event we complete a change of control transaction on or prior to the twelve-month anniversary of the Closing Date, the Royalty Fee is subject to a reduction to an amount that is equal to (i) 20% of the Total Credit Facility Amount, in the event that a signed letter of intent evidencing such change of control transaction was entered into by us on or prior to the date that is six months after the Closing Date and (ii) 30% of the Total Credit Facility Amount, in the event that a signed letter of intent evidencing such change of control transaction was entered into by us after the date that is six months, but before the date that is twelve months, after the Closing Date. We may, at our option, prepay any or all of the Royalty Fee at any time without penalty. In connection with the Barings Credit Agreement, we have granted the lenders a first-priority security interest in all of our assets, including our intellectual property, subject to certain agreed-upon exceptions. The Barings Credit Agreement includes negative covenants restricting us from making payments to the holders of the Convertible Notes, as defined below, except in connection with a proposed conversion to equity and with respect to certain permitted expenses and requiring us to maintain a minimum liquidity amount of $20.0 million. The Barings Credit Agreement also includes customary affirmative and negative covenants.

In March 2019, we issued $37.5 million of unsecured senior subordinated convertible notes, or the Convertible Notes. The Convertible Notes accrue interest at an annual rate of 6% of the outstanding principal amount, payable in cash at maturity, on March 1, 2026, unless earlier converted, repurchased or redeemed. Concurrently with entering into the Barings Credit Agreement, on August 2, 2023, we and the holders of the Convertible Notes extended the maturity of the Convertible Notes, which includes estimateswould otherwise have matured on March 1, 2026, to a date 91 days following the maturity of anticipated cash inflows from DEXTENZA product salesthe indebtedness under the Barings Credit Facility.

On June 4, 2021, we entered into the Fourth Amended and cash outflows from operating expenses,Restated Credit and Security Agreement with MidCap Financial Trust, or MidCap, as administrative agent, and the lenders party thereto, which we refer to as the MidCap

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Credit Agreement, to increase the aggregate principal amount borrowed under our credit facility, which we refer to as the MidCap Credit Facility, to $25.0 million, extend the interest-only payment period to May 1, 2024, and extend the maturity date to November 2025. In connection with entering the Barings Credit Facility, we paid MidCap and our other lenders $26.2 million in satisfaction of our obligations under the MidCap Credit Facility in August 2023.

We believe that our existing cash and cash equivalents of $134.5$66.6 million as of June 30, 2022 2023, plus the net cash received from the borrowing under the Barings Credit Facility after the repayment of the MidCap Credit Facility and reflecting the $20.0 million minimum cash covenant in the Barings Credit Agreement, will enable us to fund our planned operating expenses, debt service obligations and capital expenditure requirements through 2023.into 2025. This estimate is based on our current operating plan which includes estimates of anticipated cash inflows from DEXTENZA product sales, and cash outflows from both operating expenses, and capital expenditures.including clinical trials. With these resources, we have the funding to initiate the first of two planned pivotal clinical trials for OTX-TKI for the treatment of wet AMD. Our planned operating expenses do not include the expenses necessary to complete the first of two planned pivotal clinical trials for OTX-TKI for the treatment of wet AMD or to initiate the second of our two planned pivotal clinical trials for OTX-TKI for the treatment of wet AMD or any other pivotal trials for our other product candidates, including OTX-TKI for the treatment of NPDR, which we do not intend to commence unless we obtain additional financing. These estimates are subject to various assumptions including those relatedassumptions as to the severity and duration of the COVID-19 pandemic, the revenues and expenses associated with the commercialization of DEXTENZA, the pace of our research and clinical development programs, and other aspects of our business. These and other assumptions upon which we have based our estimateestimates may prove to be wrong, and we could use our capital resources sooner than we currently expect and would therefore need to raise additional capital to support our ongoing operations or adjust our plans accordingly. See “—Liquidity and Capital Resources.”

Resources”.

Financial Operations Overview

Revenue

In June 2019, we began to recognize revenue from the sales of DEXTENZA for the treatment of post-surgical ocular inflammation and pain.DEXTENZA. Following the FDA’s October 2021 approval of our sNDA, in October 2021, we have launched DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis, our first in-office indication. We began to recognize revenue fromindication, in the sales of ReSure Sealant for the prevention of wound leaks in corneal incisions following cataract surgery in 2014, although we have received only limited revenues from ReSure Sealant to date. As of the fourthfirst quarter of 2021, we suspended the production of ReSure Sealant in order to focus our manufacturing resources on the commercialization of DEXTENZA.

For the three and six months ended June 30, 2022, four specialty distributor customers accounted for 41%, 26%, 17% and 10% and three specialty distributor customers accounted for 41%, 25% and 20%, respectively, of our total revenue, and no other customer accounted for more than 10% of our total revenue. At June 30, 2022, the four specialty distributor customers accounted for 46%, 25%, 16%% and 10% of our total accounts receivable and no other customer accounted for more than 10% of our total accounts receivable at June 30, 2022.

For the three months and six months ended June 30, 2021, three specialty distributor customers accounted for 45%, 28%, and 15%, and 45%, 25% and 14%, respectively, of our total revenue, and no other customer accounted for more than 10% of our total revenue.

At December 31, 2021, three specialty distributor customers accounted for 42%, 26% and 21% of our total accounts receivable. No other customer accounted for more than 10% of our accounts receivable for the year ended December 31, 2021.

Operating Expenses

Cost of Product Revenue

Cost of product revenue consists primarily of costs of DEXTENZA product revenue, which include:

Direct materials costs;
Royalties;
Direct labor, which includes employee-related expenses, including salaries, related benefits and payroll taxes, and stock-based compensation expense for employees engaged in the production process;
Manufacturing overhead costs, which includes rent, depreciation, and indirect labor costs associated with the production process;
Transportation costs; and
Cost of scrap material.

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Research and Development Expenses

Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:

employee-related expenses, including salaries, related benefits and payroll taxes, travel and stock-based compensation expense for employees engaged in research and development, clinical and regulatory and other related functions;
expenses incurred in connection with the clinical trials of our product candidates, including with the investigative sites that conduct our clinical trials and under agreements with contract research organizations, or CROs;
expenses relating to regulatory activities, including filing fees paid to the FDA for our submissions for product approvals;
expenses associated with developing our pre-commercial manufacturing capabilities and manufacturing clinical study materials;
ongoing research and development activities relating to our core bioresorbable hydrogel technology and improvements to this technology;
facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies;
costs relating to the supply and manufacturing of product inventory, prior to approval by the FDA or other regulatory agencies of our products; and
expenses associated with preclinical development activities.

We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our clinical investigative sites.

Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical trials and regulatory fees. We do not allocate employee and contractor-related costs, costs associated with our platformproprietary bioresorbable hydrogel technology ELUTYX, costs related to manufacturing or purchasing clinical trial materials, and facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified. We use internal resources in combination with third-party CROs, including clinical monitors and clinical research associates, to manage our clinical trials, monitor subject enrollment and perform data analysis for many of our clinical trials. These employees work across multiple development programs and, therefore, we do not track their costs by program.

The successful development and commercialization of our products or product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:

the scope, progress, outcome and costs of our clinical trials and other research and development activities;
the timing, receipt and terms of any marketing approvals;
the efficacy and potential advantages of our products or product candidates compared to alternative treatments, including any standard of care;

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the market acceptance of our products or product candidates; and

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significant and changing government regulation.

Any changes in the outcome of any of these variables with respect to the development of our product candidates in clinical and preclinical development could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate. We anticipate that our research and development expenses will increase in the future as we support our continued development of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance, information technology, human resources legal and administrative functions. General and administrative expenses also include insurance, facility-related costs and professional fees costs associated with intellectual property,for legal, patent, consulting and accounting and audit services.

We anticipate that our general and administrative expenses will increase in the future as we support our continued development and commercialization of our product candidates. We also anticipate that we will continue to incur increased accounting, audit, legal, intellectual property, regulatory, compliance, director and officer insurance costs as well as investor and public relations expenses associated with being a public company.

Selling and Marketing Expenses

Selling and marketing expenses consist primarily of salaries and related costs for personnel in selling and marketing functions as well as consulting, advertising and promotion costs. Selling and marketing expenses for DEXTENZA increased in 2021 in connection with the continued commercialization of DEXTENZA for the treatment of ocular inflammation and pain, focused on ASCs and HOPDs, and the preparations for the commercial launch of DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis focused on the offices of ophthalmologists and optometrists. We anticipate that our selling and marketing expenses associated with DEXTENZA will continue to increase, particularly as we continue to grow our salesforce supporting DEXTENZA in 2022 and beyond and incur additional marketing expenses in connection withsupport the ongoing commercialization of DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis.in 2023 and beyond.

Other Income (Expense)

Interest Expense. Interest expense is incurred on our debt. InAs of and for the three and six months ended June 2021, we amended30, 2023, our interest-bearing debt included the Convertible Notes ($37.5 million outstanding principal) and restatedthe notes payable under the MidCap Credit Facility ($25.0 million outstanding principal). The MidCap Credit Facility was paid off in full in August 2023. Since August 2, 2023, our credit and security agreement, which we refer to as our Credit Agreement, to increaseinterest-bearing debt includes the aggregate principal amountamounts borrowed under our credit facility, which we refer to as ourthe Barings Credit Facility to $25.0($82.5 million extend the interest-only payment period to May 1, 2024, and extend the maturity date to November 2025. In the event we achieve certain milestones under the Credit Agreement, we have the right to extend through April 1, 2026.

In March 2019, we issued $37.5 million of unsecured senior subordinated convertible notes, or the 2026 Convertible Notes. The 2026 Convertible Notes accrue interest at an annual rate of 6% of the outstanding principal amount, payable in cash at maturity, on March 1, 2026, unless earlier converted, repurchased or redeemed.principal).

Change in Fair Value of Derivative Liability. In 2019, in connection with the issuance of our 2026 Convertible Notes, we identified an embedded derivative liability, which we are required to measure at fair value at inception and then at the end of each reporting period until the embedded derivative is settled. The changes in fair value are recorded through the condensed consolidated statement of operations and comprehensive loss and are presented under the caption change in fair value of derivative liability.

Critical Accounting Policies and Significant Judgments and Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. principles in the United States of America.

We define our critical accounting policies as those accounting policies that require us to make subjective estimates and judgments about matters that are uncertain and have had or are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those policies. Our critical accounting policies, which relate to revenue recognition and our derivative liability, are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the year ended December 31,

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2022, filed with the SEC on March 6, 2023. There have been no significant changes to our critical accounting policies since the beginning of this fiscal year.

The preparation of our unaudited condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue,

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costs and expenses, and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies, which include those related to revenue recognition and our derivative liability, are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022 and in the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. There have been no significant changes to our critical accounting policies since the beginning of this fiscal year.

Results of Operations

Comparison of the Three Months Ended June 30, 20222023 and 2021

2022

The following table summarizes our results of operations for the three months ended June 30, 20222023 and 2021:2022:

Three Months Ended

Three Months Ended

June 30, 

Increase

June 30, 

Increase

    

2022

    

2021

    

(Decrease)

    

2023

    

2022

    

(Decrease)

(in thousands)

(in thousands)

Revenue:

 

  

 

  

 

  

 

  

 

  

 

  

Product revenue, net

$

12,144

$

11,718

$

426

$

15,029

$

12,144

$

2,885

Collaboration revenue

 

122

 

 

122

 

157

 

122

 

35

Total revenue, net

 

12,266

 

11,718

 

548

 

15,186

 

12,266

 

2,920

Costs and operating expenses:

 

  

 

  

 

  

 

  

 

  

 

  

Cost of product revenue

 

1,155

 

1,096

 

59

 

1,304

 

1,155

 

149

Research and development

 

13,100

 

13,859

 

(759)

 

15,094

 

13,100

 

1,994

Selling and marketing

 

10,140

 

8,391

 

1,749

 

11,153

 

10,140

 

1,013

General and administrative

 

7,787

 

8,603

 

(816)

 

8,205

 

7,787

 

418

Total costs and operating expenses

 

32,182

 

31,949

 

233

 

35,756

 

32,182

 

3,574

Loss from operations

 

(19,916)

 

(20,231)

 

315

 

(20,570)

 

(19,916)

 

(654)

Other income:

 

  

 

  

 

  

 

  

 

  

 

  

Interest income

 

73

 

8

 

65

 

748

 

73

 

675

Interest expense

 

(1,696)

 

(1,655)

 

(41)

 

(1,991)

 

(1,696)

 

(295)

Change in fair value of derivative liability

2,773

 

13,396

(10,623)

1,131

 

2,773

(1,642)

Other income (expense), net

 

 

1

 

(1)

 

 

 

Total other income, net

 

1,150

 

11,750

 

(10,600)

 

(112)

 

1,150

 

(1,262)

Net (loss) income

$

(18,766)

$

(8,481)

$

(10,285)

Net loss

$

(20,682)

$

(18,766)

$

(1,916)

Gross-to-Net Deductions

We record DEXTENZA product sales net of estimated chargebacks, rebates, distribution fees and product returns. These deductions are generally referred to as gross-to-net deductions. Our total gross-to-net provisions for the three months ended June 30, 2023 and 2022 were 29.7% and 2021 were 23.1% and 23.9%, respectively, of gross DEXTENZA product sales.

Net Revenue

We generated $15.0 million of net product revenue during the three months ended June 30, 2023 from sales of our products, all of which was attributable to sales of DEXTENZA. We generated $12.1 million of net product revenue during the three months ended June 30, 2022 from sales of our products, all of which was attributable to sales of DEXTENZA. We generated $11.7 million of net product revenue during the three months ended June 30, 2021 from sales of our products, of which $11.1 million was attributable to sales of DEXTENZA and $0.6 million was attributable to sales of ReSure Sealant. We believe the growth in the second quarter of 2022 net product revenue over second quarter of 2021 for DEXTENZA was primarily due to increased market acceptance and ongoing commercialization efforts. We believe that DEXTENZA net product revenues in the second

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quarter of 2022 were adversely affected by recruitment and retention challenges at ASCs and HOPDs and recruitment and retention challenges amount our sales force.

Collaboration Revenue

We recognized $0.1$0.2 million of collaboration revenue related to the performance obligation under our license agreement with AffaMed to conduct a Phase 2 clinical trial of OTX-TIC during the three months ended June 30, 2023 compared to $0.1 million in the three months ended June 30, 2022. We recognize collaboration revenue based on a cost-to-cost method. There was no collaboration revenue for the three months ended June

30 2021.

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Research and Development Expenses

Three Months Ended

Three Months Ended

June 30, 

Increase

June 30, 

Increase

    

2022

    

2021

    

(Decrease)

    

2023

    

2022

    

(Decrease)

 

(in thousands)

 

(in thousands)

Direct research and development expenses by program:

 

  

 

  

 

  

 

  

 

  

 

  

OTX-TKI for diabetic retinopathy

$

810

$

$

810

OTX-TKI for wet AMD

$

1,335

$

1,912

$

(577)

1,036

1,335

(299)

OTX-TIC for glaucoma or ocular hypertension

 

644

 

898

 

(254)

 

1,491

 

644

 

847

OTX-CSI for treatment of dry eye disease

 

 

807

 

(807)

 

32

 

 

32

OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease

 

41

 

1,466

 

(1,425)

 

211

 

41

 

170

DEXTENZA for post-surgical ocular inflammation and pain

 

489

 

414

 

75

 

557

 

489

 

68

DEXTENZA for ocular itching associated with allergic conjunctivitis

3

44

(41)

3

(3)

ReSure Sealant

15

(15)

Preclinical programs

617

214

403

(24)

617

(641)

Unallocated expenses:

 

 

 

 

 

 

Personnel costs

 

6,321

 

5,466

 

855

 

6,867

 

6,321

 

546

All other costs

 

3,650

 

2,623

 

1,027

 

4,114

 

3,650

 

464

Total research and development expenses

$

13,100

$

13,859

$

(759)

$

15,094

$

13,100

$

1,994

Research and development expenses were $15.1 million for the three months ended June 30, 2023, compared to $13.1 million for the three months ended June 30, 2022, compared to $13.92022. Within research and development expenses, expenses for clinical programs increased $1.6 million, for the three months ended June 30, 2021. The decrease of $0.8 million was primarily due to an increase of $1.9 million in unallocated expenses offset by a decrease of $3.2increased $1.0 million, in clinical related programs.and expenses for preclinical programs decreased $0.6 million. For the three months ended June 30, 2022,2023, we incurred $2.5$4.1 million in direct research and development expenses for our products and product candidates compared to $5.6$2.5 million for the three months ended June 30, 2021.2022. The decreaseincrease of $3.1$1.6 million is related to timing and conduct of our various clinical trials for our product candidates and development activities related to our preclinical programs.

We expect that clinical trial expenses will increaseremain at approximately the same level in the remainder of 2023 for our product candidates, includingreflecting the anticipated completion of our ongoing U.S. based Phase 1 clinical trial for OTX-TKI due tofor wet AMD, the planned initiation of our pivotal clinical for OTX-TKI for wet AMD, and the continuation of our ongoing Phase 1 clinical trial in the United StatesNPDR and for OTX-TIC due to theour ongoing Phase 2 clinical trial and for our ongoing Phase 3 clinical trial to evaluate DEXTENZA in pediatric subjects following cataract surgery in accordance with the FDA’s post-approval requirement. In addition, we have adopted a plan to progress the development of OTX-CSI, including formulation work to improve product retention. We are also planning to conduct a small trial in connection with our efforts to develop an appropriate placebo comparator that may be used in both the OTX-DED and OTX-CSI programs. OTX-TIC.  

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Selling and Marketing Expenses

Three Months Ended

Three Months Ended

June 30, 

Increase

June 30, 

Increase

    

2022

    

2021

    

(Decrease)

    

2023

    

2022

    

(Decrease)

(in thousands)

(in thousands)

Personnel related (including stock-based compensation)

$

6,244

$

5,994

$

250

$

7,250

$

6,244

$

1,006

Professional fees

 

2,771

 

1,475

 

1,296

 

2,423

 

2,771

 

(348)

Facility related and other

 

1,125

 

922

 

203

 

1,480

 

1,125

 

355

Total selling and marketing expenses

$

10,140

$

8,391

$

1,749

$

11,153

$

10,140

$

1,013

Selling and marketing expenses were $11.2 million for the three months ended June 30, 2023, compared to $10.1 million for the three months ended June 30, 2022, compared to $8.4 million for the three months ended June 30, 2021.2022. The increase of $1.7$1.1 million was primarily due to an increase of $1.3$1.0 million in professional fees relatedpersonnel costs as we expanded our field-based team to trade shows, conferences and advertising.

support the commercialization of DEXTENZA.

We expect our selling and marketing expenses to continue to increase in the remainder of 20222023 and beyond as we continue to support the commercialization of DEXTENZA.

General and Administrative Expenses

Three Months Ended

June 30, 

Increase

    

2022

    

2021

    

(Decrease)

(in thousands)

Personnel related (including stock-based compensation)

$

4,520

$

4,531

$

(11)

Professional fees

 

2,596

 

3,583

 

(987)

Facility related and other

 

671

 

489

 

182

Total general and administrative expenses

$

7,787

$

8,603

$

(816)

General and administrative expenses were $7.8 million for the three months ended June 30, 2022, compared to $8.6 million for the three months ended June 30, 2021, primarily due to a decrease of $1.0 million in professional fees associated with lower legal fees.

Other Income (Expense), Net

Other income, net was $1.2 million for the three months ended June 30, 2022, compared to $11.8 million for the three months ended June 30, 2021. The decrease of $10.6 million was due primarily to the change in fair value of the derivative liability associated with the 2026 Convertible Notes of $10.6 million due primarily to a decrease in our common stock price from April 1, 2022 to June 30, 2022.

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General and Administrative Expenses

Three Months Ended

June 30, 

Increase

    

2023

    

2022

    

(Decrease)

(in thousands)

Personnel related (including stock-based compensation)

$

5,304

$

4,520

$

784

Professional fees

 

2,762

 

2,596

 

166

Facility related and other

 

139

 

671

 

(532)

Total general and administrative expenses

$

8,205

$

7,787

$

418

General and administrative expenses were $8.2 million for the three months ended June 30, 2023, compared to $7.8 million for the three months ended June 30, 2022, primarily due to an increase of $0.8 million in personnel related costs, including stock-based compensation, and a decrease of $0.5 million in facility related and other cost.

Other Income (Expense), Net

Other expense, net was $0.1 million for the three months ended June 30, 2023, compared to other income, net of $1.2 million for the three months ended June 30, 2022. The change of $1.3 million was due primarily to a decrease in the recognized income related to the fair value measurement of the derivative liability related to the Convertible Notes of $1.6 million, partially offset by an increase in interest income of $0.7 million.

Comparison of the Six Months Ended June 30, 20222023 and 20212022

The following table summarizes our results of operations for the six months ended June 30, 20222023 and 2021:2022:

Six Months Ended

June 30, 

Increase

 

    

2022

    

2021

    

(Decrease)

 

(in thousands)

 

Revenue:

 

  

 

  

 

  

Product revenue, net

$

24,642

$

19,061

$

5,581

Collaboration revenue

 

811

 

 

811

Total revenue, net

 

25,453

 

19,061

 

6,392

Costs and operating expenses:

 

  

 

  

 

  

Cost of product revenue

 

2,454

 

1,988

 

466

Research and development

 

26,200

 

24,786

 

1,414

Selling and marketing

 

19,203

 

16,477

 

2,726

General and administrative

 

15,344

 

16,268

 

(924)

Total costs and operating expenses

 

63,201

 

59,519

 

3,682

Loss from operations

 

(37,748)

 

(40,458)

 

2,710

Other income (expense):

 

  

 

  

 

  

Interest income

 

89

 

20

 

69

Interest expense

 

(3,378)

 

(3,335)

 

(43)

Change in fair value of derivative liability

9,731

 

38,412

(28,681)

Other income (expense), net

 

(2)

 

1

 

(3)

Total other income (expense), net

 

6,440

 

35,098

 

(28,658)

Net loss

$

(31,308)

$

(5,360)

$

(25,948)

Six Months Ended

June 30, 

Increase

 

    

2023

    

2022

    

(Decrease)

 

(in thousands)

 

Revenue:

 

  

 

  

 

  

Product revenue, net

$

28,243

$

24,642

$

3,601

Collaboration revenue

 

318

 

811

 

(493)

Total revenue, net

 

28,561

 

25,453

 

3,108

Costs and operating expenses:

 

  

 

  

 

  

Cost of product revenue

 

2,517

 

2,454

 

63

Research and development

 

29,842

 

26,200

 

3,642

Selling and marketing

 

21,989

 

19,203

 

2,786

General and administrative

 

17,332

 

15,344

 

1,988

Total costs and operating expenses

 

71,680

 

63,201

 

8,479

Loss from operations

 

(43,119)

 

(37,748)

 

(5,371)

Other income (expense):

 

  

 

  

 

  

Interest income

 

1,312

 

89

 

1,223

Interest expense

 

(3,760)

 

(3,378)

 

(382)

Change in fair value of derivative liability

(5,432)

 

9,731

(15,163)

Other income (expense), net

 

(1)

 

(2)

 

1

Total other income (expense), net

 

(7,881)

 

6,440

 

(14,321)

Net loss

$

(51,000)

$

(31,308)

$

(19,692)

Gross-to-Net Deductions

We record DEXTENZA product sales net of estimated chargebacks, rebates, distribution fees and product returns. These deductions are generally referred to as gross-to-net deductions. Our total gross-to-net provisions for the six months ended June 30, 2022 and 2021 were 22.5%28.9% and 25.4%22.5%, respectively, of gross DEXTENZA product sales.

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Net Revenue

We generated $25.5$28.2 million inof net product revenue during the six months ended June 30, 2022.2023, all of which was attributable to sales of DEXTENZA. We generated $24.6 million of net product revenue was attributable to sales of DEXTENZA, while $0.8 million in net revenue was due to collaboration revenue from our license agreement with AffaMed. Duringduring the six months ended June 30, 2021, we generated $19.1 million2022, all of net revenue from sales of our products, of which $17.9 million was attributable to sales of DEXTENZA and $1.2 million was attributable to sales of ReSure Sealant.DEXTENZA. We believe the growth in revenue for DEXTENZA was primarily due to increased market acceptance and our ongoing commercialization efforts.

32

TableWe recognized $0.3 million of Contentscollaboration revenue related to the performance obligation under our license agreement with AffaMed to conduct a Phase 2 clinical trial of OTX-TIC during the six months ended June 30, 2023, compared to $0.8 million in the six months ended June 30, 2022. We recognize collaboration revenue based on a cost-to-cost method.

Research and Development Expenses

Six Months Ended

Six Months Ended

June 30, 

Increase

June 30, 

Increase

    

2022

    

2021

    

(Decrease)

 

    

2023

    

2022

    

(Decrease)

 

 

(in thousands)

 

(in thousands)

Direct research and development expenses by program:

 

  

 

  

 

  

 

  

 

  

 

  

OTX-TKI for diabetic retinopathy

$

1,411

$

$

1,411

OTX-TKI for wet AMD

$

2,544

$

3,083

$

(539)

2,822

2,544

278

OTX-TIC for glaucoma or ocular hypertension

 

1,190

 

1,504

 

(314)

 

2,145

 

1,190

 

955

OTX-CSI for treatment of dry eye disease

 

161

 

1,897

 

(1,736)

 

134

 

161

 

(27)

OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease

 

307

 

2,026

 

(1,719)

 

265

 

307

 

(42)

DEXTENZA for post-surgical ocular inflammation and pain

798

783

15

1,005

798

207

DEXTENZA for ocular itching associated with allergic conjunctivitis

21

76

(55)

21

(21)

ReSure Sealant

59

(59)

Preclinical programs

716

486

230

950

716

234

Unallocated expenses:

 

 

 

  

 

 

 

  

Personnel costs

 

12,864

 

9,969

 

2,895

 

14,208

 

12,864

 

1,344

All other costs

 

7,599

 

4,903

 

2,696

 

6,902

 

7,599

 

(697)

Total research and development expenses

$

26,200

$

24,786

$

1,414

$

29,842

$

26,200

$

3,642

Research and development expenses were $29.8 million for the six months ended June 30, 2023, compared to $26.2 million for the six months ended June 30, 2022, compared to $24.8 million for the six months ended June 30, 2021.2022. The increase of $1.4$3.6 million was primarily due to an increase of $5.6$2.8 million in clinical programs, and increase of $0.6 million in unallocated expenses, and offset by a decreasean increase of $4.2$0.2 million in clinicalpreclinical related programs. For the six months ended June 30, 2022,2023, we incurred $5.0$7.8 million in direct research and development expenses for our products and product candidates compared to $9.5$5.0 million for the six months ended June 30, 2021.2022. The decreaseincrease of $4.5$2.8 million is related to timing and start of our various clinical trials for our product candidates and development activities related to our preclinical programs. We expect that clinical trial expenses will increase for our product candidates including for OTX-TKI due to the ongoing Phase 1 clinical trial in the United States and for OTX-TIC due to the ongoing Phase 2 clinical trial, and for our ongoing Phase 3 clinical trial to evaluate DEXTENZA in pediatric subjects following cataract surgery in accordance with the FDA’s post-approval requirement. In addition, we have adopted a plan to progress the development of OTX-CSI, including formulation work to improve product retention. We are also planning to conduct a small trial in connection with our efforts to develop an appropriate placebo comparator that may be used in both the OTX-DED and OTX-CSI programs. candidates.

Selling and Marketing Expenses

Six Months Ended

Six Months Ended

June 30, 

Increase

June 30, 

Increase

    

2022

    

2021

    

(Decrease)

 

    

2023

    

2022

    

(Decrease)

(in thousands)

 

(in thousands)

Personnel related (including stock-based compensation)

$

12,579

$

11,211

$

1,368

$

14,811

$

12,579

$

2,232

Professional fees

 

4,705

 

3,431

 

1,274

 

4,501

 

4,705

 

(204)

Facility related and other

 

1,919

 

1,835

 

84

 

2,677

 

1,919

 

758

Total selling and marketing expenses

$

19,203

$

16,477

$

2,726

$

21,989

$

19,203

$

2,786

Selling and marketing expenses were $22.0 million for the six months ended June 30, 2023, compared to $19.2 million for the six months ended June 30, 2022, compared to $16.5 million for the six months ended June 30, 2021.2022. The increase of $2.7$2.8 million was primarily due to increases of $1.4$2.2 million in personnel costs with the expansion of the commercial workforce to support DEXTENZA and $1.3$0.8 million in professional feesfacility related to trade shows, conferences and advertising fees.

other costs.

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General and Administrative Expenses

Six Months Ended

Six Months Ended

June 30, 

Increase

June 30, 

Increase

    

2022

    

2021

    

(Decrease)

 

    

2023

    

2022

    

(Decrease)

 

(in thousands)

 

(in thousands)

 

Personnel related (including stock-based compensation)

$

9,117

$

8,405

$

712

$

11,144

$

9,117

$

2,027

Professional fees

 

5,554

 

6,711

 

(1,157)

 

5,643

 

5,554

 

89

Facility related and other

 

673

 

1,152

 

(479)

 

545

 

673

 

(128)

Total general and administrative expenses

$

15,344

$

16,268

$

(924)

$

17,332

$

15,344

$

1,988

General and administrative expenses were $15.3$17.3 million for the six months ended June 30, 2022,2023, compared to $16.3$15.3 million for the six months ended June 30, 2021.2022. The decreaseincrease of $0.9$2.0 million was primarily due to a decrease of $1.2 million in professional fees primarily related to legal fees and other professional service costs and $0.5 million in facility related and other costs offset by an increase of $0.7$2.0 million ofin personnel related costs, including stock-based compensation.

Other Income (Expense), Net

Other expense, net was $7.9 million for the six months ended June 30, 2023, compared to other income, net wasof $6.4 million for the six months ended June 30, 2022, compared to $35.1 million other income, net for the six months ended June 30, 2021.2022. The decreasechange of $28.7$14.3 million was due primarily to a decrease in the change inrecognized income (expense) related to the fair value measurement of the derivative liability associated withrelated to the 2026 Convertible Notes of $28.7$15.2 million, related to a decreasepartially offset by an increase in our stock price from January 1, 2022 to June 30, 2022.

interest income of $1.2 million.

Liquidity and Capital Resources

We have a history of incurring significant operating losses. Our net loss was $18.8 million for the three months ended June 30, 2022, primarily due to a loss from operations of $19.9 million, offset primarily by a change of $2.8 million in the fair value of our derivative liability related to unsecured senior subordinated convertible notes, or the 2026 Convertible Notes, during the period. Our net loss was $31.3 million for the six months ended June 30, 2022, primarily due to a loss from operations of $37.7 million offset by a change of $9.7 million in the fair value of our derivative liability related to the 2026 Convertible Notes during the period. Our net loss was $8.5losses were $20.7 million and $5.4$51.0 million for the three and six months ended June 30, 2021. Our net losses were $6.62023, and $71.0 million and $155.6$6.6 million for the years ended December 31, 20212022 and 2020,2021, respectively. As of June 30, 2022,2023, we had an accumulated deficit of $577.1$667.8 million.

We commercially launched DEXTENZA for the treatment of post-surgical ocular inflammation and pain in July 2019, and we commercially launched DEXTENZA for the treatment of ocular itching associated with allergic conjunctivitis in the first quarter of 2022. All of our product candidates are in various phases of clinical and preclinical development. Our ability to generate product revenues sufficient to achieve profitability will depend heavily on our continued commercialization of DEXTENZA for the treatment of ocular inflammation and pain following ophthalmic surgery and ocular itching associated with allergic conjunctivitis and our obtaining marketing approval for and commercializing other products with significant market potential, including OTX-TKI for the treatment of wet AMD and other retinal diseases, OTX-TIC for the treatment of open-angle glaucoma or ocular hypertension, and OTX-DED and OTX-CSI for the treatment of dry eye disease. While it is difficult to predict the extent or duration of the impact of the global COVID-19 pandemic on future financial results, we anticipate current guidelines and recommendations from the global health authorities, including the delay of elective surgeries, will impact revenue for 2022 and potentially beyond.

Under our Credit Agreement, we have a term loan in the aggregate principal amount of approximately $20.8 million, which was rolled over from our prior borrowings under our Credit Facility, and an additional term loan in the principal amount of approximately $4.2 million. We refer to these term loans together as the Term Loans. The aggregate principal amount of the Term Loans available under the Credit Facility, or the Total Credit Facility Amount, is $25.0 million, the entirety of which was drawn at the closing of the most recent amendment to our Credit Facility in June 2021. As of June 30, 2022, the interest rate was 7.81%. Under the current terms of our Credit Facility, we are permitted to make interest-only payments on the Term Loans on a monthly basis until May 1, 2024. Thereafter, in addition to the monthly interest payments, we are required to make principal payments on the Term Loans in accordance with the amortization schedules set forth in the Credit Agreement. Remaining unpaid principal and accrued interest outstanding

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on the maturity date is due on the maturity date, which shall be November 30, 2025, unless we are able to provide the Administrative Agent evidence reasonably satisfactory to it, by November 15, 2025, that the outstanding principal amount of the 2026 Convertible Notes has been converted into equity interests of ours and that such indebtedness is otherwise indefeasibly satisfied in full, in which case the term is automatically extended until April 1, 2026.

In March 2019, we issued $37.5 million of the 2026 Convertible Notes. The 2026 Convertible Notes accrue interest at an annual rate of 6% of the outstanding principal amount, payable at maturity, on March 1, 2026, unless earlier converted, repurchased or redeemed. The holders of the 2026 Convertible Notes may convert all or part of the outstanding principal amount of their 2026 Convertible Notes into shares of our common stock, par value $0.0001 per share, prior to maturity and provided that no conversion results in a holder beneficially owning more than 19.99% of our issued and outstanding common stock. The conversion rate is initially 153.8462 shares of our common stock per $1,000 principal amount of the 2026 Convertible Notes, which is equivalent to an initial conversion price of $6.50 per share. The conversion rate is subject to adjustment in customary circumstances such as stock splits or similar changes to our capitalization, none of which have occurred to date.

Through June 30, 2022, we have financed our operations primarily through sales of our products, private placements of our preferred stock, public offerings of our common stock, private placements of our convertible notes and borrowings under credit facilities, which has resulted in net proceeds of $641.4 million to us.

As of June 30, 2022,2023, we had cash and cash equivalents of $134.5$66.6 million; outstanding debtnotes payable of $25.1$25.0 million netface value and senior convertible notes of unamortized discount; and the 2026 Convertible Notes with $37.5 million of aggregate principal amount,par value, plus accrued interest of $7.6$9.8 million.

On August 2, 2023, we entered into the Barings Credit Agreement which established the $82.5 million Barings Credit Facility. We borrowed the full amount of $82.5 million at closing and received proceeds of $77.8 million, after the application of a discount and fees. Concurrently with entering into the Barings Credit Agreement, we and the holders of the Convertible Notes extended the maturity of the Convertible Notes, which would otherwise have matured on March 1, 2026, to a date 91 days following the maturity of the indebtedness under the Barings Credit Facility. In connection with our entering into the Barings Credit Facility, we paid an aggregate of $26.2 million to MidCap Financial Trust and the other lenders party to the MidCap Credit Facility, comprised of $25.0 million in principal and interest accrued thereunder and $1.2 million in exit and prepayment fees in satisfaction of our obligations under the MidCap Credit Facility. Upon the payment, all liens and security interests securing the indebtedness under the MidCap Credit Facility were released. See “—Financial Position”.

Cash Flows

Based on our current plans and forecasted expenses, which includes estimates related to anticipated cash inflows from DEXTENZA product sales and cash outflows from operating expenses, we believe that our existing cash and cash equivalents, as of June 30, 2022, will enable us to fund our planned operating expenses, debt service obligations and capital expenditure requirements through 2023. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

The following table summarizes our sources and uses of cash for each of the periods presented:

Six Months Ended

June 30, 

  

2023

    

2022

Cash used in operating activities

$

(40,048)

$

(29,476)

Cash used in investing activities

 

(5,369)

 

(771)

Cash provided by financing activities

 

9,723

 

622

Net decrease in cash and cash equivalents

$

(35,694)

$

(29,625)

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Six Months Ended

June 30, 

    

2022

    

2021

Cash used in operating activities

$

(29,476)

$

(37,415)

Cash used in investing activities

 

(771)

 

(287)

Cash provided by financing activities

 

622

 

1,505

Net decrease in cash and cash equivalents

$

(29,625)

$

(36,197)

Operating activities. Net cash used in operating activities was $40.0 million for the six months ended June 30, 2023, primarily resulting from our net loss of $51.0 million, net unfavorable changes in our operating assets and liabilities of $7.1 million, offset by the increase in the fair value of our derivative liability of $5.4 million and $12.6 million of other non-cash items. Our net loss was primarily attributed to research and development activities, selling and marketing expenses, and our general and administrative expenses, which significantly offset any contributions from our revenues to date. Our non-cash charges during the six months ended June 30, 2023 consisted primarily of $9.0 million of stock-based compensation expense, $2.5 million in non-cash interest expense, and $1.1 million in depreciation and amortization expense, including amortization of operating lease assets. Net cash used by unfavorable changes in our operating assets and liabilities during the six months ended June 30, 2023 consisted primarily of net increases in accounts receivable of $6.0 million, decreases in accrued expenses and other current liabilities, excluding accrued non-cash interest, of $0.6 million, net decreases of accounts payable, excluding accounts payable related to additions to property and equipment, of $0.3 million, and net increases of prepaid expenses and other current assets of $0.6 million, partially offset by increases of deferred revenue of $0.7 million.

Net cash used in operating activities was $29.5 million for the six months ended June 30, 2022, primarily resulting from our net loss of $31.3 million, and net changes in our operating assets and liabilities of $0.4 million, the change in the fair value of our derivative liability of $9.7 million, net changes in our operating assets and liabilities of $0.4 million, partially offset by $12.0 million of other non-cash items. Our net loss was primarily attributed to research and development activities, selling and marketing expenses, and our general and administrative expenses, which significantly offset any contributions from our revenues to date. Our net non-cash charges during the six months ended June 30, 2022 consisted primarily of $8.5 million of stock-based compensation expense, $2.4 million in non-cash interest expense, and $1.1 million in depreciation and amortization expense, and the change in fair valueincluding amortization of the derivative liability of $9.7 million.operating lease assets. Net cash used by changes in our operating assets and liabilities during the six months ended June 30, 2022 consisted primarily of net decreases in accounts receivable, prepaid expenses and other operating assets, of $1.9 million and net decreases in accrued expenses and other operating liabilities of $2.3 million.

Net cash used in operating activities was $37.4 million for the six months ended June 30, 2021, primarily resulting from our net loss of $5.4 million and changes in our operating assets and liabilities of $4.6 million, offset by the change in the fair value of our derivative liability of $38.4 million and $10.9 million of non-cash items. Our net loss was primarily attributed to research and development activities, selling and marketing expenses, and our general and

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administrative expenses, which significantly offset by any contributions from our revenues to date. Our net non-cash charges during the six months ended June 30, 2021 consisted primarily of $7.4 million of stock-based compensation expense, $2.3 million of non-cash interest expense, $1.3 million in depreciation and amortization expense and the change in fair value of the derivative liability of $38.4 million. Net cash used by changes in our operating assets and liabilities during the six months ended June 30, 2021 consisted primarily of increases in accounts receivable accounts payable and accrued expenses as we continue to commercialize DEXTENZA.

liabilities.

Investing activities. Net cash used in investing activities for the six months ended June 30, 2023 and 2022 and 2021 totaled $0.8$5.4 million and $0.3$0.8 million, respectively. For both periods,the six months ended June 30, 2023, the investing activities were primarily related to leasehold improvements and purchases of equipment. For the six months ended June 30, 2022, the investing activities were purchases inof equipment.

Financing activities. Net cash provided by financing activities was $9.7 million for the six months ended June 30, 2023 and $0.6 million for the six months ended June 30, 2022 and $1.5 million2022. Net cash provided by financing activities for the six months ended June 30, 2021.2023 consisted of $8.8 million from the sale of shares of our common stock under the 2021 Sales Agreement, and $0.9 million from the exercises of stock options and purchases of shares of our common stock under the ESPP. In March 2023, the Company requested a protective advance of $2.0 million under the MidCap Credit Agreement in response to the closure of Silicon Valley Bank by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation was appointed as receiver, which was deemed a credit extension. The Company repaid the full principal amount of $2.0 million in March 2023. Net cash provided by financing activities for the six months ended June 30, 2022 of $0.6 million consisted of $0.1 millionproceeds from the exercise of stock options and $0.5 million in proceeds from the issuancepurchases of shares of our common stock pursuant tounder the employee stock purchase plan. Net cash provided by financing activities for the six months ended June 30, 2021 of $1.5 million consisted of $1.7 million in proceeds from the exercise of stock options, $3.7 million (net) in borrowings under our Credit Facility and $0.5 million in proceeds from the issuance of common stock pursuant to the employee stock purchase plan partially offset by payments on notes payable of $4.2 million.

ESPP.

Funding Requirements

We expect to continue to incur losses in connection with our ongoing activities, particularly as we advance the clinical trials of our product candidates in development and increase our sales and marketing resources to support the ongoing commercialization of DEXTENZA and the potential launch of our product candidates, subject to receiving FDA approval.

We anticipate we will incur substantial expenses if and as we:

continue to commercialize DEXTENZA in the United States, including for DEXTENZA in the office setting for the treatment of ocular itching associated with allergic conjunctivitis;States;

continue to develop and expand our sales, marketing and distribution capabilities for DEXTENZA and any of ourother products or product candidates we intend to commercialize;

continue ongoing clinical trials for our product candidates OTX-TKI for the treatment of wet AMD (in both Australia and the United States) forand the treatment of wet AMD andNPDR (United States), OTX-TIC for the treatment of open-angle glaucomaOAG or ocular hypertension, and our ongoing clinical trial to evaluate DEXTENZA in pediatric subjects following cataract surgery in accordance with the FDA’s post-approval requirement;

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determine to initiate new clinical trials to evaluate OTX-TKI for the treatment of wet AMD and other retinal diseases,OHT, OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease,diseases, and OTX-CSIDEXTENZA in pediatric subjects following cataract surgeries;
initiate our planned clinical trials, including the first of two planned pivotal clinical trials for OTX-TKI for the chronic treatment of dry eye disease ;wet AMD;

determine to initiate new clinical trials to evaluate our product candidates;
conduct research and development activities on, and seek regulatory approvals for, DEXTENZA and OTX-TIC in specified Asian markets pursuant to our license agreement and collaboration with AffaMed;

continue the research and development of our other product candidates;

seek to identify and develop additional product candidates;

seek marketing approvals for any of our product candidates that successfully complete clinical development;

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scale up our manufacturing processes and capabilities to support sales of commercial products, clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval, and expand our facilities to accommodate this scale up and any corresponding growth in personnel;

renovate our existing facilities including research and development laboratories, manufacturing space and office space;

maintain, expand and protect our intellectual property portfolio;

expand our operational, financial, administrative and management systems and personnel, including personnel to support our clinical development, manufacturing and commercialization efforts;

defend ourselves against legal proceedings;
make investments to improve our defenses against cybersecurity defenses and establish and maintain cybersecurity insurance;
increase our product liability and clinical trial insurance coverage as we expand our clinical trials and commercialization efforts; and

continue to operate as a public company.

Based on our current plans and forecasted expenses, which includes estimates related to anticipated cash inflows from DEXTENZA product sales and cash outflows from operating expenses, weWe believe that our existing cash and cash equivalents as of June 30, 2022,2023, plus the net cash received from the borrowing under the Barings Credit Facility after the repayment of the MidCap Credit Facility and reflecting the $20.0 million minimum cash covenant in the Barings Credit Agreement, will enable us to fund our planned operating expenses, debt service obligations and capital expenditure requirements through 2023.into 2025. This estimate is based on our current operating plan which includes estimates of anticipated cash inflows from DEXTENZA product sales, and cash outflows from operating expenses, including clinical trials. With these resources, we have the funding to initiate the first of two planned pivotal clinical trials for OTX-TKI for the treatment of wet AMD. Our planned operating expenses do not include the expenses necessary to complete the first of two planned pivotal clinical trials for OTX-TKI for the treatment of wet AMD or to initiate the second of our two planned pivotal clinical trials for OTX-TKI for the treatment of wet AMD or any other pivotal trials for our other product candidates, including OTX-TKI for the treatment of NPDR, which we do not intend to commence unless we obtain additional financing. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

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Our future capital requirements will depend on many factors, including:

the level of product sales from DEXTENZA and any additional products for which we obtain marketing approval in the future and the level of third-party reimbursement of such products;

the costs of sales, marketing, distribution and other commercialization efforts with respect to DEXTENZA and any additional products for which we obtain marketing approval in the future, including cost increases due to inflation;

the progress, costs and outcome of our ongoing and planned clinical trials of our product candidates, in particular OTX-TKI for the treatment of wet AMD and other retinal diseasesNPDR and OTX-TIC for the treatment of open-angle glaucomaOAG or ocular hypertension;OHT;

the scope, progress, costs and outcome of preclinical development and clinical trials of any other product candidates;

the costs, timing and outcome of regulatory review of our product candidates by the FDA, the EMA or other regulatory authorities;

the costs of scaling up our manufacturing processes and capabilities to support sales of commercial products, clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval and of expanding our facilities to accommodate this scale up and any corresponding growth in personnel;

the extent of our debt service obligations and our ability, if desired, to refinance any of our existing debt on terms that are more favorable to us;

the amounts we are entitled to receive, if any, as reimbursements for clinical trial expenditures, development, regulatory, and sales milestone payments, and royalty payments under our license agreement with AffaMed;

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the extent to which we choose to establish additional collaboration, distribution or other marketing arrangements for our products and product candidates;

the costs and outcomes of legal actions and proceedings;

the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and

the extent to which we acquire or invest in other businesses, products and technologies.

Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through equity offerings, debt financings, government or other third-party funding, collaborations, strategic alliances, licensing arrangements, royalty agreements, and marketing and distribution arrangements. We do not have any committed external source of funds, development, regulatory and sales milestone payments, or royalty payments although our license agreement with AffaMed provides for AffaMed’s reimbursement of certain clinical expenses incurred by us in connection with our collaboration and for our potential receipt of development and sales milestone payments as well as royalty payments. To the extent that we raise additional capital through the sale of equity or convertible debt securities, each security holder’s ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect each security holder’s rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. The covenants under our existing Barings Credit AgreementFacility and the pledge of our assets as collateral limit our ability to obtain additional debt financing. If we raise additional funds through government or other third-party funding, collaborations, strategic alliances, licensing arrangements, royalty agreements, or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams,

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research programs or product candidates or grant licenses on terms that may not be favorable to us.In addition, the COVID-19 pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which could adversely impact our ability to raise additional funds through equity or debt financings. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

We enter into contracts in the normal course of business to assist in the performance of our research and development activities and other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts which are not consideredincluded in contractual obligations and commitments.

On March 31, 2023, we entered into Amendment No. 1 to the MidCap Credit Agreement, or Amendment No. 1, to replace the LIBOR-based interest rate provisions of the MidCap Credit Agreement with interest rate provisions based on the Secured Overnight Financing Rate, or SOFR, establish a benchmark replacement mechanism and make additional administrative updates. On May 4, 2023, we entered into Amendment No. 2 to the MidCap Credit Agreement, or Amendment No. 2. Amendment No. 2 provided that we may maintain up to 50% of our consolidated cash and cash equivalents with banks or financial institutions other than Silicon Valley Bank and made additional administrative updates. During the three and six months ended June 30, 2022,2023, there were no significant changes to our contractual obligations and commitments as described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021.

2022 other than Amendments No. 1 and 2 to the MidCap Credit Agreement. In connection with entering the Barings Credit Facility, we paid MidCap and our other lenders $26.2 million in satisfaction of our obligations under the MidCap Credit Facility in August 2023.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission, such relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.

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Recently Issued Accounting Pronouncements

Information regarding new accounting pronouncements is included in Note 2 – Summary of Significant Accounting Policies to the current period’s unaudited condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk related to changes in interest rates. As of June 30, 2022,2023, we had cash and cash equivalents of $134.5$66.6 million, which consisted ofincludes cash in operating bank accounts, investments in money market funds. We have policies requiring us to invest in high-quality issuers, limit our exposure to any individual issuer, and ensure adequate liquidity. Our primary exposure to market risk related to our cash and cash equivalents is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.

We do not enter into financial instruments for trading or speculative purposes.

We account for the conversion option embedded in our 2026unsecured senior subordinated convertible notes, or the Convertible Notes, as a separate financial instrument, measured at fair value, using a binomial lattice model, which we refer to as the Derivative Liability. As of June 30, 2022,2023, the Derivative Liability was valued at $10.5$11.8 million. As of June 30, 2022,2023, a 10% increase or decrease of the main inputs to the valuation model would not have a material effect on the fair value of the Derivative Liability. Changes of the fair value of the Derivative Liability have no impact on anticipated cash outflows.

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As of June 30, 2022,2023, we had a variable interest rate-based note payable with a principal amount of $25.0 million. Expected cash outflows from this financial instrument fluctuate based on changes in the U.S. dollar-denominated LIBOR indexSecured Overnight Financing Rate, or SOFR, which is, among other factors, affected by the general level of U.S. and international central bank interest rates. As of June 30, 2022,2023, an immediate 100 basis point increase or decrease in the U.S. dollar-denominated LIBOR indexSOFR would not have a material effect on the anticipated cash outflows from this instrument.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2022.2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management, including our Chief Executive Officer and Chief Financial Officer, recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2022,2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended June 30, 20222023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not presently a party to any material legal proceedings, nor to the knowledge of management are any material legal proceedings threatened against us.

Item 1A. Risk Factors.

We are subject to a number of risks that could materially and adversely affect our business, financial condition, and results of operations and future growth prospects, including those identified under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021,2022, which was filed with the Securities and Exchange Commission, or SEC, on February 28, 2022.March 6, 2023, which we refer to as our Annual Report on Form 10-K, and those identified under the heading “Risk Factors” in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, which was filed with the SEC on May 8, 2023. The following information updates, and should be read in conjunction with, the risks factors discussed in our Annual Report on Form 10-K under the heading “Risk Factors” in Part I, Item 1A and in our subsequent Quarterly Reports on Form 10-Q under the heading “Risk Factors” in Part II, Item 1A. Any of the risks and uncertainties described in our Annual Report on Form 10-K, in any subsequent Quarterly Report on Form 10-Q, and in this Quarterly Report on Form 10-Q could materially and adversely affect our business, financial condition, results of operations and future growth prospects, and such risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.

Our substantial indebtedness may limit cash flow available to invest in the ongoing needs of our business or otherwise affect our operations.

On August 2, 2023, we entered into a credit and security agreement, or the Barings Credit Agreement, with Barings Finance LLC, or Barings, as administrative agent, and the lenders party thereto, providing for a secured term loan facility for us in the aggregate principal amount of $82.5 million, or the Barings Credit Facility. Under the Barings Credit Facility we have $82.5 million, net of unamortized discount and fees, of outstanding principal indebtedness. Under the Barings Credit Agreement, we are permitted to make payments of interest and fees only through August 2029, at which time we will be required to repay the full principal amount in addition to any outstanding interest and fees. In addition, we are obligated to pay a fee, which we refer to as the Royalty Fee, in an amount equal to $82.5 million, subject to potential reductions as specified in the Barings Credit Agreement. We are required to pay the Royalty Fee in installments to Barings, for the benefit of the lenders, on a quarterly basis in an amount equal to three and one-half percent (3.5%) of the net sales of DEXTENZA occurring during such quarter, subject to the terms, conditions and limitations specified in the Barings Credit Agreement, until the Royalty Fee is paid in full. The Royalty Fee is due and payable upon a change of control of the company. The Royalty Fee may also be reduced if a change of control occurs within the first twelve months of the term of the Barings Credit Agreement.

Our obligations under the Barings Credit Agreement are secured by all of our assets, including our intellectual property. The Barings Credit Facility includes negative covenants restricting us from making payments to the holders of our outstanding convertible notes, which we refer to as our Convertible Notes, except in connection with a proposed conversion to equity and with respect to certain permitted expenses and requiring us to maintain a minimum liquidity amount of $20.0 million. The Barings Credit Agreement also includes customary affirmative and negative covenants. In March 2019, we issued $37.5 million aggregate principal amount of issued and outstanding Convertible Notes. The Convertible Notes mature on a date 91 days following the maturity of the indebtedness under the Barings Credit Facility and interest on the Convertible Notes is payable at maturity or if earlier converted, repurchased or redeemed pursuant to their terms. We could in the future incur additional indebtedness beyond such amounts, including by potentially amending the Barings Credit Agreement.

Our substantial debt combined with our other financial obligations and contractual commitments could have significant adverse consequences, including:

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requiring us to dedicate a substantial portion of cash and cash equivalents and marketable securities to the payment of interest on, and principal of, our debt and related fees such as the Royalty Fee, which collectively reduce the amounts available to fund operating expenditures, including working capital, and capital expenditures and other general corporate purposes and may also have the effect of delaying, deferring or preventing a change of control;

obligating us to additional negative covenants further restricting our activities;

limiting our flexibility in planning for, or reacting to, changes in our business and our industry; and

placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.

We intend to satisfy our current and future debt service obligations with our existing cash and cash equivalents, anticipated product revenue from DEXTENZA and funds from external sources. However, we may not have sufficient funds or may be unable to arrange for additional financing to pay the amounts due under our existing debt. Funds from external sources may not be available on acceptable terms, if at all.

A failure to comply with conditions of our Barings Credit Agreement or the Convertible Notes could result in an event of default under those instruments. The Barings Credit Agreement and Convertible Notes also have cross-default provisions, pursuant to which a default under one instrument could cause a default in others. In an event of default, including upon the occurrence of an event that would reasonably be expected to have a material adverse effect on our business or operations, the amounts due under our Barings Credit Agreement or the Convertible Notes could accelerate. As a result, we may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness or to make any accelerated payments, and the lenders could seek to enforce security interests in the collateral securing such indebtedness.

Item 5. Other Information.

Barings Credit Facility

On August 2, 2023, or the Closing Date, we entered into a credit and security agreement, or the Barings Credit Agreement, with Barings Finance LLC, or Barings, as administrative agent, and the lenders party thereto, providing for a secured term loan facility for us, which we refer to as the Barings Credit Facility, in the aggregate principal amount of $82.5 million, which we refer to as the Total Credit Facility Amount. We borrowed the full amount of $82.5 million at closing and received proceeds of $77.8 million, after the application of a discount and fees. In connection with our entry into the Barings Credit Agreement, we paid an aggregate of $26.2 million in August 2023 to MidCap Financial Trust, or MidCap, and the other lenders party to the Fourth Amended and Restated Credit and Security Agreement, dated as of June 4, 2021, as amended, or the MidCap Credit Agreement. Our payment to MidCap and the other lenders under the MidCap Credit Agreement was comprised of $25.0 million in principal and interest accrued thereunder and $1.2 million in exit and prepayment fees in satisfaction of our obligations thereunder. Upon the payment, all liens and security interests securing the indebtedness under the MidCap Credit Agreement were released.

Our indebtedness under the Barings Credit Facility matures on the earlier to occur of (i) the six-year anniversary of the Closing Date and (ii) the date that is 91 days prior to the maturity date for the $37.5 million of unsecured senior subordinated convertible notes, or the Convertible Notes, that we issued in March 2019. We refer to such earlier date as the Maturity Date. We are obligated to make interest payments on our indebtedness under the Barings Credit Facility on a monthly basis, commencing on the Closing Date, to pay annual administrative fees of $0.02 million, and to pay, on the Maturity Date, any principal and accrued interest that remains outstanding as of such date. In connection with our borrowing of the full amount under the Barings Credit Facility, we also incurred an upfront fee, paid in the form of an original issue discount, equal to approximately $2.5 million.

Indebtedness under the Barings Credit Facility incurs interest at a Secured Overnight Financing Rate-based rate, subject to a minimum 1.50% floor, plus 6.75%. We may prepay funds drawn under the Barings Credit Facility at any

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time, in accordance with the terms of the Barings Credit Agreement, subject to prepayment fees for funds prepaid (i) on or before the one-year anniversary of the Closing Date, in an amount equal to the interest that would have accrued on such prepaid funds but for the prepayment, at the interest rate in effect as of the such prepayment date, discounted to its present value; (ii) on or before the two-year anniversary of the Closing Date, in an amount equal to 11.3% of principal prepaid; (iii) after the two-year but on or before the three-year anniversary of the Closing Date, in an amount equal to 5.6% of principal prepaid; and (iv) after the three-year anniversary but on or prior to the four-year anniversary of the Closing Date, in an amount equal to 2.8% of principal prepaid. No prepayment fees are required for funds prepaid after the four-year anniversary of the Closing Date.

In addition, we are obligated to pay a fee, which we refer to as the Royalty Fee, in an amount equal to the Total Credit Facility Amount, which amount shall be reduced by the total amount of interest and principal prepayment fees paid under the Barings Credit Agreement. We are required to pay the Royalty Fee in installments to Barings, for the benefit of the lenders, on a quarterly basis in an amount equal to three and one-half percent (3.5%) of the net sales of DEXTENZA occurring during such quarter, subject to the terms, conditions and limitations specified in the Barings Credit Agreement, until the Royalty Fee is paid in full. The Royalty Fee is due and payable upon a change of control of the company. In the event we complete a change of control transaction on or prior to the twelve-month anniversary of the Closing Date, the Royalty Fee is subject to a reduction to an amount that is equal to (i) 20% of the Total Credit Facility Amount, in the event that a signed letter of intent evidencing such change of control transaction was entered into by us on or prior to the date that is six months after the Closing Date and (ii) 30% of the Total Credit Facility Amount, in the event that a signed letter of intent evidencing such change of control transaction was entered into by us after the date that is six months, but before the date that is twelve months, after the Closing Date. We may, at our option, prepay any or all of the Royalty Fee at any time without penalty.

In connection with the Barings Credit Agreement, we granted the lenders a first-priority security interest in all of our assets, including our intellectual property, subject to certain agreed-upon exceptions. The Barings Credit Agreement includes negative covenants restricting us from making payments to the holders of the Convertible Notes except in connection with a proposed conversion to equity and with respect to certain permitted expenses and requiring us to maintain a minimum liquidity amount of $20.0 million. The Barings Credit Agreement also includes customary affirmative and negative covenants including limitations on dispositions, mergers or acquisitions; incurring indebtedness, liens or encumbrances; paying dividends or making distributions; making certain investments; and engaging in certain other business transactions. Our obligations under the Barings Credit Agreement are subject to acceleration upon the occurrence of specified events of default, including a material adverse change in our business, operations or financial or other condition or a breach or default in our obligations under the Convertible Notes. At the election of Barings, the Barings Credit Agreement provides that, following the occurrence and during the continuance of an event of default as defined in the Barings Credit Agreement, our indebtedness under the Barings Credit Facility may bear an interest rate that is 4.00% above the rate that is otherwise applicable.

On the Closing Date, in connection with our entry into the Barings Credit Agreement and establishment of the Barings Credit Facility, we and the holders of the Convertible Notes agreed to amend the Convertible Notes and the accompanying Note Purchase Agreement to, among other things, extend the maturity date of the Convertible Notes until the date that is 91 days following the Maturity Date.

DGCL 204 Ratification

On August 6, 2023, our board of directors adopted resolutions, or the Resolutions, ratifying issuances of certain shares of our common stock to employees pursuant to our 2014 Employee Stock Purchase Plan, or the Plan, pursuant to Section 204 of the General Corporation Law of the State of Delaware, or the Ratification, after it determined that the issuances may not have been duly authorized and effectuated in accordance with the Plan or duly authorized in accordance with Section 152 of the General Corporation Law of the State of Delaware as issuances of shares outside the Plan, or collectively, the Failure of Authorization. The Ratification became effective upon the adoption of the Resolutions on August 6, 2023, or the Validation Effective Time. The following share issuances have been ratified pursuant to the Resolutions: (i) 1,329 shares issued on June 30, 2015, (ii) 1,571 shares issued on December 31, 2015, (iii) 4,182 shares issued on June 30, 2016, (iv) 743 shares issued on December 30, 2016, (v) 525 shares issued on June 30, 2017, (vi) 6,870 shares issued on December 29, 2017, (vii) 930 shares issued on June 29, 2018, (viii) 11,648 shares issued on December 31, 2018, (ix) 13,154 shares issued on June 28, 2019, (x) 2,485 shares issued on December 31, 2019, (xi) 15,290 shares issued on June 30, 2020, (xii) 3,314 shares issued on December 31, 2020, (xiii) 10,798 shares issued on June 30, 2021, (xiv) 30,475 shares issued on December 31, 2021, (xv) 48,230 shares issued on June 30, 2022,

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and (xvi) 36,790 shares issued on December 30, 2022. Any claim that the defective corporate acts or putative stock ratified in the Resolutions are void or voidable due to the Failure of Authorization, or any claim that the Court of Chancery of the State of Delaware should declare in its discretion that the Ratification not be effective or be effective only on certain conditions, must be brought within 120 days from the later of the Validation Effective Time or the date of the filing of this Quarterly Report on Form 10-Q.

Item 6. Exhibits.

The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the following Exhibit Index.

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Exhibit Index

Incorporated by Reference

Exhibit
Number

    

Description of Exhibit

    

Form

    

File Number

    

Date of Filing

    

Exhibit Number

    

Filed Herewith

10.1

Amendment No. 2 to Fourth Amended and Restated Credit and Security Agreement, dated May 4, 2023, by and among MidCap Financial Trust, as administrative agent, the Registrant, and the Lenders listed therein.

X

10.2

2021 Stock Incentive Plan, as amended

X

10.3

Third Amendment to Lease, by and between the Registrant and Cobalt PropCo 2020, LLC, dated June 30, 2023.

8-K

001-36554

7/7/2023

10.1

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

32.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document)

X

101.SCH

Inline XBRL Taxonomy Extension Schema Document

X

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

X

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Database

X

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

X

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Incorporated by Reference

Exhibit
Number

    

Description of Exhibit

    

Form

    

File Number

    

Date of Filing

    

Exhibit Number

    

Filed Herewith

10.1

2021 Stock Incentive Plan, as amended

X

10.2

Consulting Agreement by and between the Registrant and Dr. Michael Goldstein, dated as of June 7, 2022.

X

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

32.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document)

X

101.SCH

Inline XBRL Taxonomy Extension Schema Document

X

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

X

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Database

X

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

X

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

X

104

The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL and contained in Exhibit 101

X

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

    

OCULAR THERAPEUTIX, INC.

Date: August 8, 20227, 2023

By:

/s/ Donald Notman

Donald Notman

Chief Financial Officer

(Principal Financial and Accounting Officer)

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