technology in ophthalmology, as well as rights relating to ENV1105, Envisia’s preclinical dexamethasone steroid product candidate for the treatment
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following management’s discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear elsewhere in this report and with our audited financial statements and related notes and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2020, as filed with the SEC on March 9, 2017February 26, 2021 (“20162020 Form 10-K”). This management’s discussion and analysis contains forward-looking statements that involve risks and uncertainties. Please see “Special Note Regarding Forward-Looking Statements” for additional factors relating to such statements and see “Risk Factors” in our 20162020 Form 10-K and other documents we have filed or furnished with the SEC for a discussion of certain risk factors applicable to our business, financial condition and results of operations. Past operating results are not necessarily indicative of operating results in any future periods.
Overview
We are a clinical-stagean ophthalmic pharmaceutical company focused on the discovery, development and commercialization of first-in-class therapies for the treatment of patients with open-angle glaucoma, ocular surface diseases and other diseases of the eye. retinal diseases.
U.S. Commercial Products
Our strategy is to advancesuccessfully commercialize our product candidates,U.S. Food and Drug Administration (“FDA”) approved products, RhopressaTM® (netarsudil ophthalmic solution) 0.02% (“RhopressaTM®”) and RoclatanTMRocklatan® (netarsudil/latanoprost ophthalmic solution) 0.02%/0.005% (“RoclatanTMRocklatan®”), to regulatory approvalwhich are sold in the United States and commercialize these products ourselves in North American markets. If approved, we plan to build acomprise our glaucoma franchise. We have obtained formulary coverage for Rhopressa® and Rocklatan® for the majority of lives covered under commercial plans and Medicare Part D plans. Our commercial team that will include approximately 100responsible for sales representatives to target approximately 12,000 high prescribingof Rhopressa® and Rocklatan® is targeting eye-care professionals throughout the United States and with the addition of both a contract sales organization and a telesales team, we are able to reach approximately 16,000 eye-care professionals.
| | | | | | | | |
| | Rhopressa® is a once-daily eye drop designed to reduce elevated intraocular pressure (“IOP”) in patients with open-angle glaucoma or ocular hypertension. Rhopressa® is taken in the evening and has shown in preclinical and clinical trials to be effective in reducing IOP, with a favorable safety profile. The active ingredient in Rhopressa®, netarsudil, is an Aerie-owned Rho kinase (“ROCK”) inhibitor. Rhopressa® increases the outflow of aqueous humor through the trabecular meshwork (“TM”), which accounts for approximately 80% of fluid drainage from the healthy eye and is the diseased tissue responsible for elevated IOP in glaucoma. Using this mechanism of action (“MOA”), we believe that Rhopressa® represents the first of a new drug class for reducing IOP in patients with glaucoma in over 20 years. |
| | Rocklatan® is a once-daily fixed-dose combination of Rhopressa® and latanoprost, the most commonly prescribed drug for the treatment of patients with open-angle glaucoma. Rocklatan® is also taken in the evening, and similar to Rhopressa®, has shown in preclinical and clinical trials to be effective in reducing IOP, with a favorable safety profile. Based on our clinical data, we believe that Rocklatan® has the potential to provide a greater IOP-reducing effect than any glaucoma medication currently marketed in the United States. We also believe that Rocklatan® competes with both prostaglandin analog (“PGA”) and non-PGA therapies and may over time become the product of choice for patients requiring maximal IOP reduction, including those with higher IOPs and those who present with significant disease progression despite using currently available therapies. |
Outside the United States
Our strategy also includes developing business opportunities outside of the United States including the successful commercialization of Rhopressa® and Rocklatan® in Europe, Japan and other regions. At present, we have a development and commercialization partner for Japan and certain other Asian countries, and are evaluating potential collaborators for Europe and other regions.
In Europe, Rhokiinsa® (marketed as Rhopressa® in the United States) was granted a Centralised Marketing Authorisation (“Centralised MA”) by the European Commission (“EC”) in November 2019. Roclanda® (marketed as Rocklatan® in the United States) was granted a Centralised MA by the EC in January 2021. In April 2021, Roclanda® received marketing authorisation from the Medicines and Healthcare Products Regulatory Agency (“MHRA”) in Great Britain. As the EC decision was received after the end of the Brexit transition period, we were required to complete a further administrative step in order to obtain authorisation in Great Britain.
We reported positive interim topline 90-day efficacy data in September 2020 for Mercury 3, our Phase 3b clinical trial for Roclanda®, which we believe is important to the execution of our strategy in Europe. As a result of the positive Mercury 3 results and the Roclanda® approval in Europe, discussions are underway with third parties who have expressed interest in a potential commercialization partnership in and potentially beyond Europe, while we are simultaneously preparing on our own for pricing discussions in Germany.
In Japan, we entered into a Collaboration and License Agreement (the “Santen Agreement”) with Santen Pharmaceuticals Co., Ltd. (“Santen”) in October 2020 to advance our clinical development and ultimately commercialize Rhopressa® and Rocklatan® in Japan and eight other countries in Asia. We initiated a now fully enrolled Rhopressa® Phase 3 clinical trial in December 2020, the first of three expected Phase 3 clinical trials in Japan. The trial is expected to be completed by the end of 2021 and topline results are expected to be reported shortly thereafter. Clinical trials for Rocklatan® in Japan have not yet begun.
Glaucoma Product Manufacturing
We have a sterile fill production facility in Athlone, Ireland, for the production of our FDA approved products and clinical supplies with the goal of having the Athlone manufacturing plant supply our ophthalmic products in all markets for which we received regulatory approval and are commercialized. The Athlone manufacturing plant began manufacturing commercial supplies of Rocklatan® in the first quarter of 2020 and Rhopressa® in the third quarter of 2020 for distribution to the United States. Shipments of commercial supply of Rocklatan®and Rhopressa®from the Athlone manufacturing plant to the United States commenced in the third quarter of 2020 and in the fourth quarter of 2020, respectively. The Athlone manufacturing plant has also manufactured clinical supplies of Rhopressa® for the Phase 3 clinical trials in Japan. As the Athlone manufacturing plant commenced operations in early 2020, it has not yet reached full capacity. We areexpect that the Athlone manufacturing plant will have adequate capacity to produce Rhopressa® and Rocklatan® in the United States as well as for both the European and Japanese commercial markets, if approved for commercial distribution in those markets. We expect that in 2021 the Athlone manufacturing plant will manufacture most of our ongoing needs for Rhopressa® and Rocklatan® in the United States. We may continue to use contract manufacturers to produce commercial supplies of Rhopressa® and Rocklatan® for distribution in the United States, but at reduced levels compared to before the Athlone manufacturing plant was operational.
Product Candidates and Pipeline
Our strategy also includes enhancing our longer-term commercial potential by identifying and advancing additional product candidates and drug delivery technologies, including through our internal discovery efforts, andour entry into potential research collaborations or in-licensing arrangements or acquisitionsour acquisition of additional ophthalmic products or technologies or product candidates that would complement our current product portfolio, including our recent collaboration with DSM whereby we have access to their bio-erodible polymer technology, and our acquisition of assets from Envisia Therapeutics Inc. (“Envisia”), designed to advance our progress in developing product candidates to treat retinal diseases, as discussed below.portfolio.
Our strategy also includes developing our business outside of North America, including obtaining regulatory approval in Europe and Japan on our own forAR-15512 is our product candidates. In 2015, we revised our corporate structure to align with our business strategy outside of North America by establishing Aerie Pharmaceuticals Limited, a wholly-owned subsidiary (“Aerie Limited”), and Aerie Pharmaceuticals Ireland Limited, a wholly-owned subsidiary (“Aerie Ireland Limited”). We assigned the beneficial rights to our non-U.S. and non-Canadian intellectual property for our lead product candidates to Aerie Limited (the “IP Assignment”). As part of the IP Assignment, we and Aerie Limited entered into a research and development cost-sharing agreement pursuant to which we and Aerie Limited will share the costs of the development of intellectual property and Aerie Limited and Aerie Ireland Limited entered into a license arrangement pursuant to which Aerie Ireland Limited will develop and commercialize the beneficial rights of the intellectual property assigned as part of the IP Assignment. In 2016, we assigned the beneficial rights to certain of our intellectual property in the U.S. and Canada to Aerie Distribution, Inc., a wholly-owned subsidiary (“Aerie Distribution”), and amended and restated the research and development cost-sharing agreement to transfer our rights and obligations under the agreement to Aerie Distribution.
In January 2017, we announced that we are building a new manufacturing plant in Athlone, Ireland, although we will continue to use product sourced from our current contract manufacturer based in the U.S. This will be our first manufacturing plant, expected to produce commercial supplies of our current product candidates, RhopressaTMand RoclatanTM. If we obtain regulatory approval, commercial product supply from the plant is expected to be available by 2020. We are also in the process of adding a second contract manufacturer, which we expect to produce commercial supply by as early as the end of 2018.
Product Candidate Overview
Our two advanced-stage product candidates are designed to lower intraocular pressure (“IOP”) in patients with open-angle glaucoma or ocular hypertension. Both product candidates are taken once-daily in the evening and have shown in preclinical and clinical trials to be effective in lowering IOP, with novel mechanisms of action (“MOAs”) and a favorable safety profile.
We own the worldwide rights to all indications for our current Aerie product candidates. Our intellectual property portfolio contains patents and pending patent applications related to composition of matter, pharmaceutical compositions, methods of use, and synthetic methods. We have patent protection for our current product candidates, RhopressaTM and RoclatanTM, in the United States through at least 2030.
RhopressaTM
Our first product candidate RhopressaTM,is a novel once-daily eye drop designed to lower IOP in patients with glaucoma or ocular hypertension. We are developing RhopressaTM as the first of a new class of compounds that is designed to lower IOP in patients through novel MOAs. We believe that, if approved, RhopressaTM will represent the first new MOAs for lowering IOP in patients with glaucoma in over 20 years. Based on preclinical studies and clinical data to date, we expect that RhopressaTM, if approved, will have the potential to compete with non-prostaglandin analogue products as a preferred adjunctive therapy to prostaglandin analogues (“PGAs”), due to its targeting of the diseased tissue known as the trabecular meshwork (“TM”), its demonstrated IOP-lowering ability across tested baselines with once-daily dosing, its potential synergistic effect with PGA products, and its lack of drug-related serious or systemic adverse events. Adjunctive therapies currently represent approximately one-half of the entire glaucoma therapy market in the United States, according to IMS. In addition, if approved, we believe that RhopressaTM may also potentially become a preferred therapy where PGAs are contraindicated, for patients who do not respond to PGAs and for patients who choose to avoid the cosmetic issues associated with PGA products. Also, in a 24-hour, 12-patient pilot study comparing RhopressaTM efficacy to that of placebo, RhopressaTM demonstrated similar levels of IOP lowering during nocturnal and diurnal periods. This is potentially a further differentiating feature of RhopressaTM when considering that currently marketed products have demonstrated little or no efficacy at night and eye pressure is typically highest when patients are asleep.
We resubmitted our New Drug Application (“NDA”) with the U.S. Food and Drug Administration (“FDA”) for RhopressaTMon February 28, 2017. Our initial submission, announced in September 2016, was withdrawn as a result of a contract manufacturer of our drug product not being prepared for pre-approval inspection by the FDA. The NDA submission included our second Phase 3 registration trial for RhopressaTM, named “Rocket 2,” as the pivotal clinical trial and our initial Phase 3 registration trial, named “Rocket 1,” as supportive in nature. Our Rocket 2 trial achieved its primary efficacy endpoint of demonstrating non-inferiority of RhopressaTM compared to timolol. In addition, the 12-month safety data from this registration trial also confirmed a favorable safety profile for the drug and demonstrated a consistent IOP-lowering effect throughout the 12-month period at the specified measurement time points. We also included as supportive data the 90-day efficacy resultstreatment of our Rocket 4 and Mercury 1 trials, each as further discussed below, with the NDA submission for RhopressaTM.
Our fourth Phase 3 registration trial for RhopressaTM, named “Rocket 4,” in the U.S., was designed to generate adequate six-month safety data for European regulatory approval,dry eye disease for which we expect to fileinitiated a now fully enrolled Phase 2b clinical trial named COMET-1 in October 2020. A topline readout is expected later in the second halfthird quarter of 2018. The six-month safety2021. Furthermore, we are developing three sustained-release implants focused on retinal diseases, AR-1105, AR-13503 SR and efficacy data were largely consistent with observations in the other RhopressaTMAR-14034 SR, and a ROCK inhibitor-linked-steroid, AR-6121. For AR-1105, we successfully completed a large Phase 3 registration trials and the 90-day efficacy results achieved the primary efficacy endpoint of demonstrating non-inferiority of RhopressaTM compared to timolol. A third Phase 3 registration trial for RhopressaTM, named “Rocket 3,” was a 12-month safety-only study in Canada. We have commenced Phase 1 and 2 clinical trial activitiesfor patients with macular edema due to retinal vein occlusion (“RVO”) in July 2020, which indicates sustained efficacy of up to six months, an important achievement in validating the potential capabilities of Aerie’s sustained release platform. With respect to future plans for AR-1105, we continue to have discussions with regulatory agencies in order to finalize the most efficient and effective Phase 3 pathway and continue to evaluate next steps regarding clinical and regulatory pathways for Phase 3 clinical trials along and commercialization prospects in both Europe and the United States relating to pursuing regulatory approval of RhopressaTM in Japan, andStates. We expect to initiate thestart Phase 3 clinical trialstrial activities for AR-1105 in the fourth quarter of 2017.
The RhopressaTM Phase 3 registration trial results have shown minimal drug-related serious adverse events or drug-related systemic adverse events, with the most common adverse event reported being conjunctival hyperemia, or eye redness, with incidence rates of approximately 50% across all Phase 3 registration trials for RhopressaTM, the majority of which was reported as mild.
On October 13, 2017, the FDA held an advisory committee meeting to discuss the RhopressaTM NDA. The advisory committee voted in favor of RhopressaTM regarding (a) whether the clinical trials supported the efficacy of RhopressaTM for reducing elevated IOP in patients with open-angle glaucoma or ocular hypertension and (b) whether the efficacy outweighs the safety risk. The FDA is not bound by the advice of the advisory committee, but takes the advice into consideration when reviewing investigational medicines. The Prescription Drug User Fee Act (“PDUFA”) goal date for the completion of the FDA’s review of the RhopressaTM NDA is set for February 28, 2018, which reflects a standard 12-month review period.
RoclatanTM
Our second product candidate is once-daily RoclatanTM, a fixed-dose combination of RhopressaTM and latanoprost. We believe, based on our preclinical studies and clinical trials to date, that RoclatanTM, if approved, will be the only glaucoma product that covers the full spectrum of currently known IOP-lowering MOAs, giving it the potential to provide a greater IOP-lowering effect than any currently marketed glaucoma product. Therefore, we believe that RoclatanTM, if approved, could compete with both PGA and non-PGA therapies for patients requiring maximal IOP lowering, including those with higher IOPs and those who present with significant disease progression despite currently available therapies.
We recently completed two Phase 3 registration trials for RoclatanTM. The first Phase 3 registration trial for RoclatanTM, named “Mercury 1,” was a 12-month safety trial with a 90-day efficacy readout. Mercury 1 achieved its primary efficacy endpoint of demonstrating superiority of RoclatanTM to each of its components. The safety and tolerability results for RoclatanTM from the 90-day efficacy period of Mercury 1 showed no drug-related serious adverse events or drug-related systemic adverse events. On July 19, 2017, we announced the results of the Mercury 1 12-month safety study, noting the safety results for RoclatanTM for the 12-month period were consistent with those observed for the 90-day efficacy period. There were no new adverse events that developed over the 12-month period, and there were no drug-related serious or systemic adverse events.
The second Phase 3 registration trial for RoclatanTM, named “Mercury 2,” was a 90-day efficacy and safety trial also designed to demonstrate superiority of RoclatanTM to each of its components. The Mercury 2 trial design was identical to that of Mercury 1, except that Mercury 2 was a 90-day trial without the additional nine-month safety extension included in Mercury 1. Both Mercury 1 and Mercury 2 achieved their 90-day primary efficacy endpoints of demonstrating statistical superiority over each of its components, including RhopressaTM and market-leading PGA, latanoprost, at all measured time points. The superiority of RoclatanTM over its components was consistently in the range of 1 to 3 mmHg (millimeters of mercury). We are permitted to submit the RoclatanTM NDA while the RhopressaTM NDA is still being reviewed by the FDA. We expect to submit an NDA for RoclatanTM in the second quarter of 2018.
Mercury 1 and Mercury 2 will also be used for European approval of RoclatanTM, and2021. For AR-13503 SR, we initiated a third Phase 3 registration trial for RoclatanTM, named “Mercury 3,”first in-human clinical safety study in Europe during the third quarter of 2017. Mercury 3 is designed to compare RoclatanTM to Ganfort®, a fixed-dose combination product of bimatoprost and timolol marketed in Europe, which if successful, is expected to improve our commercialization prospects in that region.
Pipeline Opportunities
Our stated objective is to build a major ophthalmic pharmaceutical company. In addition to our primary product candidates, RhopressaTM and RoclatanTM, we plan to continue exploring the benefits of RhopressaTM on 24-hour IOP lowering, normal tension glaucoma, as well antifibrotic effects on the diseased TM. We are also evaluating possible uses of our existing proprietary portfolio of Rho kinase inhibitors beyond glaucoma. Our owned preclinical small molecule, AR-13154, has demonstrated the potential2019 for the treatment of wet age-related macular degeneration (“AMD”(age-related macular degeneration, “AMD”) by inhibiting Rho kinase and Protein kinase C and has shown lesion size decreases in an in vivo preclinical model of wet AMD at levels similar to the current market-leading wet AMD anti-VEGF product, and even greater lesion size reduction in combination with the current market-leading wet AMD anti-VEGF product. Further, in our preclinical studies, we have seen a promising potential of this molecule to reduce neovascularization in a model of proliferative diabetic retinopathy. Pending additional studies, the active metabolite of AR-13154 and related molecules may have the potential to provide an entirely new mechanism and pathway to treat wet AMD and other diseases of the retina, such as diabetic macular edema (“DME”). This molecule has not yet been tested in humans in a clinical trial setting.
, which is currently ongoing. We have and may continuecurrently expect to enter into research collaboration arrangements, license, acquire or develop additional product candidates and technologies to broaden our presence in ophthalmology, and we continually explore and discuss potential additional opportunitiescomplete the dose escalation safety evaluation with the current implant design for new ophthalmic products, delivery alternatives and new therapeutic areas with potential partners. We are currently focused on the evaluation of technologies for the delivery of our owned molecules to the front and back of the eye over sustained periods.
On July 31, 2017, we announced that we entered into a collaborative research, development and licensing agreement with DSM, a global science-based company headquarteredAR-13503 SR in the Netherlands. The research collaboration agreement includes an option to license DSM’s bio-erodible polymer implant technology for evaluating its application to the deliveryfirst quarter of certain Aerie compounds, initially focused on retinal diseases. This technology uses polyesteramide polymers to produce an injectable, thin fiber that is minute in size. Preclinical experiments have demonstrated early success in conjunction with AR-13154, including demonstration of linear, sustained elution rates over several months and achievement of target retinal drug concentrations.2022.
On October 4, 2017, we acquired from Envisia the rights to use PRINT® technology in ophthalmology and certain other assets. The PRINT® technology is a proprietary system capable of creating precisely engineered sustained release products utilizing fully-scalable manufacturing processes. Our initial focus will be in using PRINT® to manufacture injectable implants containing AR-13154, potentially in conjunction with the biodegradable polymer from DSM. In addition, we acquired Envisia’s intellectual property rights relatingare also working to ENV1105, Envisia’sadvance our preclinical dexamethasone steroidsustained-release retinal implant, AR-14034 SR, and our preclinical ROCK inhibitor-linked-steroid, AR-6121. Investigational New Drug Application (“IND”) enabling preclinical studies are ongoing for AR-14034 SR and underway for AR-6121. We anticipate filing an IND for AR-14034 SR and AR-6121 with the FDA in the second half of 2022, respectively.
We discovered and developed the active ingredient in Rhopressa® and Rocklatan®, netarsudil, and AR-13503 through a rational drug design approach that coupled medicinal chemistry with high content screening of compounds in proprietary cell-based assays. We selected and formulated netarsudil for preclinical in vivo testing following a detailed characterization of over 3,000 synthesized ROCK inhibitors, a number that has since grown to approximately 4,000.
Impact of the COVID-19 Pandemic
In December 2019, there was an outbreak of a new strain of coronavirus (“COVID-19”) and on March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and workforce participation due to “shelter-in-place” restrictions by various governments worldwide and created significant volatility and disruption of financial markets.
The health and safety of our employees, patients, prescribers and community are of utmost importance during this time and we are complying with all requirements and mandates from various agencies and governments. We have taken precautionary measures to protect our employees and our stakeholders and adapted company policy to maintain the continuity of our business. We have continued to operate effectively as most of our manufacturing plant personnel are working at the manufacturing plant with precautionary measures in place, while the balance of our workforce has started to return to the office in accordance with state and local mandates or continues to primarily work from home.
We continue to see eye-care professionals’ offices returning to full capacity and are using traditional in-person office meetings to remain in contact with eye-care professionals. We have seen a majority of eye-care professionals’ offices back to pre-COVID-19 capacity. For those eye-care professionals’ offices that are operating at reduced capacity, we are using a combination of in-person and virtual tools and resources to remain in contact with eye-care professionals. Furthermore, Aerie territory managers are experiencing successful engagement with eye-care professionals through traditional face-to-face office meetings or, when necessary, virtual resources. Our sales force is interactively communicating with physicians via different technological platforms and local peer-to-peer educational meetings are primarily being implemented via webinars when in-person meetings are not available.
Many geographic communities have resumed in-person speaker programs, while adhering to strict national guidelines with social distancing, as appropriate. As part of the support of the eye-care community, our territory managers are either delivering or arranging for delivery of product candidatesamples to the eye-care professionals’ offices when needed.
Given the easing of certain COVID-19 restrictions during the second quarter of 2021, in accordance with state and local government mandates, traditional face-to-face office meetings and in-person peer-to-peer education meetings have increased. We expect that this will continue through the second half of 2021 provided that there are no additional restrictions from state and local government. Further, with the addition of a contract sales organization and a separate telesales team we are able to reach approximately 16,000 eye-care professionals.
We have not observed any disruptions to date in the supply chain for the treatmentproduction of DME, which also utilizesRhopressa® and Rocklatan®. We believe we have approximately three years of starting materials and active pharmaceutical ingredient (“API”) in inventory, and adequate supply of finished product on hand to support our commercial efforts for at least the PRINTnext six months. Production of Rhopressa® technology. and Rocklatan® is continuing.
Financial Overview
Our cash, cash equivalents and investments totaled $282.2$188.3 million as of SeptemberJune 30, 20172021. We believe that our cash, cash equivalents and are currently expected toinvestments and projected cash flows from revenues will provide sufficient resources for our current ongoing needs.needs through at least the next twelve months, though there may be need for additional financing activity as we continue to grow. See “—Liquidity and Capital Resources” below and Note 10 to our condensed consolidated financial statements included in this report for further discussion.
We have incurred net losses since our inception in June 2005. To date,Until 2018, when we have not generatedcommenced commercial operations, our business activities were primarily limited to developing product revenuecandidates, raising capital and performing research and development activities. As of June 30, 2021, we do nothad an accumulated deficit of $1,159.8 million. We recorded net losses of $38.7 million and $80.7 million for the three and six months ended June 30, 2021. For the three and six months ended June 30, 2020 we recorded net losses of $48.2 million and $97.3 million. Our capital resources and business efforts are largely focused on activities relating to the commercialization of Rhopressa® and Rocklatan®, advancing our product candidates and pipeline, global expansion and operating our manufacturing plant in Athlone, Ireland.
We expect to incur operating losses until such a time when Rhopressa® or Rocklatan® or any current or future product candidates, if approved, generate sufficient cash flows for us to achieve profitability. Accordingly, we may be required to obtain further funding through debt or equity offerings or other sources. Adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on acceptable terms, we may be forced to delay, reduce or eliminate our research and development programs or commercialization or manufacturing efforts.
Product Revenues, Net
Rhopressa® and Rocklatan®, our glaucoma franchise products, were launched in the United States in April 2018 and May 2019, respectively. We commenced generating product revenues from sales of Rhopressa® and Rocklatan® during the second quarter of 2018 and 2019, respectively. Product affordability for the patient drives consumer acceptance, and this is generally managed through coverage by third-party payers, such as government or private healthcare insurers and pharmacy benefit managers (“Third-party Payers”) and such product may be subject to rebates and discounts payable directly to those Third-party Payers. Our product revenues are recorded net of provisions relating to estimates for (i) trade discounts and allowances, such as discounts for prompt payment and distributor fees, (ii) estimated rebates to Third-party Payers, estimated payments for Medicare Part D prescription drug program coverage gap (commonly called the “donut hole”), patient co-pay program coupon utilization, chargebacks and other discount programs and (iii) reserves for expected product returns. These estimates reflect current contractual and statutory requirements, known market events and trends, industry data, forecasted customer mix and lagged claims. Actual amounts may ultimately differ from these estimates. If actual results vary, estimates may be adjusted in the period such change in estimate becomes known, which may have an impact on earnings in the period of adjustment.
We will not generate any revenue from any product candidates or future product candidates unless and until we obtain regulatory approval and commercialize such products.
Cost of Goods Sold
Cost of goods sold consists of direct and indirect costs to procure and manufacture product sold, including third-party manufacturing costs. Prior to receiving FDA approval, these costs for Rhopressa®and successfully commercialize one or moreRocklatan® were expensed as pre-approval commercial manufacturing expenses (as defined below). We began capitalizing inventory costs for Rhopressa® and Rocklatan® after receipt of our current product candidates. Our operationsFDA approval. In January 2020 and September 2020, we received FDA approval to date have primarily been limitedproduce Rocklatan® and Rhopressa®, respectively, at the Athlone manufacturing plant for commercial distribution in the United States. Shipments of commercial supply of Rocklatan® from the Athlone manufacturing plant to research and development and raising capital. Asthe United States commenced in the third quarter of September 30, 2017, we had an accumulated deficit2020. The Athlone manufacturing plant has manufactured clinical supplies of $403.2 million. We recorded net losses of $32.4 million and $86.6 millionRhopressa® for the threePhase 3 clinical trials in Japan and nine months ended September 30, 2017, respectively.has commenced shipping commercial supply of Rhopressa® to the United States in the fourth quarter of 2020. Production costs related to idle or underutilized capacity at the manufacturing plant in Athlone, Ireland, are not included in the cost of inventory but are charged directly to cost of goods sold on the condensed consolidated statements of operations and comprehensive loss in the period incurred. We recorded net lossesexpect cost of $23.8 million and $69.7 million for the three and nine months ended September 30, 2016, respectively. A substantial portion of our capital resources and efforts are focused on completing the development and obtaining regulatory approval and preparing for potential commercialization and manufacturing of our product candidates. As a result, we expectgoods sold in 2021 to continue to incur significant operating losses until suchbe unfavorably impacted by idle capacity costs due to the underutilization at the Athlone manufacturing plant as a result of the Athlone manufacturing plant having become operational in early 2020 and not yet reaching full capacity. We expect the underutilization to continue to have an unfavorable impact on cost of goods sold that will decrease over time when our product candidates are commercially successful, if at all. If we do not successfully commercialize any of our current product candidates, we may be unable to generate product revenue or achieve profitability.as the manufacturing plant reaches full capacity.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of employee-related expenses, including salaries, benefits and stock-based compensation for all officers and employees in general management, sales and marketing, finance and administration. Other significant expenses include pre-approval commercial-related manufacturing costs, pre-launch salesselling and marketing planning activities,expenses, facilities expenses, shipping and handling costs and professional fees for audit, tax, legal and other services.
We expect that our selling, generalPre-approval Commercial Manufacturing Expenses
Pre-approval commercial manufacturing expenses consist of costs incurred for commercial-related manufacturing activities for Rhopressa® and administrative expenses will increase with the continued advancement of our product candidates as we prepare for potential commercialization. We expect these increases will likely beRocklatan® prior to FDA approval. These costs include those associated with the hiringmanufacturing of additional employeesinventory in areas such as sales and marketing, and medical affairs, along with increased levelsanticipation of manufacturing activity and overheadcommercial launch, expenses associated with the growthestablishment of both our employee base.manufacturing plant in Athlone, Ireland, and our additional API and drug product contract manufacturers as well as employee-related expenses, which includes salaries, benefits and stock-based compensation for commercial-related manufacturing personnel prior to regulatory approval.
We obtained regulatory approval to produce Rocklatan® and Rhopressa® in January 2020 and September 2020, respectively, in our Athlone, Ireland plant for commercial distribution in the United States as well as approval for our additional drug product
contract manufacturers during early 2020. We do not expect any material pre-approval commercial manufacturing expenses in 2021.
Research and Development Expenses
The following table shows ourWe expense research and development (“R&D”) expenses for our advanced-stage product candidates for the three and nine months ended September 30, 2017 and 2016:
|
| | | | | | | | | | | | | | | |
| THREE MONTHS ENDED SEPTEMBER 30, | | NINE MONTHS ENDED SEPTEMBER 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
| (in thousands) |
RhopressaTM
| $ | 1,887 |
| | $ | 3,004 |
| | $ | 4,230 |
| | $ | 10,929 |
|
RoclatanTM
| 1,809 |
| | 4,920 |
| | 8,160 |
| | 12,211 |
|
Other research and development activities | 491 |
| | 183 |
| | 725 |
| | 1,290 |
|
Unallocated | 8,221 |
| | 4,581 |
| | 20,862 |
| | 13,871 |
|
Total research and development expense | $ | 12,408 |
| | $ | 12,688 |
| | $ | 33,977 |
| | $ | 38,301 |
|
We expense R&D costs to operations as incurred. OtherResearch and development expenses consist primarily of costs incurred for the research and development activities include direct costs associated with collaboration arrangementsof our preclinical and pipeline activities,clinical candidates, including our ongoing preclinical activities. Expenses relating to activities that support more than oneemployee-related expenses for research and development program or activity such as employee-related costs, including stock-based compensation, facilities expenses and depreciation expense for assets used in R&D are not allocated to specific product or potential product candidates and are separately classified as “unallocated.”
personnel.
Other (Expense) Income, (Expense), Net
Other (expense) income, (expense)net primarily includes investment income, interest expense, andinterest income, foreign exchange gains and losses. Investmentlosses and other income and expense. Interest expense consists of interest expense under the 1.50% convertible senior notes due 2024 (the “Convertible Notes”), including the amortization of debt discounts and issuance costs incurred. Interest income primarily consists of interest earned on our cash, and cash equivalents and investments,investments. See “—Liquidity and amortization or accretion of discountsCapital Resources” below and premiums onNote 10 to our investments. Interest expense consists of interest expense under the 2014 Convertible Notes, including the amortization of debt discounts and issuance costs.condensed consolidated financial statements included in this report for further discussion. Foreign exchange gains and losses are primarily due to the remeasurement of our Euro-denominated liability related to our build-to-suit lease obligation,liabilities, which isare denominated in a foreign currency and held by a subsidiary with a U.S. dollar functional currency. Also included in other income and expense are changes in the fair value of equity securities.
Critical Accounting Policies and Use of Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States or (“U.S. GAAP.GAAP”). The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses and related disclosures. We evaluate our estimates and judgments on an ongoing basis. Significant estimates include assumptions used in the determination of revenue recognition, leases, acquisitions, stock-based compensation and operating expense accruals.fair value measurements. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value 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 and the methodologies and assumptions we apply under themsignificant estimates have not materially changed since the date we filed our 20162020 Form 10-K. For more information on our critical accounting policies and estimates, refer to our 20162020 Form 10-K.
Results of Operations
Comparison of the Three Months Ended SeptemberJune 30, 20172021 and 20162020
The following table summarizes the results of our operations for the three months ended June 30, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED JUNE 30, | | CHANGE | | % CHANGE |
| 2021 | | 2020 | | |
| (in thousands, except percentages) |
Product revenues, net | $ | 27,185 | | | $ | 18,033 | | | $ | 9,152 | | | 51 | % |
Total revenues, net | 27,185 | | | 18,033 | | | 9,152 | | | 51 | % |
Costs and expenses: | | | | | | | |
Cost of goods sold | 6,177 | | | 7,326 | | | (1,149) | | | (16) | % |
Selling, general and administrative expenses | 34,542 | | | 33,237 | | | 1,305 | | | 4 | % |
Pre-approval commercial manufacturing | — | | | 80 | | | (80) | | | (100) | % |
Research and development expenses | 17,967 | | | 19,943 | | | (1,976) | | | (10) | % |
Total costs and expenses | 58,686 | | | 60,586 | | | (1,900) | | | (3) | % |
Loss from operations | (31,501) | | | (42,553) | | | 11,052 | | | (26) | % |
Other (expense) income, net | (7,169) | | | (5,634) | | | (1,535) | | | 27 | % |
Loss before income taxes | $ | (38,670) | | | $ | (48,187) | | | $ | 9,517 | | | (20) | % |
Product revenues, net
Product revenues, net were $27.2 million and $18.0 million for the three months ended June 30, 2021 and 2020, respectively, and related to sales of our U.S glaucoma franchise products, Rhopressa® or Rocklatan®. The year-over-year revenue increase is primarily due to higher volumes and higher net sales per unit, which was mostly attributable to renegotiating wholesaler agreements. In the second quarter of 2020, there was a decline in total prescription volumes, as seen within the entire pharmaceutical market, according to IQVIA data, primarily due to the impact of the COVID-19 pandemic. To the extent that the impact of the COVID-19 pandemic on the pharmaceutical industry continues to be mitigated, we would expect volumes to increase for the remainder of 2021.
Cost of goods sold
Cost of goods sold was $6.2 million and $7.3 million for the three months ended June 30, 2021 and 2020, respectively. Our gross margin percentage was 77.3% and 59.4% for the three months ended June 30, 2021 and 2020, respectively. Our cost of goods sold and gross margin percentage for the three months ended June 30, 2021 and 2020 were unfavorably impacted by idle capacity costs due to underutilization at the Athlone manufacturing plant which increased the cost of goods sold by $3.9 million and $5.0 million and lowered the gross margin percentage by 14.3% and 27.6%, respectively. Our cost of goods sold and gross margin percentage for the three months ended June 30, 2020 were also unfavorably impacted by inventory write-offs, which increased the cost of goods sold by $0.8 million and lowered the gross margin percentage by 4.8%. We expect the underutilization to continue to have an unfavorable impact on cost of goods sold that will decrease over time as the manufacturing plant reaches full capacity. We received FDA approval to produce Rocklatan® and Rhopressa® in January 2020 and September 30, 2017 and 2016:
|
| | | | | | | | | | | | | | |
| THREE MONTHS ENDED SEPTEMBER 30, | | CHANGE | | % CHANGE |
| 2017 | | 2016 | | |
| (in thousands, except percentages) |
Selling, general and administrative | $ | 19,774 |
| | $ | 10,627 |
| | $ | 9,147 |
| | 86 | % |
Research and development | 12,408 |
| | 12,688 |
| | (280 | ) | | (2 | )% |
Total operating expenses | 32,182 |
| | 23,315 |
| | 8,867 |
| | 38 | % |
Loss from operations | (32,182 | ) | | (23,315 | ) | | (8,867 | ) | | 38 | % |
Other income (expense), net | (141 | ) | | (460 | ) | | 319 |
| | (69 | )% |
Net loss before income taxes | $ | (32,323 | ) | | $ | (23,775 | ) | | $ | (8,548 | ) | | 36 | % |
| | | | | | | |
2020, respectively, at the Athlone manufacturing plant for commercial distribution in the United States. Prior to this approval, costs incurred for commercial-related manufacturing activities for both products were recorded to pre-approval commercial manufacturing expenses.Selling, general and administrative expenses
Selling, general and administrative expenses were $34.5 million and $33.2 million for the three months ended June 30, 2021 and 2020, respectively. Selling, general and administrative expenses increased by $9.1$1.3 million primarily due to higher sales and marketing expenses mostly due to higher travel expenses as a result of the easing of COVID-19 related travel restrictions. The increase was partially offset by lower employee-related expenses, including stock-based compensation. To the extent the impact of the COVID-19 pandemic on the pharmaceutical industry continues to be mitigated, we expect a continued increase of selling, general and administrative expenses to pre-COVID-19 levels, primarily due to an increase of sales and marketing expenses as well as travel expenses.
Pre-approval commercial manufacturing expenses
Pre-approval commercial manufacturing expenses were zero and $0.1 million for the three months ended June 30, 2021 and 2020, respectively. We received regulatory approval in January 2020 and September 2020 to produce Rocklatan® and Rhopressa®, respectively, at our Athlone manufacturing plant. The cost of Rocklatan®and Rhopressa®produced by the Athlone manufacturing plant for commercial distribution following regulatory approval was capitalized as inventory or expensed to cost of goods sold. Further, we received regulatory approval for our additional Rocklatan® drug product contract manufacturer, which began to supply commercial product in the first quarter of 2020. The cost of commercial Rocklatan® produced by the additional contract manufacturer following regulatory approval was capitalized as inventory. We do not expect any material pre-approval commercial manufacturing expenses for the remainder of 2021.
Research and development expenses
Research and development expenses were $18.0 million and $19.9 million for the three months ended June 30, 20172021 and 2020, respectively. Research and development expenses decreased by $2.0 million primarily due to a decline of $2.2 million in expenses associated with Rocklatan®, due to lower costs related to the Mercury 3 registration trial in Europe and a decrease of $1.3 million related to the timing of the development of our retina programs, primarily AR-13503. Employee-related expenses, including stock-based compensation, were also lower for the three months ended June 30, 2021 as compared to the three months ended SeptemberJune 30, 2016. This increase was primarily associated with the expansion of our employee base and preparatory commercial operations and manufacturing activities. 2020.
Employee-related expenses increasedThese decreases were offset by $3.6a $1.9 million including an increase in salaries and other employee-related expenses of $2.0 million due to increased headcount and an increase in stock-based compensation of $1.6 million.
Total costs related to preparatory commercial operations and manufacturing were approximately $4.5 millionfor Rhopressa® for the three months ended SeptemberJune 30, 2017, an increase of $2.7 million2021 as compared to the three months ended SeptemberJune 30, 2016, and included scale-up2020, driven by ongoing costs for Rhopressa® Phase 3 clinical trial in Japan. Santen’s portion of our current manufacturing activities. Certain of our direct preparatory commercial operations and manufacturing activities are recognized in selling, general and administrative expenses untilsuch time when we determine suchshared costs should be capitalized as saleable inventory. Expenses related to our pre-launch sales and marketing planning activities increased by $1.1 million forconducting the first Rhopressa® Phase 3 clinical trial in Japan were recorded as deferred revenue, non-current on the condensed consolidated balance sheets. In addition, travel expenses were higher as a result of the easing of COVID-19 related travel restrictions.
Furthermore, costs related to the AR-15512 Phase 2b clinical trial were essentially flat during the three months ended SeptemberJune 30, 20172021 as compared to the three months ended SeptemberJune 30, 2016. In addition, professional fees increased by $0.8 million, primarily due2020 as these clinical trial costs began to consulting fees for compliance-related activitieswind down, and legal fees to support the growthaccordingly, were not a significant driver of our operations.
Researchresearch and development expensesexpense during this quarter. A topline readout of the clinical trial is expected in the third quarter of 2021.
Research and development expenses decreasedOther (expense) income, net
Other (expense) income, net consists of the following: | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED JUNE 30, | | CHANGE |
| 2021 | | 2020 | |
| (in thousands) |
Interest income | $ | 33 | | | $ | 524 | | | $ | (491) | |
Interest expense | (7,122) | | | (6,513) | | | (609) | |
Other (expense) income | (80) | | | 355 | | | (435) | |
Other (expense) income, net | $ | (7,169) | | | $ | (5,634) | | | $ | (1,535) | |
Other (expense) income, net changed by $0.3$1.5 million for the three months ended SeptemberJune 30, 20172021 compared to the three months ended June 30, 2020.
This change was primarily due to a decrease of $0.5 million in interest income on our cash, cash equivalents and investments and a change of $0.4 million in other (expense) income during the three months ended June 30, 2021 as compared to the three months ended SeptemberJune 30, 2016. During the three months ended September 30, 2016, our research and development activity was primarily associated with Phase 3 registration trials for RhopressaTM and RoclatanTM. The Phase 3 registration trials for both RhopressaTM and RoclatanTM have been completed for purposes of applying for FDA approval in the U.S. As such, R&D costs for RoclatanTM and RhopressaTMdecreased2020.
Further, interest expense, which increased by $3.1$0.6 million and $1.1 million, respectively, for the three months ended SeptemberJune 30, 2017 as 2021compared to the three months ended June 30, 2020, relates to interest expense under the Convertible Notes issued in September 30, 2016. Unallocated expenses increased by $3.6 million primarily driven by increased employee-related expenses,2019, including stock-based compensation.the amortization of debt discounts and issuance costs incurred.
Comparison of the NineSix Months Ended SeptemberJune 30, 20172021 and 20162020
The following table summarizes the results of our operations for the ninesix months ended June 30, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | |
| SIX MONTHS ENDED JUNE 30, | | CHANGE | | % CHANGE |
| 2021 | | 2020 | | |
| (in thousands, except percentages) |
Product revenues, net | $ | 50,155 | | | $ | 38,374 | | | $ | 11,781 | | | 31 | % |
Total revenues, net | 50,155 | | | 38,374 | | | 11,781 | | | 31 | % |
Costs and expenses: | | | | | | | |
Cost of goods sold | 12,877 | | | 13,418 | | | (541) | | | (4) | % |
Selling, general and administrative expenses | 67,140 | | | 70,139 | | | (2,999) | | | (4) | % |
Pre-approval commercial manufacturing | — | | | 2,194 | | | (2,194) | | | (100) | % |
Research and development expenses | 35,858 | | | 39,116 | | | (3,258) | | | (8) | % |
Total costs and expenses | 115,875 | | | 124,867 | | | (8,992) | | | (7) | % |
Loss from operations | (65,720) | | | (86,493) | | | 20,773 | | | (24) | % |
Other (expense) income, net | (14,883) | | | (10,856) | | | (4,027) | | | 37 | % |
Loss before income taxes | $ | (80,603) | | | $ | (97,349) | | | $ | 16,746 | | | (17) | % |
Product revenues, net
Product revenues, net were $50.2 million and $38.4 million for the six months ended June 30, 2021 and 2020, respectively, and related to sales of our U.S glaucoma franchise products, Rhopressa® or Rocklatan®. The year-over-year revenue increase is primarily due to higher volumes and higher net sales per unit, which was mostly attributable to renegotiating wholesaler agreements. In the second quarter of 2020, there was a decline in total prescription volumes, as seen within the entire pharmaceutical market, according to IQVIA data, primarily due to the impact of the COVID-19 pandemic. To the extent that the impact of the COVID-19 pandemic on the pharmaceutical industry continues to be mitigated, we would expect volumes to increase for the remainder of 2021.
Cost of goods sold
Cost of goods sold was $12.9 million and $13.4 million for the six months ended June 30, 2021 and 2020, respectively. Our gross margin percentage was 74.3% and 65.0% for the six months ended June 30, 2021 and 2020, respectively. Our cost of goods sold and gross margin percentage for the six months ended June 30, 2021 and 2020 were unfavorably impacted by idle capacity costs due to underutilization at the Athlone manufacturing plant which increased the cost of goods sold by $8.3 million and $8.5 million and lowered the gross margin percentage by 16.5% and 22.2%, respectively. Our cost of goods sold and gross margin percentage for the six months ended June 30, 2020 were also unfavorably impacted by inventory write-offs, which increased the cost of goods sold by $2.3 million and lowered the gross margin percentage by 6.1%. We expect the underutilization to continue to have an unfavorable impact on cost of goods sold that will decrease over time as the manufacturing plant reaches full capacity. We received FDA approval to produce Rocklatan® and Rhopressa® in January 2020 and September 30, 2017 and 2016:
|
| | | | | | | | | | | | | | |
| NINE MONTHS ENDED SEPTEMBER 30, | | CHANGE | | % CHANGE |
| 2017 | | 2016 | | |
| (in thousands, except percentages) |
Selling, general and administrative | $ | 51,402 |
| | $ | 29,814 |
| | $ | 21,588 |
| | 72 | % |
Research and development | 33,977 |
| | 38,301 |
| | (4,324 | ) | | (11 | )% |
Total operating expenses | 85,379 |
| | 68,115 |
| | 17,264 |
| | 25 | % |
Loss from operations | (85,379 | ) | | (68,115 | ) | | (17,264 | ) | | 25 | % |
Other income (expense), net | (1,071 | ) | | (1,490 | ) | | 419 |
| | (28 | )% |
Net loss before income taxes
| $ | (86,450 | ) | | $ | (69,605 | ) | | $ | (16,845 | ) | | 24 | % |
| | | | | | | |
2020, respectively, at the Athlone manufacturing plant for commercial distribution in the United States. Prior to this approval, costs incurred for commercial-related manufacturing activities for both products were recorded to pre-approval commercial manufacturing expenses.Selling, general and administrative expenses
Selling, general and administrative expenses increased by $21.6were $67.1 million and $70.1 million for the ninesix months ended SeptemberJune 30, 2017 as compared to the nine months ended September 30, 2016. This increase was primarily associated with the expansion of our employee base2021 and preparatory commercial operations2020, respectively. Selling, general and manufacturing activities.
Employee-relatedadministrative expenses increaseddecreased by $9.0 million, including an increase in stock-based compensation expense of $4.7 million and an increase in salaries and other employee-related expenses of $4.3 million due to increased headcount.
Expenses related to our preparatory commercial operations and manufacturing activities were approximately $9.3 million for the nine months ended September 30, 2017, an increase of $5.6 million as compared to the nine months ended September 30, 2016, and included scale-up of our current manufacturing activities, as discussed above. Our pre-launch sales and marketing planning activities increased $3.2 million for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, and professional fees increased by $2.1$3.0 million primarily due to consulting feeslower sales and marketing expenses and lower employee-related expenses, including stock-based compensation, partially offset by higher travel expenses as a result of the easing of COVID-19 related travel restrictions. To the extent the impact of the COVID-19 pandemic on the pharmaceutical industry continues to be mitigated, we expect an increase of selling, general and administrative expenses to pre-COVID-19 levels, primarily due to an increase of sales and marketing expenses as well as travel expenses.
Pre-approval commercial manufacturing expenses
Pre-approval commercial manufacturing expenses were zero and $2.2 million for compliance-related activitiesthe six months ended June 30, 2021 and legal fees2020, respectively. We received regulatory approval in January 2020 and September 2020 to supportproduce Rocklatan® and Rhopressa®,
respectively, at our Athlone manufacturing plant. The cost of Rocklatan®and Rhopressa®produced by the growthAthlone manufacturing plant for commercial distribution following regulatory approval was capitalized as inventory or expensed to cost of goods sold. Further, we received regulatory approval for our operations.
additional Rocklatan® drug product contract manufacturer, which began to supply commercial product in the first quarter of 2020. The cost of commercial Rocklatan® produced by the additional contract manufacturer following regulatory approval was capitalized as inventory. We do not expect any material pre-approval commercial manufacturing expenses for the remainder of 2021.
Research and development expenses
Research and development expenses decreased by $4.3were $35.9 million and $39.1 million for the ninesix months ended SeptemberJune 30, 20172021 and 2020, respectively, and decreased by $3.3 million for the six months ended June 30, 2021 as compared to the ninesix months ended SeptemberJune 30, 2016. During2020.
A significant part of our program expenses in the ninesix months ended SeptemberJune 30, 2016, our research and development activity was primarily associated with2021 related to the AR-15512 Phase 3 registration trials for RhopressaTM and RoclatanTM. The Phase 3 registration trials for both RhopressaTM and RoclatanTM have been completed for purposes of applying for FDA approval in the U.S. As such, R&D costs for RhopressaTM and RoclatanTMdecreased2b clinical trial which increased by $6.7$3.1 million and $4.1 million, respectively, for the nine months ended September 30, 2017 as compared to the ninesix months ended SeptemberJune 30, 2016. Unallocated2020. A topline readout of the clinical trial is expected in the third quarter of 2021.
Furthermore, expenses for Rhopressa® for the six months ended June 30, 2021 increased by $7.0$3.1 million primarilycompared to the six months ended June 30, 2020, driven by increasedongoing costs for Rhopressa® Phase 3 clinical trial in Japan. Santen’s portion of shared costs related to conducting the first Rhopressa® Phase 3 clinical trial in Japan were recorded as deferred revenue, non-current on the condensed consolidated balance sheets.
These increases were offset by a decline of $3.4 million in expenses associated with Rocklatan®, due to lower costs related to the Mercury 3 registration trial in Europe and a decrease of $3.2 million related to the timing of the development of our retina programs, primarily AR 13503 SR. In addition, employee-related expenses, including stock-based compensation.compensation, decreased by $2.7 million for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 and travel expenses were lower as a result of the easing of COVID-19 related travel restrictions.
Other (expense) income, net
Other (expense) income, net consists of the following: | | | | | | | | | | | | | | | | | |
| SIX MONTHS ENDED JUNE 30, | | CHANGE |
| 2021 | | 2020 | |
| (in thousands) |
Interest income | $ | 84 | | | $ | 1,620 | | | $ | (1,536) | |
Interest expense | (14,023) | | | (12,888) | | | (1,135) | |
Other (expense) income | (944) | | | 412 | | | (1,356) | |
Other (expense) income, net | $ | (14,883) | | | $ | (10,856) | | | $ | (4,027) | |
Other (expense) income, net changed by $4.0 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.
This change was primarily due to a decrease of $1.5 million in interest income on our cash, cash equivalents and investments and a change of 1.4 million in other (expense) income during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The change in other (expense) income primarily consists of $1.0 million in realized loss on equity securities sold as of March 31, 2021.
Further, interest expense, which increased by $1.1 million for the six months endedJune 30, 2021 compared to the six months ended June 30, 2020, relates to interest expense under the Convertible Notes issued in September 2019, including the amortization of debt discounts and issuance costs incurred.
Liquidity and Capital Resources
Since our inception, we have funded operations primarily through the sale of equity securities and the issuance of convertible notes. In addition, we generate cash flow from product revenues related to sales of our glaucoma franchise products,
Rhopressa® and Rocklatan®, in the United States. Further, we entered into the Santen Agreement, pursuant to which Santen paid a $50.0 million upfront payment to Aerie Ireland Limited (the “Upfront Payment”).
We have incurred losses and experienced negative operating cash flows since our inception and anticipate that we will continue to incur losses until such a time when our current products and any future products, if commercialized, generate adequate revenues to render us profitable. We will not generate any revenue from any product candidates are commercially successful, if at all.or future product candidates unless and until we obtain regulatory approval and commercialize such products.
Sources of Liquidity
PriorOur product revenue, net amounted to our initial public offering (“IPO”), we raised net cash proceeds of $78.6$27.2 million fromfor the private placement of convertible preferred stock and convertible notes. Priorsix months ended June 30, 2021, which relate to and in connection with our IPO, all outstanding shares of convertible preferred stock and all convertible notes were converted into shares of common stock. On October 30, 2013, we completed our IPO and raised net proceeds of approximately $68.3 million, after deducting underwriting discounts, fees and expenses.
Since our IPO, we have issued:
$125.0 million aggregate principal amount of senior secured convertible notes (the “2014 Convertible Notes”), for which we received net proceeds of approximately $122.9 million, after deducting discounts and certain expenses of $2.1 million, and
10.8 million sharessales of our common stock through Septemberglaucoma franchise products, Rhopressa® and Rocklatan®. Accounts receivable, net amounted to $59.2 million as of June 30, 2017, for which we received net proceeds of approximately $339.5 million, after deducting commissions and other fees and expenses. This includes $195.9 million raised from “at-the-market” sales agreements, of which $49.3 million in net proceeds was raised during the nine months ended September 30, 2017. Additionally, we raised net proceeds of $143.6 million from the issuance of shares of our common stock pursuant to underwriting agreements, of which approximately $72.7 million was raised during the nine months ended September 30, 2017.2021.
As of SeptemberJune 30, 2017,2021, our principal sources of liquidity were our cash, cash equivalents and investments, which totaled approximately $282.2$188.3 million. In September 2019, we issued an aggregate principal amount of $316.25 million of Convertible Notes. See Note 10 to our condensed consolidated financial statements included in this report for additional information. Further, in October 2020, we entered into the Santen Agreement. Pursuant to the Santen Agreement, Santen paid the $50.0 million Upfront Payment in the fourth quarter of 2020. See Note 3 to our condensed consolidated financial statements included in this report for additional information. We believe that our cash, cash equivalents and investments and projected cash flows from revenues will provide sufficient resources for our current ongoing needs through at least the next twelve months. See “—Operating Capital Requirements.”
Cash Flows
The following table summarizes our sources and uses of cash:
| | | | | | | | | | | |
| SIX MONTHS ENDED JUNE 30, |
| 2021 | | 2020 |
| (in thousands) |
Net cash (used in) provided by: | | | |
Operating activities | $ | (50,194) | | | $ | (64,693) | |
Investing activities | (21,395) | | | 73,212 | |
Financing activities | (25) | | | (1,160) | |
Net change in cash and cash equivalents | $ | (71,614) | | | $ | 7,359 | |
|
| | | | | | | |
| NINE MONTHS ENDED SEPTEMBER 30, |
| 2017 | | 2016 |
| (in thousands) |
Net cash (used in) provided by: | | | |
Operating activities | $ | (67,063 | ) | | $ | (60,994 | ) |
Investing activities | (59,594 | ) | | 14,015 |
|
Financing activities | 122,790 |
| | 167,857 |
|
Net change in cash and cash equivalents | $ | (3,867 | ) | | $ | 120,878 |
|
Operating Activities
During the ninesix months ended SeptemberJune 30, 2017 and 2016,2021, net cash used in operating activities was $67.1of $50.2 million related to a net loss of $80.7 million, adjusted for non-cash items of $36.2 million primarily related to stock-based compensation expense, amortization and $61.0accretion and depreciation, partially offset by a net cash outflow of $5.7 million respectively. related to changes in operating assets and liabilities. During the six months June 30, 2020, net cash used in operating activities of $64.7 million related to a net loss of $97.3 million, adjusted for non-cash items of $37.3 million primarily related to stock-based compensation expense, amortization and accretion, depreciation, offset by a net cash outflow of $4.6 million related to changes in operating assets and liabilities.
The increasedecrease in net cash used in operating activities during the ninesix months ended SeptemberJune 30, 20172021 as compared to the ninesix months ended SeptemberJune 30, 20162020 was primarily due to the expansion of our employee basehigher net cash collections generated from product revenues and commercial operationslower sales and manufacturing activities in preparation for the launch of RhopressaTM, assuming FDA approval. This is partially offset by a reduction in expenditures for clinical trials in 2017 compared to 2016.marketing spend.
Investing Activities
During the ninesix months ended SeptemberJune 30, 2017, our2021, net cash used in investing activities used net cash of $59.6$21.4 million primarily related to purchases of available-for-sale investments of $101.2$73.0 million and purchases of fixed assetsproperty, plant and equipment of $7.1$1.4 million primarily associated withrelated to the build-out of our manufacturing plant in Ireland. These purchases wereAthlone, Ireland partially offset by sales and maturities of available-for-sale investments of $48.7$53.0 million. During the ninesix months ended SeptemberJune 30, 2016, our2020, net cash provided by investing activities provided net cash of approximately $14.0$73.2 million primarily related to sales and maturities of available-for-sale investments of $35.4$118.4 million which were partially offset by purchases of available-for-sale investments of $19.9 million.$43.5
million and purchases of property, plant and equipment of $1.7 million primarily related to the manufacturing plant in Athlone, Ireland.
Financing Activities
During the ninesix months ended SeptemberJune 30, 2017 and 2016, our2021, net cash used in financing activities provided net cash of $122.8 millionwas immaterial and $167.9 million, respectively. The net cash provided by financing activities for the nine months ended September 30, 2017 and 2016 was primarily related to thetax payments made on employees’ behalf through withholding of shares on restricted stock grants partially offset by proceeds from issuance and sale of common stock pursuant to our “at-the-market” sales agreementsupon exercise of stock purchase rights and underwriting agreement from which we received total net proceeds of approximately $122.0 million and $167.4 million duringstock options. During the ninesix months ended SeptemberJune 30, 2017 and 2016, respectively.2020, net cash used in financing activities of $1.2 million primarily related to tax payments made on employees’ behalf through withholding of shares on restricted stock grants.
Operating Capital Requirements
We expect to incur ongoing operating losses until such a time when ourRhopressa®, Rocklatan®, Rhokiinsa® or Roclanda® or any product candidates are commercially successful,or future product candidates, if at all. approved, generate sufficient cash flows for Aerie to achieve profitability.
Our principal liquidity requirements are for: working capital; future increased operational expenses; pre-commercialization planningoperating expenses, including for commercialization and manufacturing activities; expenses associated with developing our pipeline opportunities, including pursuing strategic growth opportunities; costs associated with executing our global expansion strategy, to expand into Europeincluding clinical and Japan;potential commercialization activities outside the United States; contractual obligations; and capital expenditures, including completing our manufacturing plant in Ireland; and debt service payments.expenditures.
In January 2017, we entered into a lease agreement for a new manufacturing plant in Ireland under which we are leasing approximately 30,000 square feet of interior floor space for build-out. Estimated project-wide equipment, construction and other related project costs are expected to total approximately $39 million (excluding ongoing labor-related and lease expenses and the potential impact of foreign exchange rate fluctuations), of which approximately $16 million is expected to be spent in 2017.
We believe that our cash, and cash equivalents and investments as of September 30, 2017and projected cash flows from revenues, will provide sufficient resources to support our operations, including interest payments for our Convertible Notes, through at least the expected approval and planned commercialization of RhopressaTMandRoclatanTMin the U.S.next twelve months.
Our future funding requirements will depend on many factors, including, but not limited to the following:
•commercial performance of Rhopressa® and Rocklatan® or any current or future product candidates, if approved, including any effects associated with the COVID-19 pandemic;
•costs of commercialization activities for Rhopressa® and Rocklatan® and any current or future product candidates, if approved;
•costs of building inventory to support sales growth and other associated working capital needs;
•costs, timing and outcome of seeking regulatory approval;
the costs of commercialization activities for our product candidates, if we receive regulatory approval, including the costs and timing of establishing product sales, marketing, manufacturing and distribution capabilities;
the commercial performance of our future product candidates;
•timing and costs of our ongoing and future clinical trials and preclinical studies and clinical trials forincluding those related to our product candidates outside of the U.S.;global expansion;
costs to complete our new manufacturing plant in Ireland;
•costs of any follow-on development or products, including the exploration and/or development of any additional indications or additional opportunities for new ophthalmic products,product candidates, delivery alternatives and new therapeutic areas;
costs of any new business strategies;
costs of operating as a public company, including legal, compliance, accounting and investor relations expenses;
•terms and timing of any acquisitions, collaborations, licensing, consulting or other arrangements;
•costs related to the Convertible Notes; and
•costs related to filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against intellectual property related claims.
We based our projections on assumptions that may prove to be incorrect or unreliable or may change due to circumstances beyond our control, and as a result, we may consume our available capital resources earlier than we originally projected. WeAccordingly, we may needbe required to obtain additional financing to fund our future operationsfurther funding through debt or we may decide, based on various factors, that additional financings are desirable.equity offerings or other sources. If such funding is required, we cannot guarantee that it will be available to us on favorable terms, if at all.
Outstanding Indebtedness
As ofIn September 30, 2017, our total indebtedness consisted of our $125.0 million2019, we issued an aggregate principal amount of 2014$316.25 million of Convertible Notes.
The Convertible Notes are senior, unsecured obligations with interest payable semi-annually in cash in arrears at a rate of 1.50% per annum on April 1 and October 1 of each year, which began on April 1, 2020. The Convertible Notes will mature on October 1, 2024 unless they are due in September 2021. For a discussionredeemed, repurchased or converted prior to such date. Prior to April 1, 2024, the Convertible Notes will be convertible at the option of holders only during certain periods and upon satisfaction of certain conditions. On and after April 1, 2024, the Convertible Notes will be convertible at the option of the 2014holders any time until the close of business on
the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Convertible Notes seemay be settled in shares of our common stock, cash or a combination, thereof, at our election. We currently intend to settle the principal and interest amounts of the Convertible Notes in cash.
See Note 710 to our condensed consolidated financial statements included in this report.report for additional information.
Contractual Obligations and Commitments
The following table summarizesThere have been no material changes to our contractual obligations at September 30, 2017:and commitments as included in our 2020 Form 10-K.
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| | | | | | | | | | | | | | | | | | | |
| TOTAL | | LESS THAN 1 YEAR | | 1 TO 3 YEARS | | 3 TO 5 YEARS | | MORE THAN 5 YEARS |
(in thousands) | |
Lease obligations(1) | $ | 14,620 |
| | $ | 2,478 |
| | $ | 5,946 |
| | $ | 3,896 |
| | $ | 2,300 |
|
2014 Convertible Notes(2) | 125,000 |
| | — |
| | — |
| | 125,000 |
| | — |
|
| $ | 139,620 |
| | $ | 2,478 |
| | $ | 5,946 |
| | $ | 128,896 |
| | $ | 2,300 |
|
| |
(1) | Our lease obligations are primarily related to our principal executive office in Irvine, California, corporate offices in Bedminster, New Jersey, and Dublin, Ireland, and our research facility in Durham, North Carolina. Additionally, in January 2017, we entered into a lease agreement for a new manufacturing plant in Athlone, Ireland, under which we are leasing approximately 30,000 square feet of interior floor space for build-out. We are permitted to terminate the lease agreement beginning in September 2027. Obligations denominated in foreign currencies have been translated to U.S. dollars at the foreign exchange rates in effect at September 30, 2017. |
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(2) | On September 30, 2014, we issued the 2014 Convertible Notes, which mature on the seventh anniversary from the date of issuance, unless earlier converted. Refer to Note 7 to our condensed consolidated financial statements included in this report for further information. |
In October 2017, we entered into an Asset Purchase Agreement (the “Agreement”) with Envisia pursuant to which we made an upfront cash payment of $10.5 million and issued 263,146 shares of Aerie’s common stock valued at approximately $14.3 million. Under the terms of the Agreement, we may also be required to make additional milestone payments contingent upon the achievement of regulatory approval. Contingent milestone payments are excluded from the table above as the timing in which we may be required to make such payments in the future, if at all, is highly uncertain. We have no other contractual obligations or commitments that are not subject to our existing financial statement accrual processes.
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 under SEC rules.None.
Jumpstart Our Business Startups Act of 2012
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) provides that an emerging growth company can take advantage of certain exemptions from various reporting and other requirements that are applicable to public companies that are not emerging growth companies. We currently take advantage of some, but not all, of the reduced regulatory and reporting requirements that are available to us for as long as we qualify as an emerging growth company. We have irrevocably elected under Section 107 of the JOBS Act not to take advantage of the extension of time to comply with new or revised financial accounting standards available under Section 102(b) of the JOBS Act and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting for as long as we qualify as an emerging growth company.
We may take advantage of these exemptions until we are no longer an “emerging growth company.” We would cease to be an “emerging growth company” upon the earliest of: (i) December 31, 2018; (ii) the last day of the first fiscal year in which our annual gross revenues are $1.07 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or (iv) as of the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year.
Since the market value of our common stock held by non-affiliates exceeded $700 million as of June 30, 2017, as of the year ending December 31, 2017, we will cease to be an “emerging growth company.” As a result, beginning with our Annual Report on Form 10-K for the year ending December 31, 2017, we will be subject to Section 404(b) of the Sarbanes-Oxley Act, which requires that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting.
Recent Accounting Pronouncements
For a discussion of recently issued accounting standards, see Note 2 to our condensed consolidated financial statements included in this report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We have market risk exposure to interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. Our cash, and cash equivalents as of September 30, 2017, totaled $194.1 million and consisted of cash and money market funds. Our investments totaled $88.2 million as of September 30, 2017 and consisted of commercial paper and corporate bonds. We had cash, cash equivalents and investments of $233.7totaled $188.3 million and $240.4 million as of June 30, 2021 and December 31, 2016.2020, respectively. Given the short-term nature of our cash, cash equivalents and investments, and our investment policy,we do not believe that a sudden change in market interest rates would not be expected to have a material impact on our financial condition or results of operations. We do not currently engage in any hedging activities against changes in interest rates. The 2014 Convertible Notes carry a fixed interest rate and, as such, are not subject to interest rate risk.
Aerie willWe face market risks attributable to fluctuations in foreign currency exchange rates and exposure on the remeasurement of foreign currency-denominated monetary assets or liabilities into U.S. dollars. In particular, our operations and subsidiary in Ireland may enter into certain obligations or transactions in Euros or other foreign currencies but has a U.S. dollar functional currency. We currently do not currently have any derivative instruments or a foreign currency hedging program. To date and during the ninesix months ended SeptemberJune 30, 2017,2021, foreign currency exposure and foreign currency financial instruments have not been material.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officerprincipal executive officer and Chief Financial Officer,principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)), as of the end of the period covered by this report. Based upon the evaluation, the Chief Executive Officerprincipal executive officer and Chief Financial Officerprincipal financial officer concluded that, as of SeptemberJune 30, 2017,2021, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file andor submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officerprincipal executive officer and Chief Financial Officer,principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management 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 benefits of possible controls and procedures relative to their costs.
Changes in Internal Control Over Financial Reporting
There have beenwere no significant changes in our internal control over financial reporting during our most recent fiscalthe quarter ended June 30, 2021 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We may periodically become subject to legal proceedings and claims arising in connection with our business. We are not a party to any known litigation, are not aware of any material unasserted claims and do not have contingency reserves established for any litigation liabilities.
Item 1A. Risk Factors
You should consider carefully the risks described below and set forth under “Risk Factors” in our 20162020 Form 10-K, and other documents that we have filed or furnished with the SEC. Except as set forth below, there have been no material changes to these risk factors.
AsHealthcare law and policy changes may negatively impact our business, including by decreasing the prices that we and our collaborators receive for our products.
In recent years, the United States has enacted or proposed legislative and regulatory actions and executive orders affecting the healthcare system that may impact our ability to profitably sell any product for which we obtain marketing approval. For example, the federal government has implemented reforms to government healthcare programs in the United States, including changes to the methods for, and amounts of, December 31, 2017, we will no longer be an “emerging growth company”Medicare reimbursement and aschanges to the Medicaid Drug Rebate Program. The implementation of certain of these policy changes has decreased our revenues and increased our costs, and federal and state legislatures, health agencies and third-party payers continue to focus on containing the cost of prescription drugs. Further legislative and regulatory changes, and increasing pressure from social sources, are likely to further influence the manner in which our products are priced, reimbursed, prescribed and purchased.
The Trump administration put forth a result, we will havenumber of proposals aimed at containing prescription drug prices and announced several Executive Orders that sought to comply with increased disclosure and governance requirements.
Asimplement a resultnumber of the significant increase in our market capitalization asadministration's proposals. For example, on November 20, 2020, the United States Department of June 30, 2017, we will ceaseHealth and Human Services finalized a regulation removing safe harbor protection under the Federal Anti-Kickback Statute for price reductions from pharmaceutical manufacturers to be an “emerging growth company” as definedplan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law or unless it is passed through to the dispensing pharmacy and reflected in the JOBS Act as of December 31, 2017. We will, as of December 31, 2017, be a large accelerated filer and, as such, will be subjectprice to certain requirements that apply to other public companies but did not previously apply to us due to our status as an emerging growth company. These requirements include:
the provisions of Section 404(b)patient. The implementation of the Sarbanes-Oxley Act requiring thatrule has been delayed by the Biden administration to January 1, 2023 in response to ongoing litigation. Further, in November 2020, the Centers for Medicare & Medicaid Services issued an interim final rule implementing the Trump administration's Most Favored Nation Executive Order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries. While the implementation of the interim final rule is currently enjoined, the Biden administration and Congress are expected to propose policies intended to reduce the prices of prescription drugs. Also, in the current climate, price increases on our independent registered public accounting firm provide an attestation report on the effectivenessproducts and negative publicity regarding drug pricing and price increases generally could negatively affect market acceptance, and sales, of our internalproducts and product candidates.
Also, some states have enacted or are considering legislation and ballot initiatives that would control over financial reporting;the prices and coverage and reimbursement levels of drugs, including laws to allow importation of pharmaceutical products from lower cost jurisdictions outside the United States and laws intended to impose price controls on state drug purchases.
In addition, governments in countries outside the requirement to provide detailed compensation discussionUnited States control the costs of pharmaceuticals. Many European countries and analysis in proxy statementsCanada have established pricing and reports filed underreimbursement policies that contain costs by referencing the Exchange Act; and
the “say on pay” provisions (requiring a non-binding stockholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding stockholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations)price of the Dodd-Frank Act and somesame or similar products in other countries. In these instances, if coverage or the level of reimbursement is reduced, limited or eliminated in one or more countries, we may be unable to obtain or maintain anticipated pricing or reimbursement in other countries or in new markets. This may influence our decision whether to sell a product in one or more countries, thus adversely affecting our geographic expansion plans. It is also possible that governments may take additional action to reform the healthcare system in response to the evolving effects of the disclosure requirements ofcoronavirus pandemic.
Healthcare reforms that have been adopted, and that may be adopted in the Dodd-Frank Act relating to compensation of its chief executive officer.
Beginning with our Annual Report on Form 10-K for the year ending December 31, 2017, we will be subject to Section 404(b) of the Sarbanes-Oxley Act, which requires that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting. Compliance with Section 404 will be expensive and time consuming for management andfuture, could result in further reductions in coverage and levels of reimbursement for our products, increases in the detection of internal control deficiencies of whichrebates payable under U.S. government rebate programs and additional downward pressure on the prices that we are currently unaware. Moreover, if we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis, and our financial statements maycollaborators receive for our products. We cannot be certain as to the ultimate content, timing, or effect of future healthcare law and policy changes, nor is it possible at this time to estimate the impact of any such potential changes; however, such changes or the ultimate impact of changes could materially misstated. Weand adversely affect our revenue or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading pricesales of our common stock to fall. We expect that the losscurrent and or potential future products and product candidates, as well as those of “emerging growth company” status and compliance with the additional requirements will substantially increase our legal and financial compliance costs and make some activities more time consuming and costly.collaborators.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Use of Proceeds from Registered Securities
On November 3, 2014, we filed a shelf registration statement on Form S-3 (the “2014 Registration Statement”) that permitted the offering, issuance and sale by us of up to a maximum aggregate offering price of $150.0 million of our common stock and permits sales of common stock by certain selling stockholders.
On September 15, 2016, we filed a shelf registration statement on Form S-3 (Registration No. 333-213643), which was effective on September 15, 2016. The shelf registration statement permits the offering, issuance and sale by us of our common stock. In addition, on May 25, 2017, we filed a prospectus supplement to the base prospectus dated September 15, 2016 (the “2017 Prospectus Supplement”). The prospectus supplement permits the offering, issuance and sale by us of up to a maximum aggregate offering price of $50.0 million of our common stock.
From November 10, 2014 through September 30, 2017, we issued and sold 6,840,570 shares of common stock under our “at-the-market” sales agreements, of which 906,858 shares were issued and sold during the nine months ended September 30, 2017, and received net proceeds of approximately $195.9 million, of which $49.3 million were received during the nine months ended September 30, 2017, in each case, after deducting commissions and other fees and expenses. Sales under the “at-the-market” sales agreements were made pursuant to the 2014 Registration Statement, the prospectus supplement (the “2016 Prospectus Supplement”), dated September 15, 2016, to the base prospectus dated September 15, 2016 and the 2017 Prospectus Supplement. As of September 30, 2017, no shares remain available for issuance under the 2014 Registration Statement, the 2016 Prospectus Supplement or the 2017 Prospectus Supplement.
Any remaining net proceeds from these sales are held as cash deposits and in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
Item 6. Exhibits
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31.1* | | |
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31.2* | | |
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32.1*** | | |
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32.2*** | | |
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10.1101.INS*** | | |
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101.INS** | | XBRL Instance Document. |
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101.SCH*** | | XBRL Taxonomy Extension Schema Document. |
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101.CAL*** | | XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.LAB*** | | XBRL Taxonomy Extension Label Linkbase Database. |
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101.PRE*** | | XBRL Taxonomy Extension Presentation Linkbase Document. |
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101.DEF*** | | XBRL Taxonomy Extension Definition Linkbase Document. |
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104*** | | Cover Page Interactive Data File |
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*** | Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): |
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| (i) Condensed Consolidated Balance Sheets at SeptemberJune 30, 20172021 and December 31, 20162020 (unaudited), (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and ninesix months ended SeptemberJune 30, 20172021 and 20162020 (unaudited), (iii) Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020 (unaudited), (iv) Condensed Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20172021 and 20162020 (unaudited) and (iv)(v) Notes to Condensed Consolidated Financial Statements (unaudited). |
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.
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| | | | AERIE PHARMACEUTICALS, INC. |
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Date: November 9, 2017August 5, 2021 | | | | /s/ RICHARD J. RUBINOCHRISTOPHER STATEN |
| | | | Richard J. RubinoChristopher Staten |
| | | | Interim Chief Financial Officer |
| | | | (Principal Financial and Accounting Officer) |