UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20212022
or
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-36152
Aerie Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
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Delaware | | 20-3109565 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
4301 Emperor Boulevard, Suite 400
Durham, North Carolina 27703
(919) 237-5300
(Address of principal executive offices, zip code and telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, par value $0.001 per share | | AERI | | Nasdaq Global Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: ☒ No: ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes: ☒ No: ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | | ☒ | | Accelerated filer | ☐ |
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Non-accelerated filer | | ☐ | | Smaller reporting company | ☐ |
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Emerging growth company | | ☐ | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 29, 2021,2022, there were 46,893,28948,622,987 shares of the registrant’s common stock, par value $0.001 per share, outstanding.
TABLE OF CONTENTS
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Unless otherwise indicated or the context requires, the terms “Aerie,” “Company,” “we,” “us” and “our” refer to Aerie Pharmaceuticals, Inc. and its subsidiaries. References to “products” mean products approved by the U.S. Food and Drug Administration (“FDA”) or other regulatory authorities; references to “product candidates” mean products that are in development but not yet approved by the FDA or other regulatory authorities; and references to “future product candidates” mean products that have not yet been developed.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may, in some cases, use terms such as “predicts,” “believes,” “potential,” “proposed,” “continue,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “would,” “could,” “might,” “will,” “should,” “exploring,” “pursuing” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements.
Forward-looking statements appear in a number of places throughout this report and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things:
•the broad impact of the coronavirus (“COVID-19”) pandemic on our business;
•the sales of Rhopressa® (netarsudil ophthalmic solution) 0.02% (“Rhopressa®”) or of Rocklatan® (netarsudil and latanoprost ophthalmic solution) 0.02%/0.005% (“Rocklatan®”), in the United States, and the potential future sales in the United States of any product candidates or future product candidates, if approved;
•the potential future sales in jurisdictions outside of the United States of Rhopressa®, named Rhokiinsa® (netarsudil ophthalmic solution) 0.02% (“Rhokiinsa®”) in Europe, or Rocklatan®, named Roclanda® (netarsudil and latanoprost ophthalmic solution) 0.02%/0.005% (“Roclanda®”) in Europe, or their equivalents, and those of any product candidates or future product candidates;
•our commercialization, marketing, manufacturing and supply management capabilities and strategies in and outside of the United States;
•third-party payer coverage and reimbursement for our products, and product candidates and any future product candidates, if approved;
•the glaucoma patient market size and the rate and degree of market adoption of our products, and product candidates and any future product candidates, if approved, by eye-care professionals and patients;
•the timing, cost or other aspects of the commercial launch of our products, and product candidates and any future product candidates, if approved;
•the success, timing and cost of our ongoing and anticipated preclinical studies and clinical trials for our product candidates and any future product candidates, including statements regarding the timing of initiation and completion of the studies and trials;
•our expectations regarding the effectiveness of our products, product candidates and any future product candidates and our expectations regarding the results of any clinical trials and preclinical studies;
•the timing of and our ability to request, obtain and maintain FDA or other regulatory authority approval of, or other action with respect to our products, product candidates and any future product candidates in the United States, Europe, Japan and elsewhere, including the expected timing of, and regulatory and/or other review of, filings for such products, product candidates and any future product candidates;
•our expectations related to the use of proceeds from our financing activities;
•our estimates regarding anticipated operating expenses and capital requirements and our needs for additional financing;
•our plans to pursue development of additional product candidates and technologies in ophthalmology, including development of our products or product candidates for additional indications, and our preclinical retinal programs and other therapeutic opportunities;
•the potential advantages of our products, product candidates and any future product candidates;
•our ability to protect our proprietary technology and enforce our intellectual property rights; and
•our expectations regarding existing and future collaborations, licensing, acquisitions and strategic operations, including our ability to in-license or acquire additional ophthalmic products, product candidates or technologies.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics, industry changechanges and other factors beyond our control, and depend on regulatory approvals and economic and other environmental circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. We discuss many of these risks in greater detail under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020,2021, as filed with the Securities and Exchange Commission (“SEC”) on February 26, 2021,25, 2022, and other documents we have filed or furnished with the SEC.
In particular, FDA approval of Rhopressa® and Rocklatan® do not constitute FDA approval of our product candidates or any future product candidates in the United States, and there can be no assurance that we will receive FDA approval for our product candidates or any future product candidates. In addition, the European Commission (“EC”) grant of a Centralised Marketing Authorisation (“Centralised MA”) for Rhokiinsa® and Roclanda® and the receipt of marketing authorization from the Medicines and Healthcare Products Regulatory Agency (“MHRA”) for Roclanda® do not constitute European Medicines Agency (“EMA”) or MHRA approval of our product candidates or any future product candidates in Europe, and there can be no assurance that we will receive EMA or MHRA approval for our product candidates or any future product candidates. FDA, EMA and MHRA approval of Rhopressa® and Rocklatan® do not constitute regulatory approval of these products in jurisdictions outside of the United States or Europe and there is no assurance that we will receive regulatory approval for Rhopressa® and Rocklatan® in such jurisdictions. In addition, the clinical trials discussed in this report are preliminary and the outcome of such clinical trials may not be predictive of the outcome of later clinical trials. Any future clinical trial results may not demonstrate safety and efficacy sufficient to obtain regulatory approval related to the clinical trials findings discussed in this report, and we may suspend or discontinue research programs at any time for any reason.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and liquidity, and events in the industry in which we operate, are consistent with the forward-looking statements contained in this report, they may not be predictive of results or developments in future periods.
In particular, FDA and European Medicines Agency (“EMA”) approval of Rhopressa® and Rocklatan®, and Medicines and Healthcare products Regulatory Agency (“MHRA”) authorization of Roclanda® does not guarantee regulatory approval of Rhopressa®, Rocklatan® or Roclanda® in other jurisdictions, and there can be no assurance that we will receive regulatory approval for Rhopressa®, Rocklatan® or Roclanda® in such other jurisdictions. In addition, FDA approval of Rhopressa® and Rocklatan® does not guarantee FDA approval of our product candidates or any future product candidates and there can be no assurance that we will receive FDA approval for our product candidates or any future product candidates. Furthermore, the acceptance of the Investigational New Drug Applications by the FDA for our product candidates does not guarantee FDA approval of such product candidates and the outcomes of later clinical trials for our product candidates may not be sufficient to submit a New Drug Application (“NDA”) with the FDA or to receive FDA approval. In addition, the clinical trials discussed in this report are preliminary and the outcome of such clinical trials may not be predictive of the outcome of later clinical trials. Any future clinical trial results may not demonstrate safety and efficacy sufficient to obtain regulatory approval related to the clinical trials findings discussed in this report, and we may suspend or discontinue research programs at any time for any reason.
Any forward-looking statements that we make in this report speak only as of the date of this report. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether the result of new information, future events or otherwise, after the date of this report.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AERIE PHARMACEUTICALS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share data)
| | | MARCH 31, 2021 | | DECEMBER 31, 2020 | | MARCH 31, 2022 | | DECEMBER 31, 2021 |
Assets | Assets | | | | Assets | | | |
Current assets | Current assets | | Current assets | |
Cash and cash equivalents | Cash and cash equivalents | $ | 122,695 | | | $ | 151,570 | | Cash and cash equivalents | $ | 56,441 | | | $ | 37,187 | |
Short-term investments | Short-term investments | 85,509 | | | 88,794 | | Short-term investments | 138,807 | | | 102,614 | |
Accounts receivable, net | Accounts receivable, net | 46,150 | | | 56,022 | | Accounts receivable, net | 63,617 | | | 68,828 | |
Inventory | Inventory | 28,324 | | | 27,059 | | Inventory | 40,190 | | | 40,410 | |
Licensing receivable | | Licensing receivable | — | | | 90,000 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | 10,899 | | | 8,310 | | Prepaid expenses and other current assets | 17,911 | | | 16,611 | |
Total current assets | Total current assets | 293,577 | | | 331,755 | | Total current assets | 316,966 | | | 355,650 | |
| Long-term investments | | Long-term investments | 3,985 | | | — | |
Property, plant and equipment, net | Property, plant and equipment, net | 53,283 | | | 54,260 | | Property, plant and equipment, net | 51,226 | | | 51,472 | |
Operating lease right-of-use assets | Operating lease right-of-use assets | 13,241 | | | 14,084 | | Operating lease right-of-use assets | 21,916 | | | 22,669 | |
Other assets | Other assets | 2,627 | | | 1,946 | | Other assets | 1,453 | | | 1,600 | |
Total assets | Total assets | $ | 362,728 | | | $ | 402,045 | | Total assets | $ | 395,546 | | | $ | 431,391 | |
Liabilities and Stockholders’ (Deficit) Equity | Liabilities and Stockholders’ (Deficit) Equity | | | | Liabilities and Stockholders’ (Deficit) Equity | | | |
Current liabilities | Current liabilities | | Current liabilities | |
Accounts payable | Accounts payable | $ | 6,520 | | | $ | 8,826 | | Accounts payable | $ | 7,877 | | | $ | 8,285 | |
Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | 82,792 | | | 90,723 | | Accrued expenses and other current liabilities | 102,950 | | | 112,341 | |
Operating lease liabilities | Operating lease liabilities | 4,052 | | | 4,923 | | Operating lease liabilities | 4,464 | | | 4,365 | |
Total current liabilities | Total current liabilities | 93,364 | | | 104,472 | | Total current liabilities | 115,291 | | | 124,991 | |
Convertible notes, net | Convertible notes, net | 216,088 | | | 210,373 | | Convertible notes, net | 311,678 | | | 234,527 | |
Deferred revenue, non-current | Deferred revenue, non-current | 51,605 | | | 50,858 | | Deferred revenue, non-current | 70,000 | | | 64,315 | |
Long-term operating lease liabilities | 9,914 | | | 10,206 | | |
Operating lease liabilities, non-current | | Operating lease liabilities, non-current | 21,033 | | | 21,751 | |
Other non-current liabilities | Other non-current liabilities | 2,125 | | | 2,168 | | Other non-current liabilities | 3,256 | | | 3,140 | |
Total liabilities | Total liabilities | 373,096 | | | 378,077 | | Total liabilities | 521,258 | | | 448,724 | |
Commitments and contingencies (Note 12) | Commitments and contingencies (Note 12) | 0 | | 0 | Commitments and contingencies (Note 12) | 0 | | 0 |
Stockholders’ (deficit) equity | | |
Preferred stock, $0.001 par value; 15,000,000 shares authorized as of March 31, 2021 and December 31, 2020; NaN issued and outstanding | 0 | | | 0 | | |
Common stock, $0.001 par value; 150,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 46,893,822 and 46,821,644 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | 47 | | | 47 | | |
Stockholders’ deficit | | Stockholders’ deficit | |
Preferred stock, $0.001 par value; 15,000,000 shares authorized as of March 31, 2022 and December 31, 2021; none issued and outstanding | | Preferred stock, $0.001 par value; 15,000,000 shares authorized as of March 31, 2022 and December 31, 2021; none issued and outstanding | — | | | — | |
Common stock, $0.001 par value; 150,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 48,635,700 and 48,444,473 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | | Common stock, $0.001 par value; 150,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 48,635,700 and 48,444,473 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | 48 | | | 48 | |
Additional paid-in capital | Additional paid-in capital | 1,110,714 | | | 1,103,074 | | Additional paid-in capital | 1,016,510 | | | 1,136,656 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (64) | | | (52) | | Accumulated other comprehensive loss | (430) | | | (126) | |
Accumulated deficit | Accumulated deficit | (1,121,065) | | | (1,079,101) | | Accumulated deficit | (1,141,840) | | | (1,153,911) | |
Total stockholders’ (deficit) equity | (10,368) | | | 23,968 | | |
Total liabilities and stockholders’ (deficit) equity | $ | 362,728 | | | $ | 402,045 | | |
Total stockholders’ deficit | | Total stockholders’ deficit | (125,712) | | | (17,333) | |
Total liabilities and stockholders’ deficit | | Total liabilities and stockholders’ deficit | $ | 395,546 | | | $ | 431,391 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
AERIE PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per share data)
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| THREE MONTHS ENDED MARCH 31, | | |
| 2021 | | 2020 | | | | |
Product revenues, net | $ | 22,970 | | | $ | 20,341 | | | | | |
Total revenues, net | 22,970 | | | 20,341 | | | | | |
Costs and expenses: | | | | | | | |
Cost of goods sold | 6,700 | | | 6,092 | | | | | |
Selling, general and administrative | 32,598 | | | 36,902 | | | | | |
Pre-approval commercial manufacturing | 0 | | | 2,114 | | | | | |
Research and development | 17,891 | | | 19,173 | | | | | |
Total costs and expenses | 57,189 | | | 64,281 | | | | | |
Loss from operations | (34,219) | | | (43,940) | | | | | |
Other (expense) income, net | (7,714) | | | (5,222) | | | | | |
Loss before income taxes | (41,933) | | | (49,162) | | | | | |
Income tax expense (benefit) | 31 | | | (33) | | | | | |
Net loss | $ | (41,964) | | | $ | (49,129) | | | | | |
Net loss per common share—basic and diluted | $ | (0.91) | | | $ | (1.07) | | | | | |
Weighted average number of common shares outstanding—basic and diluted | 46,109,080 | | | 45,792,504 | | | | | |
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Net loss | $ | (41,964) | | | $ | (49,129) | | | | | |
Unrealized loss on available-for-sale investments, net | (12) | | | (28) | | | | | |
Comprehensive loss | $ | (41,976) | | | $ | (49,157) | | | | | |
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| THREE MONTHS ENDED MARCH 31, | | |
| 2022 | | 2021 | | | | |
Product revenues, net | $ | 29,835 | | | $ | 22,970 | | | | | |
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Total revenues, net | 29,835 | | | 22,970 | | | | | |
Costs and expenses: | | | | | | | |
Cost of goods sold | 6,780 | | | 6,700 | | | | | |
Selling, general and administrative | 31,524 | | | 32,598 | | | | | |
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Research and development | 25,174 | | | 17,891 | | | | | |
Total costs and expenses | 63,478 | | | 57,189 | | | | | |
Loss from operations | (33,643) | | | (34,219) | | | | | |
Other expense, net | (1,555) | | | (7,714) | | | | | |
Loss before income taxes | (35,198) | | | (41,933) | | | | | |
Income tax expense | 693 | | | 31 | | | | | |
Net loss | $ | (35,891) | | | $ | (41,964) | | | | | |
Net loss per common share—basic and diluted | $ | (0.76) | | | $ | (0.91) | | | | | |
Weighted average number of common shares outstanding—basic and diluted | 47,520,045 | | | 46,109,080 | | | | | |
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Net loss | $ | (35,891) | | | $ | (41,964) | | | | | |
Unrealized loss on available-for-sale investments, net | (304) | | | (12) | | | | | |
Comprehensive loss | $ | (36,195) | | | $ | (41,976) | | | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
AERIE PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
(Unaudited)
(in thousands, except share data)
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| | | COMMON STOCK | | ADDITIONAL PAID-IN CAPITAL | | ACCUMULATED OTHER COMPREHENSIVE LOSS | | ACCUMULATED DEFICIT | | TOTAL |
| | | | | SHARES | | AMOUNT | |
Balances at December 31, 2019 | | | | | 46,464,669 | | | $ | 46 | | | $ | 1,062,996 | | | $ | (92) | | | $ | (896,000) | | | $ | 166,950 | |
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Issuance of common stock upon exercise of stock options and warrants | | | | | 5,811 | | | — | | | 44 | | | — | | | — | | | 44 | |
Issuance of common stock for restricted stock awards, net | | | | | 5,705 | | | — | | | (1,466) | | | — | | | — | | | (1,466) | |
Stock-based compensation | | | | | — | | | — | | | 10,838 | | | — | | | — | | | 10,838 | |
Other comprehensive loss | | | | | — | | | — | | | — | | | (28) | | | — | | | (28) | |
Net loss | | | | | — | | | — | | | — | | | — | | | (49,129) | | | (49,129) | |
Balances at March 31, 2020 | | | | | 46,476,185 | | | $ | 46 | | | $ | 1,072,412 | | | $ | (120) | | | $ | (945,129) | | | $ | 127,209 | |
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| | | COMMON STOCK | | ADDITIONAL PAID-IN CAPITAL | | ACCUMULATED OTHER COMPREHENSIVE LOSS | | ACCUMULATED DEFICIT | | TOTAL |
| | | | | SHARES | | AMOUNT | |
Balances at December 31, 2020 | | | | | 46,821,644 | | | $ | 47 | | | $ | 1,103,074 | | | $ | (52) | | | $ | (1,079,101) | | | $ | 23,968 | |
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Issuance of common stock upon exercise of stock options and warrants | | | | | 62,016 | | | — | | | 26 | | | — | | | — | | | 26 | |
Issuance of common stock for restricted stock awards, net | | | | | 10,162 | | | — | | | (1,127) | | | — | | | — | | | (1,127) | |
Stock-based compensation | | | | | — | | | — | | | 8,741 | | | — | | | — | | | 8,741 | |
Other comprehensive loss | | | | | — | | | — | | | — | | | (12) | | | — | | | (12) | |
Net loss | | | | | — | | | — | | | — | | | — | | | (41,964) | | | (41,964) | |
Balances at March 31, 2021 | | | | | 46,893,822 | | | $ | 47 | | | $ | 1,110,714 | | | $ | (64) | | | $ | (1,121,065) | | | $ | (10,368) | |
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| | | | COMMON STOCK | | ADDITIONAL PAID-IN CAPITAL | | ACCUMULATED OTHER COMPREHENSIVE LOSS | | ACCUMULATED DEFICIT | | TOTAL | | | COMMON STOCK | | ADDITIONAL PAID-IN CAPITAL | | ACCUMULATED OTHER COMPREHENSIVE LOSS | | ACCUMULATED DEFICIT | | TOTAL |
| | | SHARES | | AMOUNT | | | | | TOTAL | AMOUNT | |
Balances at December 31, 2020 | | 46,821,644 | | | $ | 47 | | | $ | 1,103,074 | | | $ | (52) | | | $ | (1,079,101) | | | $ | 23,968 | | |
Balances at December 31, 2021 | | Balances at December 31, 2021 | | 48,444,473 | | | $ | 48 | | | $ | 1,136,656 | | | $ | (126) | | | $ | (1,153,911) | | | $ | (17,333) | |
Cumulative effect adjustment from adoption of ASU 2020-06 | | Cumulative effect adjustment from adoption of ASU 2020-06 | | — | | | — | | | (124,666) | | | — | | | 47,962 | | | (76,704) | |
| Issuance of common stock upon exercise of stock options and warrants | | 62,016 | | | — | | | 26 | | | — | | | — | | | 26 | | |
Issuance of common stock for restricted stock awards, net | Issuance of common stock for restricted stock awards, net | | 10,162 | | | — | | | (1,127) | | | — | | | — | | | (1,127) | | Issuance of common stock for restricted stock awards, net | | 191,227 | | | — | | | (358) | | | — | | | — | | | (358) | |
Stock-based compensation | Stock-based compensation | | — | | | — | | | 8,741 | | | — | | | — | | | 8,741 | | Stock-based compensation | | — | | | — | | | 4,878 | | | — | | | — | | | 4,878 | |
Other comprehensive loss | Other comprehensive loss | | — | | | — | | | — | | | (12) | | | — | | | (12) | | Other comprehensive loss | | — | | | — | | | — | | | (304) | | | — | | | (304) | |
Net loss | Net loss | | — | | | — | | | — | | | — | | | (41,964) | | | (41,964) | | Net loss | | — | | | — | | | — | | | — | | | (35,891) | | | (35,891) | |
Balances at March 31, 2021 | | 46,893,822 | | | $ | 47 | | | $ | 1,110,714 | | | $ | (64) | | | $ | (1,121,065) | | | $ | (10,368) | | |
Balances at March 31, 2022 | | Balances at March 31, 2022 | | 48,635,700 | | | $ | 48 | | | $ | 1,016,510 | | | $ | (430) | | | $ | (1,141,840) | | | $ | (125,712) | |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
AERIE PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
| | | THREE MONTHS ENDED MARCH 31, | | THREE MONTHS ENDED MARCH 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
Cash flows from operating activities | Cash flows from operating activities | | | | Cash flows from operating activities | | | |
Net loss | Net loss | $ | (41,964) | | | $ | (49,129) | | Net loss | $ | (35,891) | | | $ | (41,964) | |
Adjustments to reconcile net loss to net cash used in operating activities | Adjustments to reconcile net loss to net cash used in operating activities | | Adjustments to reconcile net loss to net cash used in operating activities | |
Depreciation | Depreciation | 1,499 | | | 1,591 | | Depreciation | 1,604 | | | 1,499 | |
Amortization and accretion | Amortization and accretion | 7,408 | | | 6,585 | | Amortization and accretion | 2,007 | | | 7,408 | |
Stock-based compensation | Stock-based compensation | 8,749 | | | 10,529 | | Stock-based compensation | 4,632 | | | 8,749 | |
Other non-cash | Other non-cash | 1,116 | | | (39) | | Other non-cash | (50) | | | 1,116 | |
Changes in operating assets and liabilities | Changes in operating assets and liabilities | | Changes in operating assets and liabilities | |
Accounts receivable, net | Accounts receivable, net | 9,872 | | | (4,587) | | Accounts receivable, net | 5,211 | | | 9,872 | |
Inventory | Inventory | (1,052) | | | 1,048 | | Inventory | 538 | | | (1,052) | |
Prepaid, current and other assets | Prepaid, current and other assets | (4,286) | | | (2,410) | | Prepaid, current and other assets | (1,211) | | | (4,286) | |
Licensing receivable | | Licensing receivable | 90,000 | | | — | |
Accounts payable, accrued expenses and other current liabilities | Accounts payable, accrued expenses and other current liabilities | (10,297) | | | (3,952) | | Accounts payable, accrued expenses and other current liabilities | (9,517) | | | (10,297) | |
Operating lease liabilities | Operating lease liabilities | (1,846) | | | (1,458) | | Operating lease liabilities | (1,097) | | | (1,846) | |
Deferred revenue | Deferred revenue | 747 | | | 0 | | Deferred revenue | 5,685 | | | 747 | |
Net cash used in operating activities | (30,054) | | | (41,822) | | |
Net cash provided by (used in) operating activities | | Net cash provided by (used in) operating activities | 61,911 | | | (30,054) | |
Cash flows from investing activities | Cash flows from investing activities | | | | Cash flows from investing activities | | | |
Purchase of available-for-sale investments | Purchase of available-for-sale investments | (25,236) | | | (15,834) | | Purchase of available-for-sale investments | (70,308) | | | (25,236) | |
Proceeds from sales and maturities of investments | Proceeds from sales and maturities of investments | 28,288 | | | 50,557 | | Proceeds from sales and maturities of investments | 29,605 | | | 28,288 | |
Purchase of property, plant and equipment | Purchase of property, plant and equipment | (772) | | | (1,240) | | Purchase of property, plant and equipment | (1,597) | | | (772) | |
Net cash provided by investing activities | 2,280 | | | 33,483 | | |
Net cash (used in) provided by investing activities | | Net cash (used in) provided by investing activities | (42,300) | | | 2,280 | |
Cash flows from financing activities | Cash flows from financing activities | | | | Cash flows from financing activities | | | |
| Payments related to issuance of stock for stock-based compensation arrangements, net | Payments related to issuance of stock for stock-based compensation arrangements, net | (1,101) | | | (1,422) | | Payments related to issuance of stock for stock-based compensation arrangements, net | (357) | | | (1,101) | |
| Net cash used in financing activities | Net cash used in financing activities | (1,101) | | | (1,422) | | Net cash used in financing activities | (357) | | | (1,101) | |
Net change in cash and cash equivalents | Net change in cash and cash equivalents | (28,875) | | | (9,761) | | Net change in cash and cash equivalents | 19,254 | | | (28,875) | |
Cash and cash equivalents, at beginning of period | Cash and cash equivalents, at beginning of period | 151,570 | | | 143,940 | | Cash and cash equivalents, at beginning of period | 37,187 | | | 151,570 | |
Cash and cash equivalents, at end of period | Cash and cash equivalents, at end of period | $ | 122,695 | | | $ | 134,179 | | Cash and cash equivalents, at end of period | $ | 56,441 | | | $ | 122,695 | |
| Non-cash investing and financing activities | Non-cash investing and financing activities | | Non-cash investing and financing activities | |
Purchase of property, plant and equipment | $ | 182 | | | $ | 254 | | |
Purchase of property, plant and equipment in accounts payable and accrued expenses and other current liabilities | | Purchase of property, plant and equipment in accounts payable and accrued expenses and other current liabilities | $ | 742 | | | $ | 182 | |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
AERIE PHARMACEUTICALS, INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. The Company
Aerie Pharmaceuticals, Inc. (“Aerie”), with its wholly-owned subsidiaries, Aerie Distribution, Inc., Aerie Pharmaceuticals Limited, Aerie Pharmaceuticals Ireland Limited and Avizorex Pharma S.L. (“Aerie Distribution,” “Aerie Limited,” “Aerie Ireland Limited” and “Avizorex,” respectively, together with Aerie, the “Company”), is an ophthalmica pharmaceutical company focused on the discovery, development and commercialization of first-in-class ophthalmic therapies for the treatment of patients with eye diseases and conditions including open-angle glaucoma, ocular surface diseasesdry eye, diabetic macular edema (“DME”) and retinal diseases.wet age-related macular degeneration (“AMD”). The Company has its principal executive offices in Durham, North Carolina, and operates as 1 business segment.
U.S Commercial ProductsU.S. Commercialization of the Glaucoma Franchise
The Company has developed and commercialized 2 U.S. Food and Drug Administration (“FDA”) approved products, Rhopressa® (netarsudil ophthalmic solution) 0.02% (“Rhopressa®”) and Rocklatan® (netarsudil/latanoprost ophthalmic solution) 0.02%/0.005% (“Rocklatan®”), which are sold in the United States and comprise its glaucoma franchise. Rhopressa® is a once-daily eye drop designed to reduce elevated intraocular pressure (“IOP”) in patients with open-angle glaucoma or ocular hypertension. Rocklatan® is a once-daily fixed-dose combination of Rhopressa® and latanoprost, the most widely-prescribeda commonly prescribed drug for the treatment of patients with open-angle glaucoma.glaucoma or ocular hypertension. The Company is commercializing Rhopressa®, which was launched in the United States in April 2018, and Rocklatan®, which was launched in the United States in May 2019.
In March 2022, the Company commenced a Phase 4 program that was designed to further demonstrate that Rocklatan® is a highly effective single bottle, once daily therapy.
Efforts Outside the United States
In addition to actively promoting Rhopressa® and Rocklatan® in the United States, the Company’s strategyCompany is also includes developing business opportunities outside of the United States including the successful commercialization of and has made progress in its efforts to commercialize Rhopressa® and Rocklatan® in Europe, Japan and other regions of the world. At present,
The Company partnered and has collaboration agreements in place with Santen Pharmaceuticals Co., Ltd. (“Santen Pharmaceuticals”) and Santen SA (“Santen SA” and, together with Santen Pharmaceuticals, “Santen”) to develop and commercialize its products in Japan and South Korea, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam and Taiwan (collectively, “East Asia”), as well as Europe, China, India, the Company has aMiddle East, Commonwealth of Independent States (“CIS”), Africa, parts of Latin America and the Oceania countries. The initial Collaboration and License Agreement with Santen was executed in October 2020 (the “First Santen Agreement”) to advance the Company’s clinical development and commercialization partner for Japan and certain other Asian countries, and is evaluating potential collaborators for Europe and other regions.ultimately commercialize Rhopressa® and Rocklatan® in Japan and East Asia. The second Collaboration and License Agreement with Santen (the “Second Santen Agreement” and, together with the First Santen Agreement, the “Santen Agreements”) was executed in December 2021 to develop and commercialize Rhopressa® and Rocklatan® in Europe, China, India, the Middle East, CIS, Africa, parts of Latin America and the Oceania countries. See Note 3 for additional information. In Europe, Rhopressa® and Rocklatan® will be marketed under the names Rhokiinsa® and Roclanda®, respectively, if ultimately commercialized in Europe.respectively.
In Europe, Rhokiinsa® and Roclanda® were granted a Centralised Marketing Authorisation (“Centralised MA”) by the European Commission (“EC”) in November 2019 and January 2021, respectively. 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, the Company was required to complete a further administrative step in order to obtain authorisation in Great Britain, which has now been granted.
The Company reported positive interim topline 90-day efficacy data in September 2020 for the Phase 3b clinical trial for Roclanda®, named Mercury 3, a six-month efficacy and safety trial designed to compare Roclanda® to Ganfort®, a fixed-dose combination product marketed in Europe of bimatoprost (a prostaglandin analog), and timolol (a beta blocker). As a result of the positive Mercury 3 results, discussions are underway with third parties, who have expressed interest in a commercialization partnership in and potentially beyond Europe, while the Company has been simultaneously preparing on its own for pricing discussions in Germany.
In Japan, in October 2021, the Company entered into a Collaboration and License Agreement (the “Santen Agreement”) with Santen Pharmaceuticals Co., Ltd. (“Santen”) in October 2020 to advancereported positive topline results for its clinical development and ultimately commercialize Rhopressa® and Rocklatan® in Japan and eight other countries in Asia. See Note 3 for additional information. The Company initiated a Rhopressa® Phase 3 clinical trial in December 2020,of netarsudil ophthalmic solution 0.02% (“netarsudil 0.02%”), the first of three expected Phase 3 clinical trials in Japan. A second, confirmatory Phase 3 study, required for approval in Japan, is currently underway. Santen is taking the lead on next steps in preparation for registration in Japan under the terms of the First Santen Agreement. Clinical trials for Rocklatan® in Japan have not yet begun.begun.
Glaucoma Product Manufacturing
The Company has a sterile fill productionmanufacturing facility in Athlone, Ireland (“Athlone plant”), for the production of its FDA approved products and clinical supplies. The Company received FDA approval to produce Rocklatan® and Rhopressa® atIn addition, the Athlone manufacturing plant for commercial distribution in the United States in January 2020 and September 2020, respectively. The manufacturing plant began manufacturing commercial supplies of Rocklatan® during 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 well as registration batches to support product approval in Japan.
Product Candidates and Pipelinein Development
The Company is furthering the development of its product candidates focused on dry eye and retinal diseases particularly AR-15512, AR-1105, AR-13503 SR and AR-14034 SR,as described below.
Dry Eye Program
The Company acquired Avizorex, a Spanishis developing AR-15512 ophthalmic pharmaceutical company, developing therapeuticssolution for the treatment of patients with dry eye disease, in late 2019.disease. The active ingredient in AR-15512 is a potent and selective agonist of the TRPM8 ion channel, a cold sensor and osmolarity sensor that regulates tear production and blink rate. In addition, activating the TRPM8 receptor may reduce ocular discomfort by promoting a cooling sensation. The Investigational New Drug Application (“IND”)
In September 2021, the Company reported topline results of its Phase 2b clinical study, named COMET-1, for AR-15512 eye drop for dry eye became effective in September 2020, allowing Aerie to initiate clinical studies in the treatment of dry eye.AR-15512. The Company is currently testingcompleted a dose ranging study evaluating two concentrations of AR-15512 (0.0014% and 0.003%) in an ongoinga 90-day trial with 369 subjects. The COMET-1 clinical study achieved statistical significance for multiple pre-specified and validated signs and symptoms. The greatest efficacy was demonstrated with the higher concentration 0.003% formulation, which the Company plans to advance to Phase 3 studies. The study did not achieve statistical significance at the pre-determined primary endpoints at Day 28. The Company gained alignment with the FDA in the first quarter of 2022 on the results of the Phase 2b clinical trial with 360 subjects, which could potentially be considered pivotal. The Company initiated this now fully enrolled clinical trial, named COMET-1, in October 2020 and a topline readout is expected inconfirmed the third quarterdesign of 2021.the Phase 3 registrational trials.
Retina Program
The Company is currently developing threetwo sustained-release implants focused on retinal diseases, AR-1105 AR-13503 SR and AR-14034 SR. In July 2020,For AR-1105, a dexamethasone steroid implant, the Company completed a Phase 2 clinical trial for AR-1105, a dexamethasone steroid implant, in patients with macular edema due to retinal vein occlusion (“RVO”). Also, in July 2020 the Companyand reported topline results of the Phase 2 clinical trial for AR-1105 indicating sustained efficacy of up to six months, an important achievement in validating the capabilities of Aerie’s sustained release platform. The Company is in the process of meeting with regulatory agencies in order to harmonize development plans across both Europe and the United States and continues to evaluate next steps regarding clinical and regulatory pathways for Phase 3 clinical trials along with commercialization prospects in both markets.
The Company is also developing AR-13503, a Rho kinase (“ROCK”) and Protein kinase C inhibitor that is the active ingredient in the AR-13503 sustained-release implant. The IND for AR-13503 SR became effective in April 2019, allowing the Company to initiate human studies in the treatment of wet age-related macular degeneration (age-related macular degeneration, “AMD”) and diabetic macular edema (“DME”). The Company initiated a first-in-human clinical safety study for AR-13503 SR in the third quarter of 2019. The Company expects to complete the dose escalation safety evaluation with the current implant design for AR-13503 SR in the first quarter of 2022.months.
The preclinical stage sustained-release implant AR-14034 SR is being designed to deliver the active ingredient axitinib, a potent small molecule pan-VEGFpan vascular endothelial growth factor (“VEGF”) receptor inhibitor. AR-14034 SR has the potential to provide a duration of effect of approximately one year with a once per-year injection. It may potentially be used to treat DME, wet AMD and related diseases of the retina. IND-enabling preclinical studies are underway and the Company anticipates filing an IND for AR-14034 SR with the FDA in the second half of 2022.
Liquidity
The Company commenced generating product revenues related to the sales in the United States of Rhopressa® in the second quarter of 2018 and Rocklatan® in the second quarter of 2019. The Company’s activities prior to the commercial launch of Rhopressa® had primarily consisted of developing product candidates, raising capital and performing research and development activities. The Company has incurred losses and experienced negative operating cash flows since inception. The Company had previously funded its operations primarily through the sale of equity securities and issuance of convertible notes prior to generating product revenues. In September 2019, the Company issued an aggregate principal amount of $316.25 million of 1.50% convertible senior notes due October 2024 (the “Convertible Notes”) (Note 10). See Note 10 for additional information. Further, in October 2020, the Company entered into the First Santen Agreement and Second Santen Agreement in October 2020 and December 2021, respectively, pursuant to which Santen paid anmade upfront paymentpayments of $50.0 million (Note 3).and $88.0 million, respectively. In December 2021, the Company also earned a $2.0 million supplemental upfront payment associated with the Second Santen Agreement. Total aggregate upfront payments of $90.0 million associated with the Second Santen Agreement (the “Second Santen Agreement Upfront Payment”) were received in January 2022. See Note 3 for additional information. As of March 31, 2022, the Company had $199.2 million in cash, cash equivalents and investments. The Company believes that its cash, cash equivalents and investments and projected cash flows from revenues, will provide sufficient resources to support its operations, including interest payments for its Convertible Notes, through at least the next twelve months from the date of this filing.
The Company expects to incur ongoing operating losses until such a time when Rhopressa® or Rocklatan® or any current or future product candidates or future product candidates, if approved, generate sufficient cash flows for the Company to achieve profitability. Accordingly, the Company may be required to obtain further funding through debt or equity offerings or other sources. In addition, the Company continues to evaluate collaboration and licensing opportunities related to its product candidates in development. Adequate additional funding may not be available to the Company on acceptable terms, or at all. If the Company is unable to raise capital when needed or on acceptable terms, it may be forced to delay, reduce or eliminate its research and development programs or commercialization and manufacturing efforts.
2. Significant Accounting Policies
Basis of Presentation
The Company’s interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position and results of operations for the interim periods presented. Certain information and disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 20202021 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 26, 2021.25, 2022. The results for the three months ended March 31, 20212022 are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.
Principles of Consolidation
The interim condensed consolidated financial statements include the accounts of Aerie and its wholly-owned subsidiaries. All intercompany accounts, transactions and profits have been eliminated in consolidation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of income and expenses during the reporting periods. Significant items subject to such estimates and assumptions include revenue recognition, leases, acquisitions, stock-based compensation and fair value measurements. On March 11, 2020, the World Health Organization declared the coronavirus (“COVID-19”) outbreak a pandemic. The full extentCOVID-19 pandemic continues to evolve, which COVID-19 will directly or indirectly impact the Company’s business, results of operationsCompany considered in its critical and financial condition, including net product revenue, cost and expenses, reserves and allowances, manufacturing and clinical trials, will depend onsignificant accounting estimates as future developments that are highlycontinue to be uncertain, including as a result of new information that may emerge concerning COVID-19 and its variants and the actions taken to contain or treat it, as well as the economic impact on eye-care professionals, patients, third parties and markets. Actual results could differ from the Company’s estimates.
Adoption of New Accounting Standards
In December 2019,August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new ASU also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates. These changes aim to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing the disclosures. The guidance was effective for the Company beginning on January 1, 2021 and prescribes different transition methods for the various provisions. The adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated financial statements and disclosures.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’sEntity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity (“ASU 2020-06”) to address. This ASU simplifies the complexity associated with applying GAAP tofor certain financial instruments with characteristics of liabilities and equity. This ASU includesMore specifically, the amendments tofocus on the guidance onfor convertible instruments and the derivative scope exception for contracts in an entity’s own equity. Under ASU 2020-06, also simplifies the accountingembedded conversion features are no longer separated from the host contract for convertible instruments which includes eliminatingwith conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument, such as the cash conversion accounting modelConvertible Notes, will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments. Additionally, ASU 2020-06 will require entities to use the “if-converted” method when calculating diluted earnings per share for convertible instruments.instruments and requires additional disclosures. The guidance isbecame effective for the Company beginning on January 1, 2022, and prescribes different transition methods forwas applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the various provisions.effective date. As such, financial results reported in prior periods were not adjusted. The Company is currently evaluating the impact of adopting ASU 2020-06 on January 1, 2022, was comprised of a $124.7 million decrease to additional paid-in capital, a $76.7 million increase to convertible notes, net to reduce debt discounts and a $48.0 million decrease to accumulated deficit. Upon adoption of ASU 2020-06, the Company’s interest expense, recognized as a component of other expense, net in its condensed consolidated statements of operations and comprehensive loss, will decrease which primarily relates to no longer recognizing non-cash interest expense from the discount amortization, partially offset by an increase in amortization of debt issuance costs. See Note 10 for additional information.
Recently Issued Accounting Standards
There have been no new accounting pronouncements issued since the filing of the Annual Report on itsForm 10-K for the year ended December 31, 2021 that are expected to materially impact the Company’s consolidated financial statements and disclosures.statements.
Net Loss per Common Share
Basic net loss per common share (“Basic EPS”) is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share (“Diluted EPS”) gives effect to all dilutive potential shares of common stock outstanding during this period. For Diluted EPS, net loss used in calculating Basic EPS may be adjusted for certain items related to the dilutive securities.
For all periods presented, Aerie’s potential common stock equivalents have been excluded from the computation of Diluted EPS as their inclusion would have had an anti-dilutive effect.
The potential common stock equivalents that have been excluded from the computation of Diluted EPS consist of the following:
| | | THREE MONTHS ENDED MARCH 31, | | | THREE MONTHS ENDED MARCH 31, | |
| | 2021 | | 2020 | | | 2022 | | 2021 | |
Convertible Notes (1) | | Convertible Notes (1) | 12,662,650 | | | — | | |
Outstanding stock options | | Outstanding stock options | 6,711,485 | | | 8,720,368 | | |
| Outstanding stock options | 8,720,368 | | | 8,701,163 | | | |
Stock purchase warrants | 0 | | | 4,500 | | | |
Non-vested restricted stock awards and performance share units | 714,005 | | | 633,865 | | | |
Non-vested restricted stock awards | | Non-vested restricted stock awards | 1,077,745 | | | 714,005 | | |
Non-vested restricted stock units | Non-vested restricted stock units | 95,238 | | | 30,938 | | | Non-vested restricted stock units | 151,282 | | | 95,238 | | |
Total | Total | 9,529,611 | | | 9,370,466 | | | Total | 20,603,162 | | | 9,529,611 | | |
(1) Upon adoption of ASU 2020-06 on January 1, 2022, the if-converted method is applied to the Convertible Notes in the calculation of earnings per share. Prior to the adoption of ASU 2020-06, the Company did not include the conversion value of the Convertible Notes in the diluted earnings per share computation.
3. Revenue Recognition
Product Revenues
Net product revenues for the three months ended March 31, 20212022 and 20202021 were generated from sales of Rhopressa® and Rocklatan®, the Company’s glaucoma franchise products, which were commercially launched in the United States in April 2018 and May 2019, respectively. Aerie’s customers include a limited number of national and select regional wholesalers (the “distributors”). For the three months ended March 31, 2021,2022, 3 distributors accounted for 36%38%, 30%35% and 33%26% of total revenues, respectively. For the three months ended March 31, 2020,2021, 3 distributors accounted for 37%36%, 33%30% and 28%33% of total revenues, 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.
Product revenue isrevenues are recorded net of trade discounts, allowances, rebates, chargebacks, estimated returns and other incentives in the condensed consolidated statements of operations and comprehensive loss, discussed below. These reserves are classified as either reductions of accounts receivable or as current liabilities.liabilities in the condensed consolidated balance sheets. Amounts billed or invoiced are included in accounts receivable, net on the condensed consolidated balance sheets. The Company did not have any contract assets (unbilled receivables) as of March 31, 20212022 or December 31, 2020,2021, as customer invoicing generally occurs before or at the time of revenue recognition. The Company did not have any contract liabilities as of March 31, 20212022 or December 31, 2020,2021, as the Company did not receive payments in advance of fulfilling its performance obligations to its customers. The Company calculates its net product revenuerevenues based on the wholesale acquisition cost that the Company charges its distributors for Rhopressa® and Rocklatan® less provisions 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. Provisions for revenue reserves reduced product revenues by $50.8$63.8 million and $43.6$50.8 million in aggregate for the three months ended March 31, 20212022 and 2020,2021, respectively, a significant portion of which related to commercial and Medicare Part D rebates.
Trade Discounts and Allowances: The Company generally provides discounts on sales of Rhopressa® and Rocklatan® to its distributors for prompt payment and pays fees for distribution services and for certain data that distributors provide to the Company. The Company expects its distributors to earn these discounts and fees, and accordingly deducts the full amount of these discounts and fees from its gross product revenues at the time such revenues are recognized.
Rebates, Chargebacks and Other Discounts: The Company contracts with Third-party Payers for coverage and reimbursement of Rhopressa® and Rocklatan®. The Company estimates the rebates, donut hole and chargebacks it expects to be obligated to provide to Third-party Payers and deducts these estimated amounts from its gross product revenue at the time the revenue is recognized. The Company estimates the rebates, donut hole and chargebacks that it expects to be obligated to provide to Third-party Payers based upon (i) the Company's contracts and applicable negotiations with these Third-party Payers, (ii) estimates regarding the payer mix for Rhopressa® and Rocklatan® based on utilization of both third-party data and utilization,the Company’s historical data, (iii) inventory held by distributors and (iv) estimates of inventory held at the retail channel. Other discounts include the Company’s co-pay assistance coupon programs for commercially-insured patients meeting certain eligibility requirements. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to pay associated with product that has been recognized as revenue.
Product Returns: The Company estimates the amount of Rhopressa® and Rocklatan® that will be returned and deducts these estimated amounts from its gross revenue at the time the revenue is recognized. The Company currently estimates product returns based on historical information regarding returns of Rhopressa® and Rocklatan® as well as historical industry information regarding rates for comparable pharmaceutical products and product portfolios, the estimated remaining shelf life of Rhopressa® and Rocklatan® shipped to distributors, and contractual agreements with the Company's distributors intended to limit the amount of inventory they maintain. Reporting from the distributors includes distributor sales and inventory held by distributors, which provides the Company with visibility into the distribution channel to determine when the product would be eligible to be returned.
Santen Collaboration and License Agreements
Second Santen Agreement
In October 2020,December 2021, Aerie Ireland Limited entered into a Collaboration and Licensethe Second Santen Agreement with Santen Pharmaceutical Co., Ltd., a Japanese pharmaceutical company dedicated to ophthalmology that carries out research, development, marketing and saleswhich expands the scope of pharmaceuticals, over-the-counter products and medical devices.the First Santen Agreement, entered into in October 2020. Pursuant to the Second Santen Agreement, Aerie Ireland Limited granted to Santen the exclusive right to develop manufacture, market and commercialize Rhopressa® and Rocklatan® (the “Licensed Products”) in Japan, South Korea, Indonesia, Malaysia, Philippines, Singapore, Thailand, VietnamEurope, China, India, the Middle East, CIS, Africa, parts of Latin America and Taiwanthe Oceania countries (such jurisdictions collectively, the “Territories”“Expanded Territories”). The Company is the sole manufacturer of the Licensed Products for Santen.
Under the Santen Agreement,both parties. In addition, Aerie Ireland Limited granted Santen a first right of negotiation for the rightsrefusal to commercialize the Licensed Products in any Asian countries other than the Territories.Canada.
Under the agreement, Santen made the Second Santen Agreement Santen made an upfrontUpfront payment in January 2022 to Aerie Ireland Limited which was comprised of $50.0an $88.0 million (the “Upfront Payment”)upfront payment and a $2.0 million supplemental upfront payment that was earned based on the achievement of an event that occurred in December 2021. Upon the achievement of certain events, Aerie Ireland Limited will earn various development milestones of up to $39.0$15.5 million and sales milestones of up to $60.0 million upon the achievement of certain events.million. In addition, Santen will pay Aerie Ireland Limited a royalty in excess of 25% of the Licensed Products’ net sales in the Expanded Territories, excluding China and India (and in excess of 20% of the Licensed Products’ net sales in China and India), such consideration consisting of the cost of products supplied to Santen from Aerie Ireland Limited and a royalty for the Company’s intellectual property. Santen will be responsible for sales, marketing and pricing decisions relating toWhile the Licensed Products. Santen is also responsible for all development and commercialization costs and activities related toroyalty rate decreases when the Licensed Products in the Territories, except that Aerie Ireland Limited shares 50%are manufactured by or on behalf of the costs related to conducting the first Rhopressa® Phase 3 clinical trial in Japan, which commenced in the fourth quarter of 2020.Santen, there is a guaranteed minimum percentage.
The term of the Second Santen Agreement variescontinues on a country-by-country and product-by-product basis in the Territory until the later of (i) the expiration of the lastobligation to expire valid patent claim coveringmake payments under the Second Santen Agreement with respect to each Licensed Product and (ii) 12 years from the date of the first commercial sale ofin each Licensed Products under a New Drug Application approval, marketing authorizationcountry or the equivalent.region. The Second Santen Agreement may be terminated by either Aerie Ireland Limited or Santen upon the other party’s material breach, or bankruptcy or insolvency. Aerie Ireland Limited may also terminate the Santen Agreementagreement upon a patent challenge by Santen or on a country-by-country basis upon a breach by Santen of its obligation to develop, obtain marketing approval of and commercialize the Licensed Products in certain of the Expanded Territories. Santen may terminate the Second Santen Agreement in its discretion if following marketing authorization for Rhopressa® in Japan, Santen reasonably determines that the Licensed Products are not commercially viable in the Expanded Territory (effective upon 180 days’ prior written notice). In addition, in the event that patents are issued that may prevent the commercialization of the Licensed Products during the three-year period following marketing authorization of Rhopressa® in China, Santen would have the right to terminate the Santen Agreementagreement with respect to China only and require Aerie Ireland Limited’s repayment of upLimited to approximately 85%repay $8.0 million of the Second Santen Agreement Upfront Payment, all development milestone payments and 50% of the development expenses incurred by Santen.Payment. In the event of termination, the Licensed Products in the applicable Expanded Territories will revert to the Company.Aerie Ireland Limited.
The Company recognized deferred revenue, non-current as of March 31, 20212022 and December 31, 2020 was $51.6 million and $50.9 million, respectively, and included the Upfront Payment2021 as well as Santen’s portion of shared costs related to conducting the first Rhopressafollows:
| | | | | | | | | | | |
(in thousands) | MARCH 31, 2022 | | DECEMBER 31, 2021 |
First Santen Agreement: | | | |
Upfront payment (1) | $ | 50,000 | | | $ | 50,000 | |
Developmental milestones (2) | 6,000 | | | — | |
Santen’s portion of shared costs (3) | 6,000 | | | 6,315 | |
Second Santen Agreement: | | | |
Upfront payment (4) | 8,000 | | | 8,000 | |
Total | $ | 70,000 | | | $ | 64,315 | |
(1)® Phase 3 clinical trial in Japan, which commenced in the fourth quarter of 2020. While the Company determined that the license was a right to use the Company’s intellectual property and as of the effective date of the First Santen Agreement, the Company had provided all necessary information to Santen to benefit from the license and the license term had begun, revenue was not recognized upon satisfaction of the performance obligation due to the uncertainty around potential termination in the event that patents are issued that may prevent the commercialization of the Licensed Products.
The Company will recognize the Upfront Payment,$50.0 million upfront payment received under the First Santen Agreement, and any other current and potential future development milestones and sales milestones, when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
(2)In March 2022, Santen made a $6.0 million developmental milestone payment in connection with the First Santen Agreement.
(3)This item represents Santen’s portion of shared costs related to conducting the first Rhopressa® Phase 3 clinical trial in Japan, which commenced in the fourth quarter of 2020, as described above.
(4)As of March 31, 2022 and December 31, 2021, the Company recognized $8.0 million of the Second Santen Agreement Upfront Payment as deferred revenue, non-current in its consolidated balance sheet due to the uncertainty around potential termination in China in the event that patents are issued that may prevent the commercialization of the Licensed Products.
4. Investments
Cash, cash equivalents and investments as of March 31, 20212022 included the following:
| | | | GROSS | | GROSS | |
| | | | | | | | | | | | | | | | | | | | | | | | AMORTIZED | | UNREALIZED | | UNREALIZED | | FAIR |
(in thousands) | (in thousands) | | AMORTIZED COST | | GROSS UNREALIZED GAINS | | GROSS UNREALIZED LOSSES | | FAIR VALUE | (in thousands) | | COST | | GAINS | | LOSSES | | VALUE |
Cash and cash equivalents: | Cash and cash equivalents: | | | | | | | | | Cash and cash equivalents: | | | | | | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 122,695 | | | 0 | | 0 | | $ | 122,695 | | Cash and cash equivalents | | $ | 56,441 | | | $ | — | | | $ | — | | | $ | 56,441 | |
| Total cash and cash equivalents | Total cash and cash equivalents | | $ | 122,695 | | | $ | 0 | | | $ | 0 | | | $ | 122,695 | | Total cash and cash equivalents | | $ | 56,441 | | | $ | — | | | $ | — | | | $ | 56,441 | |
Investments: | Investments: | | Investments: | |
| Certificates of deposit (due within 1 year) | | Certificates of deposit (due within 1 year) | | $ | 9,044 | | | $ | — | | | $ | (14) | | | $ | 9,030 | |
| Commercial paper (due within 1 year) | Commercial paper (due within 1 year) | | $ | 42,942 | | | $ | 1 | | | $ | (41) | | | $ | 42,902 | | Commercial paper (due within 1 year) | | 54,456 | | | — | | | (186) | | | 54,270 | |
Corporate bonds (due within 1 year) | Corporate bonds (due within 1 year) | | 42,631 | | | 0 | | | (24) | | | 42,607 | | Corporate bonds (due within 1 year) | | 41,747 | | | — | | | (178) | | | 41,569 | |
| Corporate bonds (due within 2 years) | | Corporate bonds (due within 2 years) | | 4,020 | | | — | | | (35) | | | 3,985 | |
U.S. Government and government agencies (due within 1 year) | | U.S. Government and government agencies (due within 1 year) | | 33,955 | | | — | | | (17) | | | 33,938 | |
Total investments | Total investments | | $ | 85,573 | | | $ | 1 | | | $ | (65) | | | $ | 85,509 | | Total investments | | $ | 143,222 | | | $ | — | | | $ | (430) | | | $ | 142,792 | |
Total cash, cash equivalents and investments | Total cash, cash equivalents and investments | | $ | 208,268 | | | $ | 1 | | | $ | (65) | | | $ | 208,204 | | Total cash, cash equivalents and investments | | $ | 199,663 | | | $ | — | | | $ | (430) | | | $ | 199,233 | |
Cash, cash equivalents and investments as of December 31, 20202021 included the following:
| | | GROSS | | GROSS | | | GROSS | | GROSS | |
| | AMORTIZED | | UNREALIZED | | UNREALIZED | | FAIR | | AMORTIZED | | UNREALIZED | | UNREALIZED | | FAIR |
(in thousands) | (in thousands) | | COST | | GAINS | | LOSSES | | VALUE | (in thousands) | | COST | | GAINS | | LOSSES | | VALUE |
Cash and cash equivalents: | Cash and cash equivalents: | | | | | | | | | Cash and cash equivalents: | | | | | | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 151,570 | | | $ | 0 | | | $ | 0 | | | $ | 151,570 | | Cash and cash equivalents | | $ | 37,187 | | | $ | — | | | $ | — | | | $ | 37,187 | |
Total cash and cash equivalents | Total cash and cash equivalents | | $ | 151,570 | | | $ | 0 | | | $ | 0 | | | $ | 151,570 | | Total cash and cash equivalents | | $ | 37,187 | | | $ | — | | | $ | — | | | $ | 37,187 | |
Investments: | Investments: | | Investments: | |
| Certificates of deposit (due within 1 year) | | Certificates of deposit (due within 1 year) | | $ | 9,047 | | | $ | — | | | $ | (9) | | | $ | 9,038 | |
| Commercial paper (due within 1 year) | Commercial paper (due within 1 year) | | 44,122 | | | 5 | | | (23) | | | 44,104 | | Commercial paper (due within 1 year) | | 50,975 | | | — | | | (55) | | | 50,920 | |
Corporate bonds (due within 1 year) | Corporate bonds (due within 1 year) | | 44,724 | | | 3 | | | (37) | | | 44,690 | | Corporate bonds (due within 1 year) | | 42,718 | | | — | | | (62) | | | 42,656 | |
| Total investments | Total investments | | $ | 88,846 | | | $ | 8 | | | $ | (60) | | | $ | 88,794 | | Total investments | | $ | 102,740 | | | $ | — | | | $ | (126) | | | $ | 102,614 | |
Total cash, cash equivalents and investments | Total cash, cash equivalents and investments | | $ | 240,416 | | | $ | 8 | | | $ | (60) | | | $ | 240,364 | | Total cash, cash equivalents and investments | | $ | 139,927 | | | $ | — | | | $ | (126) | | | $ | 139,801 | |
Interest income earned on the Company’s cash, cash equivalents and investments was $0.1 million and $1.1 million forin each of the three months endedMarch 31, 2022 and 2021, and 2020, respectively.respectively. Realized gains or losses were immaterial during the three months ended March 31, 20212022 and 2020.2021.
As of March 31, 2021, the Company had 0 equity securities. As of2022 and December 31, 2020, the fair value of the equity securities held at the end of the period was $1.3 million. For the three months ended March 31, 2021, the Company had $1.0 million of losses ondid not hold any equity securities sold during the period.securities.
5. Fair Value Measurements
The following tables summarize the fair value of financial assets and liabilities that are measured at fair value and the classification by level of input within the fair value hierarchy:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | FAIR VALUE MEASUREMENTS AS OF |
| | MARCH 31, 2021 |
(in thousands) | | LEVEL 1 | | LEVEL 2 | | LEVEL 3 | | TOTAL |
Cash and cash equivalents: | | | | | | | | |
Cash and cash equivalents | | $ | 122,695 | | | 0 | | 0 | | $ | 122,695 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total cash and cash equivalents: | | $ | 122,695 | | | $ | 0 | | | $ | 0 | | | $ | 122,695 | |
Investments: | | | | | | | | |
| | | | | | | | |
Commercial paper | | 0 | | $ | 42,902 | | | 0 | | 42,902 | |
Corporate bonds | | 0 | | 42,607 | | | 0 | | 42,607 | |
| | | | | | | | |
Total investments | | $ | 0 | | | $ | 85,509 | | | $ | 0 | | | $ | 85,509 | |
Total cash, cash equivalents and investments: | | $ | 122,695 | | | $ | 85,509 | | | $ | 0 | | | $ | 208,204 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | FAIR VALUE MEASUREMENTS AS OF |
| | MARCH 31, 2022 |
(in thousands) | | LEVEL 1 | | LEVEL 2 | | LEVEL 3 | | TOTAL |
Cash and cash equivalents: | | | | | | | | |
Cash and cash equivalents | | $ | 56,441 | | | $ | — | | | $ | — | | | $ | 56,441 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total cash and cash equivalents: | | $ | 56,441 | | | $ | — | | | $ | — | | | $ | 56,441 | |
Investments: | | | | | | | | |
Certificates of deposit | | $ | — | | | $ | 9,030 | | | $ | — | | | $ | 9,030 | |
Commercial paper | | — | | | 54,270 | | | — | | | 54,270 | |
Corporate bonds | | — | | | 45,554 | | | — | | | 45,554 | |
U.S. Government and government agencies | | — | | | 33,938 | | | — | | | 33,938 | |
Total investments | | $ | — | | | $ | 142,792 | | | $ | — | | | $ | 142,792 | |
Total cash, cash equivalents and investments: | | $ | 56,441 | | | $ | 142,792 | | | $ | — | | | $ | 199,233 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | FAIR VALUE MEASUREMENTS AS OF |
| | DECEMBER 31, 2020 |
(in thousands) | | LEVEL 1 | | LEVEL 2 | | LEVEL 3 | | TOTAL |
Cash and cash equivalents: | | | | | | | | |
Cash and cash equivalents | | $ | 151,570 | | | $ | 0 | | | $ | 0 | | | $ | 151,570 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total cash and cash equivalents: | | $ | 151,570 | | | $ | 0 | | | $ | 0 | | | $ | 151,570 | |
Investments: | | | | | | | | |
| | | | | | | | |
Commercial paper | | $ | 0 | | | $ | 44,104 | | | $ | 0 | | | $ | 44,104 | |
Corporate bonds | | 0 | | | 44,690 | | | 0 | | | 44,690 | |
| | | | | | | | |
Total investments | | $ | 0 | | | $ | 88,794 | | | $ | 0 | | | $ | 88,794 | |
Total cash, cash equivalents and investments: | | $ | 151,570 | | | $ | 88,794 | | | $ | 0 | | | $ | 240,364 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | FAIR VALUE MEASUREMENTS AS OF |
| | DECEMBER 31, 2021 |
(in thousands) | | LEVEL 1 | | LEVEL 2 | | LEVEL 3 | | TOTAL |
Cash and cash equivalents: | | | | | | | | |
Cash and cash equivalents | | $ | 37,187 | | | $ | — | | | $ | — | | | $ | 37,187 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total cash and cash equivalents: | | $ | 37,187 | | | $ | — | | | $ | — | | | $ | 37,187 | |
Investments: | | | | | | | | |
Certificates of deposit | | $ | — | | | $ | 9,038 | | | $ | — | | | $ | 9,038 | |
Commercial paper | | — | | | 50,920 | | | — | | | 50,920 | |
Corporate bonds | | — | | | 42,656 | | | — | | | 42,656 | |
| | | | | | | | |
Total investments | | $ | — | | | $ | 102,614 | | | $ | — | | | $ | 102,614 | |
Total cash, cash equivalents and investments: | | $ | 37,187 | | | $ | 102,614 | | | $ | — | | | $ | 139,801 | |
The fair value of the Convertible Notes, which differs from their carrying value, is influenced by interest rates, stock price and stock price volatility and is determined by prices observed in market trading. The market for trading of the Convertible Notes is not considered to be an active market and therefore the estimate of fair value is based on Level 2 inputs. The estimated fair value of the Convertible Notes was $332.9$284.8 million and $270.4 million at March 31, 2021.2022 and December 31, 2021, respectively.
There were no transfers between the different levels of the fair value hierarchy during the three months ended March 31, 20212022 and 2020.2021.
6. Inventory
Inventory consists of the following:
| | | | | | | | | | | | | | |
(in thousands) | | MARCH 31, 2021 | | DECEMBER 31, 2020 |
Raw materials | | $ | 2,695 | | | $ | 1,875 | |
Work-in-process | | 22,365 | | | 21,648 | |
Finished goods | | 3,264 | | | 3,536 | |
Total inventory | | $ | 28,324 | | | $ | 27,059 | |
| | | | | | | | | | | | | | |
(in thousands) | | MARCH 31, 2022 | | DECEMBER 31, 2021 |
Raw materials | | $ | 4,968 | | | $ | 5,368 | |
Work-in-process | | 30,480 | | | 30,989 | |
Finished goods | | 4,742 | | | 4,053 | |
Total inventory | | $ | 40,190 | | | $ | 40,410 | |
For the three months ended March 31, 2022 and 2021, and 2020, $4.4$3.9 million and $3.5$4.4 million, respectively, of idleproduction costs associated with underutilized capacity cost associated withat the Company’s Athlone manufacturing plant waswere recorded to costs of goods sold. The idle capacityunderutilization results from the manufacturing plant having commenced operations earlier in 2020 and not having yet reached full capacity.capacity as it commenced operations in early 2020.
7. Property, Plant and Equipment, Net
Property, plant and equipment, net consists of the following:
| (in thousands) | (in thousands) | | MARCH 31, 2021 | | DECEMBER 31, 2020 | (in thousands) | | MARCH 31, 2022 | | DECEMBER 31, 2021 |
Manufacturing equipment | Manufacturing equipment | | $ | 21,822 | | | $ | 21,705 | | Manufacturing equipment | | $ | 22,485 | | | $ | 22,464 | |
Laboratory equipment | Laboratory equipment | | 8,391 | | | 7,948 | | Laboratory equipment | | 9,509 | | | 9,182 | |
Furniture and fixtures | Furniture and fixtures | | 1,681 | | | 1,681 | | Furniture and fixtures | | 1,612 | | | 1,569 | |
Software, computer and other equipment | Software, computer and other equipment | | 7,838 | | | 7,836 | | Software, computer and other equipment | | 7,857 | | | 7,779 | |
Leasehold improvements | Leasehold improvements | | 30,433 | | | 30,178 | | Leasehold improvements | | 31,452 | | | 31,175 | |
Construction-in-progress | Construction-in-progress | | 1,243 | | | 1,481 | | Construction-in-progress | | 2,703 | | | 2,037 | |
Property, plant and equipment | Property, plant and equipment | | 71,408 | | | 70,829 | | Property, plant and equipment | | 75,618 | | | 74,206 | |
Less: Accumulated depreciation | Less: Accumulated depreciation | | (18,125) | | | (16,569) | | Less: Accumulated depreciation | | (24,392) | | | (22,734) | |
Property, plant and equipment, net | Property, plant and equipment, net | | $ | 53,283 | | | $ | 54,260 | | Property, plant and equipment, net | | $ | 51,226 | | | $ | 51,472 | |
8. Leases
The Company has operating leases for corporate offices, research and development facilities and a fleet of vehicles. The properties primarily relate to the Company’s principal executive office and research facility located in Durham, North Carolina, regulatory, commercial support and other administrative activities located in Irvine, California, and clinical, finance and legal operations located in Bedminster, New Jersey. The Durham, North Carolina, facility consists of approximately 61,000 square feet of laboratory and office space under leasesa lease that expire between January 2022was renewed in the third quarter of 2021 and expires in June 2024 and the2029. The Irvine, California, location consists of approximately 37,30027,000 square feet of office space under a lease that was renewed in the third quarter of 2021 and expires in January 2022.October 2027. The Bedminster, New Jersey, location consists of approximately 34,000 square feet of office space under a lease that expires in October 2029. There are also small offices in Ireland, the United Kingdom and Japan.
The Company is leasing approximately 30,000 square feet of interior floor space for its manufacturing plant in Athlone, Ireland. The Company is reasonably certain it will remain in the lease through the end of its lease term in 2037, however, the Company is permitted to terminate the lease as early as September 2027.
The Company’s operating leases have remaining lease terms of approximately 1 year to 1615 years, some of which include options to extend the leases.
Balance sheet information related to leases was as follows:
| | | | | | | | | | | |
(in thousands) | MARCH 31, 2021 | | DECEMBER 31, 2020 |
Operating Leases | | | |
Operating lease right-of-use assets | $ | 13,241 | | | $ | 14,084 | |
| | | |
Operating lease liabilities | $ | 4,052 | | | $ | 4,923 | |
Long-term operating lease liabilities | 9,914 | | | 10,206 | |
Total operating lease liabilities | $ | 13,966 | | | $ | 15,129 | |
9. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
| | | | | | | | | | | |
(in thousands) | MARCH 31, 2021 | | DECEMBER 31, 2020 |
Accrued expenses and other current liabilities: | | | |
Accrued compensation and benefits | $ | 9,653 | | | $ | 15,207 | |
Accrued consulting and professional fees | 3,215 | | | 2,645 | |
Accrued research and development (1) | 3,821 | | | 2,222 | |
Accrued revenue reserves(2) | 61,472 | | | 66,552 | |
Accrued other (3) | 4,631 | | | 4,097 | |
Total accrued expenses and other current liabilities | $ | 82,792 | | | $ | 90,723 | |
| | | | | | | | | | | |
(in thousands) | MARCH 31, 2022 | | DECEMBER 31, 2021 |
Accrued expenses and other current liabilities: | | | |
Accrued compensation and benefits | $ | 11,855 | | | $ | 15,881 | |
Accrued consulting and professional fees | 3,976 | | | 5,007 | |
Accrued research and development (1) | 3,089 | | | 2,262 | |
Accrued revenue reserves (2) | 79,213 | | | 85,381 | |
Accrued other (3) | 4,817 | | | 3,810 | |
Total accrued expenses and other current liabilities | $ | 102,950 | | | $ | 112,341 | |
(1)Comprised primarily of accruals related to fees for investigative sites, contract research organizations and other service providers that assist in conducting preclinical research studies and clinical trials.
(2)Comprised primarily of accruals related to commercial and government rebates as well as returns.
(3)Comprised primarily of accruals related to interest payable as well as other business-related expenses.
10. Debt
Convertible Notes
In September 2019, the Company issued an aggregate principal amount of $316.25 million of Convertible Notes to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended. The Convertible Notes, governed by an
indenture between the Company and a trustee, are senior, unsecured obligations and do not include financial and operating covenants nor any restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by Aerie or any of its subsidiaries. Interest on the Convertible Notes is 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 redeemed, 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 holders any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Convertible Notes may be settled in shares of Aerie common stock, cash or a combination, thereof, at the Company's election. The Company intends to settle the principal and interest amountspay cash upon conversion of the Convertible Notes in cash, and therefore, the Company currently would not expect the conversion to have a dilutive effect on the Company’s earnings per share, as applicable. However, the Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements and disclosures, in which the Company will soon no longer be eligible to use the treasury stock method to reflect the shares underlying the Convertible Notes in the Company’s dilutive earnings per share.Notes. See Note 2 for additional information.
The Convertible Notes have an initial conversion rate of 40.04 shares of Aerie common stock per $1,000 principal amount of the Convertible Notes, which will be subject to customary anti-dilution adjustments in certain circumstances. This represents an initial effective conversion price of approximately $24.98 per share, which represents a premium of approximately 35% to the $18.50 per share closing price of Aerie common stock on September 4, 2019, the date the Company priced the offering.
The Company may redeem all or any portion of the Convertible Notes, at its option, on or after October 3, 2022, at a cash redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price of Aerie common stock exceeds 130% of the conversion price of $24.98, which amounts to $32.47, then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately before the date the Company provides written notice of redemption; and the trading day immediately before the notice is sent.
Holders of Convertible Notes may require the Company to repurchase their Convertible Notes upon the occurrence of certain events that constitute a fundamental change under the indenture governing the Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
During the three months ended March 31, 2021,2022, the conditions allowing holders of the Convertible Notes to elect to convert had not been met. As of March 31, 2021,2022, the if-converted value of the Convertible Notes did not exceed the principal amount of the Convertible Notes.
The estimated fair value of the liability component of the Convertible Notes at the time of issuance was $187.9 million, and was determined based on a discounted cash flow analysis and a binomial lattice model. The valuation required the use of Level 3 unobservable inputs and subjective assumptions, including but not limited to the stock price volatility and bond yield. The effective interest rate on the liability component was 10.5% for the period from the date of issuance through March 31, 2021. The equity component of the Convertible Notes was recognized at issuance and represents the difference between the principal amount of the Convertible Notes and the fair value of the liability component of the Convertible Notes at issuance. The equity component was approximately $128.4 million at the time of issuance and its fair value is not remeasured as long as it continues to meet the conditions for equity classification.
In connection with the issuance of the Convertible Notes, the Company incurred debt issuance costs of $9.2 million for the three months ended December 31, 2019. In accordance with ASC Topic 470, Debt, these costs were allocated to debt and equity components in proportion to the allocation of proceeds. Issuance costs of $5.5 million were recorded as debt issuance costs in the net carrying value of Convertible Notes. The debt issuance costs are amortized on an effective interest basis over the term of the Convertible Notes. The remaining issuance costs of $3.7 million were recorded as additional paid-in capital, net with the equity component and such amounts are not subject to amortization.
The following table summarizesUpon the carrying valueCompany’s adoption of ASU 2020-06 on January 1, 2022, as further discussed in Note 2, embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, the Convertible Notes will be accounted for as ofa single liability measured at its amortized cost. The effective interest rate was 2.1% for the three months ended March 31, 2021:
| | | | | | | | | | | |
(in thousands) | MARCH 31, 2021 | | DECEMBER 31, 2020 |
Gross proceeds | $ | 316,250 | | | $ | 316,250 | |
Unamortized debt discount | (96,083) | | | (101,565) | |
Unamortized issuance costs | (4,079) | | | (4,312) | |
Carrying value | $ | 216,088 | | | $ | 210,373 | |
2022.
The following table summarizes the carrying value of the Convertible Notes:
| | | | | | | | | | | |
(in thousands) | MARCH 31, 2022 | | DECEMBER 31, 2021 |
Gross proceeds | $ | 316,250 | | | $ | 316,250 | |
Unamortized debt discount | — | | | (78,395) | |
Unamortized issuance costs | (4,572) | | | (3,328) | |
Carrying value | $ | 311,678 | | | $ | 234,527 | |
The following table summarizes the interest expense recognized related to the Convertible Notes:
| | | THREE MONTHS ENDED MARCH 31, | | | THREE MONTHS ENDED MARCH 31, | |
(in thousands) | (in thousands) | 2021 | | 2020 | | (in thousands) | 2022 | | 2021 | |
Stated interest | Stated interest | $ | 1,186 | | | $ | 1,193 | | | Stated interest | $ | 1,186 | | | $ | 1,186 | | |
Amortized debt discount | Amortized debt discount | 5,482 | | | 4,971 | | | Amortized debt discount | — | | | 5,482 | | |
Amortized issuance costs | Amortized issuance costs | 232 | | | 211 | | | Amortized issuance costs | 447 | | | 232 | | |
Interest Expense | $ | 6,900 | | | $ | 6,375 | | | |
Interest expense | | Interest expense | $ | 1,633 | | | $ | 6,900 | | |
Separately, in September 2019, the Company entered into privately negotiated capped call options with financial institutions. The capped call options cover, subject to customary anti-dilution adjustments, the number of shares of Aerie common stock that initially underlie the Convertible Notes. The cap price of the capped call options is $37.00 per share of Aerie common stock, representing a premium of 100% above the closing price of $18.50 per share of Aerie common stock on September 4, 2019, and is subject to certain adjustments under the terms of the capped call options. The capped call options are generally intended to reduce or offset potential dilution to Aerie common stock upon conversion of the Convertible Notes with such reduction and/ or offset, as the case may be, subject to a cap based on the cap price. The Company paid a total of $32.9 million in premiums for the capped call options, which was recorded as additional paid-in capital, using a portion of the gross proceeds from the issuance and sale of the Convertible Notes. The capped call options are excluded from diluted earnings per share because the impact would be anti-dilutive.
11. Stock-Based Compensation
Stock-based compensation expense for options granted, restricted stock awards (“RSAs”), RSAs with non-market performance and service conditions (“PSAs”), restricted stock units (“RSUs”) and stock appreciation rights (“SARs”) is reflected in the condensed consolidated statements of operations and comprehensive loss as follows:
| | | | | | | | | | | | | | | |
| THREE MONTHS ENDED MARCH 31, | | |
(in thousands) | 2021 | | 2020 | | | | |
Cost of goods sold | $ | 507 | | | $ | 497 | | | | | |
Selling, general and administrative | 6,255 | | | 6,908 | | | | | |
Pre-approval commercial manufacturing | 0 | | | 294 | | | | | |
Research and development | 1,987 | | | 2,830 | | | | | |
Total | $ | 8,749 | | | $ | 10,529 | | | | | |
| | | | | | | | | | | | | | | |
| THREE MONTHS ENDED MARCH 31, | | |
(in thousands) | 2022 | | 2021 | | | | |
Cost of goods sold | $ | 162 | | | $ | 507 | | | | | |
Selling, general and administrative | 3,134 | | | 6,255 | | | | | |
| | | | | | | |
Research and development | 1,336 | | | 1,987 | | | | | |
Total | $ | 4,632 | | | $ | 8,749 | | | | | |
Equity Plans
The Company maintains 3 equity compensation plans,plans: the 2005 Aerie Pharmaceutical Stock Plan (the “2005 Plan”), the 2013 Omnibus Incentive Plan (the “2013 Equity Plan”), which was amended and restated as the Aerie Pharmaceuticals, Inc. Second Amended and Restated Omnibus Incentive Plan (the “Second Amended and Restated Equity Plan”), as described below, and the Aerie Pharmaceuticals, Inc. Inducement Award Plan (the “Inducement Award Plan”), which was amended and restated as the Aerie Pharmaceuticals, Inc. Second Amended and Restated Inducement Award Plan (the “Second Amended and Restated Inducement Award Plan”), as described below. The 2005 Plan, the Second Amended and Restated Equity Plan and the Second Amended and Restated Inducement Award Plan are referred to collectively as the “Plans.” The 2005 Plan was frozen in 2013 and 0no additional awards have been or will be made under the 2005 Plan.
In 2018, Aerie’s stockholders approved the adoption of the Second Amended and Restated Equity Plan to increase the number of shares issuable under the Plan by 4,500,000. The Second Amended and Restated Equity Plan provides for the granting of up to 10,229,068 equity awards in respect of common stock of Aerie, common stock.including equity awards that were previously available for issuance under the 2013 Equity Plan.
On December 7,In 2016, Aerie’s Board of Directors approved the Inducement Award Plan which provides for the granting of up to 418,000 equity awards in respect of common stock of Aerie and was subsequently amended duringand restated the year ended December 31,Inducement Award Plan twice in 2017 to increase the equity awards that may be issued by a total of an additional 874,500 shares. On December 5,In 2019, the Second Amended and Restated Inducement Award Plan was further amended by the Company’sAerie’s Board of Directors to increase the number of shares issuable under the plan by 100,000 shares. On December 9, 2021, Aerie’s Board of Directors approved an increase to the number of shares issuable under the plan for grants made to the Company’s new Chief Executive Officer in connection with his hiring, including 602,952 shares for grants made in December 2021 and additional shares for grants made in the first quarter of 2022. On March 11, 2022, Aerie’s Board of Directors approved an amendment to the Second Amended and Restated Inducement Award Plan to increase the number of shares that may be issued under the plan to 4,092,500 shares, which includes the 602,952 shares granted to our Chief Executive Officer in December 2021 as well as an additional 2,097,048 shares to cover his previously approved March 2022 grant and other new hire grant projections. Awards granted under the Second Amended and Restated Inducement Award Plan, as amended from time to time are intended to qualify as employment inducement awards under NASDAQ Listing Rule 5635(c)(4).
Options to Purchase Common Stock
The following table summarizes the stock option activity under the Plans:
| | | | | | | | | | | | | | | | | | | | | | | |
| NUMBER OF SHARES | | WEIGHTED AVERAGE EXERCISE PRICE | | WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS) | | AGGREGATE INTRINSIC VALUE (000’s) |
Options outstanding at December 31, 2020 | 8,588,614 | | | $ | 27.36 | | | | | |
Granted | 421,280 | | | 17.50 | | | | | |
Exercised | (63,370) | | | 0.76 | | | | | |
Canceled | (226,156) | | | 38.78 | | | | | |
Options outstanding at March 31, 2021 | 8,720,368 | | | $ | 26.78 | | | 5.9 | | $ | 23,551 | |
Options exercisable at March 31, 2021 | 6,464,439 | | | $ | 26.66 | | | 4.9 | | $ | 21,828 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| NUMBER OF SHARES | | WEIGHTED AVERAGE EXERCISE PRICE | | WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS) | | AGGREGATE INTRINSIC VALUE (000’s) |
Options outstanding at December 31, 2021 | 6,550,610 | | | $ | 26.87 | | | | | |
Granted | 673,888 | | | 8.73 | | | | | |
| | | | | | | |
Canceled | (513,013) | | | 23.91 | | | | | |
Options outstanding at March 31, 2022 | 6,711,485 | | | $ | 25.27 | | | 6.4 | | $ | 2,354 | |
Options exercisable at March 31, 2022 | 4,569,275 | | | $ | 30.42 | | | 5.1 | | $ | 1,716 | |
As of March 31, 2021,2022, the Company had $39.2$18.0 million of unrecognized compensation expense related to options granted under its equity plans. This expense is expected to be recognized over a weighted average period of 2.12.5 years as of March 31, 2021.2022.
Restricted Stock Awards
The following table summarizes the RSA, including PSA, activity under the Plans:
| | | | | | | | | | | |
| NUMBER OF SHARES | | WEIGHTED AVERAGE FAIR VALUE PER SHARE |
Non-vested RSAs at December 31, 2020 | 809,527 | | | $ | 29.03 | |
Granted | 94,132 | | | 17.61 | |
Vested | (160,259) | | | 44.62 | |
Canceled | (29,395) | | | 23.86 | |
Non-vested RSAs at March 31, 2021 | 714,005 | | | $ | 24.23 | |
| | | | | | | | | | | |
| NUMBER OF SHARES | | WEIGHTED AVERAGE FAIR VALUE PER SHARE |
Non-vested RSAs at December 31, 2021 | 977,244 | | | $ | 18.32 | |
Granted | 347,814 | | | 8.80 | |
Vested | (132,905) | | | 34.07 | |
Canceled | (114,408) | | | 19.43 | |
Non-vested RSAs at March 31, 2022 | 1,077,745 | | | 13.21 | |
As of March 31, 2021,2022, the Company had $15.0$12.0 million of unrecognized compensation expense related to unvested RSAs.RSAs, including PSAs. This expense is expected to be recognized over the weighted average period of 2.42.8 years as of March 31, 2021.2022.
The vesting of the RSAs is time and service based with terms of one1 to four4 years. During the year ended December 31,In 2017, the Company granted 98,817 RSAs with non-marketPSAs that vested in 2020 upon the satisfaction of certain performance conditions (PSAs) thatand service conditions. During the three months ended March 31, 2022, the Company granted 218,418 PSAs which vest upon the satisfaction of certain performance conditions and service conditions. Asconditions, none of the second quarter of 2020, all PSAs werewhich have vested.
Restricted Stock Units
The following table summarizes the RSU activity under the Plans:
| | | NUMBER OF SHARES | | WEIGHTED AVERAGE FAIR VALUE PER SHARE | | NUMBER OF SHARES | | WEIGHTED AVERAGE FAIR VALUE PER SHARE |
Non-vested RSUs at December 31, 2020 | 107,182 | | | $ | 14.43 | | |
Non-vested RSUs at December 31, 2021 | | Non-vested RSUs at December 31, 2021 | 156,873 | | | $ | 14.88 | |
Granted | Granted | 1,407 | | | 19.18 | | Granted | 1,989 | | | 6.88 | |
Vested | Vested | (11,035) | | | 19.25 | | Vested | (7,143) | | | 7.00 | |
Canceled | Canceled | (2,316) | | | 14.34 | | Canceled | (437) | | | 16.22 | |
Non-vested RSUs at March 31, 2021 | 95,238 | | | $ | 13.95 | | |
Non-vested RSUs at March 31, 2022 | | Non-vested RSUs at March 31, 2022 | 151,282 | | | 15.14 | |
As of March 31, 2021,2022, the associated unrecognized compensation expense totaled $2.1$2.8 million. This expense is expected to be recognized over the weighted average period of 2.62.8 years as of March 31, 2021.2022.
Stock Appreciation Rights
The following table summarizes the SARSARs activity under the Plans:
| | | | | | | | | | | | | | | | | | | | | | | |
| NUMBER OF SHARES | | WEIGHTED AVERAGE EXERCISE PRICE | | WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS) | | AGGREGATE INTRINSIC VALUE (000’s) |
SARs outstanding at December 31, 2020 | 212,044 | | | $ | 32.28 | | | | | |
Granted | 5,000 | | | 18.68 | | | | | |
| | | | | | | |
Canceled | (13,801) | | | 28.43 | | | | | |
SARs outstanding at March 31, 2021 | 203,243 | | | $ | 32.20 | | | 3.3 | | $ | 280 | |
SARs exercisable at March 31, 2021 | 66,546 | | | $ | 45.16 | | | 2.5 | | $ | 3 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| NUMBER OF SHARES | | WEIGHTED AVERAGE EXERCISE PRICE | | WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS) | | AGGREGATE INTRINSIC VALUE (000’s) |
SARs outstanding at December 31, 2021 | 238,349 | | | $ | 27.67 | | | | | |
Granted | 3,000 | | | 6.97 | | | | | |
| | | | | | | |
Canceled | (13,434) | | | 28.02 | | | | | |
SARs outstanding at March 31, 2022 | 227,915 | | | $ | 27.37 | | | 2.8 | | $ | 7 | |
SARs exercisable at March 31, 2022 | 96,106 | | | $ | 39.26 | | | 1.9 | | $ | — | |
Holders of the SARs are entitled under the terms of the Plans to receive cash payments calculated based on the excess of Aerie’s common stock price over the exercise price in their award; consequently, these awards are accounted for as liability-classified awards and the Company measures compensation cost based on their estimated fair value at each reporting date, net of actual forfeitures, if any.
12. Commitments and Contingencies
Milestone Payments
In the first quarter of 2022, the Company gained alignment with the FDA on the results of its Phase 2b clinical trial for AR-15512 and confirmed the design of the Phase 3 trials, which the Company currently expects to initiate in the second quarter of 2022. This resulted in the achievement of a regulatory milestone in which the Company paid the former shareholders of Avizorex $8.0 million in the first quarter of 2022.
Litigation
The Company may periodically become subject to legal proceedings and claims arising in connection with its business. TheAs of March 31, 2022, the Company is not a party to any known litigation, is not aware of any material unasserted claimspending legal or administrative proceedings and, to its knowledge, no such proceedings are threatened or contemplated. The Company does not have contingency reserves established for any litigation liabilities.liabilities as of March 31, 2022.
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, 2020,2021, as filed with the SEC on February 26, 25, 2022 (“2021 (“2020 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 20202021 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 an ophthalmica pharmaceutical company focused on the discovery, development and commercialization of first-in-class ophthalmic therapies for the treatment of patients with eye diseases and conditions including open-angle glaucoma, ocular surface diseasesdry eye, DME and retinal diseases.wet AMD.
U.S. Commercial ProductsCommercialization of the Glaucoma Franchise
Our strategy is to successfully commercializegrow the market share of our U.S. Food and Drug Administration (“FDA”)FDA approved glaucoma franchise products, Rhopressa® (netarsudil ophthalmic solution) 0.02% (“Rhopressa®”) and Rocklatan® (netarsudilin the United States. Both Rhopressa® and latanoprost ophthalmic solution) 0.02%/0.005% (“Rocklatan®”), which are being sold into national and regional U.S. pharmaceutical distributors, and patients have access to them through pharmacies across the United States and comprise our glaucoma franchise.States. We have obtained broad formulary coverage for Rhopressa® and Rocklatan® for the majority of lives covered under commercial plans and Medicare Part D plans. Our commercial team responsible for sales of Rhopressa® and Rocklatan® is targeting select eye-care professionals who treat glaucoma throughout the United States States.
In March 2022, we commenced a Phase 4 program that was designed to further demonstrate that Rocklatanand with® is a highly effective single bottle, once daily therapy. We expect topline data for this Phase 4 Multi-center Open-label Rocklatan® Evaluation (“MORE”) study to be available in the additionfirst half of a contract sales organization and a separate telesales team, we are able to reach over 16,000 eye-care professionals.2023.
| | | | | | | | |
| | Rhopressa® is a once-daily eye drop designed to reduce elevated intraocular pressure (“IOP”)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 mosta commonly prescribed drug for the treatment of patients with open-angle glaucoma.glaucoma or ocular hypertension. Rocklatan® is also taken in the evening, and similar to Rhopressa®, has shown in preclinical and clinical trials to be highly 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. |
Efforts Outside the United States
OurIn addition to growing the market share of Rhopressa® and Rocklatan® in the United States, our strategy also includes developing business opportunities outside of the United States including the successful commercialization of and we continue to make progress in our efforts to commercialize Rhopressa® and Rocklatan® in Europe, Japan and other regions of the world.
We have partnered and have collaboration agreements in place with Santen to develop and commercialize our products in Japan, East Asia, as well as . At present, we have aEurope, China, India, the Middle East, CIS, Africa, parts of Latin America and the Oceania countries. The First Santen Agreement was executed in October 2020 to advance our clinical development and commercialization partner for Japan and certain other Asian countries, and are evaluating potential collaborators for Europe and other regions.ultimately
In Europe, Rhokiinsa® (marketed ascommercialize Rhopressa® in the United States) was granted a Centralised Marketing Authorisation (“Centralised MA”) by the European Commission (“EC”) in November 2019. Roclanda® (marketed asand Rocklatan® in Japan and East Asia. The Second Santen Agreement was executed in December 2021 to develop and commercialize Rhopressa® and Rocklatan® in Europe, China, India, the United States) Middle East, CIS, Africa, parts of Latin America and the Oceania countries.
In Europe, Rhopressawas® and Rocklatan® will be marketed under the names Rhokiinsa® and Roclanda®, respectively. Rhokiinsa® and Roclanda® were granted a Centralised MA by the EC in November 2019 and January 2021,. respectively. In April 2021, Roclanda® received marketing authorisation from the Medicines and Healthcare Products Regulatory Agency (“MHRA”)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, which has now been granted.
We reported positive interim topline 90-day efficacy data in September 2020 for our Phase 3b clinical trial for Roclanda®, named Mercury 3, 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 “wSanten Agreement”) with Santen Pharmaceuticals Co., Ltd. (“Santen”) in October 2020 to advancee reported positive topline results for our clinical development and ultimately commercialize Rhopressa® and Rocklatan® in Japan and eight other countries in Asia. We initiated a Rhopressa® Phase 3 clinical trial of netarsudil ophthalmic solution 0.02% in December 2020,October 2021, the first of three expected Phase 3 clinical trials in Japan. The results evaluated netarsudil 0.02% versus ripasudil hydrochloride hydrate ophthalmic solution 0.4% (“ripasudil 0.4%”) and showed that netarsudil 0.02% once daily was superior to ripasudil 0.4% twice daily in lowering IOP after four weeks (p<0.0001), the primary endpoint of the study. The medications were safe and well tolerated. The most common treatment emergent adverse event was conjunctival hyperemia, which is treatable. In March 2022, Santen made a $6.0 million developmental milestone payment in connection with the conclusion of this Phase 3 clinical trial. A second, confirmatory Phase 3 study, required for approval in Japan, is currently underway. Santen is taking the lead on next steps in preparation for registration in Japan under the terms of the First Santen Agreement. 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 goalintent 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 both Rocklatan® and Rhopressa® from the Athlone manufacturing plant to the United States commenced in the third quartersecond half of 2020 and in. In addition, 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 well as registration batches to support product approval in Japan. We expect to commence shipments of Roclanda® to Santen pursuant to the Second Santen Agreement in the fourth quarter of 2022.
As the Athlone manufacturing plant commenced operations in early 2020, it has not yet reached full capacity. We expect that the Athlone manufacturing plant will have adequate capacity to produce Rhopressa® and Rocklatan®for the markets included in the United StatesSanten Agreements, as well as for bothneeded, which include Europe, Japan, East Asia and certain other regions of the European and Japanese commercial markets,world, if approved for commercial distribution in those markets. We expect that in 2021 theThe Athlone manufacturing plant will manufacturemanufactures most of our ongoing needs for Rhopressa®and RocklatanRocklatan® 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 beforeas a result of the Athlone plant commencing manufacturing plant was operational.operations.
Product Candidates and Pipelinein Development
Our strategy also includes enhancing our longer-term commercial potential by identifying and advancing additional product candidates through our internal discovery efforts, our entry into potential research collaborations or in-licensing arrangements or our acquisition of additional ophthalmic products, or technologies or product candidates that complement our current product portfolio.
Dry Eye Program
We are developing AR-15512 is our product candidateophthalmic solution for the treatment of patients with dry eye disease for whichdisease. In September 2021, we initiated a now fully enrolledreported topline results of our Phase 2b clinical study, named COMET-1, for AR-15512. We completed a dose ranging study evaluating two concentrations of AR-15512 (0.0014% and 0.003%) in a 90-day trial with 369 subjects. The COMET-1 clinical study achieved statistical significance for multiple pre-specified and validated signs and symptoms. The greatest efficacy was demonstrated with the higher concentration 0.003% formulation, which we plan to advance to Phase 3 studies. The study did not achieve statistical significance at the pre-determined primary endpoints at Day 28. We gained alignment with the FDA in the first quarter of 2022 on the results of the Phase 2b clinical study and confirmed the design of the Phase 3 registrational trials, which we currently expect to initiate in the second quarter of 2022. The first Phase 3 registrational trial, named COMET-1COMET-2, will be a multi-center, vehicle-controlled, double-masked, randomized study that will evaluate a single concentration of AR-15512 (0.003%) compared to the AR-15512 vehicle, administered twice daily for 90 days. COMET-2 is expected to enroll about 460 participants at approximately 20 sites in October 2020. the United States.
Retina Program
Furthermore, we are currently developing threetwo sustained-release implants focused on retinal diseases, AR-1105 AR-13503 SR and AR-14034 SR. For AR-1105, we successfully completed a large Phase 2 clinical trial for patients with macular edema due to retinal vein occlusion (“RVO”)RVO in July 2020 which indicatesand reported
topline results indicating sustained efficacy of up to six months, an important achievementmonths. We have received advice from regulatory agencies in validatingboth Europe and the potential capabilities of Aerie’s sustained release platform. With respect to future plans for AR-1105, we continue to evaluate next stepsUnited States regarding clinical and regulatory pathways for Phase 3 clinical trials along with commercialization prospects in both Europe and the United States. For AR-13503 SR, we initiated a first in-human clinical safety study in the third quarter of 2019 for the treatment of wet age-related macular degeneration (age-related macular degeneration, “AMD”) and diabetic macular edema (“DME”), which istrials. We are currently ongoing. We expect to complete the dose escalation safety evaluation with the current implant design for AR-13503 SR in the first quarter of 2022. evaluating Phase 3 development options as well as partnership opportunities. In addition, we are also working to advance our preclinical sustained-release retinal implant, AR-14034 SR, infor which we anticipate filing an Investigational New Drug Application (“IND”) enabling preclinical studies are underway. We anticipate filing an IND for AR-14034 SR with the FDA in the second half of 2022.
Pipeline
We own over 4,000 ROCK inhibitor molecules that provide a basis for further research and development opportunities. We discovered and developed the active ingredient in Rhopressa® and Rocklatan®, and 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 preclinicalin vivotesting 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 onOn March 11, 2020, the World Health Organization declared COVID-19the coronavirus (“COVID-19”) outbreak a pandemic. TheAs the COVID-19 pandemic has negatively impactedcontinues to evolve, we considered this in our critical and significant accounting estimates as future developments continue to be uncertain, including as a result of new information that may emerge concerning COVID-19 and its variants and the global economy, disrupted global supply chainsactions taken to contain or treat it, as well as the economic impact on eye-care professionals, patients, third parties and workforce participation due to “shelter-in-place” restrictions by various governments worldwide and created significant volatility and disruption of financial markets. Actual results could differ from our estimates.
The health and safety of our employees, patients, prescribers and community are of utmost importance during this time and wetime. We are complying with all requirements and mandates from various agencies and governments.governments and we continue to monitor applicable federal and state regulations, including with respect to vaccination mandates and required weekly testing of unvaccinated employees. We have taken precautionary measures to protect our employees and our stakeholders and adapted company policy to maintain the continuity of our business. We continuehave 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 continueshas the option to primarily work from home.
While some eye-care professionals’ offices continueremotely or to operate at reduced capacity, we are using a combination of in-person and virtual tools and resources to remain in contact with eye-care professionals. Aerie territory managers are experiencing successful engagement with eye-care professionals through either traditional face-to-face office meetings or 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. Certain geographic communities have resumed in-person speaker programs, while adhering to strict national guidelines with appropriate social distancing. As part of the support of the eye-care community, our territory managers are either delivering or arranging for delivery of product samplesreturn to the eye-care professionals’ offices when needed. To the extent the COVID-19 impacts are mitigated,office in accordance with state and local mandates. We may take further actions as government mandates,authorities require or recommend or as we expect that traditional face-to-face office meetings and in-person peer-to-peer education meetingsdetermine to increasebe in the second halfbest interest of 2021. Further, with the addition of a contract sales organization and a separate telesales team we are able to reach over 16,000 eye-care professionals.
We have observed no disruptions to date in the supply chain for the production of Rhopressa® 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 next six months. Production of Rhopressa® and Rocklatan® is continuing.employees.
Financial Overview
Our cash, cash equivalentsequivalents and investments totaled $208.2$199.2 million as of March 31, 2021.2022. 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 from the date of this filing, though there may be need for additional financing activity as we continue to grow.grow, in addition to our aggregate principal amount of $316.25 million of Convertible Notes which mature on October 1, 2024. We continue to evaluate our product candidates in development for collaboration and licensing opportunities. 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. Until 2018, when we commenced commercial operations, our business activities were primarily limited to developing product candidates, raising capital and performing research and development activities. As of March 31, 2021,2022, we had an accumulated deficit of $1,121.1 million. We recorded$1,141.8 million and recognized a net lossesloss of $42.0$35.9 million for the three months ended March 31, 2021.2022. For the three months ended March 31, 20202021 we recordedrecognized a net lossesloss of $49.1$42.0 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, globalin development, international expansion and operating our manufacturing plant in Athlone Ireland.plant.
We expect to incur operating losses until such a time when Rhopressa® or Rocklatan® or any current or future product candidates, if approved, or proceeds in connection with collaboration and licensing arrangements, 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 revenuerevenues from any product candidates or future product candidates unless and until we obtain regulatory approval and commercialize such products.
Licensing Revenues
Licensing revenues consist of the upfront license fee and supplemental upfront payment earned from the licensing of our intellectual property. We recognize revenues from license fees when the license is considered a right to use the intellectual property and we have provided all necessary information to the licensee to benefit from the license and the license term has begun. If it is probable that a significant reversal in the amount of cumulative revenue recognized will occur, we record the upfront license fees in deferred revenue, non-current until the uncertainty is resolved.
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 Rocklatan® were expensed as pre-approval commercial manufacturing expenses (as defined below). We began capitalizing inventory costs for Rhopressa® and Rocklatan® after receipt of FDA approval. In January 2020 and September 2020, we received FDA approval to produce Rocklatan® and Rhopressa®, respectively, at the Athlone manufacturing plant for commercial distribution in the United States. Shipments of commercial supply of both Rocklatan® and Rhopressa® from the Athlone manufacturing plant to the United States commenced in the third quartersecond half of 2020. The Athlone manufacturing plant has manufactured clinical supplies of Rhopressa® for the Phase 3 clinical trials in Japan and 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 manufacturingAthlone plant, in Athlone, Ireland, are not included in the cost of inventory but are charged directly to cost of goods sold onin the condensed consolidated statements of operations and comprehensive loss in the period incurred. We expect cost of goods sold in 20212022 to continue to be unfavorably impacted by idle capacityproduction 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 having not yet reachingreached full capacity, along with the potential for future inventory obsolescence write-offs, for which we do not expect the impact to be material.capacity. 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.
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 selling and marketing expenses, facilities expenses, shipping and handling costs and professional fees for audit, tax, legal and other services.
Pre-approval Commercial Manufacturing Expenses
Pre-approval commercial manufacturing expenses consist of costs incurred for commercial-related manufacturing activities for Rhopressa® and Rocklatan® prior to FDA approval. These costs include those associated with the manufacturing of inventory in anticipation of commercial launch, expenses associated with the establishment of both our 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 pre-approval commercial manufacturing expenses in 2021.
Research and Development Expenses
We expense research and development costs to operations as incurred. Research and development expenses consist primarily of costs incurred for the research and development of our preclinical and clinical candidates, including which include:
•employee-related expenses, including salaries, benefits, travel and stock-based compensation expense for research and development personnel.personnel;
•expenses incurred under agreements with CROs, contract manufacturing organizations and service providers that assist in conducting clinical trials and preclinical studies;
•costs associated with any collaboration arrangements, licenses or acquisitions of preclinical molecules, product candidates or technologies;
•costs associated with preclinical activities and development activities;
•costs associated with regulatory operations; and
•depreciation expense for assets used in research and development activities.
Our expenses related to clinical trials are based on estimates of patient enrollment and related expenses at clinical investigator sites as well as estimates for the services received and efforts expended pursuant to contracts with research institutions, consultants and CROs that assist in conducting and managing clinical trials. We accrue expenses related to clinical trials based on contracted amounts applied to the level of patient enrollment and activity according to the protocol. If future timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we modify our estimates of accrued expenses accordingly on a prospective basis. Historically, such modifications have not been material.
Other (Expense) Income,Expense, Net
Other (expense) income,expense, net primarily includes interest expense, interest income, foreign exchange gains and losses and other income and expense. Interest expense consists of interest expense under the 1.50% convertible senior notes due 2024 (the “Convertible Notes”),Convertible Notes, including the amortization of debt discounts and issuance costs incurred. Interest income primarily consists of interest earned on our cash, cash equivalents and investments. See “—Liquidity and Capital Resources” below and
Note 10 to our condensed consolidated financial statements included in this report for further discussion. Foreign exchange gains and losses are primarily due to the remeasurement of our lease liabilities, which are 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.securities (sold during the three months ended March 31, 2021) and research and development tax credit refunds.
Income Tax Expense
Income tax expense primarily includes branch taxes of our non-U.S. subsidiaries and withholding taxes related to the $6.0 million developmental milestone made by Santen Pharmaceuticals pursuant to the First Santen Agreement.
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 (“U.S. 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 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 significant estimates have not materially changed since the date we filed our 20202021 Form 10-K. For more information on our critical accounting policies and estimates, refer to our 20202021 Form 10-K.
Results of Operations
Comparison of the Three Months Ended March 31, 20212022 and 20202021
The following table summarizes the results of our operations for the three months ended March 31, 20212022 and 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED MARCH 31, | | CHANGE | | % CHANGE |
| 2021 | | 2020 | | |
| (in thousands, except percentages) |
Product revenues, net | $ | 22,970 | | | $ | 20,341 | | | $ | 2,629 | | | 13 | % |
Total revenues, net | 22,970 | | | 20,341 | | | 2,629 | | | 13 | % |
Costs and expenses: | | | | | | | |
Cost of goods sold | 6,700 | | | 6,092 | | | 608 | | | 10 | % |
Selling, general and administrative expenses | 32,598 | | | 36,902 | | | (4,304) | | | (12) | % |
Pre-approval commercial manufacturing | — | | | 2,114 | | | (2,114) | | | (100) | % |
Research and development expenses | 17,891 | | | 19,173 | | | (1,282) | | | (7) | % |
Total costs and expenses | 57,189 | | | 64,281 | | | (7,092) | | | (11) | % |
Loss from operations | (34,219) | | | (43,940) | | | 9,721 | | | (22) | % |
Other (expense) income, net | (7,714) | | | (5,222) | | | (2,492) | | | 48 | % |
Loss before income taxes | $ | (41,933) | | | $ | (49,162) | | | $ | 7,229 | | | (15) | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED MARCH 31, | | $ CHANGE | | % CHANGE |
| 2022 | | 2021 | | |
| (in thousands, except percentages) |
Product revenues, net | $ | 29,835 | | | $ | 22,970 | | | $ | 6,865 | | | 30 | % |
Total revenues, net | 29,835 | | | 22,970 | | | 6,865 | | | 30 | % |
Costs and expenses: | | | | | | | |
Cost of goods sold | 6,780 | | | 6,700 | | | 80 | | | 1 | % |
Selling, general and administrative expenses | 31,524 | | | 32,598 | | | (1,074) | | | (3) | % |
| | | | | | | |
Research and development expenses | 25,174 | | | 17,891 | | | 7,283 | | | 41 | % |
Total costs and expenses | 63,478 | | | 57,189 | | | 6,289 | | | 11 | % |
Loss from operations | (33,643) | | | (34,219) | | | 576 | | | (2) | % |
Other expense, net | (1,555) | | | (7,714) | | | 6,159 | | | (80) | % |
Loss before income taxes | $ | (35,198) | | | $ | (41,933) | | | $ | 6,735 | | | (16) | % |
Product revenues, net
Product revenues, net were $23.0$29.8 million and $20.3$23.0 million for the three months ended March 31, 20212022 and 2020,2021, respectively, and related to sales of our U.SU.S. glaucoma franchise products, Rhopressa® or Rocklatan®. The year-over-year revenue increase is primarily attributabledue to higher volumes despite overall glaucoma market declines during the period. Net sales per unit remained relatively consistentan increase in the first quartersnumber of 2020units shipped to wholesalers and 2021. The impacts of the COVID-19 pandemic did not significantly change between the first quarter of 2021 as compared to the fourth quarter of 2020 in terms of doctor offices reopening and patient volumes in ophthalmology offices. We experienced lower sequential volumes in the first quarter of 2021 as the first quarter is typically the weakest quarter for our glaucoma franchise products, as seen with several other pharmaceutical products, largely due to patient insurance deductibles. The volumes for the first quarter of 2021 were also affected by inclement weather impacting the central region of the United States. To the extent that the impact of the COVID-19 pandemic on the pharmaceutical industry is mitigated, we would expect volumes to increase for the remainder of 2021.improved margins per bottle.
Cost of goods sold
Cost of goods sold was $6.8 million and $6.7 million for the three months ended March 31, 2022 and 2021, compared to $6.1 million in the prior year period.respectively. Our gross margin percentage was 70.8%77.3% and 70.1%70.8% for the three months ended March 31, 2022 and 2021, and 2020, respectively. The increase in the gross margin percentage was driven by the increase in product revenues, net as discussed above. Our cost of goods sold and gross margin percentage for the three months ended March 31, 20212022 and 20202021 were unfavorably impacted by idle capacity costs due to underutilizationunderutilized capacity at the Athlone manufacturing plant, which increased the cost of goods sold by $4.4$3.9 million and $3.5$4.4 million and lowered the gross margin percentage by 19.0%13.0% and 17.3%19.0%, respectively. Our cost of goods sold and gross margin percentage for the three months ended March 31, 2020 were also unfavorably impacted by inventory write-offs, which increased the cost of goods sold by $1.5 million and lowered the gross margin percentage by 7.3%. We expect the underutilization to continue to have an unfavorable impact on cost of goods sold that will decrease over time as the manufacturingAthlone plant reaches full capacity. We received FDA approval to produce Rocklatan® and Rhopressa® in January 2020 and September 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 decreased by $4.3were $31.5 million and $32.6 million for the three months ended March 31, 2022 and 2021, respectively. Selling, general and administrative expenses decreased by $1.1 million primarily due to lower stock-based compensation partially offset by higher employee-related and sales and marketing expenses. We expect selling, general and administrative expenses to decrease for the remainder of 2022.
Research and development expenses
Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of costs incurred for the research and development of our preclinical and clinical product candidates, which include but are not limited to: (1) expenses incurred under agreements with contract research organizations, contract manufacturing organizations and service providers that assist in conducting clinical and preclinical studies; (2) costs associated with any collaboration arrangements, licenses or acquisitions of preclinical molecules, product candidates or technologies; and (3) costs associated with our preclinical activities, development activities and regulatory operations. We do not allocate employee-related expenses,
stock-based compensation or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs.
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED MARCH 31, | | $ CHANGE | | % CHANGE |
| 2022 | | 2021 | | |
| (in thousands, except percentages) |
Direct research and development expenses by program: | | | | | | | |
Rhopressa® | $ | 135 | | | $ | 1,257 | | | $ | (1,122) | | | (89) | % |
Rocklatan® | 132 | | | — | | | 132 | | | * |
AR-15512 | 10,733 | | | 4,004 | | | 6,729 | | | * |
Retina programs (1) | 573 | | | 194 | | | 379 | | | * |
Other direct research and development program costs (2) | 424 | | | 80 | | | 344 | | | * |
Total direct research and development program costs | 11,997 | | | 5,535 | | | 6,462 | | | * |
Employee-related costs | 6,851 | | | 6,666 | | | 185 | | | 3 | % |
Stock-based compensation | 1,336 | | | 1,987 | | | (651) | | | (33) | % |
Other indirect costs (3) | 4,990 | | | 3,703 | | | 1,287 | | | 35 | % |
Research and development expenses | $ | 25,174 | | | $ | 17,891 | | | $ | 7,283 | | | 41 | % |
*Percentage not meaningful | | | | | | | |
(1) Consists of AR-1105, AR-13503 SR and AR-14034 SR in 2021 and 2022.
(2) Other direct research development program costs primarily include AR-6121.
(3) Consists primarily of other indirect costs incurred for the research and development of preclinical and clinical product candidates, including expenses associated with our research facilities such as lab supplies, depreciation and other research facility related costs.
Research and development expenses were $25.2 million and $17.9 million for the three months ended March 31, 2022 and 2021, respectively. Research and development expenses increased by $7.3 million primarily due to an increase of $6.7 million in expenses associated with AR-15512. In September 2021, we reported topline results on safety and efficacy for COMET-1, a Phase 2b clinical trial in which we completed a dose ranging study evaluating two concentrations of AR-15512 (0.0014% and 0.003%). In January 2022, the Company gained alignment with the FDA on the results of its Phase 2b clinical trial and confirmed the design of the Phase 3 trials. This resulted in the achievement of a regulatory milestone in which the Company paid the former shareholders of Avizorex $8.0 million. We expect to initiate Phase 3 clinical trials for AR-15512 in the second quarter of 2022, and therefore expect an increase in these costs through the end of the year.
The increase was offset by a $1.1 million decrease in expenses for Rhopressa® for the three months ended March 31, 2022 compared to the three months ended March 31, 2020, primarily due to lower sales and marketing expenses as well as lower travel expenses as a result of COVID-19 related travel restrictions. To the extent the impact of the COVID-19 pandemic on the pharmaceutical industry is 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 $2.1 million for the three months ended March 31, 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 pre-approval commercial manufacturing expenses for the remainder of 2021.
Research and development expenses
Research and development expenses decreased by $1.3 million for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.
A significant part of our program spend in the three months ended March 31, 2021 related to the AR-15512 Phase 2b clinical trial which increased expenses by $3.2 million as compared to the three months ended March 31, 2020.
Furthermore, expenses for Rhopressa® in the three months ended March 31, 2021 consisted of ongoing costs for the 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 decrease of $1.9 millionCosts related to the timing of the development of our retina programs and a decline of $1.2 million in expenses associated with Rocklatan®, due to lower costs relatedwere relatively flat for the three months ended March 31, 2022 compared to the Mercury 3 registration trialthree months ended March 31, 2021.In addition, we are also working to advance our preclinical sustained-release retinal implant, AR-14034 SR, for which we anticipate filing an IND with the FDA in Europe. In addition, travel expenses were lower as a resultthe second half of COVID-19 related travel restrictions.2022.
Other (expense) income,expense, net
Other (expense) income,expense, net consists of the following:
| | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED MARCH 31, | | CHANGE |
| 2021 | | 2020 | |
| (in thousands) |
Interest income | $ | 51 | | | $ | 1,096 | | | $ | (1,045) | |
Interest expense | (6,901) | | | (6,375) | | | (526) | |
Other (expense) income | (864) | | | 57 | | | (921) | |
Other (expense) income, net | $ | (7,714) | | | $ | (5,222) | | | $ | (2,492) | |
| | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED MARCH 31, | | $ CHANGE |
| 2022 | | 2021 | |
| (in thousands) |
Interest income | $ | 55 | | | $ | 51 | | | $ | 4 | |
Interest expense | (1,633) | | | (6,901) | | | 5,268 | |
Other income (expense) | 23 | | | (864) | | | 887 | |
Other expense, net | $ | (1,555) | | | $ | (7,714) | | | $ | 6,159 | |
Other (expense) income,expense, net changed by $2.5$6.2 million for the three months ended March 31, 20212022 compared to the three months ended March 31, 2020.2021.
This change was primarily due to aan decrease of $1.0$5.3 million in interest incomeexpense due to the impact of adopting Accounting Standards Update 2020-06 on our cash, cash equivalents and investments andJanuary 1, 2022 which accounts for convertible debt instruments, such as the Convertible Notes, as a single liability measured at its amortized cost, partially offset by a change of $0.9 million in other income (expense) income during the three months ended March 31, 20212022 as compared to the three months ended March 31, 2020.2021. The change in other income (expense) income primarily consists of $1.0 million in realized loss on equity securities sold atin the end of theprior period.
Further, interest expense, which decreased by $0.5 million See Notes 2 and 10 to our condensed consolidated financial statements for the three months ended March 31, 2021compared to the three months ended March 31, 2020, relates to interest expense underadditional information on the Convertible Notes issued in September 2019, including the amortization of debt discounts and issuance costs incurred.Notes.
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 Second Santen Agreement in December 2021 which included the Second Santen Agreement Upfront Payment, consisting of (a) $88.0 million which we received in January 2022 and (b) a supplemental upfront payment of $2.0 million. This expands the scope of the First Santen Agreement pursuant to which Santen paid amade an upfront payment of $50.0 million upfront payment to Aerie Ireland Limited (the “Upfront Payment”).in the fourth quarter of 2020.
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 or future product candidates unless and until we obtain regulatory approval and commercialize such products.
Sources of Liquidity
Our product revenue, net amounted to $23.0$29.8 million for the three months ended March 31, 2021,2022, which relate to sales of our glaucoma franchise products, Rhopressa® and Rocklatan®. Accounts receivable, net amounted to $46.2$63.6 million as of March 31, 2021.2022.
As of March 31, 2021,2022, our principal sources of liquidity were our cash, cash equivalents and investments, which totaled approximately $208.2$199.2 million. In September 2019,January 2022, we issuedreceived an aggregate principal amount of $316.25$90.0 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 intoassociated with the Santen Agreement. Pursuant to theSecond Santen Agreement Santen paid the $50.0 million Upfront Payment in the fourth quarter of 2020.Payment. 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:
| | | | | | | | | | | |
| THREE MONTHS ENDED MARCH 31, |
| 2021 | | 2020 |
| (in thousands) |
Net cash (used in) provided by: | | | |
Operating activities | $ | (30,054) | | | $ | (41,822) | |
Investing activities | 2,280 | | | 33,483 | |
Financing activities | (1,101) | | | (1,422) | |
Net change in cash and cash equivalents | $ | (28,875) | | | $ | (9,761) | |
| | | | | | | | | | | |
| THREE MONTHS ENDED MARCH 31, |
| 2022 | | 2021 |
| (in thousands) |
Net cash (used in) provided by: | | | |
Operating activities | $ | 61,911 | | | $ | (30,054) | |
Investing activities | (42,300) | | | 2,280 | |
Financing activities | (357) | | | (1,101) | |
Net change in cash and cash equivalents | $ | 19,254 | | | $ | (28,875) | |
Operating Activities
During the three months ended March 31, 2022, net cash provided by operating activities of $61.9 million related to a net loss of $35.9 million, adjusted for non-cash items of $8.2 million primarily related to amortization and accretion, stock-based compensation expense and depreciation, partially offset by a net cash inflow of $89.6 million related to changes in operating assets and liabilities. During the three months March 31, 2021, net cash used in operating activities of $30.1 million related to a net loss of $42.0 million, adjusted for non-cash items of $18.8 million primarily related to stock-based compensation expense, amortization and accretion and depreciation, partially offset by a net cash outflow of $6.9 million related to changes in operating assets and liabilities. During the three months March 31, 2020, net cash used in operating activities of $41.8 million related to a net loss of $49.1 million, adjusted for non-cash items of $18.7 million primarily related to stock-based compensation expense, amortization and accretion, depreciation, offset by a net cash outflow of $11.4 million related to changes in operating assets and liabilities.
The decreaseincrease in net cash used inprovided by operating activities during the three months ended March 31, 20212022 as compared to the three months March 31, 20202021 was primarily due to the receipt of the $90.0 million Second Santen Agreement Upfront Payment from Santen in connection with the Second Santen Agreement and higher net cash collections generated from product revenues and lower sales and marketing spend.revenues.
Investing Activities
During the three months ended March 31, 2021, our2022, net cash used in investing activities providedof $42.3 million related to purchases of available-for-sale investments of $70.3 million and purchases of property, plant and equipment of $1.6 million primarily related to the manufacturing plant in Athlone, Ireland partially offset by sales and maturities of available-for-sale investments of $29.6 million. During the three months ended March 31, 2021, net cash provided by investing activities of $2.3 million related to sales and maturities of available-for-sale investments of $28.3 million, offset by purchases of available-for-sale investments of $25.2 million and purchases of property, plant and equipment of $0.8 million primarily related to the manufacturing plant in Athlone Ireland. During the three months ended March 31, 2020, our investing activities provided net cash of approximately $33.5 million related to sales and maturities of available-for-sale investments of $50.6 million offset by purchases of available-for-sale investments of $15.8 million and purchases of property, plant and equipment of $1.2 million primarily related to the manufacturing plant in Athlone, Ireland.plant.
Financing Activities
During the three months ended March 31, 2021, our financing activities used net cash of $1.1 million. The2022, net cash used in financing activities of $1.1was $0.4 million for three months ended March 31, 2021 wasand primarily related to tax payments made on employees’ behalf through withholding of shares on restricted stock grants. During the three months ended March 31, 2020 our financing activities used net cash of $1.4 million. The2021, net cash used in financing activities of $1.4$1.1 million for the three months ended March 31, 2020 was 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 Rhopressa®, Rocklatan®, Rhokiinsa® or Roclanda® or any product candidates or future product candidates, if approved, generate sufficient cash flows for Aerie to achieve profitability.
Our principal liquidity requirements are for: working capital; operating 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, including clinical and potential commercialization activities outside the United States; contractual obligations; and capital expenditures.
We believe that our cash, cash equivalents and investments and projected cash flows from revenues, will provide sufficient resources to support our operations, including interest payments for our Convertible Notes, through at least the 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®, Rhokiinsa® or Roclanda® or any current or future product candidates, if approved, including any effects associated with the COVID-19 pandemic;approved;
•costs of commercialization activities for Rhopressa® and, Rocklatan®, Rhokiinsa® or Roclanda® 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;
•timing and costs of our ongoing and future clinical trials and preclinical studies including those related to our global expansion;
•costs of any follow-on development or products, including the exploration and/or development of any additional indications or additional opportunities for new ophthalmic product candidates, delivery alternatives and new therapeutic areas;
•terms and timing of any acquisitions, collaborations, 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. Accordingly, we may be required to obtain further funding through debt or 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
In September 2019, we issued an aggregate principal amount of $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 redeemed, 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 holders any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Convertible Notes may 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 10 to our condensed consolidated financial statements included in this report for additional information.
Contractual Obligations and Commitments
There have been no material changes to our contractual obligations and commitments as included in our 20202021 Form 10-K.
Off-Balance Sheet Arrangements
None.
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, cash equivalents and investments totaled $208.2$199.2 million and $240.4$139.8 million as of March 31, 20212022 and
December 31, 2020,2021, respectively. Given the short-term nature of our cash, cash equivalents and investments, we do not believe that a change in market interest rates would 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.
We 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 do not currently have a foreign currency hedging program. To date and during the three months ended March 31, 2021,2022, 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 Officerour principal executive officer and Chief Financial Officerprincipal financial officer concluded that, as of March 31, 2021,2022, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file or 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 were no changes in our internal control over financial reporting during the quarter ended March 31, 20212022 that have materially affected, or are 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. WeAs of March 31, 2022, we are not a party to any known litigation,material pending legal or administrative proceedings and, to our knowledge, no such proceedings are not aware of any material unasserted claims and do not have contingency reserves established for any litigation liabilities.threatened or contemplated.
Item 1A. Risk Factors
You should consider carefully the risks set forth under “Risk Factors” in our 20202021 Form 10-K, and other documents that we have filed or furnished with the SEC. Except as set forth below, thereThere have been no material changes to these risk factors.
Healthcare 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, Medicare reimbursement and changes 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 number of proposals aimed at containing prescription drug prices and announced several Executive Orders that sought to implement a number of the administration's proposals. For example, on November 20, 2020, the United States Department of Health and Human Services finalized a regulation removing safe harbor protection under the Federal Anti-Kickback Statute for price reductions from pharmaceutical manufacturers to plan 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 price to the patient. The implementation of the rule 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 products and negative publicity regarding drug pricing and price increases generally could negatively affect market acceptance, and sales, of our products and product candidates.
Also, some states have enacted or are considering legislation and ballot initiatives that would control 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 United States control the costs of pharmaceuticals. Many European countries and Canada have established pricing and reimbursement policies that contain costs by referencing the price of the same 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 coronavirus pandemic.
Healthcare reforms that have been adopted, and that may be adopted in the future, could result in further reductions in coverage and levels of reimbursement for our products, increases in the rebates payable under U.S. government rebate programs and additional downward pressure on the prices that we and our collaborators 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 and adversely affect our revenue or sales of our current and or potential future products and product candidates, as well as those of our collaborators.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
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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10.1*†# | | |
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10.2*# | | |
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10.3*† | | |
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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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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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† | Exhibit is a management contract or compensatory plan or arrangement. | | | |
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Portions of this exhibit (indicated by asterisks) have been redacted in accordance with Item 601(b)(10)(iv) of Regulation S-K. | | | |
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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 March 31, 20212022 and December 31, 20202021 (unaudited), (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 20212022 and 20202021 (unaudited), (iii) Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the three months ended March 31, 20212022 and 20202021 (unaudited), (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 20212022 and 20202021 (unaudited) and (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: May 6, 20212022 | | | | /s/ PETER LANG |
| | | | Peter Lang |
| | | | Chief Financial Officer |
| | | | (Principal Financial Officer) |
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| | | | /s/ JEFFREY M. CALABRESE, CPA |
| | | | /s/ RICHARD J. RUBINOJeffrey M. Calabrese, CPA |
| | | | Richard J. Rubino |
| | | | Chief Financial OfficerVice President, Finance |
| | | | (Principal Financial and Accounting Officer) |