Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 02, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | KALA PHARMACEUTICALS, INC. | |
Entity Central Index Key | 0001479419 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Common Stock, Shares Outstanding | 34,006,631 | |
Entity Shell Company | false | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash | $ 118,006 | $ 170,898 |
Accounts receivable, net | 5,648 | |
Inventory | 8,219 | 4,095 |
Prepaid expenses and other current assets | 930 | 2,035 |
Total current assets | 132,803 | 177,028 |
Noncurrent assets: | ||
Property and equipment, net | 2,721 | 2,166 |
Right-of-use assets | 30,713 | 29,566 |
Restricted cash | 12,578 | 12,206 |
Total assets | 178,815 | 220,966 |
Current liabilities: | ||
Accounts payable | 3,196 | 5,446 |
Accrued expenses and other current liabilities | 12,878 | 11,101 |
Current portion of lease liabilities | 1,627 | 463 |
Total current liabilities | 17,701 | 17,010 |
Long-term liabilities: | ||
Long-term lease liability - less current portion | 29,356 | 28,752 |
Long-term debt | 70,692 | 70,226 |
Total long-term liabilities | 100,048 | 98,978 |
Total liabilities | 117,749 | 115,988 |
Commitments and Contingencies (Note 11) | ||
Stockholders' equity: | ||
Common stock, $0.001 par value; 120,000,000 shares authorized as of June 30, 2019 and December 31, 2018; 33,882,967 and 33,863,077 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively | 34 | 34 |
Additional paid-in capital | 311,354 | 306,053 |
Accumulated deficit | (250,322) | (201,109) |
Total stockholders' equity | 61,066 | 104,978 |
Total liabilities and stockholders' equity | $ 178,815 | $ 220,966 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2019 | Dec. 31, 2018 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, authorized | 120,000,000 | 120,000,000 |
Common stock, shares issued | 33,882,967 | 33,863,077 |
Common stock, shares outstanding | 33,882,967 | 33,863,077 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Product revenues, net | $ 2,057 | $ 3,443 | ||
Costs and expenses: | ||||
Cost of product revenues | 352 | 593 | ||
Selling, general and administrative | 17,007 | $ 7,151 | 35,243 | $ 12,633 |
Research and development | 7,108 | 7,368 | 14,067 | 13,024 |
Total costs and expenses | 24,467 | 14,519 | 49,903 | 25,657 |
Loss from operations | (22,410) | (14,519) | (46,460) | (25,657) |
Other income (expense): | ||||
Interest income | 646 | 313 | 1,402 | 522 |
Interest expense | (2,061) | (414) | (4,155) | (781) |
Total other income (expense) | (1,415) | (101) | (2,753) | (259) |
Net loss | $ (23,825) | $ (14,620) | $ (49,213) | $ (25,916) |
Net loss per share—basic and diluted | $ (0.70) | $ (0.60) | $ (1.45) | $ (1.06) |
Weighted average shares outstanding—basic and diluted | 33,882,939 | 24,567,103 | 33,880,494 | 24,554,834 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Balance as of beginning of period at Dec. 31, 2017 | $ 25 | $ 224,025 | $ (134,371) | $ 89,679 |
Balance as of beginning of period (in shares) at Dec. 31, 2017 | 24,538,309 | |||
Stockholders' Equity | ||||
Exercise of stock options | 178 | 178 | ||
Exercise of stock options (in shares) | 53,965 | |||
Stock-based compensation expense | 4,152 | 4,152 | ||
Net loss | (25,916) | (25,916) | ||
Balance as of end of period at Jun. 30, 2018 | $ 25 | 228,355 | (160,287) | 68,093 |
Balance as of end of period (in shares) at Jun. 30, 2018 | 24,592,274 | |||
Balance as of beginning of period at Mar. 31, 2018 | $ 25 | 225,914 | (145,668) | 80,271 |
Balance as of beginning of period (in shares) at Mar. 31, 2018 | 24,556,094 | |||
Stockholders' Equity | ||||
Exercise of stock options | 150 | 150 | ||
Exercise of stock options (in shares) | 36,180 | |||
Stock-based compensation expense | 2,291 | 2,291 | ||
Net loss | (14,619) | (14,619) | ||
Balance as of end of period at Jun. 30, 2018 | $ 25 | 228,355 | (160,287) | 68,093 |
Balance as of end of period (in shares) at Jun. 30, 2018 | 24,592,274 | |||
Balance as of beginning of period at Dec. 31, 2018 | $ 34 | 306,053 | (201,109) | 104,978 |
Balance as of beginning of period (in shares) at Dec. 31, 2018 | 33,863,077 | |||
Stockholders' Equity | ||||
Exercise of stock options | 39 | 39 | ||
Exercise of stock options (in shares) | 19,890 | |||
Stock-based compensation expense | 5,262 | 5,262 | ||
Net loss | (49,213) | (49,213) | ||
Balance as of end of period at Jun. 30, 2019 | $ 34 | 311,354 | (250,322) | 61,066 |
Balance as of end of period (in shares) at Jun. 30, 2019 | 33,882,967 | |||
Balance as of beginning of period at Mar. 31, 2019 | $ 34 | 308,830 | (226,497) | 82,367 |
Balance as of beginning of period (in shares) at Mar. 31, 2019 | 33,882,857 | |||
Stockholders' Equity | ||||
Exercise of stock options (in shares) | 110 | |||
Stock-based compensation expense | 2,524 | 2,524 | ||
Net loss | (23,825) | (23,825) | ||
Balance as of end of period at Jun. 30, 2019 | $ 34 | $ 311,354 | $ (250,322) | $ 61,066 |
Balance as of end of period (in shares) at Jun. 30, 2019 | 33,882,967 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Cash flows from operating activities: | ||
Net loss | $ (49,213) | $ (25,916) |
Adjustments to reconcile net loss to cash used in operating activities: | ||
Depreciation | 388 | 173 |
Non-cash operating lease cost | 840 | 187 |
Amortization of debt discount and other non-cash interest | 466 | 51 |
Stock-based compensation | 5,094 | 4,152 |
Change in operating assets and liabilities: | ||
Accounts receivable | (5,648) | |
Prepaid expenses and other current assets | 1,106 | 12 |
Inventory | (3,955) | |
Accounts payable | (2,249) | 1,085 |
Accrued expenses | 1,776 | (1,460) |
Lease liabilities and other long-term liabilities | (201) | (203) |
Net cash used in operating activities | (51,596) | (21,919) |
Cash flows from investing activities: | ||
Purchases of property and equipment | (943) | (541) |
Net cash used in investing activities | (943) | (541) |
Cash flows from financing activities: | ||
Proceeds from venture debt, net of debt issuance costs of $50 | 2,728 | |
Payment of principal and prepayment penalty on venture debt | (1,667) | |
Payment of principal on finance lease | (20) | |
Proceeds from exercise of stock options | 39 | 83 |
Net cash provided by financing activities | 19 | 1,144 |
Net decrease in cash and restricted cash: | (52,520) | (21,316) |
Cash and restricted cash at beginning of period | 183,104 | 114,699 |
Cash and restricted cash at end of period | 130,584 | 93,383 |
Reconciliation of cash and restricted cash: | ||
Cash and restricted cash at end of period | 183,104 | 114,699 |
Non-cash investing and financing activities: | ||
Right-of-use asset obtained in exchange for finance lease obligation | 136 | |
Purchases of property and equipment in accounts payable | 95 | |
Exercise of stock options in prepaid expenses and other current assets | 95 | |
Supplemental disclosure: | ||
Cash paid for interest | 3,683 | $ 800 |
Right-of-use assets obtained in exchange of operating lease obligations | $ 1,852 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) $ in Thousands | Jun. 30, 2018USD ($) |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |
Debt issuance costs | $ 50 |
Nature of business and basis of
Nature of business and basis of presentation | 6 Months Ended |
Jun. 30, 2019 | |
Nature of business and basis of presentation | |
Nature of business and basis of presentation | 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION Nature of Business — Kala Pharmaceuticals, Inc. (the “Company”) was incorporated on July 7, 2009, and is a biopharmaceutical company focused on the development and commercialization of therapeutics using its AMPPLIFY mucus-penetrating particle (“MPP”) Drug Delivery Technology, with an initial focus on the treatment of eye diseases. The Company has applied the AMPPLIFY technology to loteprednol etabonate (“LE”), a corticosteroid designed for ocular applications, resulting in the U.S. Food and Drug Administration’s (the “FDA”) approval of INVELTYS ® (loteprednol etabonate ophthalmic suspension) 1% as the first and only twice-daily ocular corticosteroid for treatment of post-operative inflammation and pain following ocular surgery, and the development of its lead product candidate, KPI-121 0.25%, for the temporary relief of the signs and symptoms of dry eye disease. On October 16, 2018, the Company submitted a New Drug Application to the FDA for KPI-121 0.25%, for which the FDA has granted a target action date under the Prescription Drug User Fee Act (“PDUFA”) of August 15, 2019. In addition, based upon the recommendation of the FDA, the Company initiated an additional Phase 3 clinical trial (“STRIDE 3”) (STRIDE- S hort T erm R elief I n D ry E ye), in the third quarter of 2018 evaluating KPI-121 0.25% for the temporary relief of the signs and symptoms of dry eye disease. The Company is targeting topline data for STRIDE 3 by the end of 2019. The Company is evaluating opportunities for MPP nanosuspensions of LE with less frequent daily dosing regimens for the temporary relief of the signs and symptoms of dry eye disease and for potential chronic treatment of dry eye disease. The Company is also evaluating compounds in its receptor Tyrosine Kinase Inhibitor program (the “rTKI program”), that inhibit the vascular endothelial growth factor (“VEGF”), pathway, for the potential treatment of a number of retinal diseases. In January 2019, the Company launched its first commercial product, INVELTYS, in the United States. The Company is currently engaged in the commercialization of INVELTYS, research and development activities, raising capital and recruiting skilled personnel. The Company is subject to a number of risks similar to those of other companies conducting high‑risk, early‑stage research and development of pharmaceutical product candidates and launching a product for the first time. Principal among these risks are dependence on key individuals and intellectual property, competition from other products and companies and the technical risks associated with the successful research, development and marketing of its product candidates. The Company’s success is dependent upon its ability to raise additional capital in order to fund ongoing and future research and development, obtain regulatory approval of its product candidates, successfully commercialize its products, generate revenue, meet its obligations, and, ultimately, attain profitable operations. Liquidity — Since inception, the Company has incurred significant losses from operations and negative cash flows from operations. As of June 30, 2019, the Company had an accumulated deficit of $250.3 million. The Company has generated only limited revenues to date from product sales and has financed operations primarily through its initial public offering of common stock (“IPO”), private placements of preferred stock, convertible debt financings, borrowings under credit facilities, warrants, public common stock offerings, sales of its common stock under its at-the-market offering facility and to a lesser extent, payments received in connection with various feasibility studies . The Company has devoted substantially all of its financial resources and efforts to research and development, including preclinical studies and clinical trials and engaging in activities to commercialize INVELTYS. The Company expects to continue to incur significant expenses and operating losses over the next several years. Net losses may fluctuate significantly from quarter-to-quarter and year-to-year. The Company believes that its existing cash on hand as of June 30, 2019, will enable it to fund its planned operating expenses, debt service obligations and capital expenditure requirements for at least twelve months from the date these condensed consolidated financial statements were issued. This evaluation is based on relevant conditions and events that are known and reasonably knowable at the date that the condensed consolidated financial statements are issued. As a result, the Company could deplete its available capital resources sooner than it currently expects. Use of Estimates —The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America Net Loss per Share —Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the sum of the weighted average number of common shares outstanding during the period and, if dilutive, the weighted average number of potential shares of common stock, including the assumed exercise of stock options and warrants. Basic and diluted shares outstanding are the same for each period presented as all common stock equivalents would be antidilutive due to the net losses incurred. Unaudited Interim Financial Information —The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. The accompanying condensed consolidated financial statements reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations, statement of stockholders’ equity and cash flows for the interim periods presented. Interim results are not necessarily indicative of results for a full year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “Annual Report”). The unaudited condensed consolidated financial statements include the accounts of Kala Pharmaceuticals, Inc. and its wholly owned subsidiary, Kala Pharmaceuticals Security Corporation. All intercompany transactions and balances have been eliminated in consolidation. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2019 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements included in the Annual Report. There have been no material changes to the significant accounting policies during the period ended June 30, 2019 other than those noted below. Revenue The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers . Under ASC Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to be entitled in exchange for those goods or services. The Company performs the following five steps to recognize revenue under ASC Topic 606: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only recognizes revenue when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services that will be transferred to the customer. Product revenues, net The Company sells INVELTYS to wholesalers and/or specialty distributors in the United States (collectively, “Customers”). These Customers subsequently resell the Company’s products to specialty and other retail pharmacies. In addition to agreements with Customers, the Company enters into arrangements with payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts for the purchase of the Company’s products. The goods promised in the Company’s product sales contracts represent a single performance obligation; as the promise to transfer the individual products to the Customer is not separately identifiable from other promises in the contracts and, therefore, not distinct. The Company recognizes revenue from product sales at the point the Customer obtains control of the product, which occurs upon delivery. The transaction price (“net sales price”) that is recognized as revenue for product sales includes the selling price to the Customer and an estimate of variable consideration. Components of variable consideration include prompt pay and other discounts, product returns, government rebates, third-party payor rebates, coverage gap rebates, incentives such as patient co-pay assistance, and other fees paid to Customers where a distinct good or service is not received. Variable consideration is recorded on the consolidated balance sheet as either a reduction of accounts receivable, if payable to a Customer, or as a current liability, if payable to a third-party other than a Customer. The Company considers all relevant information when estimating variable consideration such as assessment of its current and anticipated sales and demand forecasts, specific known market events and trends, industry data and current contractual and statutory requirements that are reasonably available. The Company includes estimated amounts in the net sales price to the extent it is determined probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Payment terms with Customers do not exceed one year and, therefore, the Company does not account for a significant financing component in its arrangements. The Company expenses incremental cost of obtaining a contract with a Customer when incurred as the period of benefit is less than one year. Reserves for Variable Consideration : Trade Discounts and Allowances The Company provides its Customers with certain trade discounts and allowances including discounts for prompt payments and fees paid for distribution, data and administrative services. These discounts and fees are based on contractually-determined percentages and are recorded as a reduction of revenue and accounts receivable in the period in which the related product revenue is recognized. Chargebacks Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from the Company. Customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These components of variable consideration are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. Reserves for chargebacks consist of credits the Company expects to issue for units that remain in the distribution channel at the end of each reporting period and that the Company expects will be sold to qualified healthcare providers, as well as chargebacks that Customers have claimed, but for which the Company has not yet issued a credit. Product Returns Consistent with industry practice, the Company has a product returns policy that provides Customers a right of return for product purchased within a specified period prior to and subsequent to the product’s expiration date. The Company estimates the amount of its products that may be returned and presents this amount as a reduction of revenue in the period the related product revenue is recognized, in addition to establishing a liability. The Company’s estimates for product returns are based upon available industry data and its own sales information, including its visibility into the inventory remaining in the distribution channel. Commercial Payor and Medicare Part D Rebates The Company contracts with certain third-party payors, primarily pharmacy benefit managers (“PBMs”) and health plans (“Plans”), for the payment of rebates with respect to utilization of its product. These rebates are based on contractual percentages applied to the amount of product prescribed to patients who are covered by the PBMs or the Plans with which it contracts. The Company estimates the rebates for commercial and Medicare Part D payors based on the contractual discount percentage, the various payor mix for INVELTYS as well as future rebates that will be made for product that has been recognized as revenue but remains in the distribution channel at the end of each reporting period. The Company also estimates the number of patients in the prescription drug coverage gap for whom it will owe an additional liability under the Medicare Part D program. Such estimates are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. Government Rebates The Company is subject to discount obligations under Medicaid and other government programs. For Medicaid, reserves are based on estimates of future Medicaid beneficiary utilization applied to the Medicaid unit rebate formula established by the Centers for Medicaid and Medicare Services. The Company’s liability for these rebates consists of estimates of claims for the current period and estimated future claims that will be made for product that has been recognized as revenue but remains in the distribution channel at the end of each reporting period. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. Co-pay Assistance The Company offers a co-pay assistance program (the “co-pay program”), which is intended to provide financial assistance to p atients who may or may not be covered by commercial insurance or who opt out of government insurance programs . The calculation of accruals for the co-pay program is based on actual claims processed during the period as well as an estimate of the number and cost per claim that the Company expects to receive associated with product that has been recognized as revenue but remains in the distribution channel at the end of each reporting period. Allowances for estimated co-pay claims are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. Accounts Receivable, net Accounts receivable are reported on the consolidated balance sheets at outstanding amounts due from Customers for product sales. The Company deducts sales discounts for prompt payments and contractual fees for service arrangements from accounts receivable. The Company evaluates the collectability of accounts receivable on a regular basis, by reviewing the financial condition and payment history of Customers, an overall review of collections experience on other accounts, and economic factors or events expected to affect future collections experience. An allowance for doubtful accounts is recorded when a receivable is deemed to be uncollectible. The Company recorded no allowance for doubtful accounts as of June 30, 2019. The Company recorded an allowance of approximately $0.9 million for expected sales discounts, related to prompt pay discounts and contractual fee for service arrangements, to wholesalers and distributors as of June 30, 2019. Cost of Product Revenues The cost of product revenues consists primarily of materials, third-party manufacturing costs, freight and distribution costs, royalty expense, allocation of labor, quality control and assurance, spoilage and other manufacturing overhead costs. The Company expenses costs of product revenues related to product candidates as research and development expenses prior to regulatory approval in the respective territory. The Company received regulatory approval for INVELTYS on August 22, 2018. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 states that an entity should recognize revenue based on the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB subsequently issued amendments to ASU 2014-09 that had the same effective date of January 1, 2018. Revenue from sales of INVELTYS, as well as any other future revenue arrangements, are and will be recognized under the provisions of ASU 2014-09. While the Company adopted ASU 2014-09 effective January 1, 2018, the Company did not generate any revenue from product sales prior to 2019. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 substantially aligns accounting for share-based payments to employees and non-employees. This ASU became effective for annual periods beginning after December 15, 2018, including interim periods within that period, and early adoption is permitted. The new standard was effective on January 1, 2019 and the adoption of ASU 2018-07 did not have an impact on the Company’s condensed consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measuremen t (“ASU 2018-13”). ASU 2018-13 is intended to improve the effectiveness of disclosures in the notes to financial statements related to fair value measurements in Topic 820. This ASU will become effective for annual periods beginning after December 15, 2019, including interim periods within that period, and early adoption is permitted. The Company is currently evaluating the effect of this new guidance on its condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-15 , Intangibles - Goodwill and Other - Internal-Use Software -Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. This ASU will become effective for annual periods beginning after December 15, 2019, including interim periods within that period, and early adoption is permitted. The Company does not expect the adoption of ASU 2018-15 to have a material effect on its condensed consolidated financial statements. |
Inventory
Inventory | 6 Months Ended |
Jun. 30, 2019 | |
Inventory | |
Inventory | 3. INVENTORY Inventory is stated at the lower of cost or net realizable value, on a first in, first out basis. Costs include amounts related to third-party manufacturing, freight and distribution costs, allocation of labor, quality control and quality assurance and other manufacturing overhead. Capitalization of costs as inventory begins when the product has received regulatory approval in the United States. The Company expensed inventory costs related to product candidates as research and development expenses prior to regulatory approval. For INVELTYS, capitalization of costs as inventory began upon U.S. regulatory approval on August 22, 2018. Inventory produced that will be used in a promotional sample program is expensed to selling, general and administrative expense when it is selected for use and shipped as part of a marketing program. Inventory consists of the following (in thousands): June 30, December 31, 2019 2018 Raw materials $ 706 $ 350 Work in progress 6,928 3,357 Finished goods 585 388 Inventory $ 8,219 $ 4,095 |
Accrued Expenses
Accrued Expenses | 6 Months Ended |
Jun. 30, 2019 | |
Accrued Expenses | |
Accrued Expenses | 4. ACCRUED EXPENSES June 30, December 31, 2019 2018 Compensation and benefits $ 4,662 $ 5,352 Accrued revenue reserves (1) 3,444 — Development costs 1,314 1,223 Professional services 828 1,019 Commercial cost 835 1,722 Contract manufacturing 1,347 434 Payable related to construction of facility — 1,026 Other 448 325 Accrued expenses $ 12,878 $ 11,101 (1) As of June 30, 2019, $0.5 million of additional revenue reserves were in accounts payable. |
Leases
Leases | 6 Months Ended |
Jun. 30, 2019 | |
Leases | |
Leases | 5. LEASES Operating leases The Company entered into a three‑year lease agreement for its former headquarters (the “Waltham Lease”) on September 30, 2013, with a commencement date of February 1, 2014 . On June 30, 2016, the lease was amended to extend the term from January 31, 2017 to January 31, 2019. In connection with the lease agreement, the Company issued a letter of credit to the landlord for $0.1 million. The Company secured the letter of credit for the full amount of the letter with cash on deposit, which was reported as restricted cash as of December 31, 2018. Upon the expiration of the lease term on January 31, 2019, the deposit was returned and was no longer restricted. With the adoption of ASU 2016-02, Leases , the Company has recorded a right-of-use asset and corresponding lease liability. On March 15, 2018, the Company entered into a lease agreement with Duffy Associates, LLC for the lease of a portion of the building located at 465 Waverley Oaks Road, Suite 301, Waltham, Massachusetts (the “Waverley Oaks Lease”). The term of the Waverley Oaks Lease was one-year, and as a result, a right-of-use asset and corresponding lease liability was not recorded. On February 28, 2018, the Company entered into a lease agreement with 480 Arsenal Group LLC (the “Arsenal Group”) for the lease of a portion of the building located at 490 Arsenal Way, Watertown, Massachusetts (the “Watertown Lease”) to be used as its new corporate headquarters. T he Company recognized the right-of-use asset and corresponding lease liability on November 15, 2018, by calculating the present value of lease payments, discounted at 9.9%, the Company’s estimated incremental borrowing rate, over the 13-year expected term. In connection with the Watertown Lease, the Company issued a letter of credit to the Arsenal Group for $2.0 million. The Company secured the letter of credit for the full amount of the letter with cash on deposit, which is reported as restricted cash as of June 30, 2019 and December 31, 2018. As of June 30, 2019, the variable lease expense for the Watertown Lease, which includes common area maintenance and real estate taxes was $0.5 million and the remaining lease term was 12.3 years. As of December 31, 2018, the remaining lease term on the lease for the Waltham Lease was 0.08 years and for the Watertown Lease was 12.83 years. Vehicle Fleet lease During the six months ended June 30, 2019, the Company entered into a master fleet lease agreement (the “Vehicle Fleet Lease”), pursuant to which it currently leases 65 vehicles. In connection with the Vehicle Fleet Lease, the company issued a letter of credit for $0.5 million, which was reported as restricted cash on the balance sheet. The lease has an expected term of three years, which commenced upon the delivery of the vehicles in March 2019. As of June 30, 2019, the remaining lease term was 2.7 years. The components of lease expense and related cash flows were as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Lease cost Operating lease cost $ $ $ $ Short-term lease cost — — Total lease cost $ $ $ $ Operating cash outflows from operating leases $ $ $ $ Future minimum commitments due under the Company’s lease agreements as of June 30, 2019 were as follows (in thousands): Years Ending December 31, Operating Lease Finance Lease Obligation (2) Total 2019 (remaining six months) $ 2,433 $ 21 $ 2,454 2020 4,141 41 4,182 2021 4,233 41 4,274 2022 4,021 41 4,062 2023 3,960 — 3,960 Thereafter 35,415 — 35,415 Present value adjustment (23,339) (25) (23,364) Present value of lease payments $ 30,864 $ 119 $ 30,983 (1) Future minimum lease payments under the Company’s Watertown Lease and its Vehicle Fleet Lease. (2) F uture minimum lease payments under the Company’s finance lease obligation. |
Debt
Debt | 6 Months Ended |
Jun. 30, 2019 | |
Debt | |
Debt | 6. DEBT 2014 Debt Facility In November 2014, the Company entered into a venture debt facility (“2014 Debt Facility”), which was subsequently amended in October 2016, November 2017 and March 2018. The 2014 Debt Facility, as amended, increased the initial commitment under the debt facility to a total of $20.0 million of funding and extended the interest-only end date for 12 months following the execution of the March 2018 amendment. The maturity date of the 2014 Debt Facility was also extended from October 13, 2020 to March 29, 2022. The unpaid principal balance under the 2014 Debt Facility was $20.0 million as of June 30, 2018. The unamortized discount was $0.2 million as of June 30, 2018. During the three months ended June 30, 2018, the Company recognized interest expense of $0.4 million which consisted of amortization of the debt discount of $21,000 and the contractual coupon interest expense of $0.4 million. During the six months ended June 30, 2018, the Company recognized interest expense of $0.8 million which consisted of amortization of the debt discount of $51,000 and the contractual coupon interest expense of $0.7 million. On October 1, 2018, the Company repaid the outstanding principal balance under the 2014 Debt Facility of $20.0 million. In connection with the repayment of the 2014 Debt Facility, the Company paid a prepayment fee of $0.2 million. Athyrium Credit Facility On October 1, 2018, the Company entered into a credit agreement (the “Athyrium Credit Facility”), with Athyrium Opportunities III Acquisition LP (“Athyrium”) for up to $110.0 million . The Athyrium Credit Facility provides for a Term Loan A in the aggregate principal amount of $75.0 million (the “Term Loan A”), and a Term Loan B in the aggregate principal amount of $35.0 million (the “Term Loan B”). On October 1, 2018, the Company borrowed the entire principal amount of the Term Loan A. The Company may draw down the Term Loan B upon either (i) FDA approval of KPI-121 0.25% for a dry eye disease indication or (ii) reaching certain net product revenues for INVELTYS, in each case on or prior to June 30, 2020. The maturity date of the Athyrium Credit Facility is October 1, 2024. The Term Loan A bears interest at a rate of 9.875% per annum, with quarterly, interest-only payments until the fourth anniversary of the Term Loan A. The unpaid principal amount of the Term Loan A is due and payable in quarterly installments starting on the fourth anniversary of the loan. The Company may make voluntary prepayments, in whole or in part, and subject to certain exceptions, is required to make mandatory prepayments upon the occurrence of certain events of default as defined in the agreement, including but not limited to, the occurrence of a change of control. In addition, upon payment or repayment of any outstanding balance under the Athyrium Credit Facility, the Company will have to pay a 1% exit fee of All mandatory and voluntary prepayments of the Athyrium Credit Facility are subject to the payment of prepayment premiums as follows: (i) if prepayment occurs prior to the second anniversary of the applicable date of issuance, an amount equal to the amount by which (a) the present value of 105% of the principal prepaid plus all interest that would have accrued on such principal through such second anniversary exceeds (b) the amount of principal prepaid, (ii) if prepayment occurs on or after the second anniversary of the applicable date of issuance but prior to the third anniversary of such issuance, an amount equal to 3% of the principal prepaid, and (iii) if prepayment occurs on or after the third anniversary of the applicable date of issuance but prior to the fourth anniversary of such issuance, an amount equal to 2% of the principal prepaid. No prepayment premium is due on any principal prepaid after the fourth anniversary of the applicable date of issuance. The Athyrium Credit Facility includes features requiring (1) additional interest rate upon an event of default accrued at an additional 3%, or a total interest rate of 12.875%, and (2) the lender’s right to declare all outstanding principal and interest immediately payable upon an event of default. These two features were analyzed and determined to be embedded derivatives to be valued as separate financial instruments. These embedded derivatives were bundled and valued as one compound derivative in accordance with the applicable accounting guidance for derivatives and hedging transactions. The Company determined that, due to the unlikely event of default, the embedded derivatives have a de minimus value as of June 30, 2019. The derivative liability will be remeasured at fair value at each reporting date, with changes in fair value being recorded as other income (expense) in the consolidated statements of operations. The Athyrium Credit Facility is secured by a pledge of substantially all of the Company’s assets and contains affirmative and negative covenants customary for financings of this type, including limitations on the Company’s and its subsidiaries’ ability to, among other things, incur and prepay additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, change in the nature of business, enter into sale and leaseback transactions, make distributions, and enter into affiliate transactions, in each case, subject to certain exceptions. In addition, the Athyrium Credit Facility also contains a financial covenant requiring the Company to maintain at least $10.0 million of cash and cash equivalents. As a result of this financial covenant, the Company has recorded $10.0 million as restricted cash as of June 30, 2019 and December 31, 2018. In connection with the Athyrium Credit Facility, the Company issued a warrant (“Warrant”), to purchase up to 270,835 shares of the Company’s common stock, at an exercise price per share of $12.18456. The Warrant is immediately exercisable as to 184,660 shares and will become exercisable as to the remaining 86,175 shares only upon the Company’s draw of the Term Loan B. The Warrant is exercisable through October 1, 2025 and is In addition, the Company paid certain fees to Athyrium and other third-party service providers in the aggregate amount of $3.0 million. These fees paid to Athyrium were recorded as a debt discount while the fees paid to other third-party service providers were recorded as debt issuance cost, respectively, in the aggregate amount of $3.0 million. These costs, along with the fair value of the Warrant of $1.9 million are being amortized using the effective interest method over the term of the Athyrium Credit Facility. The amortization of debt discount and debt issuance cost is included in interest expense within the Condensed Consolidated Statements of Operations. As of June 30, 2019, the effective interest rate was 11.63%, which takes into consideration the non-cash accretion of the exit fee and the amortization of the debt discount and issuance costs. During the three months ended June 30, 2019, the Company recognized interest expense of $2.1 million which consisted of amortization of the debt discount of $0.2 million, and the contractual coupon interest expense of $1.9 million. During the six months ended June 30, 2019, the Company recognized interest expense of $4.1 million which consisted of amortization of the debt discount of $0.4 million, and the contractual coupon interest expense of $3.7 million. The components of the carrying value of the debt as of June 30, 2019, and December 31, 2018 are detailed below (in thousands): June 30, December 31, 2019 2018 Principal loan balance $ 75,000 $ 75,000 Unamortized debt discount and issuance cost (4,417) (4,806) Accretion of exit fee 109 32 Long-term debt, net $ 70,692 $ 70,226 The future annual principal payments due under the Athyrium Credit Facility as of June 30, 2019 were as follows (in thousands): Years Ending December 31, 2019 (remaining six months) — 2020 — 2021 — 2022 16,665 2023 33,330 Thereafter 25,005 Total $ 75,000 |
Warrants
Warrants | 6 Months Ended |
Jun. 30, 2019 | |
Warrants | |
Warrants | 7. WARRANTS The Company issued warrants in connection with debt transactions that were completed prior to 2017. Upon the completion of the IPO, the Company’s then outstanding warrants to purchase preferred stock converted into warrants to purchase common stock. The Company also issued the Warrant to purchase common stock in connection with the Athyrium Credit Facility, described further in Note 6. The following table summarizes the common stock warrants outstanding as of June 30, 2019 and December 31, 2018, each exercisable into the number of shares of common stock set forth below as of the specified dates: Shares Exercisable at Exercise Expiration Exercisable June 30, December 31, Issued Price Date From 2019 2018 2013 $ 7.50 April 2021 July 2017 82,816 82,816 2014 $ 7.50 November 2024 July 2017 16,000 16,000 2016 $ 8.27 October 2026 September 2017 14,512 14,512 2018 $ 12.18 October 2025 October 2018 184,660 184,660 2018 $ 12.18 October 2025 (1) — — 297,988 297,988 (1) As of June 30, 2019 and December 31, 2018, warrants outstanding to acquire 86,175 shares of common stock are not exercisable and are only exercisable upon draw down of the Term Loan B. |
Equity Financings
Equity Financings | 6 Months Ended |
Jun. 30, 2019 | |
Equity Financings | |
Equity Financings | 8. EQUITY FINANCINGS On August 9, 2018, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on August 27, 2018 (the “Shelf Registration”). Under the Shelf Registration, the Company may offer and sell up to $250.0 million of a variety of securities including common stock, preferred stock, warrants, depositary shares, debt securities, purchase contracts, purchase units or any combination of such securities during the three-year period that commenced upon the Shelf Registration becoming effective. On October 5, 2018, the Company sold 7,500,000 shares of the Company’s common stock (the “Shares”) in an underwritten offering pursuant to the Shelf Registration at a public offering price of $8.25 per share, before underwriting discounts and commissions. In addition, the underwriters were granted an overallotment option to purchase an additional 1,125,000 shares of the common stock at the same public offering price, less underwriting discounts and commissions (the “Overallotment Shares”). On October 11, 2018, the underwriters exercised in full their option to purchase the Overallotment Shares. The total number of Shares and Overallotment Shares sold by the Company in the offering was 8,625,000 shares, resulting in net proceeds to the Company, after underwriting discounts and offering expenses, of approximately $66.1 million. In connection with the filing of the Shelf Registration, the Company entered into a sales agreement with Jefferies, LLC (the “Sales Agreement”) pursuant to which the Company may issue and sell, from time to time, up to an aggregate of $50.0 million of its common stock in an at-the-market equity offering (“ATM Offering”) through Jefferies, LLC, as sales agent. During the fourth quarter of 2018, the Company issued an aggregate of 518,135 shares of its common stock under the ATM Offering, resulting in net proceeds to the Company of approximately $4.6 million. Under the Shelf Registration, the Company may periodically offer one or more types of securities in amounts, at prices and on terms announced, if and when the securities are ever offered, of up to an additional $174.0 million. |
Stock-based Compensation
Stock-based Compensation | 6 Months Ended |
Jun. 30, 2019 | |
Stock-based Compensation | |
Stock-based Compensation | 9. STOCK‑BASED COMPENSATION Stock Incentive Plans —In December 2009, the Board of Directors (the “Board”) adopted the 2009 Employee, Director and Consultant Equity Incentive Plan (the “2009 Plan”) for the issuance of common stock and stock options to employees, officers, directors, consultants, and advisors. In July 2017, the Company’s 2017 Also approved under the 2017 Plan is an annual increase for each of the years through December 31, 2027, equal to the least of (i) 3,573,766 shares of common stock, (ii) 4% of the shares of common stock outstanding on December 31 of the prior year and (iii) an amount determined by the Board. Under the plans, the Board determines the number of shares of common stock to be granted pursuant to the awards, as well as the exercise price and terms of such awards. The exercise price of incentive stock options could not be less than the fair value of the common stock on the date of grant. Stock options awarded under the plans expire 10 years after the grant date, unless the Board sets a shorter term. Options granted under the plans generally vest over a four‑year period. A portion of the unvested stock options will vest upon the sale of all or substantially all of the stock or assets of the Company. In the past, the Company had granted stock options which contain performance‑based vesting criteria. These criteria were milestone events that were specific to the Company’s corporate goals. Stock‑based compensation expense associated with performance‑based stock options is recognized if the achievement of the performance condition is considered probable using management’s best estimates. As of June 30, 2019, there were no performance-based awards outstanding. Employee Stock Purchase Plan — In 2017, the Company approved the 2017 Employee Stock Purchase Plan, which was amended and restated in December 2018 (as amended, the “ESPP”). The ESPP reserved an aggregate of 223,341 shares of common stock and provides for an annual increase on the first day of each fiscal year, beginning on January 1, 2019 and ending on December 31, 2029, in an amount equal to the lowest of: (1) 893,441 shares of the Company’s common stock; (2) 1% of the total number of shares of the Company’s common stock outstanding on the first day of the applicable fiscal year; and (3) an amount determined by the Company’s board of directors. The ESPP provides for two six-month offering periods each year; the first offering period begins on the first trading day on or after each January 1; the second offering period begins on the first trading day on or after each July 1. Under the ESPP, participating employees can authorize the Company to withhold a portion of their base pay during consecutive six-month payment periods for the purchase of shares of the Company’s common stock. At the conclusion of the period, participating employees can purchase shares of the Company’s common stock at 85% of the lesser of the closing price of the common stock on (i) the first business day of the plan period or (ii) the exercise date. The fair value of the purchase rights granted under the ESPP was estimated on the date of grant, using the Black-Scholes option-pricing model. No shares of the Company’s common stock were purchased under the ESPP during the six months ended June 30, 2019. The first offering period for 2019 ended on June 30, 2019. In July 2019, employees of the Company purchased an aggregate of 123,664 shares under the ESPP. Inducement Stock Option Awards —During the three months ended June 30, 2019 and 2018, the Company granted non-statutory stock options to purchase an aggregate of 63,000 shares and 150,000 shares of the Company’s common stock, respectively. During the six months ended June 30, 2019 and 2018, the Company granted non-statutory stock options to purchase an aggregate of 148,500 shares and 150,000 shares of the Company’s common stock, respectively. These stock options will vest over a four-year period, with 25% of the shares underlying each option award vesting on the one-year anniversary of the applicable employees’ new hire date and the remaining 75% of the shares underlying each award vesting monthly thereafter for three-years. Vesting of each option is subject to such employee’s continued service with the Company through the applicable vesting dates. These stock options were granted outside of the 2017 Plan as an inducement material to each employee’s acceptance of employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). A summary of option activity for employee and non‑employee awards under the 2009 Plan, the 2017 Plan and inducement grants for the six months ended June 30, 2019 is as follows: Weighted Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Shares Price Term Value (Years) (in thousands) Outstanding at January 1, 2019 $ 8.96 $ 3,771 Granted 5.26 Exercised 1.96 Forfeited 13.29 Outstanding at June 30, 2019 $ 7.79 $ 9,925 Vested or expected to vest at June 30, 2019 7,016,675 $ 7.79 $ 9,925 Options exercisable at June 30, 2019 3,331,360 $ 6.68 $ 6,908 The Company records stock‑based compensation related to stock options granted at fair value. The Company utilizes the Black‑Scholes option‑pricing model to estimate the fair value of stock option grants and to determine the related compensation expense. The assumptions used in calculating the fair value of stock‑based payment awards represent management’s best estimates. There were 1,243,390 options granted during the six months ended June 30, 2018. The assumptions used in determining fair value of the stock options granted and shares purchasable under the ESPP during the six months ended June 30, 2019 and 2018 are as follows: Six Months Ended June 30, 2019 2018 Expected volatility – 82% – 85% Risk-free interest rate – 2.58% – 2.96% Expected dividend yield 0% 0% Expected term (in years) 0.50 – 6.63 – 6.13 The Company derived the risk‑free interest rate assumption from the U.S. Treasury rates for U.S. Treasury zero‑coupon bonds with maturities similar to those of the expected term of the awards being valued. The Company based the assumed dividend yield on its expectation of not paying dividends in the foreseeable future. The Company calculated the weighted‑average expected term of options using the simplified method, as the Company lacks relevant historical data due to the Company’s limited operating experience. The estimated volatility is based upon the historical volatility of comparable companies with publicly available share prices. The impact of forfeitures on compensation expense is recorded as they occur. During the three months ended June 30, 2019 and 2018, the weighted average grant‑date fair value of options granted was $3.71 and $11.46, respectively. During the six months ended June 30, 2019 and 2018, the weighted average grant‑date fair value of options granted was $3.71 and $10.12, respectively. The fair value is being expensed over the vesting period of the options on a straight‑line basis as the services are being provided. As of June 30, 2019, there was $23.0 million of unrecognized compensation cost related to the stock options granted, which is expected to be expensed over a weighted‑average period of 2.67 years. Reserved Shares —As of June 30, 2019 and December 31, 2018, the Company had reserved the following shares of common stock issuable upon exercise of rights under equity compensation plans and inducement stock option awards: June 30, December 31, 2019 2018 Warrant rights to acquire Common Stock 384,163 384,163 ESPP 561,971 223,341 Shares reserved for outstanding inducement stock option awards 646,500 498,000 2009 Plan 2,543,292 2,563,072 2017 Plan 4,485,323 3,130,910 Total 8,621,249 6,799,486 Stock-based Compensation Expenses —Stock‑based compensation expense was classified in the statements of operations as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Cost of product revenues $ 39 $ – $ 41 $ – Research and development 795 741 1,402 1,380 Selling, general and administrative 1,787 1,550 3,651 2,772 Total $ 2,621 $ 2,291 $ 5,094 $ 4,152 Stock-based compensation expense for the Company’s manufacturing employees related to INVELTYS manufactured since the FDA approval of $0.01 million and $0.3 million for the three and six months ended June 30, 2019, respectively, has been capitalized into inventory |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2019 | |
Income Taxes | |
Income Taxes | 10. INCOME TAXES The Company did not record a provision or benefit for income taxes during the three and six months ended June 30, 2019 and 2018. The Company continues to maintain a full valuation allowance for its U.S. federal and state deferred tax assets. The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its generation of limited revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Management reevaluates the positive and negative evidence at each reporting period. Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended, certain substantial changes in the Company’s ownership, including a sale of the Company, or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards, which could be used annually to offset future taxable income. The Company has determined that ownership changes have occurred as of April 2016, and such changes have not materially impacted the Company’s ability to utilize its net operating loss carryforwards and research and development tax credits to offset future tax liabilities. The Company may be further limited by any changes that may have occurred or may occur subsequent to December 31, 2017. The Company files its corporate income tax returns in the United States and Massachusetts, Alabama, California, Montana, Oklahoma, Illinois, Kentucky, Pennsylvania, New Hampshire, New York, North Carolina and Texas. All tax years since the date of incorporation remain open to examination by the major taxing jurisdictions (state and federal) to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (“IRS”) or other authorities if they have or will be used in a future period. The Company is not currently under examination by the IRS or any other jurisdictions for any tax year. As of June 30, 2019 and 2018, the Company had no uncertain tax positions. The Company’s policy is to recognize interest and penalties related to income tax matters as a component of income tax expense, of which no interest or penalties were recorded for the three and six months ended June 30, 2019 and 2018. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies. | |
Commitments and Contingencies | 11. COMMITMENTS AND CONTINGENCIES License Agreement —In 2009, the Company entered into an exclusive license agreement with The Johns Hopkins University (“JHU”), as amended in November 2012, May 2014, August 2014, October 2014 and June 2018, which licensed to the Company a portfolio of specified patent rights and remains in full force and effect. Pursuant to the terms of the agreement, as amended, the Company agreed to pay an initial license fee, minimum annual payments beginning in 2017, certain development and commercial milestone payments, royalties on product sales and reimburse all or a portion of the costs associated with the preparation, filing, prosecution and maintenance of the agreed‑upon patents and patent applications to JHU. After 2016 and until the first commercial sale of product, which occurred in January 2019, the minimum annual payment was $37,500. Upon the first commercial sale of INVELTYS, the annual minimum payment increased to $0.1 million. The Company is obligated to pay JHU low single‑digit running royalties based upon a percentage of net sales of the licensed products, which is applied to the annual minimum payment. The Company also has an obligation to pay JHU certain one‑time development and commercial milestone payments. During the three and six months ended June 30, 2019 the Company paid JHU $0.3 million related to the first commercial sale milestone and royalty. The Company recorded other expenses related to the JHU agreement of $0.1 million and $0.2 million, for the three months ended June 30, 2019 and 2018, respectively. The Company recorded other expenses related to the JHU agreement of $0.1 million and $0.2 million for the six months ended June 30, 2019 and 2018, respectively. Litigation —The Company is not currently subject to any material legal proceedings. Other Commitments — The Company entered into a commercial supply agreement with Catalent Pharma Solutions, LLC to manufacture commercial supplies of INVELTYS and KPI-121 0.25%, with annual minimum purchase requirements. The Company became subject to the minimum purchase requirements for INVELTYS upon receiving FDA approval for the product. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events | |
Subsequent Events | 12. SUBSEQUENT EVENTS The Company has evaluated all events and transactions that occurred after the balance sheet date through the date of this filing. During this period, the Company did not have any material subsequent events that impacted its condensed consolidated financial statements or disclosures. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Summary of Significant Accounting Policies | |
Revenue | Revenue The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers . Under ASC Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to be entitled in exchange for those goods or services. The Company performs the following five steps to recognize revenue under ASC Topic 606: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only recognizes revenue when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services that will be transferred to the customer. Product revenues, net The Company sells INVELTYS to wholesalers and/or specialty distributors in the United States (collectively, “Customers”). These Customers subsequently resell the Company’s products to specialty and other retail pharmacies. In addition to agreements with Customers, the Company enters into arrangements with payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts for the purchase of the Company’s products. The goods promised in the Company’s product sales contracts represent a single performance obligation; as the promise to transfer the individual products to the Customer is not separately identifiable from other promises in the contracts and, therefore, not distinct. The Company recognizes revenue from product sales at the point the Customer obtains control of the product, which occurs upon delivery. The transaction price (“net sales price”) that is recognized as revenue for product sales includes the selling price to the Customer and an estimate of variable consideration. Components of variable consideration include prompt pay and other discounts, product returns, government rebates, third-party payor rebates, coverage gap rebates, incentives such as patient co-pay assistance, and other fees paid to Customers where a distinct good or service is not received. Variable consideration is recorded on the consolidated balance sheet as either a reduction of accounts receivable, if payable to a Customer, or as a current liability, if payable to a third-party other than a Customer. The Company considers all relevant information when estimating variable consideration such as assessment of its current and anticipated sales and demand forecasts, specific known market events and trends, industry data and current contractual and statutory requirements that are reasonably available. The Company includes estimated amounts in the net sales price to the extent it is determined probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Payment terms with Customers do not exceed one year and, therefore, the Company does not account for a significant financing component in its arrangements. The Company expenses incremental cost of obtaining a contract with a Customer when incurred as the period of benefit is less than one year. Reserves for Variable Consideration : Trade Discounts and Allowances The Company provides its Customers with certain trade discounts and allowances including discounts for prompt payments and fees paid for distribution, data and administrative services. These discounts and fees are based on contractually-determined percentages and are recorded as a reduction of revenue and accounts receivable in the period in which the related product revenue is recognized. Chargebacks Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from the Company. Customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These components of variable consideration are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. Reserves for chargebacks consist of credits the Company expects to issue for units that remain in the distribution channel at the end of each reporting period and that the Company expects will be sold to qualified healthcare providers, as well as chargebacks that Customers have claimed, but for which the Company has not yet issued a credit. Product Returns Consistent with industry practice, the Company has a product returns policy that provides Customers a right of return for product purchased within a specified period prior to and subsequent to the product’s expiration date. The Company estimates the amount of its products that may be returned and presents this amount as a reduction of revenue in the period the related product revenue is recognized, in addition to establishing a liability. The Company’s estimates for product returns are based upon available industry data and its own sales information, including its visibility into the inventory remaining in the distribution channel. Commercial Payor and Medicare Part D Rebates The Company contracts with certain third-party payors, primarily pharmacy benefit managers (“PBMs”) and health plans (“Plans”), for the payment of rebates with respect to utilization of its product. These rebates are based on contractual percentages applied to the amount of product prescribed to patients who are covered by the PBMs or the Plans with which it contracts. The Company estimates the rebates for commercial and Medicare Part D payors based on the contractual discount percentage, the various payor mix for INVELTYS as well as future rebates that will be made for product that has been recognized as revenue but remains in the distribution channel at the end of each reporting period. The Company also estimates the number of patients in the prescription drug coverage gap for whom it will owe an additional liability under the Medicare Part D program. Such estimates are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. Government Rebates The Company is subject to discount obligations under Medicaid and other government programs. For Medicaid, reserves are based on estimates of future Medicaid beneficiary utilization applied to the Medicaid unit rebate formula established by the Centers for Medicaid and Medicare Services. The Company’s liability for these rebates consists of estimates of claims for the current period and estimated future claims that will be made for product that has been recognized as revenue but remains in the distribution channel at the end of each reporting period. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. Co-pay Assistance The Company offers a co-pay assistance program (the “co-pay program”), which is intended to provide financial assistance to p atients who may or may not be covered by commercial insurance or who opt out of government insurance programs . The calculation of accruals for the co-pay program is based on actual claims processed during the period as well as an estimate of the number and cost per claim that the Company expects to receive associated with product that has been recognized as revenue but remains in the distribution channel at the end of each reporting period. Allowances for estimated co-pay claims are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. |
Accounts Receivable, net | Accounts Receivable, net Accounts receivable are reported on the consolidated balance sheets at outstanding amounts due from Customers for product sales. The Company deducts sales discounts for prompt payments and contractual fees for service arrangements from accounts receivable. The Company evaluates the collectability of accounts receivable on a regular basis, by reviewing the financial condition and payment history of Customers, an overall review of collections experience on other accounts, and economic factors or events expected to affect future collections experience. An allowance for doubtful accounts is recorded when a receivable is deemed to be uncollectible. The Company recorded no allowance for doubtful accounts as of June 30, 2019. The Company recorded an allowance of approximately $0.9 million for expected sales discounts, related to prompt pay discounts and contractual fee for service arrangements, to wholesalers and distributors as of June 30, 2019. |
Cost of Product Revenues | Cost of Product Revenues The cost of product revenues consists primarily of materials, third-party manufacturing costs, freight and distribution costs, royalty expense, allocation of labor, quality control and assurance, spoilage and other manufacturing overhead costs. The Company expenses costs of product revenues related to product candidates as research and development expenses prior to regulatory approval in the respective territory. The Company received regulatory approval for INVELTYS on August 22, 2018. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 states that an entity should recognize revenue based on the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB subsequently issued amendments to ASU 2014-09 that had the same effective date of January 1, 2018. Revenue from sales of INVELTYS, as well as any other future revenue arrangements, are and will be recognized under the provisions of ASU 2014-09. While the Company adopted ASU 2014-09 effective January 1, 2018, the Company did not generate any revenue from product sales prior to 2019. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 substantially aligns accounting for share-based payments to employees and non-employees. This ASU became effective for annual periods beginning after December 15, 2018, including interim periods within that period, and early adoption is permitted. The new standard was effective on January 1, 2019 and the adoption of ASU 2018-07 did not have an impact on the Company’s condensed consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measuremen t (“ASU 2018-13”). ASU 2018-13 is intended to improve the effectiveness of disclosures in the notes to financial statements related to fair value measurements in Topic 820. This ASU will become effective for annual periods beginning after December 15, 2019, including interim periods within that period, and early adoption is permitted. The Company is currently evaluating the effect of this new guidance on its condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-15 , Intangibles - Goodwill and Other - Internal-Use Software -Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. This ASU will become effective for annual periods beginning after December 15, 2019, including interim periods within that period, and early adoption is permitted. The Company does not expect the adoption of ASU 2018-15 to have a material effect on its condensed consolidated financial statements. |
Inventory (Tables)
Inventory (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Inventory | |
Schedule of Inventory | June 30, December 31, 2019 2018 Raw materials $ 706 $ 350 Work in progress 6,928 3,357 Finished goods 585 388 Inventory $ 8,219 $ 4,095 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Accrued Expenses | |
Schedule of accrued expenses | June 30, December 31, 2019 2018 Compensation and benefits $ 4,662 $ 5,352 Accrued revenue reserves (1) 3,444 — Development costs 1,314 1,223 Professional services 828 1,019 Commercial cost 835 1,722 Contract manufacturing 1,347 434 Payable related to construction of facility — 1,026 Other 448 325 Accrued expenses $ 12,878 $ 11,101 (1) As of June 30, 2019, $0.5 million of additional revenue reserves were in accounts payable. |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Leases | |
Schedule of components of lease expense and related cash flows | The components of lease expense and related cash flows were as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Lease cost Operating lease cost $ $ $ $ Short-term lease cost — — Total lease cost $ $ $ $ Operating cash outflows from operating leases $ $ $ $ |
Schedule of maturities of operating lease liability | Years Ending December 31, Operating Lease Finance Lease Obligation (2) Total 2019 (remaining six months) $ 2,433 $ 21 $ 2,454 2020 4,141 41 4,182 2021 4,233 41 4,274 2022 4,021 41 4,062 2023 3,960 — 3,960 Thereafter 35,415 — 35,415 Present value adjustment (23,339) (25) (23,364) Present value of lease payments $ 30,864 $ 119 $ 30,983 (1) Future minimum lease payments under the Company’s Watertown Lease and its Vehicle Fleet Lease. (2) F uture minimum lease payments under the Company’s finance lease obligation. |
Schedule of maturities of finance lease liability | Future minimum commitments due under the Company’s lease agreements as of June 30, 2019 were as follows (in thousands): Years Ending December 31, Operating Lease Finance Lease Obligation (2) Total 2019 (remaining six months) $ 2,433 $ 21 $ 2,454 2020 4,141 41 4,182 2021 4,233 41 4,274 2022 4,021 41 4,062 2023 3,960 — 3,960 Thereafter 35,415 — 35,415 Present value adjustment (23,339) (25) (23,364) Present value of lease payments $ 30,864 $ 119 $ 30,983 (1) Future minimum lease payments under the Company’s Watertown Lease and its Vehicle Fleet Lease. (2) F uture minimum lease payments under the Company’s finance lease obligation. |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Debt | |
Schedule of carrying value of debt | The components of the carrying value of the debt as of June 30, 2019, and December 31, 2018 are detailed below (in thousands): June 30, December 31, 2019 2018 Principal loan balance $ 75,000 $ 75,000 Unamortized debt discount and issuance cost (4,417) (4,806) Accretion of exit fee 109 32 Long-term debt, net $ 70,692 $ 70,226 |
Schedule of maturities of long-term debt | The future annual principal payments due under the Athyrium Credit Facility as of June 30, 2019 were as follows (in thousands): Years Ending December 31, 2019 (remaining six months) — 2020 — 2021 — 2022 16,665 2023 33,330 Thereafter 25,005 Total $ 75,000 |
Warrants (Tables)
Warrants (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Warrants | |
Schedule of outstanding warrants | Shares Exercisable at Exercise Expiration Exercisable June 30, December 31, Issued Price Date From 2019 2018 2013 $ 7.50 April 2021 July 2017 82,816 82,816 2014 $ 7.50 November 2024 July 2017 16,000 16,000 2016 $ 8.27 October 2026 September 2017 14,512 14,512 2018 $ 12.18 October 2025 October 2018 184,660 184,660 2018 $ 12.18 October 2025 (1) — — 297,988 297,988 (1) As of June 30, 2019 and December 31, 2018, warrants outstanding to acquire 86,175 shares of common stock are not exercisable and are only exercisable upon draw down of the Term Loan B. |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Stock-based Compensation | |
Summary of option activity for employee and non employee awards | Weighted Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Shares Price Term Value (Years) (in thousands) Outstanding at January 1, 2019 $ 8.96 $ 3,771 Granted 5.26 Exercised 1.96 Forfeited 13.29 Outstanding at June 30, 2019 $ 7.79 $ 9,925 Vested or expected to vest at June 30, 2019 7,016,675 $ 7.79 $ 9,925 Options exercisable at June 30, 2019 3,331,360 $ 6.68 $ 6,908 |
Schedule of assumptions used in determining fair value of the stock options granted | Six Months Ended June 30, 2019 2018 Expected volatility – 82% – 85% Risk-free interest rate – 2.58% – 2.96% Expected dividend yield 0% 0% Expected term (in years) 0.50 – 6.63 – 6.13 |
Schedule of reserved common stock shares upon exercise of rights under equity compensation plans | June 30, December 31, 2019 2018 Warrant rights to acquire Common Stock 384,163 384,163 ESPP 561,971 223,341 Shares reserved for outstanding inducement stock option awards 646,500 498,000 2009 Plan 2,543,292 2,563,072 2017 Plan 4,485,323 3,130,910 Total 8,621,249 6,799,486 |
Schedule of stock based compensation expense | Stock-based Compensation Expenses —Stock‑based compensation expense was classified in the statements of operations as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Cost of product revenues $ 39 $ – $ 41 $ – Research and development 795 741 1,402 1,380 Selling, general and administrative 1,787 1,550 3,651 2,772 Total $ 2,621 $ 2,291 $ 5,094 $ 4,152 |
Nature of business and basis _2
Nature of business and basis of presentation (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Nature of business and basis of presentation | ||
Accumulated deficit | $ (250,322) | $ (201,109) |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Allowance for bad debts | $ 0 |
Maximum | |
Payment terms | 1 year |
Sales discounts and contractual fee for service arrangements | |
Allowance for bad debts | $ 900 |
Inventory (Details)
Inventory (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Inventory | ||
Raw Materials | $ 706 | $ 350 |
Work in Progress | 6,928 | 3,357 |
Finished Goods | 585 | 388 |
Inventory | $ 8,219 | $ 4,095 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Compensation and benefits | $ 4,662 | $ 5,352 |
Accrued revenue reserves | 3,444 | |
Development costs | 1,314 | 1,223 |
Professional services | 828 | 1,019 |
Commercial cost | 835 | 1,722 |
Contract manufacturing | 1,347 | 434 |
Payable related to construction of facility | 1,026 | |
Other | 448 | 325 |
Accrued expenses | 12,878 | $ 11,101 |
Accounts payable | ||
Accrued revenue reserves | $ 500 |
Leases (Details)
Leases (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Jun. 30, 2019USD ($)item | Jun. 30, 2018USD ($) | Jun. 30, 2019USD ($)item | Jun. 30, 2018USD ($) | Dec. 31, 2018USD ($) | Nov. 15, 2018 | Mar. 15, 2018 | Sep. 30, 2013USD ($) | |
Leases | ||||||||
Restricted cash | $ 12,578 | $ 2,178 | $ 12,578 | $ 2,178 | $ 12,206 | |||
Remaining lease term | 2 years 8 months 12 days | |||||||
Number of vehicles leased under a master fleet lease agreement | item | 65 | 65 | ||||||
Term of vehicle lease | 3 years | |||||||
Amount borrowed | $ 500 | $ 500 | ||||||
Lease cost | ||||||||
Operating lease cost | 1,187 | 99 | 2,243 | 198 | ||||
Short-term lease cost | 53 | 62 | ||||||
Total lease cost | 1,187 | 152 | 2,243 | 260 | ||||
Operating cash outflows from operating leases | $ 911 | $ 103 | $ 1,654 | $ 205 | ||||
Watertown Lease | ||||||||
Leases | ||||||||
Lease term | 13 years | 13 years | ||||||
Restricted cash | $ 2,000 | $ 2,000 | $ 100 | |||||
Discount rate (as a percent) | 9.90% | |||||||
Variable lease cost | $ 500 | |||||||
Remaining lease term | 12 years 3 months 18 days | 12 years 9 months 29 days | ||||||
Waltham Lease | ||||||||
Leases | ||||||||
Lease term | 3 years | |||||||
Existence of option to extend | true | |||||||
Remaining lease term | 29 days | |||||||
Waverley Oaks Lease | ||||||||
Leases | ||||||||
Lease term | 1 year |
Leases - Future Minimum Commitm
Leases - Future Minimum Commitments Due (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Future minimum commitments due | |
2019 (remaining six months) | $ 2,433 |
2020 | 4,141 |
2021 | 4,233 |
2022 | 4,021 |
2023 | 3,960 |
Thereafter | 35,415 |
Present value adjustment | (23,339) |
Present value of lease payments, operating | 30,864 |
Finance Lease Payments | |
2019 (remaining six months) | 21 |
2020 | 41 |
2021 | 41 |
2022 | 41 |
Present value adjustment | (25) |
Present value of lease payments, financing | 119 |
Operating and Finance Leases Payments | |
2019 (remaining six months) | 2,454 |
2020 | 4,182 |
2021 | 4,274 |
2022 | 4,062 |
2023 | 3,960 |
Thereafter | 35,415 |
Present value adjustment | (23,364) |
Present value of lease payments | $ 30,983 |
Debt (Details)
Debt (Details) - USD ($) | Oct. 01, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 |
Debt instruments | ||||||
Amount borrowed | $ 500,000 | $ 500,000 | ||||
Interest expense | $ 2,061,000 | $ 414,000 | $ 4,155,000 | $ 781,000 | ||
2014 Debt Facility | ||||||
Debt instruments | ||||||
Interest-only end date extension period | 12 months | |||||
Unpaid principal balance | 20,000,000 | 20,000,000 | ||||
Unamortized discount | 200,000 | 200,000 | ||||
Interest expense | 400,000 | 800,000 | ||||
Amortization of debt discount | 21,000 | 51,000 | ||||
Contractual coupon interest | $ 400,000 | $ 700,000 | ||||
Debt repayments | $ 20,000,000 | |||||
Prepayment fees paid | $ 200,000 |
Debt - Athyrium Credit Facility
Debt - Athyrium Credit Facility (Details) $ / shares in Units, $ in Thousands | Oct. 01, 2018USD ($)$ / sharesshares | Jun. 30, 2019USD ($)item$ / shares | Jun. 30, 2018USD ($) | Jun. 30, 2019USD ($)item$ / sharesshares | Jun. 30, 2018USD ($) | Dec. 31, 2018USD ($)shares |
Debt instruments | ||||||
Warrant exercisable | shares | 297,988 | 297,988 | ||||
Debt issuance costs | $ 50 | $ 50 | ||||
Interest expense | $ 2,061 | $ 414 | $ 4,155 | $ 781 | ||
Warrants 2018 | ||||||
Debt instruments | ||||||
Exercise Price | $ / shares | $ 12.18 | $ 12.18 | ||||
Warrant exercisable | shares | 184,660 | 184,660 | ||||
Remaining warrant exercisable upon condition | shares | 86,175 | 86,175 | ||||
Athyrium Credit Facility | ||||||
Debt instruments | ||||||
Aggregate principal amount | $ 110,000 | $ 75,000 | $ 75,000 | $ 75,000 | ||
Accretion of exit fee | $ 109 | $ 109 | 32 | |||
Present value of prepayments if prepayment occurs prior to the second anniversary (as a percent) | 105.00% | |||||
Prepayments if prepayment occurs on or after the second anniversary of the applicable date of issuance but prior to the third anniversary (as a percent) | 3.00% | |||||
Prepayments if prepayment occurs on or after the third anniversary (as a percent) | 2.00% | |||||
Prepayments if prepayment occurs after the fourth anniversary (as a percent) | 0.00% | |||||
Additional interest rate upon an event of default accrued (as a percent) | 3.00% | |||||
Total interest rate (as a percent) | 12.875% | |||||
Number of features of embedded derivative | item | 2 | |||||
Number of derivatives | item | 1 | 1 | ||||
Financial covenant amount | $ 10,000 | |||||
Restricted Cash and Cash Equivalents | $ 10,000 | $ 10,000 | 10,000 | |||
Fees to service provider | 3,000 | |||||
Debt issuance costs | $ 3,000 | $ 4,417 | $ 4,417 | $ 4,806 | ||
Effective interest rate | 11.63% | 11.63% | ||||
Interest expense | $ 2,100 | $ 4,100 | ||||
Amortization of debt discount | 200 | 400 | ||||
Contractual coupon interest | $ 1,900 | $ 3,700 | ||||
Athyrium Credit Facility | Warrants 2018 | ||||||
Debt instruments | ||||||
Warrant to purchase shares of common stock | shares | 270,835 | |||||
Exercise Price | $ / shares | $ 12.18456 | |||||
Warrant exercisable | shares | 184,660 | |||||
Remaining warrant exercisable upon condition | shares | 86,175 | |||||
Initial fair value of the Warrant | $ 1,900 | |||||
Term Loan A | ||||||
Debt instruments | ||||||
Aggregate principal amount | $ 75,000 | |||||
Interest rate (as a percent) | 9.875% | |||||
Exit fee of the total principal payments (as a percent) | 1.00% | |||||
Accretion of exit fee | $ 800 | |||||
Term Loan B | ||||||
Debt instruments | ||||||
Aggregate principal amount | $ 35,000 |
Debt - Carrying Value (Details)
Debt - Carrying Value (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 | Oct. 01, 2018 | Jun. 30, 2018 |
Debt instruments | ||||
Unamortized debt discount and issuance cost | $ (50) | |||
Long-term debt, net | $ 70,692 | $ 70,226 | ||
Athyrium Credit Facility | ||||
Debt instruments | ||||
Principal Loan Balance | 75,000 | 75,000 | $ 110,000 | |
Unamortized debt discount and issuance cost | (4,417) | (4,806) | $ (3,000) | |
Accretion of exit fee | 109 | 32 | ||
Long-term debt, net | $ 70,692 | $ 70,226 |
Debt - Future annual principal
Debt - Future annual principal payments (Details) - Athyrium Credit Facility $ in Thousands | Jun. 30, 2019USD ($) |
Maturities of long-term debt | |
2022 | $ 16,665 |
2023 | 33,330 |
Thereafter | 25,005 |
Total | $ 75,000 |
Warrants (Details)
Warrants (Details) - $ / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Preferred stock warrants | ||
Shares Exercisable | 297,988 | 297,988 |
Warrants 2013 | ||
Preferred stock warrants | ||
Exercise Price | $ 7.50 | |
Shares Exercisable | 82,816 | 82,816 |
Warrants 2014 | ||
Preferred stock warrants | ||
Exercise Price | $ 7.50 | |
Shares Exercisable | 16,000 | 16,000 |
Warrants 2016 | ||
Preferred stock warrants | ||
Exercise Price | $ 8.27 | |
Shares Exercisable | 14,512 | 14,512 |
Warrants 2018 | ||
Preferred stock warrants | ||
Exercise Price | $ 12.18 | |
Shares Exercisable | 184,660 | 184,660 |
Shares Exercisable upon condition | 86,175 | 86,175 |
Equity Financings (Details)
Equity Financings (Details) - USD ($) $ / shares in Units, $ in Millions | Oct. 11, 2018 | Oct. 05, 2018 | Dec. 31, 2018 | Jun. 30, 2019 | Aug. 27, 2018 |
Equity Offerings | |||||
Net proceeds | $ 66.1 | ||||
Underwriter's option | |||||
Equity Offerings | |||||
Issuance of common stock | 1,125,000 | ||||
Shelf | |||||
Equity Offerings | |||||
Issuance of common stock | 7,500,000 | ||||
Share price (in dollars per share) | $ 8.25 | ||||
Shelf | Maximum | |||||
Equity Offerings | |||||
Additional authorized value of securities | $ 174 | $ 250 | |||
Overallotment Shares and Shelf Registration | |||||
Equity Offerings | |||||
Issuance of common stock | 8,625,000 | ||||
ATM | |||||
Equity Offerings | |||||
Additional authorized value of securities | $ 50 | ||||
Issuance of common stock | 518,135 | ||||
Net proceeds | $ 4.6 |
Stock-based Compensation (Detai
Stock-based Compensation (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jul. 31, 2019shares | Jun. 30, 2019USD ($)$ / sharesshares | Jun. 30, 2018USD ($)$ / sharesshares | Jun. 30, 2019USD ($)$ / sharesshares | Jun. 30, 2018USD ($)$ / sharesshares | Dec. 31, 2018periodshares | |
Stock-based compensation | ||||||
Common stock available for future grant | 8,621,249 | 8,621,249 | 6,799,486 | |||
Options granted | 1,243,390 | |||||
Weighted average grant date fair value of options granted | $ / shares | $ 3.71 | $ 11.46 | $ 3.71 | $ 10.12 | ||
Stock based compensation expense | $ | $ 2,621 | $ 2,291 | $ 5,094 | $ 4,152 | ||
Inventories | INVELTYS | ||||||
Stock-based compensation | ||||||
Stock based compensation expense | $ | $ 10 | $ 300 | ||||
2017 Equity Incentive Plan | ||||||
Stock-based compensation | ||||||
Common stock available for future grant | 636,440 | 636,440 | ||||
2017 Equity Incentive Plan | Maximum | ||||||
Stock-based compensation | ||||||
Common stock available for future grant | 2,543,292 | 2,543,292 | ||||
2017 Equity Incentive Plan | Minimum | ||||||
Stock-based compensation | ||||||
Common stock available for future grant | 3,573,766 | |||||
Percentage of aggregate number of common shares reserved for future issuance (as a percent) | 4.00% | |||||
2009 plan | ||||||
Stock-based compensation | ||||||
Common stock available for future grant | 2,543,292 | 2,543,292 | 2,563,072 | |||
Number of shares outstanding | 7,016,675 | 7,016,675 | 5,111,690 | |||
Options granted | 2,083,425 | |||||
Unrecognized compensation expense | $ | $ 23,000 | $ 23,000 | ||||
Weighted average expense recognition period | 2 years 8 months 1 day | |||||
Employee and Non-Employee Stock Options | 2009 plan | ||||||
Stock-based compensation | ||||||
Options Expiry Term | 10 years | |||||
Vesting Period | 4 years | |||||
Performance Stock Options | ||||||
Stock-based compensation | ||||||
Number of shares outstanding | 0 | 0 | ||||
ESPP | ||||||
Stock-based compensation | ||||||
Common stock available for future grant | 561,971 | 561,971 | 223,341 | |||
Number of offering period | period | 2 | |||||
Term of offering period | 6 months | |||||
Closing price of common stock (as percent) | 85.00% | |||||
Number of share purchased | 123,664 | 0 | ||||
Number of common stock issuable upon exercise of rights under equity compensation plans | 223,341 | |||||
ESPP | Minimum | ||||||
Stock-based compensation | ||||||
Common stock available for future grant | 893,441 | |||||
Percentage of aggregate number of common shares reserved for future issuance (as a percent) | 1.00% | |||||
Non-statutory Stock Options | Employee | ||||||
Stock-based compensation | ||||||
Options Expiry Term | 4 years | |||||
Vesting Period | 3 years | |||||
Percentage of vesting of share-based compensation awards on the one year anniversary of the grant date | 25.00% | |||||
Anniversary of the share-based compensation arrangement | 1 year | |||||
Percentage of vesting of share-based compensation awards after the year anniversary of the grant date | 75.00% | |||||
Options granted | 63,000 | 150,000 | 148,500 | 150,000 |
Stock-based Compensation - Stoc
Stock-based Compensation - Stock Options (Details) $ / shares in Units, $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019USD ($)$ / sharesshares | Dec. 31, 2018USD ($)$ / sharesshares | |
Number of Shares | ||
Granted (in shares) | 1,243,390 | |
2009 plan | ||
Number of Shares | ||
Outstanding at the beginning of the period (in shares) | 5,111,690 | |
Granted (in shares) | 2,083,425 | |
Exercised (in shares) | (19,890) | |
Forfeited | (158,550) | |
Outstanding at the end of the period (in shares) | 7,016,675 | 5,111,690 |
Vested and expected to vest (in shares) | 7,016,675 | |
Options exercisable (in shares) | 3,331,360 | |
Weighted Average Exercise Price | ||
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 8.96 | |
Granted (in dollars per share) | $ / shares | 5.26 | |
Exercised (in dollars per share) | $ / shares | 1.96 | |
Forfeited (in dollars per share) | $ / shares | 13.29 | |
Outstanding at the end of the period (in dollars per share) | $ / shares | 7.79 | $ 8.96 |
Vested and expected to vest (in dollars per share ) | $ / shares | 7.79 | |
Options exercisable (in dollars per shares) | $ / shares | $ 6.68 | |
Weighted Average Remaining Contractual Term | ||
Weighted average period | 8 years 1 month 6 days | 8 years |
Vested and expected to vest | 8 years 1 month 6 days | |
Options exercisable | 7 years | |
Aggregate Intrinsic Value | ||
Outstanding at the beginning of the period (in dollars) | $ | $ 3,771 | |
Outstanding at the end of the period (in dollars) | $ | 9,925 | $ 3,771 |
Vested and expected to vest (in dollars) | $ | 9,925 | |
Options exercisable (in dollars) | $ | $ 6,908 |
Stock-based Compensation - Fair
Stock-based Compensation - Fair Value Assumptions (Details) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Assumptions used in determining fair value of the stock options granted | ||
Expected volatility (minimum) | 61.00% | 83.00% |
Expected volatility (maximum) | 82.00% | 85.00% |
Risk-free interest rate (minimum) | 1.87% | 2.63% |
Risk-free interest rate (maximum) | 2.58% | 2.96% |
Expected dividend yield | 0.00% | 0.00% |
Minimum | ||
Assumptions used in determining fair value of the stock options granted | ||
Expected term (in years) | 6 months | 5 years 3 months 7 days |
Maximum | ||
Assumptions used in determining fair value of the stock options granted | ||
Expected term (in years) | 6 years 7 months 17 days | 6 years 1 month 17 days |
Stock-based Compensation - Rese
Stock-based Compensation - Reserved Shares (Details) - shares | Jun. 30, 2019 | Dec. 31, 2018 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Common stock shares reserved for future issuance | 8,621,249 | 6,799,486 |
2017 Employee Stock Purchase Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Common stock shares reserved for future issuance | 4,485,323 | 3,130,910 |
Stock Options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Common stock shares reserved for future issuance | 646,500 | 498,000 |
ESPP | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of common stock issuable upon exercise of rights under equity compensation plans | 223,341 | |
Common stock shares reserved for future issuance | 561,971 | 223,341 |
Warrants | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Common stock shares reserved for future issuance | 384,163 | 384,163 |
2009 plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Common stock shares reserved for future issuance | 2,543,292 | 2,563,072 |
Stock-based Compensation - St_2
Stock-based Compensation - Stock-based compensation expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Stock-based compensation | ||||
Stock based compensation expense | $ 2,621 | $ 2,291 | $ 5,094 | $ 4,152 |
Cost of product revenues | ||||
Stock-based compensation | ||||
Stock based compensation expense | 39 | 41 | ||
Research and development | ||||
Stock-based compensation | ||||
Stock based compensation expense | 795 | 741 | 1,402 | 1,380 |
Selling, general and administrative | ||||
Stock-based compensation | ||||
Stock based compensation expense | $ 1,787 | $ 1,550 | $ 3,651 | $ 2,772 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Taxes | ||||
Income tax expense | $ 0 | $ 0 | $ 0 | $ 0 |
Uncertain tax positions | 0 | 0 | 0 | 0 |
Interest or penalties recorded | $ 0 | $ 0 | $ 0 | $ 0 |
Commitments and Contingencies -
Commitments and Contingencies - License Agreement (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Contingencies | ||||
Research and development expenses | $ 7,108,000 | $ 7,368,000 | $ 14,067,000 | $ 13,024,000 |
The Johns Hopkins University (“JHU”) | ||||
Contingencies | ||||
Minimum annual payment | 37,500 | |||
License fee, if the company achieves the first commercial sale | 100,000 | |||
First commercial sale milestone | 300,000 | 300,000 | ||
Research and development expenses | $ 100,000 | $ 200,000 | $ 100,000 | $ 200,000 |