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The Company
9 Months Ended
Sep. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
The Company The Company
Aerie Pharmaceuticals, Inc. (“Aerie”), with its wholly-owned subsidiaries, Aerie Distribution, Inc., Aerie Pharmaceuticals Limited, Aerie Pharmaceuticals Ireland Limited, and Avizorex Pharma S.L. (“Aerie Distribution,” “Aerie Limited,” “Aerie Ireland Limited,” and “Avizorex,” respectively, together with Aerie, the “Company”), is a pharmaceutical company focused on the discovery, development, and commercialization of first-in-class ophthalmic therapies for the treatment of patients with eye diseases and conditions including open-angle glaucoma, dry eye, diabetic macular edema (“DME”), and wet age-related macular degeneration (“AMD”). The Company has its principal executive offices in Durham, North Carolina, and operates as one business segment.
U.S. Commercialization of the Glaucoma Franchise
The Company has developed and commercialized two U.S. Food and Drug Administration (“FDA”) approved products, Rocklatan® (netarsudil/latanoprost ophthalmic solution) 0.02%/0.005% (“Rocklatan®”) and Rhopressa® (netarsudil ophthalmic solution) 0.02% (“Rhopressa®”), which are sold in the United States and comprise its glaucoma franchise. Rocklatan® is a once-daily fixed-dose combination of Rhopressa® and latanoprost, a commonly prescribed drug for the treatment of patients with open-angle glaucoma or ocular hypertension. Rhopressa® is a once-daily eye drop designed to reduce elevated intraocular pressure (“IOP”) in patients with open-angle glaucoma or ocular hypertension. The Company is commercializing Rocklatan®, which was launched in the United States in May 2019, and Rhopressa®, which was launched in the United States in April 2018.
In March 2022, the Company commenced a Phase 4 program that was designed to further demonstrate that Rocklatan® is a highly effective single bottle, once-daily therapy.
Efforts Outside the United States
In addition to actively promoting Rocklatan® and Rhopressa® in the United States, the Company is also developing business opportunities outside of the United States and has made progress in its efforts to commercialize Rocklatan® and Rhopressa® in Europe, Japan, and other regions of the world.
The Company partnered and has collaboration agreements in place with Santen Pharmaceuticals Co., Ltd. (“Santen Pharmaceuticals”) and Santen SA (“Santen SA” and, together with Santen Pharmaceuticals, “Santen”) to develop and commercialize its products in Japan and South Korea, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, and Taiwan (collectively, “East Asia”), as well as Europe, China, India, the Middle East, Commonwealth of Independent States (“CIS”), Africa, parts of Latin America, and the Oceania countries. The initial Collaboration and License Agreement with Santen was executed in October 2020 (the “First Santen Agreement”) to advance the Company’s clinical development and ultimately commercialize Rocklatan® and Rhopressa® in Japan and East Asia. The second Collaboration and License Agreement with Santen (the “Second Santen Agreement” and, together with the First Santen Agreement, the “Santen Agreements”) was executed in December 2021 to develop and commercialize Rocklatan® and Rhopressa® in Europe, China, India, the Middle East, CIS, Africa, parts of Latin America, and the Oceania countries. See Note 3 for additional information. In Europe, Rocklatan® and Rhopressa® will be marketed under the names Roclanda® and Rhokiinsa®, respectively.
Roclanda® and Rhokiinsa® were granted a Centralised Marketing Authorisation (“Centralised MA”) by the European Commission (“EC”) in January 2021 and November 2019, respectively. In April 2021, Roclanda® received marketing authorisation from the Medicines and Healthcare Products Regulatory Agency (“MHRA”) in Great Britain.
In Japan, in October 2021, the Company reported positive topline results for its Phase 3 clinical trial of netarsudil ophthalmic solution 0.02% (“netarsudil 0.02%”), the first of three expected Phase 3 clinical trials in Japan. A second, confirmatory Phase 3 study, required for approval in Japan, is currently underway. Santen is taking the lead on next steps in preparation for registration in Japan under the terms of the First Santen Agreement. Clinical trials for Rocklatan® in Japan have not yet begun.
Glaucoma Product Manufacturing
The Company has a sterile fill manufacturing facility in Athlone, Ireland (“Athlone plant”), for the production of its FDA and EMA approved products and clinical supplies. In addition, the Athlone plant has also manufactured clinical supplies of Rhopressa® for the Phase 3 clinical trials in Japan as well as registration batches to support product approval in Japan.
Product Candidates in Development
The Company is furthering the development of its product candidates focused on dry eye and retinal diseases as described below.
Dry Eye Program
The Company is developing AR-15512 ophthalmic solution for the treatment of patients with dry eye disease. The active ingredient in AR-15512 is a potent and selective agonist of the TRPM8 ion channel, a cold sensor and osmolarity sensor that regulates tear production and blink rate. In addition, activating the TRPM8 receptor may reduce ocular discomfort by promoting a cooling sensation.
In September 2021, the Company reported topline results of its Phase 2b clinical study, named COMET-1, for AR-15512. The Company completed a dose ranging study evaluating two concentrations of AR-15512 (0.0014% and 0.003%) in a 90-day trial with 369 subjects. The COMET-1 clinical study achieved statistical significance for multiple pre-specified and validated signs and symptoms. The greatest efficacy was demonstrated with the higher concentration 0.003% formulation, which the Company plans to advance to Phase 3 studies. The study did not achieve statistical significance at the pre-determined primary endpoints at Day 28. The Company gained alignment with the FDA in the first quarter of 2022 on the results of the Phase 2b clinical trial and confirmed the design of the Phase 3 registrational trials, which was based on the endpoints that achieved statistical significance in the COMET-1 study. The Company initiated the Phase 3 registrational trials in the second quarter of 2022, with the first Phase 3 registrational trial, named COMET-2, commencing in May 2022 with the enrollment of the first participant. The second Phase 3 registrational trial, named COMET-3, commenced in August 2022 with the enrollment of the first participant. Both COMET-2 and COMET-3 are multi-center, vehicle-controlled, double-masked, randomized clinical studies, designed to evaluate a single concentration of AR-15512 (0.003%) compared to the AR-15512 vehicle, administered twice-daily for 90 days. The last of the Phase 3 registrational trials, a 12-month study designed to evaluate the long-term safety of AR-15512, named COMET-4, commenced in November 2022 with the enrollment of the first participant.
Retina Program
The Company is currently developing two sustained-release implants focused on retinal diseases, AR-1105 and AR-14034 SR. For AR-1105, a dexamethasone steroid implant, the Company completed a Phase 2 clinical trial for patients with macular edema due to retinal vein occlusion (“RVO”) in July 2020 and reported topline results indicating sustained efficacy of up to six months.
The preclinical sustained-release implant AR-14034 SR is being designed to deliver the active ingredient, axitinib, a potent small molecule pan vascular endothelial growth factor (“VEGF”) receptor inhibitor. AR-14034 SR has the potential to provide a duration of effect of approximately one year with a once per-year injection. It may potentially be used to treat DME, wet AMD, and related diseases of the retina.
Liquidity
The Company’s activities prior to the commercial launch of Rhopressa® had primarily consisted of developing product candidates, raising capital, and performing research and development activities. The Company has incurred losses and experienced negative operating cash flows since inception. The Company had previously funded its operations primarily through the sale of equity securities and issuance of convertible notes prior to generating product revenues. In September 2019, the Company issued an aggregate principal amount of $316.25 million of 1.50% convertible senior notes due October 2024 (the “Convertible Notes”). See Note 10 for additional information. Further, the Company entered into the First Santen Agreement and Second Santen Agreement in October 2020 and December 2021, respectively, pursuant to which Santen made upfront payments of $50.0 million and $88.0 million, respectively. In December 2021, the Company also earned a $2.0 million supplemental upfront payment associated with the Second Santen Agreement. Total aggregate upfront payments of $90.0 million associated with the Second Santen Agreement (the “Second Santen Agreement Upfront Payment”) were received in January 2022. See Note 3 for additional information. As of September 30, 2022, the Company had $172.5 million in cash, cash equivalents, and investments. The Company believes that its cash, cash equivalents, and investments and projected cash flows from revenues will provide sufficient resources to support its operations, including interest payments for its Convertible Notes, through at least the next twelve months from the date of this filing, without giving effect to the proposed Merger (as defined below) and assuming the Company remains a standalone entity.
The Company expects to incur ongoing operating losses until such a time when Rocklatan® or Rhopressa® or any current or future product candidates, if approved, generate sufficient cash flows for the Company to achieve profitability. Accordingly, the Company may be required to obtain further funding through debt or equity offerings or other sources. In addition, the Company continues to evaluate collaboration and licensing opportunities related to its product candidates in development. Adequate
additional funding may not be available to the Company on acceptable terms, or at all. If the Company is unable to raise capital or repurchase, repay, or otherwise refinance its Convertible Notes when needed or on acceptable terms, it may be forced to delay, reduce or eliminate its research and development programs or commercialization and manufacturing efforts.
Additionally, pursuant to the Merger Agreement (as defined below) the Company is subject to a variety of operational restrictions. Unless the Company obtains Alcon’s prior written consent, it may not, among other things and subject to certain exceptions and aggregate limitations, incur additional indebtedness, issue additional shares of common stock, repurchase common stock, pay dividends, acquire assets, or enter into material contracts. The Company does not believe these restrictions will prevent it from meeting ongoing costs of operations, working capital needs, or capital expenditure requirements.
Proposed Merger
On August 22, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Alcon Research, LLC, a Delaware limited liability company (“Alcon”) and indirect wholly owned subsidiary of Alcon Inc., and Lyon Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Alcon (“Merger Sub”). The Merger Agreement provides, among other things, and subject to the terms and conditions set forth therein, that Merger Sub will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Alcon (the “Merger”).
At the effective time of the Merger (the “Effective Time”), and by virtue of the Merger, each share of common stock, par value $0.001 per share, of the Company then outstanding (other than shares held (i) by the Company or held in the Company’s treasury or (ii) by Alcon, Merger Sub or any direct or indirect wholly owned Subsidiary (as defined in the Merger Agreement) of Alcon or the Company, which, in each case, will be cancelled and retired and will cease to exist) will be converted into the right to receive $15.25 per share in cash (the “Merger Consideration”), without interest and subject to any withholding of taxes. As a result of the Merger, the Company’s common stock will no longer be publicly traded, and will be delisted from The Nasdaq Global Market (“Nasdaq”).
The Company’s Board of Directors unanimously approved the Merger Agreement and transactions contemplated thereby, including the Merger, and directed that a proposal to adopt the Merger Agreement be submitted to a vote at a meeting of the Company’s stockholders.
The consummation of the Merger (the “Closing”) is subject to certain conditions, including, but not limited to, (i) the approval and adoption of the Merger Agreement and the Merger by the affirmative vote of the holders of a majority of the issued and outstanding shares of common stock of the Company as of the close of business on October 4, 2022 at the stockholder meeting on November 17, 2022, (ii) the absence of any temporary restraining order, preliminary or permanent injunction or final judgment, or law, regulation, or order promulgated, enacted, issued or deemed applicable to the Merger, by any governmental entity in any jurisdiction in which Alcon or the Company has material business operations that prohibits or otherwise makes illegal the consummation of the Merger, and (iii) the expiration or termination of any waiting period (or any extension thereof) applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the rules and regulations promulgated thereunder. The parties expect the transaction to close following the receipt of all required regulatory and antitrust approvals and the satisfaction or waiver of the other closing conditions. The waiting period applicable to the Merger under the HSR Act expired in October 2022.
Pursuant to the terms of the Merger Agreement, the Company would be required to pay a termination fee to Alcon equal to $27.0 million under certain specified conditions upon or following the termination of the Merger Agreement. Alcon will be required to make a payment to the Company equal to $65.0 million if the Merger Agreement is terminated under certain specified conditions.

For the nine months ended September 30, 2022, the Company incurred $10.4 million in Merger-related costs, including for professional services, which are included in general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive loss.
The Merger is expected to close during the fourth quarter of 2022.