UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2024

OR

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

For the transition period from                      to                     

Commission file number: 001-36554

Ocular Therapeutix, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-5560161
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
15 Crosby Drive
Bedford, MA	01730
(Address of principal executive offices)	(Zip Code)

(781) 357-4000

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	OCUL	The Nasdaq Global Market

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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

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

As of August 2, 2024, there were 155,921,685 shares of Common Stock, $0.0001 par value per share, outstanding.

Ocular Therapeutix, Inc.

INDEX

		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2024 and 2023	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023	6
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 5.	Other Information	39
Item 6.	Exhibits	39
SIGNATURES		42

FORWARD-LOOKING STATEMENTS

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

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

● our ongoing clinical trials, including our registrational Phase 3 clinical trial of AXPAXLI that we initiated for the treatment of wet age-related macular degeneration, or wet AMD, and which we refer to as the SOL-1 trial; our second Phase 3 clinical trial of AXPAXLI for the treatment of wet AMD, which we refer to as the SOL-R trial; our Phase 1 clinical trials of AXPAXLI for the treatment of wet AMD; our Phase 1 clinical trial of AXPAXLI for the treatment of non-proliferative diabetic retinopathy, or NPDR, which we refer to as the HELIOS trial; our Phase 2 clinical trial of PAXTRAVA for the reduction of intraocular pressure, or IOP, in patients with primary open-angle glaucoma, or OAG, or ocular hypertension, or OHT; and our Phase 2 clinical trial of OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease; and our clinical trial to evaluate DEXTENZA in pediatric subjects following cataract surgery;

● any additional clinical trials we might determine in the future to conduct for our product candidates;

● determining our next steps for AXPAXLI for the treatment of patients with NPDR, PAXTRAVA for the treatment of patients with OAG or OHT, OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease, and OTX-CSI for the chronic treatment of dry eye disease;

● our commercialization efforts for our product DEXTENZA;

● our plans to potentially develop, seek regulatory approval for and commercialize AXPAXLI, PAXTRAVA, OTX-DED, OTX-CSI, and any other product candidate that we might develop based on our proprietary bioresorbable hydrogel-based formulation technology ELUTYX;

● our ability to manufacture DEXTENZA and our product candidates in compliance with Current Good Manufacturing Practices and in sufficient quantities for our clinical trials and commercial use;

● the timing of and our ability to submit applications and obtain and maintain regulatory approvals for DEXTENZA and our product candidates;

● our estimates regarding future revenue; expenses; the sufficiency of our cash resources; our ability to fund our operating expenses, debt service obligations and capital expenditure requirements; and our needs for additional financing;

● our plans to raise additional capital, including through equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, royalty agreements and marketing and distribution arrangements;

● the potential advantages of DEXTENZA and our product candidates;

● the rate and degree of market acceptance and clinical utility of our products;

● our ability to secure and maintain reimbursement for our products as well as the associated procedures to insert, implant or inject our products;

● our estimates regarding the market opportunity for DEXTENZA and our product candidates;

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● our license agreement and collaboration with AffaMed Therapeutics Limited under which we are collaborating on the development and commercialization of DEXTENZA and our product candidate PAXTRAVA in mainland China, Taiwan, Hong Kong, Macau, South Korea, and the countries of the Association of Southeast Asian Nations;

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

● our intellectual property position;

● the impact of government laws and regulations; and

● our competitive position.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2023, that was filed with the Securities and Exchange Commission, or the SEC, on March 11, 2024, in each case, particularly in the section captioned “Risk Factors”, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, licensing agreements or investments we may make.

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

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

This Quarterly Report on Form 10-Q contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q and the documents incorporated by reference herein may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. AXPAXLI is a trade name which we use to refer to our OTX-TKI product candidate, and PAXTRAVA is a trade name which we use to refer to our OTX-TIC product candidate. The U.S. Food and Drug Administration, or FDA, has not approved either AXPAXLI or PAXTRAVA as product names.

2

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Ocular Therapeutix, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

	June 30,		December 31,
	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	459,690	$	195,807
Accounts receivable, net		30,232		26,179
Inventory		2,547		2,305
Restricted cash		—		150
Prepaid expenses and other current assets		6,116		7,794
Total current assets		498,585		232,235
Property and equipment, net		10,887		11,739
Restricted cash		1,614		1,614
Operating lease assets		6,005		6,472
Total assets	$	517,091	$	252,060
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,689	$	4,389
Accrued expenses and other current liabilities		24,358		28,666
Deferred revenue		269		255
Operating lease liabilities		1,656		1,586
Total current liabilities		29,972		34,896
Other liabilities:
Operating lease liabilities, net of current portion		6,100		6,878
Derivative liabilities		22,078		29,987
Deferred revenue, net of current portion		14,000		14,135
Notes payable, net		67,132		65,787
Other non-current liabilities		114		108
Convertible Notes, net		—		9,138
Total liabilities		139,396		160,929
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized and no shares issued or outstanding at June 30, 2024 and December 31, 2023, respectively		—		—
Common stock, $0.0001 par value; 400,000,000 and 200,000,000 shares authorized and 155,624,363 and 114,963,193 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		16		12
Additional paid-in capital		1,183,882		788,697
Accumulated deficit		(806,203)		(697,578)
Total stockholders’ equity		377,695		91,131
Total liabilities and stockholders’ equity	$	517,091	$	252,060

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

3

Ocular Therapeutix, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Revenue:
Product revenue, net	$	16,379	$	15,029	$	31,094	$	28,243
Collaboration revenue		62		157		121		318
Total revenue, net		16,441		15,186		31,215		28,561
Costs and operating expenses:
Cost of product revenue		1,509		1,304		2,835		2,517
Research and development		28,857		15,094		49,592		29,842
Selling and marketing		9,994		11,153		20,177		21,989
General and administrative		19,671		8,205		33,818		17,332
Total costs and operating expenses		60,031		35,756		106,422		71,680
Loss from operations		(43,590)		(20,570)		(75,207)		(43,119)
Other income (expense):
Interest income		6,036		748		9,958		1,312
Interest expense		(3,196)		(1,991)		(7,247)		(3,760)
Change in fair value of derivative liabilities		(3,027)		1,131		(8,179)		(5,432)
Loss on extinguishment of debt		—		—		(27,950)		—
Other expense		—		—		—		(1)
Total other income (expense), net		(187)		(112)		(33,418)		(7,881)
Net loss	$	(43,777)	$	(20,682)	$	(108,625)	$	(51,000)
Net loss per share, basic	$	(0.26)	$	(0.26)	$	(0.73)	$	(0.66)
Weighted average common shares outstanding, basic		165,824,778		78,047,705		148,922,937		77,718,823
Net loss per share, diluted	$	(0.26)	$	(0.26)	$	(0.73)	$	(0.66)
Weighted average common shares outstanding, diluted		165,824,778		78,047,705		148,922,937		77,718,823

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

4

Ocular Therapeutix, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(108,625)	$	(51,000)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense		19,271		8,985
Non-cash interest expense		2,537		2,481
Change in fair value of derivative liabilities		8,179		5,432
Depreciation and amortization expense		1,876		1,135
Loss on extinguishment of debt		27,950		—
Gain on disposal of property and equipment		—		(1)
Changes in operating assets and liabilities:
Accounts receivable		(4,053)		(5,984)
Prepaid expenses and other current assets		1,678		(565)
Inventory		(242)		(230)
Accounts payable		(727)		(320)
Operating lease assets		467		790
Accrued expenses		(6,171)		(578)
Deferred revenue		(121)		682
Operating lease liabilities		(708)		(875)
Net cash used in operating activities		(58,689)		(40,048)
Cash flows from investing activities:
Purchases of property and equipment		(997)		(5,369)
Net cash used in investing activities		(997)		(5,369)
Cash flows from financing activities:
Proceeds from issuance of short-term bridge loan		—		2,000
Proceeds from exercise of stock options		6,574		481
Proceeds from issuance of common stock pursuant to employee stock purchase plan		492		418
Repayment from issuance of short-term bridge loan		—		(2,000)
Proceeds from issuance of common stock and pre-funded warrants upon private placement, net of issuance costs		316,353		8,824
Net cash provided by financing activities		323,419		9,723
Net increase (decrease) in cash, cash equivalents and restricted cash		263,733		(35,694)
Cash, cash equivalents and restricted cash at beginning of period		197,571		104,064
Cash, cash equivalents and restricted cash at end of period	$	461,304	$	68,370
Supplemental disclosure of cash flow information:
Cash paid for interest	$	15,595	$	1,521
Supplemental disclosure of non-cash investing and financing activities:
Additions to property and equipment included in accounts payable and accrued expenses	$	43	$	116

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

5

Ocular Therapeutix, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

				Additional				Total
	Common Stock			Paid-in		Accumulated		Stockholders’
	Shares	Par Value		Capital		Deficit		Equity
Balances at December 31, 2023	114,963,193	$	12	$	788,697	$	(697,578)	$	91,131
Issuance of common stock upon exercise of stock options	1,025,384		—		4,870		—		4,870
Issuance of common stock upon vesting of restricted stock units	532,717		—		—		—		—
Issuance of common stock and pre-funded warrants upon private placement, net of issuance costs	32,413,560		3		316,350		—		316,353
Issuance of common stock in connection with conversion of Convertible Notes	5,769,232		—		52,499		—		52,499
Stock-based compensation expense	—		—		7,978		—		7,978
Net loss	—		—		—		(64,848)		(64,848)
Balances at March 31, 2024	154,704,086	$	15	$	1,170,394	$	(762,426)	$	407,983
Issuance of common stock upon exercise of stock options	245,554		1		1,703		—		1,704
Issuance of common stock in connection with employee stock purchase plan	120,806		—		492		—		492
Issuance of common stock upon vesting of restricted stock units	553,917		—		—		—		—
Stock-based compensation expense	—		—		11,293		—		11,293
Net loss	—		—		—		(43,777)		(43,777)
Balances at June 30, 2024	155,624,363	$	16	$	1,183,882	$	(806,203)	$	377,695

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

6

Ocular Therapeutix, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

				Additional				Total
	Common Stock			Paid-in		Accumulated		Stockholders’
	Shares	Par Value		Capital		Deficit		Equity
Balances at December 31, 2022	77,201,819	$	8	$	652,213	$	(616,842)	$	35,379
Issuance of common stock upon exercise of stock options	26,443		—		78		—		78
Issuance of common stock upon vesting of restricted stock units	288,376		—		—		—		—
Stock-based compensation expense	—		—		4,572		—		4,572
Net loss	—		—		—		(30,318)		(30,318)
Balances at March 31, 2023	77,516,638	$	8	$	656,863	$	(647,160)	$	9,711
Issuance of common stock upon exercise of stock options	97,435		—		403		—		403
Issuance of common stock in connection with employee stock purchase plan	176,406		—		418		—		418
Issuance of common stock upon vesting of restricted stock units	73,117		—		—		—		—
Issuance of common stock upon public offering, net of issuance costs	1,370,208		—		8,824		—		8,824
Stock-based compensation expense	—		—		4,413		—		4,413
Net loss	—		—		—		(20,682)		(20,682)
Balances at June 30, 2023	79,233,804	$	8	$	670,921	$	(667,842)	$	3,087

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

7

Ocular Therapeutix, Inc.

Notes to the Condensed Consolidated Financial Statements

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

(Unaudited)

1. Nature of the Business

Ocular Therapeutix, Inc. (the “Company”) was incorporated on September 12, 2006 under the laws of the State of Delaware. The Company is a biopharmaceutical company committed to improving vision in the real world through the development and commercialization of innovative therapies for retinal diseases and other eye conditions. AXPAXLI (axitinib intravitreal implant), the Company’s product candidate for retinal disease, is based on its ELUTYX proprietary bioresorbable hydrogel-based formulation technology.

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

The Company is currently commercializing DEXTENZA (dexamethasone insert) 0.4mg, an intracanalicular insert for the treatment of post-surgical ocular inflammation and pain and for the treatment of ocular itching associated with allergic conjunctivitis, in the United States. The Company’s most advanced product candidate, AXPAXLI, is in Phase 3 clinical development for the treatment of wet age-related macular degeneration; the Company’s other programs and product candidates are in either Phase 1 or Phase 2 clinical development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval and adequate reimbursement or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapidly changing technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants. The Company may not be able to generate significant revenue from sales of any product for several years, if at all. Accordingly, the Company will need to obtain additional capital to finance its operations.

The Company has incurred losses and negative cash flows from operations since its inception, and the Company expects to continue to generate operating losses and negative cash flows from operations in the foreseeable future. As of June 30, 2024, the Company had an accumulated deficit of $806,203. Based on its current operating plan which includes estimates of anticipated cash inflows from product sales and cash outflows from operating expenses and capital expenditures, the Company believes that its existing cash and cash equivalents of $459,690 as of June 30, 2024 will enable it to fund its planned operating expenses, debt service obligations and capital expenditures at least through the next 12 months from the issuance date of these unaudited condensed consolidated financial statements while the Company observes a minimum liquidity covenant of $20,000 in its credit facility (Note 7).

The future viability of the Company is dependent on the Company’s ability to generate cash flows from the sales of DEXTENZA and sales of the Company’s product candidates, if and as approved, and raise additional capital to finance its operations. The Company will need to finance its operations through public or private securities offerings, debt financings, collaborations, strategic alliances, licensing agreements, royalty agreements, or marketing and distribution agreements. Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing on terms acceptable to the Company, if at all. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs for product candidates, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.

8

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements are consistent with those described in Note 2 - Summary of Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on March 11, 2024, and in Note 2 – Summary of Significant Accounting Policies in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 7, 2024.

Use of Estimates

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

Unaudited Interim Financial Information

The balance sheet at December 31, 2023 was derived from the Company’s audited consolidated financial statements but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 have been prepared by the Company, pursuant to the rules and regulations of the SEC for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of June 30, 2024, the results of operations for the three and six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023 have been made. The results of operations for the three and six months ended June 30, 2024 and 2023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2024.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board and adopted by the Company as of the specified effective date. The Company believes that recently issued accounting pronouncements that are not yet effective will not have a material impact on our consolidated financial statements and disclosures.

3. Licensing Agreements and Deferred Revenue

Incept License Agreement (in-licensing)

On September 13, 2018, the Company entered into a second amended and restated license agreement with Incept, LLC (“Incept”) to use and develop certain intellectual property (the “Incept License Agreement”). Under the Incept License Agreement, as amended and restated, the Company was granted a worldwide, perpetual, exclusive license to use

9

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

The terms and conditions of the Incept License Agreement are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024.

Royalties paid under this agreement related to product sales (the “Incept Royalties”) were $441 and $882 for the three and six months ended June 30, 2024, respectively, and $396 and $813 for the three and six months ended June 30, 2023, respectively. The Incept Royalties have been charged to cost of product revenue.

AffaMed License Agreement (out-licensing)

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

The terms and conditions of the AffaMed License Agreement are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024.

The Company recognized collaboration revenue related to its performance obligation regarding the conduct of a Phase 2 clinical trial of PAXTRAVA (the “Phase 2 Clinical Trial of PAXTRAVA performance obligation”) of $62 and $121 for the three and six months ended June 30, 2024, respectively, and $157 and $318 for the three and six months ended June 30, 2023, respectively.

As of June 30, 2024, the aggregate amount of the transaction price allocated to the partially unsatisfied Phase 2 Clinical Trial of PAXTRAVA performance obligation was $269. This amount is expected to be recognized as this performance obligation is satisfied through June 2025. 

Deferred revenue activity for the six months ended June 30, 2024 was as follows:

	Deferred Revenue
Deferred revenue at December 31, 2023	$	14,390
Amounts recognized into revenue		(121)
Deferred revenue at June 30, 2024	$	14,269

4. Cash Equivalents and Restricted Cash

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

	June 30,		June 30,
	2024		2023
Cash and cash equivalents	$	459,690	$	66,606
Restricted cash (non-current)		1,614		1,764
Total cash, cash equivalents and restricted cash as shown on the statements of cash flows	$	461,304	$	68,370

The Company held restricted cash as security deposits for its real estate leases.

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5. Inventory

Inventory consisted of the following:

	June 30,		December 31,
	2024		2023
Raw materials	$	267	$	302
Work-in-process		1,057		1,012
Finished goods		1,223		991
	$	2,547	$	2,305

6. Expenses

Restructuring

On May 29, 2024, the Company’s board of directors approved a strategic reduction in force to eliminate 37 full-time employees of the Company, primarily in research and development and technical operations and representing approximately 13% of the Company’s workforce, as part of an initiative to prioritize Company resources on the clinical development of AXPAXLI for the treatment of wet age-related macular degeneration.

The Company has substantially completed the reduction in force and recorded the related restructuring costs, primarily for paid-leave for terminated employees, severance, and related costs, in the three months ended June 30, 2024. The Company expects to pay the remaining balance of accrued restructuring costs at June 30, 2024 in the third quarter of 2024.

A roll-forward of the costs accrued with regard to this restructuring is as follows:

	As of
Accrued restructuring costs at March 31, 2024		—
Restructuring costs incurred during the period		1,601
Restructuring costs paid during the period		(395)
Accrued restructuring costs at June 30, 2024		1,206

Restructuring costs incurred during three and six months ended June 30, 2024 are included in general and administrative expenses on the consolidated statements of operations and comprehensive loss.

Accrued Expenses

Accrued expenses and other current liabilities consisted of the following:

	June 30,		December 31,
	2024		2023
Accrued payroll and related expenses (excluding accrued restructuring costs)	$	8,435	$	8,156
Accrued rebates and programs		5,655		5,117
Accrued research and development expenses		4,621		1,488
Accrued other		1,918		1,525
Accrued professional fees		1,748		691
Accrued restructuring costs		1,206		—
Accrued interest payable on Barings Credit Facility (Note 7)		775		803
Accrued interest payable on Convertible Notes (Note 7)		—		10,886
	$	24,358	$	28,666

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7. Financial Liabilities

Barings Credit Agreement

On August 2, 2023 (the “Closing Date”), the Company entered into a credit and security agreement (the “Barings Credit Agreement”) with Barings Finance LLC (“Barings”), as administrative agent, and the lenders party thereto, providing for a secured term loan facility for the Company (the “Barings Credit Facility”) in the aggregate principal amount of $82,474 (the “Total Credit Facility Amount”). The Company borrowed the full amount of $82,474 at closing and received proceeds of $77,290, after the application of an original issue discount and fees. Indebtedness under the Barings Credit Facility matures on the earlier to occur of (i) the six-year anniversary of the Closing Date and (ii) the date that is 91 days prior to the maturity date for the Company’s Convertible Notes (as defined below). Indebtedness under the Barings Credit Facility incurs interest based on the Secured Overnight Financing Rate (“SOFR”), subject to a minimum 1.50% floor, plus 6.75%. The Company is obligated to make interest payments on its indebtedness under the Barings Credit Facility on a monthly basis, commencing on the Closing Date; to pay annual administration fees; and to pay, on the maturity date, any principal and accrued interest that remains outstanding as of such date. In addition, the Company is obligated to pay a fee in an amount equal to the Total Credit Facility Amount, which amount shall be reduced by the total amount of interest and principal prepayment fees paid under the Barings Credit Agreement (such fee, the “Barings Royalty Fee”). The Company is required to pay the Barings Royalty Fee in installments to Barings, for the benefit of the lenders, on a quarterly basis in an amount equal to three and one-half percent (3.5%) of the net sales of DEXTENZA occurring during such quarter, subject to the terms, conditions and limitations specified in the Barings Credit Agreement, until the Barings Royalty Fee is paid in full. The Barings Royalty Fee is due and payable upon a change of control of the Company. The Company may, at its option, prepay any or all of the Barings Royalty Fee at any time without penalty. In connection with the Barings Credit Agreement, the Company granted the lenders thereto a first-priority security interest in all assets of the Company, including its intellectual property, subject to certain agreed-upon exceptions. The Barings Credit Agreement includes negative covenants requiring the Company to maintain a minimum liquidity amount of $20,000. The Barings Credit Agreement also includes customary affirmative and negative covenants.

The Company determined that the embedded obligation to pay the Barings Royalty Fee (the “Barings Royalty Fee Obligation”) is required to be separated from the Barings Credit Facility and accounted for as a freestanding derivative instrument subject to derivative accounting. The allocation of proceeds to the Barings Royalty Fee Obligation resulted in a discount on the Barings Credit Facility. The Company is amortizing the discount to interest expense over the term of the Barings Credit Facility using the effective interest method. Accrued or paid Barings Royalty Fees are included in the change in fair value of derivative liabilities on the consolidated statements of operations and comprehensive loss (Note 9).

A summary of the Barings Credit Facility at June 30, 2024 and December 31, 2023 is as follows:

	June 30,		December 31,
	2024		2023
Barings Credit Facility	$	82,474		82,474
Less: unamortized discount		(15,342)		(16,687)
Total	$	67,132		65,787

As of June 30, 2024, the full principal for the Barings Credit Facility of $82,474 was due for repayment in 2029.

Convertible Notes

On March 1, 2019, the Company issued $37,500 of convertible notes, which accrued interest at an annual rate of 6% of their outstanding principal amount which was payable, along with the principal amount, at maturity unless earlier converted, repurchased or redeemed (as amended the “Convertible Notes”). The terms and conditions of the Convertible Notes are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024.

The Company determined that the embedded conversion option was required to be separated from the Convertible Notes and accounted for the embedded conversion option as a freestanding derivative instrument subject to derivative accounting (the “Conversion Option Derivative Liability”).

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On March 28, 2024, the Company issued 5,769,232 shares of its common stock with a total fair value of $52,499 (Note 10) to the holder of the Convertible Notes in connection with the conversion of the principal amount of the Convertible Notes (the “Conversion”) and paid the holder $11,361 for accrued interest. The extinguishment of obligations under the Convertible Notes and the resulting derecognition of the principal of the Convertible Notes ($37,500), the unamortized discount ($27,950), and the Conversion Option Derivative Liability ($15,000), resulted in a net loss of $27,950, which was charged to losses on extinguishment of debt on the unaudited condensed consolidated statements of operations and comprehensive loss for the six months ended June 30, 2024.

MidCap Credit Agreement

The Company entered into a credit and security agreement in 2014 (as amended, the “MidCap Credit Agreement”) establishing a credit facility (the “MidCap Credit Facility”). The terms and conditions of the MidCap Credit Agreement and the MidCap Credit Facility are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024. In connection with entering into the Barings Credit Facility, in August 2023 the Company paid MidCap Financial Trust, as administrative agent, and its other lenders an aggregate of $26,157 in satisfaction of the Company’s obligations under the MidCap Credit Facility. In connection with its satisfaction of its obligations, the Company extinguished the MidCap Credit Facility, and all liens and security interests securing the indebtedness under the MidCap Credit Agreement were released.

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

8. Derivative Liability

Barings Credit Agreement

The Barings Credit Agreement (Note 7) contains the embedded Barings Royalty Fee Obligation that meets the criteria to be bifurcated and accounted for separately from the Barings Credit Facility (the “Royalty Fee Derivative Liability”). The Royalty Fee Derivative Liability was recorded at fair value upon the entering into the Barings Credit Facility and is subsequently remeasured to fair value at each reporting period. The Royalty Fee Derivative Liability was initially valued and is remeasured using a “with-and-without” method. The “with-and-without” methodology involves valuing the whole instrument on an as-is basis with the embedded Barings Royalty Fee Obligation and then valuing the instrument without the embedded Barings Royalty Fee Obligation. Royalty payments are estimated using a Monte Carlo simulation. Refer to Note 9 for details regarding the determination of fair value.

A roll-forward of the Royalty Fee Derivative Liability is as follows:

	As of
Balance at December 31, 2023	$	12,389
Change in fair value		9,689
Balance at June 30, 2024	$	22,078

Convertible Notes

The Convertible Notes (Note 7), which were extinguished in March 2024, contained the Conversion Option Derivative Liability, an embedded conversion option that meets the criteria to be bifurcated and accounted for separately from the Convertible Notes. The Conversion Option Derivative Liability was recorded at fair value upon the issuance of the Convertible Notes and was subsequently remeasured to fair value at each reporting period. The Conversion Option Derivative Liability was initially valued and was subsequently remeasured using a “with-and-without” method. The “with-and-without” methodology involves valuing the whole instrument on an as-is basis with the embedded conversion option and then valuing the instrument without the embedded conversion option. The difference between the entire instrument with the embedded conversion option compared to the instrument without the embedded conversion option is

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the fair value of the derivative, recorded as the Conversion Option Derivative Liability. Refer to Note 9 for details regarding the determination of fair value.

A roll-forward of the Conversion Option Derivative Liability is as follows:

	As of
Balance at December 31, 2023	$	17,598
Change in fair value		(2,598)
Balance at March 28, 2024		15,000
Extinguishment in connection with Conversion		(15,000)
Balance at June 30, 2024	$	—

9. Risks and Fair Value

Concentration of Credit Risk and of Significant Suppliers and Customers

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

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

Three specialty distributor customers accounted for the following percentages of the Company’s total revenue:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Customer 1		42	%		58	%		46	%		55	%
Customer 2		24			21			22			23
Customer 3		12			10			12			11

Three specialty distributor customers accounted for the following percentages of the Company’s accounts receivable, net:

	As of
	June 30,			December 31,
	2024			2023
Customer 1		47	%		50	%
Customer 2		26			28
Customer 3		12			11

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Change in Fair Value of Derivative Liabilities

Other income (expenses) from the change in the fair values of derivative liabilities as presented on the Company’s consolidated statements of operations and comprehensive loss includes the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Change in the fair value of the Conversion Option Derivative Liability	$	—	$	1,131	$	2,598	$	(5,432)
Change in the fair value of Royalty Fee Derivative Liability		(2,454)		—		(9,689)		—
Barings Royalty Fee		(573)		—		(1,088)		—
Total	$	(3,027)	$	1,131	$	(8,179)	$	(5,432)

Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 and indicate the level of the fair value hierarchy utilized to determine such fair value:

	Fair Value Measurements as of
	June 30, 2024 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	451,447	$	—	$	—	$	451,447
Liability:
Derivative liability	$	—	$	—	$	22,078	$	22,078

	Fair Value Measurements as of
	December 31, 2023 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	187,951	$	—	$	—	$	187,951
Liability:
Derivative liabilities	$	—	$	—	$	29,987	$	29,987

Barings Credit Agreement and Royalty Fee Derivative Liability

At June 30, 2024, the Barings Credit Facility, net of the Royalty Fee Derivative Liability, was carried at amortized cost totaling $67,907, comprised of the $67,132 non-current liability (Note 7) and $775 accrued interest (Note 6). The estimated fair value of the Barings Credit Facility, without the Royalty Fee Derivative Liability, was $76,968 at June 30, 2024. At December 31, 2023, the Barings Credit Facility, net of the Royalty Fee Derivative Liability, was carried at amortized cost totaling $66,590 comprised of the $65,787 non-current liability (Note 7) and $803 accrued interest (Note 6). The estimated fair value of the Barings Credit Facility, without the Royalty Fee Derivative Liability, was $72,295 at December 31, 2023.

The fair value of the Royalty Fee Derivative Liability is estimated using a Monte Carlo simulation. The use of this approach requires the use of Level 3 unobservable inputs. The main inputs when determining the fair value of the Royalty Fee Derivative Liability are the amount and timing of the expected future revenue of the Company, the estimated volatility of these revenues, and the discount rate corresponding to the risk of revenue. The estimated fair

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value presented is not necessarily indicative of an amount that could be realized in a current market exchange. The use of alternative inputs and estimation methodologies could have a material effect on these estimates of fair value.

The main inputs to valuing the Royalty Fee Derivative Liability are as follows:

	As of
	June 30,			December 31,
	2024			2023
Revenue volatility		75.0	%		67.0	%
Revenue discount rate		16.2	%		15.8	%

Convertible Notes and Conversion Option Derivative Liability

At December 31, 2023, the Convertible Notes, net of the Conversion Option Derivative Liability, were carried at amortized cost totaling $20,024, comprised of the $9,138 non-current liability (Note 7) and $10,886 accrued interest (Note 6).

The fair value of the Convertible Notes with and without the conversion option as of December 31, 2023 was estimated using a binomial lattice approach. The use of this approach required the use of Level 3 unobservable inputs. The main input when determining the fair value of the Convertible Notes was the bond yield that pertained to the host instrument without the conversion option. The significant assumption used in determining the bond yield was the market yield movements of a comparable instrument issued as of the valuation date, which was assessed and updated each period. The main input when determining the fair value for disclosure purposes was the bond yield which was updated each period to reflect the yield of a comparable instrument issued as of the valuation date. The fair value of the Conversion Option Derivative Liability immediately before the Conversion was determined based on the intrinsic value of the separated conversion option.

10. Equity

In June 2024, the Company adopted an amended and restated certificate of incorporation increasing the number of its authorized shares of its common stock by 200,000,000 shares to 400,000,000 shares.

On February 21, 2024, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional accredited investors (the “Investors”), pursuant to which the Company issued and sold to the Investors in a private placement an aggregate of 32,413,560 shares of the Company’s common stock, par value $0.0001 per share (the “Shares”), at a price of $7.52 per share, and, to certain Investors in lieu of Shares, pre-funded warrants to purchase 10,805,957 shares of the Company’s common stock (the “Pre-Funded Warrants”), at a price of $7.519 per Pre-Funded Warrant (the “2024 Private Placement”). Each Pre-Funded Warrant issued in the 2024 Private Placement has an exercise price of $0.001 per share, is currently exercisable and will remain exercisable until the Pre-Funded Warrant is exercised in full. The 2024 Private Placement closed on February 26, 2024. The Company received total net proceeds from the 2024 Private Placement of approximately $316,353 after deducting placement agent fees and offering expenses. The Company accounts for the Pre-Funded Warrants as a component of permanent equity. In connection with entering into the Securities Purchase Agreement, also on February 21, 2024, the Company entered into a registration rights agreement with the Investors, pursuant to which the Company agreed to register for resale the Shares and the shares of the Company’s common stock issuable upon exercise of the Pre-Funded Warrants (together with the Shares, the “Registrable Securities”). The Company filed a registration statement regarding the Registrable Securities on Form S-3 with the SEC on March 25, 2024.

On March 28, 2024, the Company issued 5,769,232 shares of its common stock to the holder of the Convertible Notes in connection with the Conversion. The newly issued shares of common stock were valued at fair value, being the closing price of the Company’s common stock on that day, and resulted in an increase in additional paid-in capital of $52,499.

On August 9, 2021, the Company and Jefferies LLC (“Jefferies”) entered into an Open Market Sale Agreement (the “2021 Sales Agreement”) under which the Company may offer and sell shares of its common stock having an aggregate

16

offering price of up to $100,000 from time to time through Jefferies, acting as agent. The Company did not offer or sell shares of its common stock under the 2021 Sales Agreement during the three and six months ended June 30, 2024. During the three and six months ended June 30, 2023, the Company sold 1,370,208 shares of common stock under the 2021 Sales Agreement, resulting in gross proceeds to the Company of $9,162, and net proceeds, after accounting for issuance costs, of $8,824.

11. Stock-Based Awards

For the three and six months ended June 30, 2024, the Company had three stock-based compensation plans under which it was able to grant stock-based awards, the 2021 Stock Incentive Plan, as amended (the “2021 Plan”), the 2019 Inducement Stock Incentive Plan, as amended (the “2019 Inducement Plan”), and the 2014 Employee Stock Purchase Plan (the “ESPP”) (collectively, the “Stock Plans”). The 2021 Plan and the 2019 Inducement Plan provide for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units (“RSUs”), stock appreciation rights and other stock-based awards.

The terms and conditions of the Stock Plans are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024. Subsequent updates to Stock Plans during the three and six months ended June 30, 2024 are as follows:

2021 Plan - On June 12, 2024, the Company’s shareholders approved an amendment of the 2021 Plan to increase the aggregate number of shares issuable thereunder by 7,000,000.

2019 Inducement Plan - On February 20, 2024, the Company’s board of directors amended the 2019 Inducement Plan to increase the aggregate number of shares issuable thereunder from 1,054,000 to 3,804,000 shares of common stock. On April 16, 2024, the board of directors of the Company further amended the 2019 Inducement Plan to increase the aggregate number of shares issuable thereunder from 3,804,000 to 4,804,000 shares of common stock.

ESPP - On January 1, 2024, the number of shares available for issuance under the ESPP increased from 398,784 to 606,186.

As of June 30, 2024, 8,803,632, 544,696, and 485,380 shares of common stock remained available for issuance under the 2021 Plan, the 2019 Inducement Plan, and the ESPP, respectively.

Stock options and RSUs

During the three and six months ended June 30, 2024, the Company granted options to purchase 1,010,325 and 6,828,071 shares of common stock, respectively, at a weighted exercise price of $6.11 and $7.12 per share, respectively. Of these, options to purchase 37,900 and 4,328,627 shares of common stock, respectively, were granted under the 2021 Plan, and options to purchase 972,425 and 2,499,444 shares of common stock, respectively, were granted under the 2019 Inducement Plan.

During the three and six months ended June 30, 2024, the Company granted 333,341 and 2,611,757 RSUs, respectively. Of these, 12,634 and 1,355,771 RSUs, respectively, were granted under the 2021 Plan, and 320,707 and 1,255,986 RSUs, respectively, were granted under the 2019 Inducement Plan. Each RSU is settleable for one share of common stock upon vesting.

During the three and six months ended June 30, 2024, 731,580 and 1,040,261 stock options, respectively, and 147,238 and 266,842 RSUs, respectively, expired or were forfeited.

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Stock-based Compensation

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Research and development	$	2,345	$	1,133	$	3,798	$	2,274
Selling and marketing		689		970		1,526		2,014
General and administrative		8,259		2,310		13,947		4,697
	$	11,293	$	4,413	$	19,271	$	8,985

During the three months ended June 30, 2024, vesting of certain stock options and RSUs granted to a former executive of the Company was accelerated upon his departure from the Company, resulting in incremental stock-based compensation expense of $5,092. During the six months ended June 30, 2024, vesting of certain stock options and RSUs granted to two former executives of the Company was accelerated upon their departures from the Company, resulting in incremental stock-based compensation expense of $7,493.

As of June 30, 2024, the Company had an aggregate of $43,728 of unrecognized stock-based compensation cost, which is expected to be recognized over a weighted average period of 3.0 years.

12. Income Taxes

The Company did not provide for any income taxes in its unaudited condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024 and 2023, respectively. The Company has provided a valuation allowance for the full amount of its net deferred tax assets because, at June 30, 2024 and December 31, 2023, it was more likely than not that any future benefit from deductible temporary differences and net operating loss and tax credit carryforwards would not be realized.

13. Net Loss Per Share

Basic net loss per share was calculated as follows for the three and six months ended June 30, 2024 and 2023:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Numerator:
Net loss attributable to common stockholders	$	(43,777)	$	(20,682)	$	(108,625)	$	(51,000)
Denominator:
Weighted average common shares outstanding, basic		165,824,778		78,047,705		148,922,937		77,718,823
Net loss per share - basic	$	(0.26)	$	(0.26)	$	(0.73)	$	(0.66)

For the three and six months ended June 30, 2024 and 2023, respectively, there was no dilutive impact from potentially issuable common shares. Therefore, diluted net loss per share was the same as basic net loss per share. As of June 30, 2024, the Pre-Funded Warrants (Note 10) are included in the calculation of basic and diluted net loss per share.

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The Company excluded the following potentially issuable common shares, outstanding as of June 30, 2024 and 2023, respectively, from the computation of diluted net loss per share for the three and six months ended June 30, 2024 and 2023, respectively, because they had an anti-dilutive impact.

	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
Options to purchase common stock	20,693,663	16,333,870	20,693,663	16,333,870
Restricted stock units	2,885,622	1,654,517	2,885,622	1,654,517
Shares issuable in connection with conversion of Convertible Notes, if converted	—	5,769,232	—	5,769,232
	23,579,285	23,757,619	23,579,285	23,757,619

14. Commitments and Contingencies

Indemnification Agreements

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend indemnified parties for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. To date, the Company has not incurred any material costs as a result of such indemnifications.

15. Related Party Transactions

The Company has engaged Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) to provide certain legal services to the Company. Christopher White, who served as the Company’s Chief Business Officer until March 6, 2024, is the brother of a partner at WilmerHale who has not participated in providing legal services to the Company. Upon Mr. White’s departure, WilmerHale ceased to be a related party to the Company. For the three and six months ended June 30, 2024, the Company incurred fees for legal services rendered by WilmerHale while being deemed a related party through March 31, 2024 of $0 and $1,080, respectively. The Company incurred fees for legal services rendered by WilmerHale of $239 and $633 for the three and six months ended June 30, 2023, respectively. As of December 31, 2023, there was $298 recorded in accounts payable for WilmerHale. As of December 31, 2023, there was $0 recorded in accrued expenses for WilmerHale.

The Company has engaged Heier Consulting, LLC (“Heier Consulting”), an entity affiliated with Jeffrey Heier, M.D. a former member of the Company’s Board of Directors and the Company’s current Chief Scientific Officer, to provide advice or expertise on one or more of the Company’s development-stage drug or medical device products relating to retinal diseases or conditions under a consultant agreement (the “Consultant Agreement”). On February 21, 2024, the Company entered into an employment agreement with Dr. Heier (the “Heier Employment Agreement”) under which Dr. Heier agreed to serve as Chief Scientific Officer of the Company on a part-time basis, working 50% of a full-time schedule. In connection with entering into the Heier Employment Agreement, the Heier Consulting Agreement was terminated. In addition, in connection with his commencement of employment, Dr. Heier resigned from the Company’s board of directors, effective February 21, 2024. Compensation for the consulting services was in the form of cash and stock-based awards. The total grant date fair value of stock-based awards granted to Dr. Heier was $96, which was recognized to expense on a straight-line basis over the respective vesting periods. The Company did not incur any cash-based fees for services rendered by Heier Consulting for the three months ended June 30, 2024 and 2023, respectively. The Company incurred cash-based fees for services rendered by Heier Consulting before termination of the Consultant Agreement of approximately $5 and $0 for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and December 31, 2023, there were $0 and $6 recorded in accounts payable for Heier Consulting, respectively. As of June 30, 2024 and December 31, 2023, there were $0 and $0 recorded in accrued expenses for Heier Consulting, respectively.

16. Subsequent Events

No subsequent events noted.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties and should be read together with the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of important factors that could cause actual results to differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Overview

Our Company

We are a biopharmaceutical company committed to improving vision in the real world through the development and commercialization of innovative therapies for retinal diseases and other eye conditions. AXPAXLI (axitinib intravitreal implant, also known as OTX-TKI), our product candidate for retinal disease, is based on our ELUTYX proprietary bioresorbable hydrogel-based formulation technology.

We are currently evaluating AXPAXLI as a treatment for wet age-related macular degeneration, or wet AMD, in two Phase 3 clinical trials, which we refer to as the SOL-1 trial and the SOL-R trial. Our clinical portfolio also includes PAXTRAVA (travoprost intracameral implant, also known as OTX-TIC), currently in a Phase 2 clinical trial for the treatment of open-angle glaucoma, or OAG, or ocular hypertension, or OHT. We are also currently evaluating AXPAXLI in a Phase 1 clinical trial for the treatment of non-proliferative diabetic retinopathy, or NPDR, which we refer to as the HELIOS trial.

Our expertise in the formulation, development and commercialization of innovative therapies of the eye and our ELUTYX platform supported the development and launch of our first commercial drug product, DEXTENZA, a corticosteroid approved by the U.S. Food and Drug Administration, or FDA, for the treatment of ocular inflammation and pain following ophthalmic surgery and ocular itching associated with allergic conjunctivitis. ELUTYX is also the foundation for two other clinical-stage assets, OTX-CSI (cyclosporine intracanalicular insert) for the chronic treatment of dry eye disease and OTX-DED (dexamethasone intracanalicular insert) for the short-term treatment of the signs and symptoms of dry eye disease.

Key Business and Financial Developments

AXPAXLI for wet AMD

We are currently conducting the SOL-1 trial, a registrational Phase 3 clinical trial for the treatment of wet AMD. The SOL-1 trial is designed as a prospective, multi-center, randomized, parallel-group trial. We expect to conduct the SOL-1 trial primarily at U.S. sites, as well as sites in Argentina and potentially other countries. The SOL-1 trial is designed as a superiority trial comparing a single optimized implant of AXPAXLI with a drug load of 450 µg of axitinib to a single injection of aflibercept and assessing the safety and efficacy of AXPAXLI in subjects with wet AMD by measuring Best Corrected Visual Accuity, or BCVA, and central subfield thickness. We are conducting the SOL-1 trial in accordance with a Special Protocol Assessment, or SPA, agreement letter we received in October 2023 from the FDA regarding the proposed clinical trial protocol and the statistical analysis plan and a subsequent SPA agreement modification letter we received from the FDA in January 2024 regarding the formulation of AXPAXLI to be used and the trial’s inclusion criteria.

We plan to randomize approximately 300 evaluable wet AMD subjects who are treatment naïve in the study eye with good visual acuity and a diagnosis of macular choroidal neovascularization at screening in the SOL-1 trial. Under the study protocol, after initial screening, enrolled subjects in the trial will receive two aflibercept loading doses between the screening visit and Day 1: one at week -8 and another at week -4. Subjects reaching approximately 20/20 vision or experiencing an improvement of 10 Early Treatment of Diabetic Retinopathy Study, or ETDRS, letters after these injections, in addition to satisfying other criteria, will then be randomized in the trial at Day 1 to receive either one

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implant of AXPAXLI in the investigational arm or one injection of aflibercept in the control arm. Those subjects who fail randomization will then be eligible to be enrolled in the SOL-R trial. All subjects who are successfully randomized in the SOL-1 trial will then be followed every month and rescued as needed with supplemental anti-VEGF treatment based on pre-specified criteria. The primary endpoint is the proportion of subjects who maintain visual acuity, defined as a BCVA loss of less than 15 letters on the ETDRS chart at week 36. Our pre-specified rescue criteria are a loss of 15 or more letters on the ETDRS chart compared to baseline, or a new hemorrhage that is deemed to be likely to cause irreversible vision loss. A loss of 15 letters or more on the ETDRS chart at any time in the trial would be considered as having met the endpoint as a treatment failure.

The first subjects in the SOL-1 trial were screened and received their first aflibercept injections in February 2024, and we started randomizing subjects in April 2024. During our Investor Day on June 13, 2024, we announced that, as of June 7, 2024, we had 60 active study sites and 151 subjects enrolled in various stages of loading and randomization. We expect to complete enrollment of the SOL-1 trial by the end of the first quarter of 2025.

In June 2024, we initiated the SOL-R trial, a repeat-dosing registrational Phase 3 clinical trial for the treatment of wet AMD. The SOL-R trial is designed as a multi-center, double-masked, randomized (2:2:1), three-arm study that will involve sites located in the U.S. and the rest of the world. The trial is intended to randomize approximately 825 subjects that are either treatment naïve or have been diagnosed with wet AMD within three months prior to enrollment in the study eye. This non-inferiority trial reflects a patient enrichment strategy that includes multiple loading doses of aflibercept and monitoring to exclude those with significant retinal fluid fluctuations. In the first arm, subjects will be randomized to receive a single dose of AXPAXLI at Day 1 and re-dosed at Week 24. In the second arm, subjects will receive aflibercept (2mg) on-label every 8 weeks. In a third arm, subjects will receive a single dose of the comparator, Eylea HD, at Day 1 and will be re-dosed at Week 24, aligned with the AXPAXLI dosing regimen in the first arm and serving as adequate masking to the FDA. The clinical trial protocol requires that, during the study, subjects in any arm meeting pre-specified rescue criteria will receive a supplemental dose of aflibercept. The primary endpoint is non-inferiority in mean BCVA change from baseline between the AXPAXLI and on-label aflibercept (2mg) arms at one year. Subjects enrolled in SOL-R are initially expected to include subjects that constitute loading or randomization failures from the SOL-1 trial until such time as SOL-1 is fully enrolled. The first subjects were enrolled in the SOL-R trial in July 2024.

In August 2024, we received a Type C written response in which the FDA agreed that the SOL-R clinical trial is appropriate as an adequate and well-controlled study in support of a potential NDA and product label. The FDA also noted that the use of one superiority study and one non-inferiority study is generally acceptable as the basis of an eventual NDA in wet AMD.

If we were to obtain favorable results from the SOL-1 trial and the SOL-R trial, we plan to submit an NDA with the FDA for marketing approval of AXPAXLI for the treatment of wet AMD.

AXPAXLI for NPDR

We are currently conducting the HELIOS trial, a U.S.-based, multicenter, double-masked, randomized, parallel group Phase 1 study evaluating the safety, tolerability and efficacy of a single injection of AXPAXLI in subjects with moderately severe to severe NPDR without diabetic macular edema. We started conducting the Phase 1 clinical trial initially under an exploratory IND, which was subsequently converted to a traditional IND. We have enrolled 22 subjects with diabetic retinopathy secondary to type 1 or type 2 diabetes who had not had an anti-VEGF injection in the prior 12 months or diabetic macular edema in the prior six months, randomized 2:1 to either a single implant of AXPAXLI containing 600 µg of axitinib or sham control. One subject dropped out from the HELIOS trial for reasons unrelated to HELIOS trial.

In June 2024, we announced topline data from the HELIOS trial at 48 weeks. AXPAXLI was generally well-tolerated and did not result in any reported incidence of intraocular inflammation, iritis, vitritis, or vasculitis. No subjects in either arm received rescue medication. At week 48, six of 13 (46.2%) subjects in the AXPAXLI group experienced a 1 or 2-step improvement in the Diabetic Retinopathy Severity Scale, or DRSS, with three of the 13 (23.1%) experiencing a 2-step improvement. No subjects in the control group showed a 1- or 2-step improvement at the same timepoint. No subjects in the AXPAXLI group experienced any worsening in DRSS. Two of eight (25.0%) subjects in the control group experienced worsening in the DRSS at 48 weeks. No subjects in the AXPAXLI group developed proliferative diabetic retinopathy, or PDR, or center-involved diabetic macular edema, or CI-DME at week 48. Three of eight (37.5%)

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subjects in the control group developed PDR or CI-DME at the same timepoint. On average, subjects in the AXPAXLI arm showed improvement in mean central subfield thickness versus baseline compared to the control group, which showed worsening at the 48-week timepoint.

We plan to request a meeting with the FDA to discuss the results of the HELIOS trial and seek guidance as to the regulatory requirements regarding the further clinical development of AXPAXLI for the treatment of diabetic retinopathy. We are also developing a potential next-generation injector that we believe could improve the administration of AXPAXLI to the eye. 

PAXTRAVA

We are conducting a U.S.-based Phase 2 prospective, multi-center, randomized, controlled clinical trial evaluating the safety, tolerability and efficacy of PAXTRAVA for the treatment of subjects with primary OAG or OHT under an IND. The Phase 2 clinical trial was initially designed to include approximately 105 subjects at 15 to 20 sites between three arms of approximately 35 subjects each to evaluate two formulations of PAXTRAVA for the treatment of OAG or OHT in subjects compared to DURYSTA. The non-study eye of each subject receives a topical prostaglandin analog daily, if not contraindicated. The primary efficacy endpoint is measured by diurnal IOP mean change from baseline (8 a.m., 10 a.m. and 4 p.m.) at two, six and 12 weeks. The active comparator control arm receives one injection of DURYSTA in one eye and a topical prostaglandin analog daily in the non-study eye, if not contraindicated. In April 2024, we presented 6-month topline data from this Phase 2 clinical trial at the 2024 American Society of Cataract and Refractive Surgery Annual Meeting. In the trial, the PAXTRAVA 26 µg single implant demonstrated consistent control of intraocular pressure, or IOP, through six months, as statistically significant IOP changes from baseline were observed for every individual and mean diurnal measurement at primary endpoints Week 2 (M0.5), Week 6 (M1.5), and Week 12 (M3), as well as secondary endpoints Months 4.5 and 6 (p<0.0001), although no formal statistical testing was prespecified by the clinical trial protocol. Clinically meaningful mean IOP reduction of approximately 24-30% from baseline over six months was observed. A majority (81.3%) of treated eyes did not require additional IOP-lowering therapy through six months, indicating sustained and consistent treatment effects.

PAXTRAVA 26 µg was generally well tolerated with no impact on the corneal endothelium having been observed at six months following a single administration of the product candidate. The majority of adverse events, or AEs, observed were mild in severity and generally resolved with topical medical treatment. Most ocular AEs within three days were deemed related to the injection procedure by the investigators. AEs observed more than three days post-injection procedure were consistent with the travoprost label. There was one serious AE in the trial, where an implant required removal, which the investigator assessed to be likely due to a peri-implantation bacterial infection.

Consistent bioresorption of the implant coupled with the durable effect observed in the Phase 2 trial suggests redosing could be possible without the risk of stacking implants. We are conducting a pilot repeat-dose sub-study in the Phase 2 clinical trial to evaluate the safety of a repeat, sustained-release dose in a small subset of subjects with OAG or OHT.

Once we have completed the pilot repeat-dose sub-study, we plan to seek an end-of-Phase 2 meeting with the FDA and to determine our next steps for PAXTRAVA for the treatment of OAG or OHT following that meeting. We are also developing a potential next-generation injector that we believe could improve the administration of therapy.

Commercial

Our net product revenue generated from the sale of DEXTENZA was $16.4 million for the three months ended June 30, 2024, reflecting an increase of $1.4 million or 9.0% over the three months ended June 30, 2023, and an increase of $1.7 million or 11.3% over the three months ended March 31, 2024. Our net product revenue generated from the sale of DEXTENZA was $31.1 million for the six months ended June 30, 2024, reflecting an increase of $2.9 million or 10.1% over the six months ended June 30, 2023.

Reduction in Force

In May 2024, our board of directors approved a strategic reduction in force to eliminate 37 full-time employees, primarily in research and development and technical operations and representing approximately 13% of our workforce, as part of an initiative to prioritize our resources on the clinical development of AXPAXLI for the treatment of wet

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AMD, or the Strategic Restructuring. We have substantially completed the Strategic Restructuring and recorded the related restructuring charges of $1.6 million, resulting primarily from garden leaves and severance benefits, in each of the three and six months ended June 30, 2024.

2024 Private Placement

In February 2024, we sold in a private placement 32,413,560 shares of our common stock at $7.52 per share and, in lieu of common stock to certain investors, pre-funded warrants to purchase up to an aggregate of 10,805,957 shares of our common stock at a price of $7.519 per pre-funded warrant for total net proceeds to us of approximately $316.4 million, after deducting placement agent fees and other offering expenses, or the 2024 Private Placement. Each pre-funded warrant has an exercise price of $0.001 per share, is currently exercisable and will remain exercisable until exercised in full.

Convertible Notes

In March 2024, the holder of our $37.5 million unsecured senior subordinated convertible notes, or the Convertible Notes, converted the principal amount of the Convertible Notes, and we issued to the holder of the Convertible Notes 5,769,232 shares of our common stock with a total fair value of $52.5 million and paid $11.4 million for accrued interest. The accounting for the extinguishment of the Convertible Notes resulted in a non-cash loss of $28.0 million.

Components of our Financial Performance

Revenue

We recognize product revenue when we sell DEXTENZA in the United States to a network of specialty distributors on a direct basis, who then resell the product to ASCs, hospital out-patient departments, or HOPDs, and physicians’ offices, and when we sell DEXTENZA on a direct basis to a small number of ASCs. We refer to these resales from the specialty distributors to the ASCs and HOPDs as in-market unit sales. We record DEXTENZA product sales net of estimated chargebacks, rebates, distribution fees and product returns. These deductions are generally referred to as gross-to-net deductions.

Operating Expenses

Cost of Product Revenue

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

● Direct materials costs;

● Royalties;

● Direct labor, which includes employee-related expenses, including salaries, related benefits and payroll taxes, and stock-based compensation expense for employees engaged in the production process;

● Manufacturing overhead costs, which includes rent, depreciation, and indirect labor costs associated with the production process;

● Transportation costs; and

● Cost of scrap material.

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Research and Development Expenses

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

● expenses incurred in connection with the clinical trials of our product candidates, including with the investigative sites that conduct our clinical trials and under agreements with contract research organizations, or CROs;

● employee-related expenses, including salaries, related benefits and payroll taxes, travel and stock-based compensation expense for employees engaged in research and development, clinical and regulatory and other related functions;

● expenses relating to regulatory activities, including filing fees paid to the FDA for our submissions for product approvals;

● expenses associated with developing our pre-commercial manufacturing capabilities and manufacturing clinical study materials;

● ongoing research and development activities relating to our core bioresorbable hydrogel technology and improvements to this technology;

● facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies;

● costs relating to the supply and manufacturing of product inventory, prior to approval by the FDA or other regulatory agencies of our products; and

● expenses associated with preclinical development activities.

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

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

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

● the scope, progress, outcome and costs of our clinical trials and other research and development activities;

● the timing, receipt and terms of any marketing approvals;

● the efficacy and potential advantages of our products or product candidates compared to alternative treatments, including any standard of care;

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● the market acceptance of our products or product candidates; and

● significant and changing government regulation.

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

Selling and Marketing Expenses

Selling and marketing expenses consist primarily of salaries and related costs for personnel in selling and marketing functions as well as consulting, advertising and promotion costs.

General and Administrative Expenses

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

Other Income (Expense)

Interest Expense. Interest expense is incurred on our debt. In August 2023, we entered into a credit and security agreement, or the Barings Credit Agreement, with Barings Finance LLC, or Barings, as administrative agent, and the lenders party thereto, providing for a secured term loan facility, or the Barings Credit Facility, in the aggregate principal amount of $82.5 million. For the three months ended June 30, 2024, our interest-bearing debt included the Barings Credit Facility ($82.5 million outstanding principal). For the six months ended June 30, 2024, our interest-bearing debt included the Barings Credit Facility and the Convertible Notes ($37.5 million outstanding principal through March 28, 2024, no outstanding principal thereafter).

Change in Fair Value of Derivative Liabilities. In August 2023, in connection with entering into the Barings Credit Agreement, we identified an embedded derivative liability, which we were required to measure at fair value at inception and then are required to measure at the end of each reporting period until the embedded derivative is settled. In 2019, in connection with the issuance of our Convertible Notes, we identified an embedded derivative liability, which we were required to measure at fair value at inception and then at the end of each reporting period until the embedded derivative was settled. The settlement of the derivative liability related to the Convertible Notes occurred on March 28, 2024. The changes in fair value of these derivative liabilities are recorded through the condensed consolidated statement of operations and comprehensive loss and are presented under the caption “change in fair value of derivative liabilities”.

Losses from Debt Extinguishment. In March 2024, the holder of the Convertible Notes converted the Convertible Notes. In connection with the conversion, our obligations under the Convertible Notes extinguished, resulting in a loss on extinguishment.

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Results of Operations

Comparison of the Three Months Ended June 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023:

	Three Months Ended
	June 30,				Increase
	2024		2023		(Decrease)
	(in thousands)
Revenue:
Product revenue, net	$	16,379	$	15,029	$	1,350
Collaboration revenue		62		157		(95)
Total revenue, net		16,441		15,186		1,255
Costs and operating expenses:
Cost of product revenue		1,509		1,304		205
Research and development		28,857		15,094		13,763
Selling and marketing		9,994		11,153		(1,159)
General and administrative		19,671		8,205		11,466
Total costs and operating expenses		60,031		35,756		24,275
Loss from operations		(43,590)		(20,570)		(23,020)
Other income (expense):
Interest income		6,036		748		5,288
Interest expense		(3,196)		(1,991)		(1,205)
Change in fair value of derivative liabilities		(3,027)		1,131		(4,158)
Total other income (expense), net		(187)		(112)		(75)
Net loss	$	(43,777)	$	(20,682)	$	(23,095)

Product Revenue, net

Our product revenue, net was $16.4 million and $15.0 million for the three months ended June 30, 2024 and 2023, respectively, reflecting an increase of $1.4 million year-over-year. All of our product revenue, net, was attributable to sales of DEXTENZA.

Our total gross-to-net provisions, or GTN Provisions, for the three months ended June 30, 2024 and 2023 were 39.6% and 29.7%, respectively, of gross DEXTENZA product sales. Effective April 1, 2024, we increased the wholesale acquisition cost, or WAC, for DEXTENZA and the off-invoice discount, or OID. The OID amounts are generally determined at the time of resale by specialty distributors or direct sales to ASCs by us. The increase in the WAC and the OID has resulted in an elevation of the level of the GTN Provisions relative to gross DEXTENZA product sales compared to periods prior to the increase in the WAC and the OID, and we expect that GTN Provisions relative to gross DEXTENZA product sales will remain at an elevated level for 2024 and beyond.

Collaboration Revenue

During the three months ended June 30, 2024, we recognized $0.1 million of collaboration revenue related to the performance obligation under our license agreement with AffaMed to conduct a Phase 2 clinical trial of PAXTRAVA, compared to $0.2 million in the three months ended June 30, 2023. We recognize collaboration revenue based on a cost-to-cost method.

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Research and Development Expenses

	Three Months Ended
	June 30,				Increase
	2024		2023		(Decrease)
		(in thousands)
Direct research and development expenses by program:
AXPAXLI for wet AMD	$	12,753	$	1,036	$	11,717
AXPAXLI for NPDR		639		810		(171)
PAXTRAVA for OAG or OHT		635		1,491		(856)
DEXTENZA for post-surgical ocular inflammation and pain		639		557		82
OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease		130		211		(81)
OTX-CSI for treatment of dry eye disease		—		32		(32)
Preclinical programs		308		(24)		332
Unallocated expenses:
Personnel costs		9,583		6,867		2,716
All other costs		4,170		4,114		56
Total research and development expenses	$	28,857	$	15,094	$	13,763

Research and development expenses were $28.9 million and $15.1 million for the three months ended June 30, 2024 and 2023, respectively, reflecting an increase of $13.8 million year-over-year.

Within research and development expenses, expenses for clinical programs increased $10.7 million, unallocated expenses increased $2.8 million, and expenses for preclinical programs increased $0.3 million.

For the three months ended June 30, 2024, we incurred $15.1 million in direct research and development expenses for our products and product candidates compared to $4.1 million for the three months ended June 30, 2023. The increase of $11.0 million is primarily related to timing and conduct of our clinical trials of AXPAXLI, including the SOL-1 trial and the initiation of the SOL-R trial, partially offset by a decrease in costs associated with our Phase 2 clinical trial of PAXTRAVA as we shifted to the smaller size repeat dose sub-study.

We expect that direct research and development expenses for our products and product candidates will increase significantly for the remainder of 2024 and beyond as we progress with the SOL-1 trial and the SOL-R trial; complete our other ongoing clinical trials; and initiate any other clinical trials of our product candidates that we might determine in the future to conduct, partially offset by reduced costs related to preclinical programs as a result of the Strategic Restructuring. We expect that personnel costs will increase for the remainder of 2024 and beyond, as we have recently strengthened and continue to strengthen our leadership team and our clinical teams dedicated to the SOL-1 and SOL-R trials with the addition of several retinal disease experts and other key professionals. The anticipated increase will be partially offset by reduced personnel costs as a result of the Strategic Restructuring.  

Selling and Marketing Expenses

		Three Months Ended
		June 30,				Increase
		2024		2023		(Decrease)
		(in thousands)
Personnel-related (including stock-based compensation)	$		6,690	$	7,250	$	(560)
Professional fees			2,026		2,423		(397)
Facility-related and other			1,278		1,480		(202)
Total selling and marketing expenses	$		9,994	$	11,153	$	(1,159)

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Selling and marketing expenses were $10.0 million and $11.2 million for the three months ended June 30, 2024 and 2023, respectively, reflecting a decrease of $1.2 million year-over-year.

The decrease was primarily due to a decrease in personnel-related costs, including stock-based compensation, of $0.6 million; a decrease in professional fees, including consulting, of $0.4 million; and a decrease in facility-related and other costs of $0.2 million.

We expect our selling and marketing expenses to remain stable or increase slightly for the remainder of 2024 and beyond as we continue to support the commercialization of DEXTENZA.

General and Administrative Expenses

	Three Months Ended
	June 30,				Increase
	2024		2023		(Decrease)
	(in thousands)
Personnel-related (including stock-based compensation)	$	14,675	$	5,304	$	9,371
Professional fees		3,933		2,762		1,171
Facility-related and other		1,063		139		924
Total general and administrative expenses	$	19,671	$	8,205	$	11,466

General and administrative expenses were $19.7 million and $8.2 million for the three months ended June 30, 2024 and 2023, respectively, reflecting an increase of $11.5 million year-over-year.

The increase was primarily due to an increase of $9.4 million in personnel-related costs, including stock-based compensation, an increase in professional fees of $1.2 million, and an increase of $0.9 million in facility-related and other costs. Personnel-related costs, including stock-based compensation, for the three months ended June 30, 2024 include $1.6 million related to accrued wages, severance, and other benefits under the Strategic Restructuring, and $7.1 million related to accrued severance and acceleration of stock-based compensation for certain employees who departed during the three months ended June 30, 2024 separate from the Strategic Restructuring, including our former Chief Executive Officer and our former Chief Medical Officer.

We anticipate that the level of our general and administrative expenses will be lower for the remainder of 2024, due to $8.7 million of one-time expenses incurred in the three months ended June 30, 2024 related to the departure of certain employees and the Strategic Restructuring. We anticipate, however, that the level of our general and administrative expenses, exclusive of these one-time charges, will increase for the remainder of 2024 and beyond, as we have recently strengthened, and as we continue to further strengthen, our leadership team and other certain functions that support our clinical trials of AXPAXLI, including the SOL-1 trial and the SOL-R trial, and our business in general.

Other Income (Expense), Net

Interest Income. Interest income was $6.0 million and $0.7 million for the three months ended June 30, 2024 and 2023, respectively, reflecting an increase of $5.3 million year-over-year. The increase is primarily due to a higher average balance of cash and cash equivalents held by us, and higher interest rates.

Interest Expense. Interest expense was $3.2 million and $2.0 million for the three months ended June 30, 2024 and 2023, respectively, reflecting an increase of $1.2 million year-over-year. The increase is primarily due to higher average balances of debt outstanding as a result of us drawing $82.5 million of debt under the Barings Credit Facility in August 2023, partially offset by us paying off the MidCap Credit Facility, as defined below, of $25.0 million in August 2023, and the conversion of the Convertible Notes of $37.5 million in March 2024.

Change in Fair Value of Derivative Liabilities. We recognized a non-cash loss from the change in fair values of our derivative liabilities of $3.0 million for the three months ended June 30, 2024, compared to a gain of $1.1 million for the three months ended June 30, 2023. The net loss for the three months ended June 30, 2024 is comprised of a loss of $2.5

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million from the change in the fair value of the derivative liability related to the Barings Credit Agreement, and $0.6 million related to royalty fees under the Barings Credit Agreement that we paid or accrued. The loss for the three months ended June 30, 2023 resulted solely from the change in the fair value of the derivative liability related to a conversion option embedded in the Convertible Notes. We cannot predict how the fair value of the derivative liability related to the Barings Credit Agreement will change in 2024 and beyond.

Comparison of the Six Months Ended June 30, 2024 and 2023

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023:

	Six Months Ended
	June 30,				Increase
	2024		2023		(Decrease)
	(in thousands)
Revenue:
Product revenue, net	$	31,094	$	28,243	$	2,851
Collaboration revenue		121		318		(197)
Total revenue, net		31,215		28,561		2,654
Costs and operating expenses:
Cost of product revenue		2,835		2,517		318
Research and development		49,592		29,842		19,750
Selling and marketing		20,177		21,989		(1,812)
General and administrative		33,818		17,332		16,486
Total costs and operating expenses		106,422		71,680		34,742
Loss from operations		(75,207)		(43,119)		(32,088)
Other income (expense):
Interest income		9,958		1,312		8,646
Interest expense		(7,247)		(3,760)		(3,487)
Change in fair value of derivative liabilities		(8,179)		(5,432)		(2,747)
Gains and losses on extinguishment of debt, net		(27,950)		—		(27,950)
Other expense, net		—		(1)		1
Total other income, net		(33,418)		(7,881)		(25,537)
Net loss	$	(108,625)	$	(51,000)	$	(57,625)

Product Revenue, net

Our product revenue, net was $31.1 million and $28.2 million for the six months ended June 30, 2024 and 2023, respectively, reflecting an increase of $2.9 million year-over-year. All of our product revenue, net, was attributable to sales of DEXTENZA.

Our total GTN Provisions for the six months ended June 30, 2024 and 2023 were 38.0% and 28.9%, respectively, of gross DEXTENZA product sales. Effective April 1, 2024, we increased the WAC for DEXTENZA and the OID. The OID amounts are generally determined at the time of resale by specialty distributors or direct sales to ASCs by us. The total GTN Provisions for the six months ended June 30, 2024 include timing effects related to this increase, as units that we sold to specialty distributors under the pre-April 1, 2024 WAC through March 31, 2024 will be subject to the increased OID to the extent that such units are sold in-market by specialty distributors to ASCs, HOPDs, and physicians’ offices after March 31, 2024. The increase in the WAC and the OID has resulted in an elevation of the level of the GTN Provisions relative to gross DEXTENZA product sales compared to periods prior to the increase in the WAC and the OID, and we expect that GTN Provisions relative to gross DEXTENZA product sales will further increase for 2024 and beyond.

Collaboration Revenue

We recognized $0.1 million of collaboration revenue related to the performance obligation under our license agreement with AffaMed to conduct a Phase 2 clinical trial of PAXTRAVA during the six months ended June 30, 2024 compared to $0.3 million in the six months ended June 30, 2023. We recognize collaboration revenue based on a cost-to-cost method.

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Research and Development Expenses

	Six Months Ended
	June 30,				Increase
	2024		2023		(Decrease)
		(in thousands)
Direct research and development expenses by program:
AXPAXLI for wet AMD	$	18,246	$	2,822	$	15,424
AXPAXLI for NPDR		1,471		1,411		60
PAXTRAVA for OAG or OHT		1,628		2,145		(517)
DEXTENZA for post-surgical ocular inflammation and pain		1,232		1,005		227
OTX-DED for the short-term treatment of the signs and symptoms of dry eye disease		395		265		130
OTX-CSI for treatment of dry eye disease		—		134		(134)
Preclinical programs		840		950		(110)
Unallocated expenses:
Personnel costs		17,942		14,208		3,734
All other costs		7,838		6,902		936
Total research and development expenses	$	49,592	$	29,842	$	19,750

Research and development expenses were $49.6 million and $29.8 million for the six months ended June 30, 2024 and 2023, respectively, reflecting an increase of $19.8 million year-over-year.

Within research and development expenses, expenses for clinical programs increased $15.2 million, unallocated expenses increased $4.7 million, and expenses for preclinical programs decreased $0.1 million.

For the six months ended June 30, 2024, we incurred $23.8 million in direct research and development expenses for our products and product candidates compared to $8.7 million for the six months ended June 30, 2023. The increase of $15.1 million is primarily related to timing and conduct of our clinical trials of AXPAXLI, including the SOL-1 trial and the initiation of the SOL-R trial, partially offset by reduced development activities related to our Phase 2 clinical trial of PAXTRAVA as we shifted to the smaller size repeat dose sub-study.

We expect that direct research and development expenses for our products and product candidates will increase significantly for the remainder of 2024 and beyond as we progress with the SOL-1 trial and the SOL-R trial; complete our other ongoing clinical trials; and initiate any other clinical trials of our product candidates that we might determine in the future to conduct, partially offset by reduced costs related to preclinical programs as a result of the Strategic Restructuring. We expect that personnel costs will increase for the remainder of 2024 and beyond, as we have recently strengthened and continue to strengthen our leadership team and our clinical teams dedicated to the SOL-1 and SOL-R trials with the addition of several retinal disease experts and other key professionals. The anticipated increase will be partially offset by reduced personnel costs as a result of the Strategic Restructuring.

Selling and Marketing Expenses

	Six Months Ended
	June 30,				Increase
	2024		2023		(Decrease)
	(in thousands)
Personnel-related (including stock-based compensation)	$	14,043	$	14,811	$	(768)
Professional fees		3,589		4,501		(912)
Facility-related and other		2,545		2,677		(132)
Total selling and marketing expenses	$	20,177	$	21,989	$	(1,812)

Selling and marketing expenses were $20.2 million and $22.0 million for the six months ended June 30, 2024 and 2023, respectively, reflecting a decrease of $1.8 million year-over-year.

The decrease was primarily due to a decrease of $0.9 million in professional fees, including consulting; a decrease in personnel-related costs, including stock-based compensation, of $0.8 million; and a decrease in facility-related and other costs of $0.1 million.

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We expect our selling and marketing expenses to remain stable or increase slightly for the remainder of 2024 and beyond as we continue to support the commercialization of DEXTENZA.

General and Administrative Expenses

	Six Months Ended
	June 30,				Increase
	2024		2023		(Decrease)
	(in thousands)
Personnel-related (including stock-based compensation)	$	24,431	$	11,144	$	13,287
Professional fees		7,752		5,643		2,109
Facility-related and other		1,635		545		1,090
Total general and administrative expenses	$	33,818	$	17,332	$	16,486

General and administrative expenses were $33.8 million and $17.3 million for the six months ended June 30, 2024 and 2023, respectively, reflecting an increase of $16.5 million year-over-year.

The increase was primarily due to an increase of $13.3 million in personnel-related costs, including stock-based compensation, an increase in professional fees of $2.1 million, and an increase of $1.1 million in facility-related and other costs. Personnel-related costs, including stock-based compensation, for the six months ended June 30, 2024 include $1.6 million related to accrued wages, severance, and other benefits under the Strategic Restructuring and $9.9 million related to accrued severance and acceleration of stock-based compensation for certain employees who departed during the six months ended June 30, 2024 separate from the Strategic Restructuring, including our former Chief Executive Officer, our former Chief Business Officer, and our former Chief Medical Officer.

We anticipate that the level of our general and administrative expenses will be lower for the remainder of 2024, due to $11.5 million of one-time expenses incurred in the six months ended June 30, 2024 related to the departure of certain employees and the Strategic Restructuring. We anticipate, however, that the level of our general and administrative expenses, exclusive of these one-time charges, will increase for the remainder of 2024 and beyond, as we have recently strengthened, and as we continue to further strengthen, our leadership team and other certain functions that support our clinical trials of AXPAXLI, including the SOL-1 trial and the SOL-R trial, and our business in general.

Other Income (Expense), Net

Interest Income. Interest income was $10.0 million and $1.3 million for the six months ended June 30, 2024 and 2023, respectively, reflecting an increase of $8.7 million year-over-year. The increase is primarily due to a higher average balance of cash and cash equivalents held by us, and higher interest rates.

Interest Expense. Interest expense was $7.2 million and $3.8 million for the six months ended June 30, 2024 and 2023, respectively, reflecting an increase of $3.4 million year-over-year. The increase is primarily due to higher average balances of debt outstanding as a result of us drawing $82.5 million of debt under the Barings Credit Facility in August 2023, partially offset by us paying off the MidCap Credit Facility, of $25.0 million in August 2023, and the conversion of the Convertible Notes of $37.5 million in March 2024.

Change in Fair Value of Derivative Liabilities. We recognized a non-cash loss from the change in fair values of our derivative liabilities of $8.2 million for the six months ended June 30, 2024, compared to a loss of $5.4 million for the six months ended June 30, 2023. The net loss for the six months ended June 30, 2024 is comprised of a loss of $9.7 million from the change in the fair value of the derivative liability related to the Barings Credit Agreement, and $1.1 million related to royalty fees under the Barings Credit Agreement that we paid or accrued, partially offset by a gain of $2.6 million from the change in the fair value of the derivative liability related to a conversion option embedded in the Convertible Notes. The loss for the six months ended June 30, 2023 results solely from the change in the fair value of the derivative liability related to the conversion option embedded in the Convertible Notes. We cannot predict how the fair value of the derivative liability related to the Barings Credit Agreement will change in 2024 and beyond.

Loss on extinguishment of debt. We recognized a non-cash loss on extinguishment of debt from the conversion of the Convertible Notes in March 2024 of $28.0 million.

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Liquidity and Capital Resources

Sources of Liquidity

We have financed our operations primarily through private placements of our preferred stock, public offerings and private placements of our common stock and pre-funded warrants to purchase our common stock, borrowings under credit facilities, the private placements of our convertible notes, and sales of our products.

As of June 30, 2024, we had cash and cash equivalents of $459.7 million, and outstanding notes payable with a principal amount of $82.5 million par value under the Barings Credit Facility.

In February 2024, we sold 32,413,560 shares of our common stock at $7.52 per share and, in lieu of common stock to certain investors, pre-funded warrants to purchase up to an aggregate of 10,805,957 shares of our common stock at a price of $7.519 per pre-funded warrant for total net proceeds of approximately $316.4 million, after deducting placement agent fees and other offering expenses, in the 2024 Private Placement. Each pre-funded warrant has an exercise price of $0.001 per share, is currently exercisable and will remain exercisable until exercised in full.

On December 18, 2023, we sold 35,420,000 shares of our common stock in an underwritten public offering at a public offering price of $3.25 per share. The total net proceeds of the public offering to us were approximately $107.7 million, after deducting underwriting discounts and commissions and other offering expenses payable by us.

In August 2023, we entered into a credit and security agreement, or the Barings Credit Agreement, with Barings Finance LLC, or Barings, as administrative agent, and the lenders party thereto, providing for a secured term loan facility for us, or the Barings Credit Facility, in the aggregate principal amount of $82.5 million. We borrowed the full amount of $82.5 million at closing and received proceeds of $77.3 million, after the application of an original issue discount and fees.

In August 2021, we entered into an Open Market Sale Agreement, or the 2021 Sales Agreement, with Jefferies LLC, or Jefferies, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time through Jefferies, acting as agent. We did not offer or sell shares of our common stock under the 2021 Sales Agreement during the three and six months ended June 30, 2024. During the three and six months ended June 30, 2023, we sold 1,370,208 shares of common stock under the 2021 Sales Agreement, resulting in gross proceeds to us of $9.2 million, and net proceeds, after accounting for issuance costs, of $8.8 million.

In connection with entering the Barings Credit Facility, in August 2023, we paid MidCap Financial Trust, as administrative agent, and our other lenders an aggregate of $26.2 million in satisfaction of our obligations under our prior credit facility, which we refer to as the MidCap Credit Facility.

Funding Requirements

We have a history of incurring significant operating losses. Our net losses were $43.8 million for the three months ended June 30, 2024, $108.6 million for the six months ended June 30, 2024, and $80.7 million and $71.0 million for the years ended December 31, 2023 and 2022, respectively. As of June 30, 2024, we had an accumulated deficit of $806.2 million.

We expect to continue to incur losses in connection with our ongoing activities, particularly as we advance the clinical trials of our product candidates in development, specifically the SOL-1 trial and the SOL-R trial, and as we support the commercialization of DEXTENZA and the potential commercialization of our product candidates, subject to receiving FDA approval.

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

● continue our ongoing clinical trials, including the SOL-1 and the SOL-R trials of AXPAXLI for the treatment of wet AMD;

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● continue to monitor subjects in our clinical trials according to the applicable clinical trial protocols, or prepare submission documentation such as clinical study reports, for our clinical trials that have been completed;

● initiate any additional clinical trials we might determine in the future to conduct for our product candidates;

● continue to commercialize DEXTENZA in the United States;

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

● conduct or support research and development activities on, and seek regulatory approvals for, DEXTENZA and PAXTRAVA in specified Asian markets pursuant to our license agreement and collaboration with AffaMed Therapeutics Limited, or AffaMed;

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

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

● maintain, expand and protect our intellectual property portfolio;

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

● defend ourselves against legal proceedings, if any;

● make investments to improve our defenses against cybersecurity threats and establish and maintain cybersecurity insurance;

● increase our product liability and clinical trial insurance coverage as we expand our clinical trials and commercialization efforts; and

● continue to operate as a public company.

The amount and timing of these expenses determines our future capital requirements.

Based on our current operating plan, which includes estimates of anticipated cash inflows from DEXTENZA product sales and cash outflows from operating expenses and capital expenditures and reflects our observance of the minimum liquidity covenant of $20.0 million under the Barings Credit Agreement, we believe that our existing cash and cash equivalents as of June 30, 2024 will enable us to fund our planned operating expenses, debt service obligations and capital expenditure requirements into 2028. We have based our estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

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

● the progress, costs and outcome of our ongoing and planned clinical trials of AXPAXLI for the treatment of wet AMD and NPDR,

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

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

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● the scope, progress, costs and outcome of preclinical development and any additional clinical trials we might determine in the future to conduct for our product candidates;

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

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

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

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

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

● the costs and outcomes of any legal actions and proceedings;

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

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

Until such time, if ever, as we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, royalty agreements, and marketing and distribution arrangements.  We do not have any committed external source of funds, although our license agreement with AffaMed provides for AffaMed’s reimbursement of certain clinical expenses incurred by us in connection with our collaboration and for our potential receipt of development and sales milestone payments and royalty payments.  To the extent that we raise additional capital through the sale of equity, preferred equity or convertible debt securities, our securityholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing securityholders’ rights as holders or beneficial owners of our common stock.  Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.  The covenants under the Barings Credit Facility and our pledge of our assets as collateral to secure our obligations under the Barings Credit Facility pursuant to which we have a total borrowing capacity of $82.5 million, which has been fully drawn down, may limit our ability to obtain additional debt or other financing. If we raise additional funds through collaborations, strategic alliances, licensing arrangements, royalty agreements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, products or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

Cash Flows

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

	Six Months Ended
	June 30,
	2024		2023
Cash used in operating activities	$	(58,689)	$	(40,048)
Cash used in investing activities		(997)		(5,369)
Cash provided by financing activities		323,419		9,723
Net increase (decrease) in cash and cash equivalents	$	263,733	$	(35,694)

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Operating activities. Net cash used in operating activities was $58.7 million for the six months ended June 30, 2024, primarily resulting from our net loss of $108.6 million and net unfavorable changes in operating assets and liabilities of $9.9 million, partially offset by non-cash adjustments of $59.8 million. Our net loss was primarily attributed to operating expenses of $106.4 million, which we incurred primarily for research and development activities, selling and marketing activities, and general and administrative activities, and non-operating expenses of $33.4 million, partially offset by $31.2 million of revenue. Non-cash adjustments primarily include losses on extinguishment of debt of $28.0 million, stock-based compensation expense of $19.3 million, changes in the fair value of our derivative liabilities of $8.2 million, non-cash interest expense of $2.5 million, and depreciation and amortization expense of $1.9 million. Net cash used by net unfavorable changes in our operating assets and liabilities during the six months ended June 30, 2024 consisted primarily of net decreases of accrued expenses of $6.2 million and net increases of accounts receivable of $4.1 million, partially offset by other items, net, of $0.4 million. Decreases of accrued expenses include a $11.4 million payment of interest to the holder of the Convertible Notes.

Net cash used in operating activities was $40.0 million for the six months ended June 30, 2023, primarily resulting from our net loss of $51.0 million and net unfavorable changes in operating assets and liabilities of $7.1 million, partially offset by non-cash adjustments of $18.0 million. Our net loss was primarily attributed to operating expenses of $71.7 million, which we incurred primarily for research and development activities, selling and marketing activities, and general and administrative activities, and non-operating expenses of $7.9 million, partially offset by $28.6 million of revenue. Non-cash adjustments primarily include stock-based compensation expense of $9.0 million, changes in the fair value of our derivative liabilities of $5.4 million, non-cash interest expense of $2.5 million, and depreciation and amortization expense of $1.1 million. Net cash used by net unfavorable changes in our operating assets and liabilities during the six months ended June 30, 2023 consisted primarily of net increases of accounts receivables of $6.0 million and other items, net of $1.1 million.

Investing activities. Net cash used in investing activities was $1.0 million for the six months ended June 30, 2024, consisting of cash used to purchase property and equipment and leasehold improvements. Net cash used in investing activities was $5.4 million for the six months ended June 30, 2023, consisting of cash used to purchase property and equipment, primarily consisting of leasehold improvements.

Financing activities. Net cash provided by financing activities for the six months ended June 30, 2024 was $323.4 million and consisted of total net proceeds from the issuance of common stock and pre-funded warrants in a private placement of approximately $316.4 million, proceeds from the exercise of stock options of $6.6 million, and proceeds from issuing shares under our Employee Stock Purchase Plan, or ESPP, of $0.5 million.

Net cash provided by financing activities for the six months ended June 30, 2023 was $9.7 million and consisted of proceeds of $8.8 million from the sale of shares of our common stock under the 2021 Sales Agreement with Jefferies and $0.9 million from the exercises of stock options and purchases of shares of our common stock under the ESPP. In March 2023, we requested a protective advance of $2.0 million under our Fourth Amended and Restated Credit and Security Agreement with MidCap Financial Trust, as administrative agent, and the lenders party thereto, in response to the closure of Silicon Valley Bank, which was deemed a credit extension. We repaid the full principal amount of $2.0 million in March 2023.

Contractual Obligations and Commitments

			Less Than		1 to 3		3 to 5		More than
	Total		1 Year		Years		Years		5 Years
	(in thousands)
Operating lease commitments	$	9,799	$	2,724		5,551		1,524		—
Barings Credit Agreement		82,474		—		—		—		82,474
Total	$	92,273	$	2,724	$	5,551	$	1,524	$	82,474

The table above includes our enforceable and legally binding obligations and future commitments at June 30, 2024, as well as obligations related to contracts that we are likely to continue, regardless of the fact that they may be cancelable at June 30, 2024. Some of the figures that we include in this table are based on management’s estimates and assumptions about these obligations, including their duration, and other factors. Because these estimates and

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assumptions are necessarily subjective, the amounts we will actually pay in future periods may vary from those reflected in the table.

We enter into contracts in the normal course of business to assist in the performance of our research and development activities, including agreements with clinical research organizations regarding the SOL-1 trial and the SOL-R trial, and other services and products for operating purposes. These contracts generally provide for termination on notice and therefore are cancelable contracts which are not included in contractual obligations and commitments.

Operating lease commitments represent payments due under our leases of office, laboratory and manufacturing space in Bedford, Massachusetts that expire in July 2027 and July 2028, and leases of equipment that expire in 2028.

The commitments under the Barings Credit Agreement represent repayment of principal only. Future payments of interest under the Barings Credit Agreement depend on the level of the Secured Overnight Financing Rate, and future payments of royalty fees depend on our future revenue from DEXTENZA, both of which cannot be estimated at this time.

We have in-licensed a significant portion of our intellectual property from Incept, an intellectual property holding company, under an amended and restated license agreement, or the Incept License Agreement, that we entered into with Incept in January 2012, which was most recently amended in September 2018. We are obligated to pay Incept a royalty equal to a low-single-digit percentage of net sales made by us or our affiliates of any products, devices, materials, or components thereof, or the Licensed Products, including or covered by Original IP (as defined in the Incept License Agreement), excluding the Shape-Changing IP (as defined in the Incept License Agreement), in the Ophthalmic Field of Use (as defined in the Incept License Agreement). We are obligated to pay Incept a royalty equal to a mid-single-digit percentage of net sales made by us or our affiliates of any Licensed Products including or covered by Original IP, excluding the Shape-Changing IP, in the Additional Field of Use (as defined in the Incept License Agreement). We are obligated to pay Incept a royalty equal to a low-single-digit percentage of net sales made by us or our affiliates of any Licensed Products including or covered by Incept IP (as defined in the Incept License Agreement) or Joint IP (as defined in the Incept License Agreement) in the field of drug delivery. Any sublicensee of ours also will be obligated to pay Incept a royalty on net sales of Licensed Products made by it and will be bound by the terms of the agreement to the same extent as we are. We are obligated to reimburse Incept for our share of the reasonable fees and costs incurred by Incept in connection with the prosecution of the patent applications licensed to us under the agreement. Our share of these fees and costs is equal to the total amount of such fees and costs divided by the total number of Incept’s exclusive licensees of the patent application. We have not included in the table above any payments to Incept under this license agreement as the amount, timing and likelihood of such payments are not known.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies and Significant Judgments and Estimates

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

We define our critical accounting policies as those accounting policies that require us to make subjective estimates and judgments about matters that are uncertain and have had or are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those policies. Our critical accounting policies, which relate to revenue recognition and our derivative liabilities, are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024.

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

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

Recently Issued Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk related to changes in interest rates. As of June 30, 2024, we had cash and cash equivalents of $459.7 million, which includes cash in operating bank accounts, and investments in money market funds. We have policies requiring us to invest in high-quality issuers, limit our exposure to any individual issuer, and ensure adequate liquidity. Our primary exposure to market risk related to our cash and cash equivalents is interest-rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.

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

As of June 30, 2024, we had a secured term loan facility with a principal amount of $82.5 million under a credit and security agreement with Barings Finance LLC and the lenders party thereto, or the Barings Credit Agreement. Expected cash outflows from this financial instrument fluctuate based on changes in the Secured Overnight Financing Rate, or SOFR, which is, among other factors, affected by the general level of U.S. and international central bank interest rates. As of June 30, 2024, an immediate 100 basis point increase or decrease in the SOFR would not have a material effect on the anticipated cash outflows from this instrument.

We account for the obligation to pay royalty fees embedded in the Barings Credit Agreement as a separate financial instrument, measured at fair value, using a Monte Carlo simulation, which we refer to as the Royalty Fee Derivative Liability. As of June 30, 2024, the Royalty Fee Derivative Liability was valued at $22.1 million. As of June 30, 2024, a 10% increase or decrease of the interest rate used in the valuation model would not have a material effect on the fair value of the Royalty Fee Derivative Liability. Changes of the fair value of the Royalty Fee Derivative Liability have no impact on anticipated cash outflows.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management, including our Chief Executive Officer and Chief Financial Officer, recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and

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procedures as of June 30, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

We are subject to a number of risks that could materially and adversely affect our business, financial condition, and results of operations and future growth prospects, including those identified under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission, or SEC, on March 11, 2024, which we refer to as our Annual Report on Form 10-K. Any of the risks and uncertainties described in our Annual Report on Form 10-K could materially and adversely affect our business, financial condition, results of operations and future growth prospects, and such risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.

Item 5. Other Information.

Shares of Common Stock

In connection with effecting a sell-to-cover transaction for a former employee to satisfy his tax withholding obligations upon the vesting and settlement of a restricted stock unit award, on May 15, 2024, we inadvertently sold an additional 30,000 shares of our common stock, approximately, on the Nasdaq Global Market at prevailing market prices. Due to the administrative error, such sale was effectively made on our behalf. Total proceeds to us from this sale were insignificant.

Director and Officer Trading Arrangements

None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarterly period covered by this report.

Item 6. Exhibits.

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

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Exhibit Index

		Incorporated by Reference
Exhibit Number	Description of Exhibit	Form	File Number	Date of Filing	Exhibit Number	Filed Herewith
3.1	Restated Certificate of Incorporation, as amended					X
10.1	Amendment No. 3 to 2019 Inducement Stock Incentive Plan	8-K	001-36554	4/18/2024	99.1
10.2	Amendment No. 3 to 2021 Stock Incentive Plan	DEF-14A	001-36554	4/29/2024	Appendix A
10.3	Separation Agreement, by and between the Registrant and Antony C. Mattessich, dated May 1, 2024					X
10.4	Separation Agreement, by and between the Registrant and Rabia Gurses-Ozden, dated May 29, 2024					X
10.5	Employment Agreement, by and between the Registrant and Nadia Waheed, dated April 15, 2024					X
10.6	Letter Agreement, by and between the Registrant and Nadia Waheed, dated April 22, 2024					X
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document)					X
101.SCH	Inline XBRL Taxonomy Extension Schema Document					X

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101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Database	X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	X
104	The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL and contained in Exhibit 101	X

† Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

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SIGNATURES

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

	OCULAR THERAPEUTIX, INC.
Date: August 7, 2024	By:	/s/ Donald Notman
		Donald Notman
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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