0001558370-23-008798 | 10-Q | XBRL Viewer

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Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2023	May 08, 2023
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-38150
Entity Registrant Name	KALA PHARMACEUTICALS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	27-0604595
Entity Address, Address Line One	1167 Massachusetts Avenue
Entity Address, City or Town	Arlington
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02476
City Area Code	781
Local Phone Number	996-5252
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	KALA
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		2,348,687
Entity Central Index Key	0001479419
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 63,636	$ 70,495
Prepaid expenses and other current assets (Note 7)	2,353	7,852
Current assets held for sale (Note 4)	5,355	7,595
Total current assets	71,344	85,942
Non-current assets:
Property and equipment, net	504	400
Right-of-use assets	6	16
Restricted cash and other long-term assets	372	462
Total assets	72,226	86,820
Current liabilities:
Accounts payable	997	2,832
Accrued expenses and other current liabilities	5,076	8,910
Deferred gain on sale of commercial business	4,189	4,189
Current portion of lease liabilities	3	13
Current portion of long-term debt		5,000
Current portion of contingent consideration		4,146
Current portion of deferred purchase consideration		595
Total current liabilities	10,265	25,685
Long-term liabilities:
Long-term debt	33,266	37,937
Long-term contingent consideration	5,234	4,224
Total long-term liabilities	38,500	42,161
Total liabilities	48,765	67,846
Commitments and Contingencies (Note 16)
Stockholders' equity:
Common stock, $0.001 par value; 120,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 2,309,287 and 1,706,971 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	2	2
Additional paid-in capital	625,124	606,182
Accumulated deficit	(601,665)	(587,210)
Total stockholders' equity	23,461	18,974
Total liabilities and stockholders' equity	$ 72,226	$ 86,820

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, authorized	5,000,000	5,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, authorized	120,000,000	120,000,000
Common stock, shares issued	2,309,287	1,706,971
Common stock, shares outstanding	2,309,287	1,706,971
Series E preferred shares
Preferred stock, shares issued	53,144	53,144
Preferred stock, shares outstanding	53,144	53,144

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Product revenues, net		$ 1,372
Costs and expenses:
Cost of product revenues		775
Selling, general and administrative	$ 6,030	26,982
Research and development	4,036	4,466
(Gain) loss on fair value remeasurement of deferred purchase consideration	(230)	1,051
Loss (gain) on fair value remeasurement of contingent consideration	1,847	(988)
Total costs and expenses	11,683	32,286
Loss from operations	(11,683)	(30,914)
Other income (expense):
Interest income	675	8
Interest expense	(1,474)	(2,035)
Other income (expense), net	(1,973)
Total interest and other expense	(2,772)	(2,027)
Net loss	$ (14,455)	$ (32,941)
Net loss per share attributable to common stockholders-basic (in dollar per share)	$ (6.99)	$ (22.18)
Net loss per share attributable to common stockholders-diluted (in dollar per share)	$ (6.99)	$ (22.18)
Weighted average shares outstanding-basic (in shares)	2,069,186	1,485,168
Weighted average shares outstanding-diluted (in shares)	2,069,186	1,485,168
Statement of Comprehensive Income (Loss)
Net loss	$ (14,455)	$ (32,941)
Other comprehensive loss:
Change in unrealized gains on investments		(2)
Total other comprehensive loss		(2)
Total comprehensive loss	$ (14,455)	$ (32,943)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands	Preferred stock Series E preferred shares	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income	Accumulated Deficit	Total
Balance as of beginning of period at Dec. 31, 2021		$ 1	$ 559,191		$ (542,388)	$ 16,804
Balance as of beginning of period (in shares) at Dec. 31, 2021		1,322,464
Stockholders' Equity
Exercise of stock options			3			3
Exercise of stock options (in shares)		102
Issuance of common stock for vested restricted stock units (in shares)		2,370
Issuance of common stock to satisfy deferred purchase consideration			7,936			7,936
Issuance of common stock to satisfy deferred purchase consideration (in shares)		136,314
Issuance of common stock under employee stock purchase plan			160			160
Issuance of common stock under employee stock purchase plan (in shares)		3,103
Stock-based compensation expense			2,756			2,756
Change in fair value of investments				$ (2)		(2)
Net loss					(32,941)	(32,941)
Balance as of end of period at Mar. 31, 2022		$ 1	570,046	$ (2)	(575,329)	(5,284)
Balance as of end of period (in shares) at Mar. 31, 2022		1,464,353
Balance as of beginning of period at Dec. 31, 2022		$ 2	606,182		(587,210)	18,974
Balance as of beginning of period (in shares) at Dec. 31, 2022	53,144	1,706,971
Stockholders' Equity
At the market offering, net of offering costs			14,893			14,893
At the market offering, net of offering costs (in shares)		475,265
Issuance of common stock for vested restricted stock units (in shares)		2,202
Issuance of common stock to satisfy deferred purchase consideration			365			365
Issuance of common stock to satisfy deferred purchase consideration (in shares)		19,350
Issuance of common stock to satisfy contingent consideration			2,354			2,354
Issuance of common stock to satisfy contingent consideration (in shares)		105,038
Issuance of common stock under employee stock purchase plan			6			6
Issuance of common stock under employee stock purchase plan (in shares)		461
Stock-based compensation expense			1,324			1,324
Net loss					(14,455)	(14,455)
Balance as of end of period at Mar. 31, 2023		$ 2	$ 625,124		$ (601,665)	$ 23,461
Balance as of end of period (in shares) at Mar. 31, 2023	53,144	2,309,287

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (Parenthetical) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Offering costs	$ 384

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Cash flows from operating activities:
Net loss	$ (14,455)	$ (32,941)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	77	157
Non-cash operating lease cost	10	181
(Gain) loss on fair value remeasurement of deferred purchase consideration	(230)	1,051
Loss (gain) on fair value remeasurement of contingent consideration	1,847	(988)
Amortization of debt discount and other non-cash interest	329	432
Stock-based compensation	1,324	2,805
Other non-cash gains, net		(2)
Change in operating assets and liabilities:
Accounts receivable	80	2,325
Prepaid expenses and other current assets	5,470	1,662
Inventory	2,189	(164)
Accounts payable	(1,826)	1,222
Accrued expenses and other current liabilities	(4,489)	326
Lease liabilities and other long-term liabilities	(10)	(155)
Net cash used in operating activities	(9,684)	(24,089)
Cash flows from investing activities:
Purchases of property and equipment and other assets	(108)	(81)
Purchases of short-term investments		(4,992)
Net cash used in investing activities	(108)	(5,073)
Cash flows from financing activities:
Payment of principal and final payment fee on debt	(10,000)
Proceeds from common stock offerings, net of offering costs	14,893
Contingent consideration related to Combangio acquisition	(2,041)
Payment of principal on finance lease		(9)
Proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan	6	163
Net cash provided by financing activities	2,858	154
Net decrease in cash, cash equivalents and restricted cash:	(6,934)	(29,008)
Cash, cash equivalents and restricted cash at beginning of period	70,745	94,878	$ 94,878
Cash, cash equivalents and restricted cash at end of period	63,811	65,870	70,745
Reconciliation of cash, cash equivalents and restricted cash:
Cash, cash equivalents, and restricted cash at end of period	63,811	65,870	70,745
Less restricted cash (Note 9)	(175)	(700)
Cash and cash equivalents at end of period	63,636	65,170	$ 70,495
Non-cash investing and financing activities:
Purchases of property and equipment in accounts payable and accrued expenses	67	174
Issuance of common stock to satisfy deferred purchase consideration in additional paid-in capital	365
Issuance of common stock to satisfy contingent consideration in additional paid-in capital	2,354
Supplemental disclosure:
Cash paid for interest	$ 1,227	1,603
Right-of-use assets obtained in exchange of operating lease obligations		$ 424

NATURE OF BUSINESS AND BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2023

NATURE OF BUSINESS AND BASIS OF PRESENTATION

NATURE OF BUSINESS AND BASIS OF PRESENTATION

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

Nature of Business— Kala Pharmaceuticals, Inc. (the “Company”) was incorporated on July 7, 2009, and is a clinical-stage biopharmaceutical company dedicated to the research, development and commercialization of innovative therapies for rare and severe diseases of the eye.

On November 15, 2021, the Company and its newly formed, direct wholly owned subsidiary, Ceres Merger Sub, Inc. (the “Merger Subsidiary”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Combangio, Inc. (“Combangio”) and Fortis Advisors LLC, solely in its capacity as Combangio Equityholder Representative in connection with the Merger Agreement, pursuant to which on November 15, 2021, the Merger Subsidiary merged with and into Combangio with Combangio surviving such merger and becoming a direct wholly owned subsidiary of the Company (the “Combangio Acquisition”). In connection with the Combangio Acquisition, the Company acquired Combangio’s mesenchymal stem cell secretomes (“MSC-S”) platform, including its lead product candidate for the treatment of persistent corneal epithelial defects (“PCED”), which the Company refers to as KPI-012. PCED is a rare disease of impaired corneal healing. The Company submitted an investigational new drug application (“IND”) to the U.S. Food and Drug Administration, (“FDA”), which was accepted in December 2022. In February 2023, the Company dosed its first patient in the CHASE (“Corneal Healing After SEcretome therapy”) Phase 2b clinical trial of KPI-012 for PCED in the United States. KPI-012 has received both Orphan Drug and Fast Track designations from the FDA for the treatment of PCED. The Company expects to commercialize in the United States any of its product candidates that receive marketing approval.

In connection with the determination to focus its research and development efforts on KPI-012, in 2022, the Company ceased the development of its preclinical pipeline programs that are unrelated to its MSC-S platform, including the development of KPI-287, its receptor tyrosine kinase inhibitor, and its selective glucocorticoid receptor modulators.

The Company previously developed and commercialized two marketed products, EYSUVIS^® (loteprednol etabonate ophthalmic suspension) 0.25%, for the short-term (up to two weeks) treatment of the signs and symptoms of dry eye disease, and INVELTYS^® (loteprednol etabonate ophthalmic suspension) 1%, a topical twice-a-day ocular steroid for the treatment of post-operative inflammation and pain following ocular surgery. Both products applied a proprietary mucus-penetrating particle drug delivery technology, which the Company referred to as the AMPPLIFY^® Drug Delivery Technology. On July 8, 2022, the Company closed the transaction (the “Alcon Transaction”), contemplated by the asset purchase agreement, dated as of May 21, 2022 (the “Asset Purchase Agreement”), by and between the Company, Alcon Pharmaceuticals Ltd. and Alcon Vision, LLC (together referred to as “Alcon”), pursuant to which Alcon purchased the rights to manufacture, sell, distribute, market and commercialize EYSUVIS and INVELTYS and to develop, manufacture, market and otherwise exploit the Company’s AMPPLIFY Drug Delivery Technology (collectively, the “Commercial Business”). Alcon also assumed certain liabilities with respect to the Commercial Business at the closing of the Alcon Transaction. See Note 3, “Sale of Commercial Business to Alcon”, for additional information about the Alcon Transaction.

The Company’s success is dependent upon its ability to develop, obtain regulatory approval for and commercialize KPI-012 and any other product candidate it may develop in the future, the success of its research and development efforts, whether it receives any commercial-based sales milestone payments from Alcon, its ability to raise additional capital when needed and, ultimately, attain profitable operations.

Reverse Stock Split— On October 20, 2022, the Company effected a 1-for-50 reverse stock split of the Company’s shares of common stock either issued and outstanding or held by the Company as treasury stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, every 50 shares of issued and outstanding common stock were automatically combined into one issued and outstanding share of common stock, without any change in the par

value per share. No fractional shares were issued as a result of the Reverse Stock Split. Any fractional shares that would otherwise have resulted from the Reverse Stock Split were rounded up to the next whole number. The number of authorized shares of common stock under the Company’s Restated Certificate of Incorporation, as amended, remained unchanged at 120,000,000 shares. All historical share and per share amounts reflected throughout these financial statements have been adjusted to reflect the Reverse Stock Split. Proportionate adjustments were made to the per share exercise price and the number of shares of common stock that may be purchased upon exercise of outstanding stock options and warrants, and the number of shares of common stock reserved for future issuance under the Company’s 2017 Equity Incentive Plan and Employee Stock Purchase Plan.

Liquidity— Since inception, the Company has incurred significant losses from operations and negative cash flows from operations including a net loss of $14,455 and $32,941, for the three months ended March 31, 2023 and 2022, respectively, and cash used in operating activities of $9,684 and $24,089, in the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, the Company had an accumulated deficit of $601,665. As the Company commenced a full promotional launch of EYSUVIS in early January 2021 and commercially launched its first product, INVELTYS, in January 2019, the Company generated only limited revenues from product sales prior to the sale of the Commercial Business to Alcon in July 2022. The Company has financed its operations to date primarily through proceeds from the sale of the Commercial Business to Alcon, its initial public offering of common stock, follow-on public common stock offerings and sales of its common stock under its at-the-market offering facility, private placements of common stock and preferred stock (including the Company’s private placement of common stock and preferred stock for gross proceeds of approximately $31.0 million in December 2022 (the “Private Placement”)), borrowings under credit facilities and the Loan and Security Agreement with Oxford Finance LLC (“Oxford Finance”), convertible promissory notes and warrants. The Company has devoted substantially all of its financial resources and efforts to research and development, including preclinical studies and clinical trials, and, prior to the sale of the Commercial Business to Alcon in July 2022, engaging in activities to launch and commercialize EYSUVIS and INVELTYS. As a result of the Combangio Acquisition and the sale of the Commercial Business to Alcon, the Company is devoting substantial financial resources to the research and development and potential commercialization of KPI-012. The Company has no revenue-generating commercial products and, as a result of the Combangio Acquisition, may be required to pay certain milestones and royalty payments to former equityholders of Combangio. Although the Company is eligible to receive up to $325,000 in payments from Alcon based upon the achievement of specified commercial sales-based milestones with respect to EYSUVIS and INVELTYS, there can be no assurance when the Company may receive such milestone payments or of the amount of milestone payments the Company may receive, if any. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future, including in connection with its continued development, regulatory approval efforts and commercialization, if any, of KPI-012. The Company may never achieve or maintain profitability. Net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

The Company expects that its cash and cash equivalents as of March 31, 2023, will enable it to fund its operating expenses, lease and debt service obligations and capital expenditure requirements for at least twelve months from the date these condensed consolidated financial statements were issued. This evaluation is based on relevant conditions and events that are known and reasonably knowable at the date that the condensed consolidated financial statements are issued. To the extent these conditions or events change, the Company could deplete its available capital resources sooner than it currently expects.

COVID-19— The Company does not know the extent to which the COVID-19 pandemic will impact its development of KPI-012 or any other product candidate it develops. The COVID-19 pandemic negatively impacted the Company’s revenues from INVELTYS. In addition, the COVID-19 pandemic has generally had an adverse impact on the launch of pharmaceutical products, and the Company believes the pandemic impacted the launch of EYSUVIS. The Company cannot predict whether the COVID-19 pandemic will impact Alcon’s ability to commercialize EYSUVIS and INVELTYS, and as a result, it cannot be certain whether the COVID-19 pandemic might adversely affect when the

Company may receive milestone payments from Alcon, which milestone payments the Company may receive and if the Company will receive any milestone payments at all. Any impact of COVID-19 on Alcon’s commercialization efforts of EYSUVIS and INVELTYS, the Company’s development of KPI-012 and any other product candidate it may develop in the future and the Company’s operational and financial performance will depend on certain future developments, including the length and severity of the pandemic, the timing and extent of any resurgence of the COVID-19 virus or any variant strains of the virus, the availability and effectiveness of vaccines and treatments, and the impact of the foregoing on employees, vendors and government agencies, all of which are uncertain and cannot be predicted. The Company cannot reasonably estimate the extent to which the disruption may materially impact its condensed consolidated results of operations or financial position.

Use of Estimates— The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expense, and related disclosures. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. Estimates and assumptions relied upon in preparing these condensed consolidated financial statements relate to, but are not limited to, revenue recognition, inventory, the present value of lease liabilities and the corresponding right-of-use assets, the fair value of warrants, stock-based compensation, accrued expenses, deferred purchase consideration, contingent consideration, assets held for sale and the recoverability of the Company’s net deferred tax assets and related valuation allowance. Actual results may differ from these estimates under different assumptions or conditions.

Net Loss per Share Attributable to Common Stockholders—The Company follows the two-class method when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The two-class method is not applicable during periods with a net loss, as the holders of the convertible preferred stock have no contractual obligation to share in losses. For all periods presented, the two-class method was not applicable.

Basic net loss per share attributable to common stockholders is computed using the weighted-average number of common shares outstanding during the period. Diluted net loss per share attributable to common stockholders is computed using the weighted average number of common shares outstanding during the period and, if dilutive, the weighted average number of potential shares of common stock, including the assumed exercise of stock options and warrants, the issuance of unvested restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) and convertible preferred stock using the if-converted method.

The weighted average number of common shares included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options, warrants, unvested RSUs and PSUs and convertible preferred stock using the if-converted method. Common stock equivalent shares are excluded from the computation of diluted net loss per share attributable to common stockholders if their effect is antidilutive. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to common stockholders for the three months ended March 31, 2023 and 2022. (See Note 14).

Unaudited Interim Financial Information—The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. The accompanying condensed consolidated financial statements reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations, statement of stockholders’ equity and cash flows for the interim periods presented. Interim results are not necessarily indicative of results for a full year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “Annual Report”).

The unaudited condensed consolidated financial statements include the accounts of Kala Pharmaceuticals, Inc. and its wholly owned subsidiaries, Kala Pharmaceuticals Security Corporation and Combangio, Inc. All intercompany transactions and balances have been eliminated in consolidation.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2023

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements included in the Annual Report. There have been no material changes to the significant accounting policies during the three months ended March 31, 2023.

Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial statements.

SALE OF COMMERCIAL BUSINESS TO ALCON

3 Months Ended

Mar. 31, 2023

SALE OF COMMERCIAL BUSINESS TO ALCON

SALE OF COMMERCIAL BUSINESS TO ALCON

3. SALE OF COMMERCIAL BUSINESS TO ALCON

On July 8, 2022, the Company closed the Alcon Transaction contemplated by the Asset Purchase Agreement, pursuant to which Alcon purchased the Commercial Business and assumed certain liabilities with respect to the Commercial Business. Alcon paid to the Company an upfront cash payment of $60,000 upon the closing of the Alcon Transaction. In addition, pursuant to the Asset Purchase Agreement, the Company is eligible to receive from Alcon up to four commercial-based sales milestone payments as follows: (1) $25,000 upon the achievement of $50,000 or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (2) $65,000 upon the achievement of $100,000 or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (3) $75,000 upon the achievement of $175,000 or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029 and (4) $160,000 upon the achievement of $250,000 or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029. Each milestone payment will only become payable once, if at all, upon the first time such milestone is achieved, and only one milestone payment will be paid with respect to a calendar year. In the event that more than one milestone is achieved in a calendar year, the higher milestone payment will become payable and the lower milestone payment will become payable only if the corresponding milestone is achieved again in a subsequent calendar year.

Pursuant to the Asset Purchase Agreement, on July 8, 2022, the Company entered into supply and commercial agreements under which the Company agreed to supply EYSUVIS and INVELTYS to Alcon and distribute EYSUVIS and INVELTYS to third-party customers of the Commercial Business on behalf of Alcon for a period of six months following the closing of the Alcon Transaction, subject to early termination. In addition, the Company entered into a transition services agreement under which the Company provided certain transition services to Alcon on a cost-plus

pricing arrangement for six months following the closing of the Alcon Transaction. Pursuant to the supply agreement, Alcon purchased from the Company, at the closing of the Alcon Transaction, $5,027 of EYSUVIS and INVELTYS inventory on-hand at the Company. Together, the supply, commercial and transition services agreements are referred to herein as the “Transition Agreement.”

The Company has determined that the disposition of these assets does not qualify for reporting as a discontinued operation as it was not considered a component of an entity that comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company. During the year ended December 31, 2022, the Company recognized a net gain on the sale of the Commercial Business as follows:


Gross consideration from the sale of the Commercial Business	$	65,027
Closing and transaction costs		2,119
Net proceeds from the sale of the Commercial Business		62,908
Book value of assets transferred
Inventories		8,915
Prepaid expenses and other current assets		556
Property and equipment, net		1,819
Other long-term assets		434
Total book value of assets transferred		11,724
Gain on sale of Commercial Business		51,184
Deferred gain on sale of Commercial Business		4,189
Net gain on sale of Commercial Business	$	46,995

Alcon may purchase any remaining inventory owned by the Company (the “Remaining Inventory”) at an agreed upon discounted price. As the overall components of the Alcon Transaction should be reflected at fair value, the Company has deferred a portion of the gross consideration related to the discounted pricing on the Remaining Inventory. The deferred gain on the sale of the Commercial Business of $4,189 was recorded on the condensed consolidated balance sheet as of the transaction date as deferred gain on sale of Commercial Business and will be reduced at the time of recoverability of the Remaining Inventory.

The Company collected cash on behalf of Alcon for revenue generated by sales of EYSUVIS and INVELTYS from July 8, 2022 through the transition period and the Company transferred all cash generated by such sales to Alcon as of December 31, 2022.

As of March 31, 2023, the receivables due from Alcon for reimbursement for services performed under the Transition Agreement and invoices processed on Alcon’s behalf were $669 and $14, respectively, for a total receivable due from Alcon of $683 included in prepaid and other current assets on the condensed consolidated balance sheet as of March 31, 2023. The Company also has $26 of receivables due from third parties in connection with the Transition Agreement as of March 31, 2023. The Company recorded income from the Transition Agreement of $157 which is presented in other income on the condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2023 and which offsets operating expenses related to the Transition Agreement captured within loss from operations. The Company’s condensed consolidated balance sheet as of March 31, 2023 reflected an additional $41 in payables to third parties included within accrued expenses and other current liabilities related to amounts the Company is obligated to pay on Alcon’s behalf. As of March 31, 2023, the Company had a net receivable due from Alcon and third parties in connection with the Transition Agreement of $668.

As of December 31, 2022, the Company had total receivables due from Alcon and third parties of $5,394 and $26, respectively, and total payables to third parties related to the Transition Agreement of $3,981 of which $1,737 was

included in accounts payable and $2,244 within accrued expenses and other current liabilities related to invoices the Company was obligated to pay on Alcon’s behalf. As of December 31, 2022, the Company had a net receivable due from Alcon and third parties in connection with the Transition Agreement of $1,439.

ASSETS HELD FOR SALE

3 Months Ended

Mar. 31, 2023

ASSETS HELD FOR SALE

ASSETS HELD FOR SALE

4. ASSETS HELD FOR SALE

As of March 31, 2023, the Company presented assets to be disposed of that met the criteria as held for sale as a single asset in its condensed consolidated financial statements. The EYSUVIS and INVELTYS product inventory classified as held for sale represents the net realizable value of the Remaining Inventory which Alcon, and solely Alcon, has the right to purchase. As noted in Note 3, “Sale of Commercial Business to Alcon” above, the Company deferred a portion of the gain on the sale of the Commercial Business related to the discounted pricing on the Remaining Inventory of $4,189.

The following is a summary of the major categories of assets that have been reclassified to held for sale on the condensed consolidated balance sheet as of March 31, 2023 and December 31, 2022:


	March 31,		December 31,
	2023		2022
Inventories	$	5,355	$	7,544
Property and equipment, net		—		51
Total assets held for sale	$	5,355	$	7,595

See Note 3, “Sale of Commercial Business to Alcon”, for further information on the sale of the Commercial Business.

FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2023

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and its own assumptions (unobservable inputs). The hierarchy consists of three levels:

●

Level 1—Quoted prices in active markets for identical assets or liabilities.

●

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

●

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s financial instruments as of March 31, 2023 and December 31, 2022 consisted primarily of cash equivalents and contingent consideration. Cash equivalents and contingent consideration are reported at their respective fair values on the Company’s condensed consolidated balance sheets.

The Company acquired Combangio in November 2021 and in connection with the closing of the Combangio Acquisition, the Company agreed to issue an aggregate of 155,664 shares (the “Deferred Purchase Consideration”) of the Company’s common stock to former Combangio stockholders and other equityholders (the “Combangio Equityholders”) consisting of (i) an aggregate of 136,314 shares of common stock issued on January 3, 2022 (the “Upfront Shares”) and (ii) an aggregate of 19,350 shares of common stock that were held back as partial security for the satisfaction of indemnification obligations and other payment obligations of the Combangio Equityholders and were issued on March 10, 2023 (the “Holdback Shares”). The Company established liabilities for these considerations. The Deferred Purchase Consideration related to the Combangio Acquisition was measured at fair value each reporting period using Level 3 unobservable inputs. The fair value of the Deferred Purchase Consideration was based on the fair value of the underlying stock and a discount for lack of marketability. Changes in these estimates and assumptions could have had a significant impact on the fair value of the Deferred Purchase Consideration. Any change in the fair value of the Deferred Purchase Consideration was included in loss from operations in the condensed consolidated statements of operations and comprehensive loss. During the three months ended March 31, 2022, the Company settled $7,935 of the liability upon issuance of the Upfront Shares and during the three months ended March 31, 2023, the Company settled the remaining liability of $365 upon the issuance of the Holdback Shares. The change in the fair value of the Deferred Purchase Consideration was a gain of $230 and a loss of $1,051 during the three months ended March 31, 2023 and 2022, respectively, primarily due to the change in the fair value of the underlying stock price and is recognized as the (gain) loss on fair value remeasurement of deferred purchase consideration in the condensed consolidated statements of operations and comprehensive loss.

Additionally, the purchase price in connection with the Combangio Acquisition included potential future payments of up to $105,000 that are contingent upon the achievement of specified development, regulatory and commercialization milestones and are required to be recorded at fair value. To date and during the three months ended March 31, 2023, of the $105,000 in contingent milestone payments, the Company has paid to the Combangio Equityholders an aggregate of $2,500 in cash and $2,354 in shares of the Company’s common stock (representing an aggregate of 105,038 shares of the Company’s common stock) upon dosing of the first patient in the Company’s CHASE Phase 2b clinical trial of KPI-012 for PCED in the United States in February 2023 (the “Dosing Milestone”). The Company will pay the remaining amount due in connection with the Dosing Milestone of $146 in cash in January 2024, of which the discounted amount of $129 is included within accrued expenses and other current liabilities on the condensed consolidated balance sheet as of March 31, 2023. Contingent consideration liabilities related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs. The fair values of the contingent consideration liabilities were based on a probability-adjusted discounted cash flow calculation using Level 3 fair value measurements. Changes in these estimates and assumptions could have a significant impact on the fair value of the contingent consideration liabilities. Any changes in the fair value of these contingent consideration liabilities are included in loss from operations in the condensed consolidated statements of operations and comprehensive loss. During the three months ended March 31, 2023 and 2022, the change in fair value of the contingent consideration liabilities was a loss of $1,847 and a gain of $988 respectively, primarily due to changes in discount rates, partially offset by the passage of time, and were recognized as a loss (gain) on fair value remeasurement of contingent consideration in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2023 and 2022.

The following tables set forth the fair value of the Company’s financial instruments by level within the fair value hierarchy as of March 31, 2023 and December 31, 2022:


	March 31, 2023
	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	62,514	$	62,514	$	—	$	—
Total Assets	$	62,514	$	62,514	$	—	$	—
Liabilities:
Contingent consideration	$	5,234	$	—	$	—	$	5,234
Total Liabilities	$	5,234	$	—	$	—	$	5,234


	December 31, 2022
	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	31,587	$	31,587	$	—	$	—
Total Assets	$	31,587	$	31,587	$	—	$	—
Liabilities:
Deferred purchase consideration	$	595	$	—	$	—	$	595
Contingent consideration		8,370		—		—		8,370
Total Liabilities	$	8,965	$	—	$	—	$	8,965

The following tables summarize quantitative information and assumptions pertaining to the fair value measurement of the Level 3 inputs as of March 31, 2023 and December 31, 2022:


	Fair Value at
	March 31,				Range
Financial Instrument	2023		Valuation Technique	Unobservable Input	(Average)
Contingent consideration	$	5,234	Probability-adjusted	Period of expected milestone achievement	2024 - 2027 (2026)
			discounted cash flow model	Probabilities of achievement	21.0% - 45.0% (29.7%)
				Discount rate	18.0%


	Fair Value at
	December 31,				Range
Financial Instrument	2022		Valuation Technique	Unobservable Input	(Average)
Deferred purchase consideration	$	595	Option pricing model	Discount for lack of marketability	20%

Contingent consideration	$	8,370	Probability-adjusted	Period of expected milestone achievement	2023 - 2027 (2025)
			discounted cash flow model	Probabilities of achievement	19.9% - 95.0% (44.9%)
				Discount rate	19.0%
				Discount for lack of marketability	20.0%

The following table summarizes the changes in the Deferred Purchase Consideration and contingent consideration liabilities measured at fair value using Level 3 inputs for the three months ended March 31, 2023 and 2022:


Deferred purchase consideration
Balance at January 1, 2023	$	595
Fair value adjustments		(230)
Settlements		(365)
Balance at March 31, 2023	$	—

Contingent consideration
Balance at January 1, 2023	$	8,370
Fair value adjustments		1,847
Settlements		(4,854)
Reclassification to accrued expenses and other current liabilities		(129)
Balance at March 31, 2023	$	5,234

Deferred purchase consideration
Balance at January 1, 2022	$	7,892
Fair value adjustments		1,051
Settlements		(7,935)
Balance at March 31, 2022	$	1,008

Contingent consideration
Balance at January 1, 2022	$	8,658
Fair value adjustments		(988)
Balance at March 31, 2022	$	7,670

During the three months ended March 31, 2023 and the year ended December 31, 2022, there were no transfers between Level 1, Level 2, and Level 3.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

REVENUE

3 Months Ended

Mar. 31, 2023

REVENUE

REVENUE

6. REVENUE

Following the sale of its Commercial Business to Alcon in July 2022, the Company no longer has any commercial products in its portfolio. The Company accounted for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. Under ASC Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to be entitled in exchange for those goods or services. The Company performed the following five steps to recognize revenue under ASC Topic 606: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only recognized revenue when it was probable that it would collect the consideration to which it was entitled in exchange for the goods or services that would be transferred to the customer.

Product revenues, net

The Company sold EYSUVIS and INVELTYS primarily to wholesalers in the United States (collectively, “Customers”). These Customers subsequently resold the Company’s products to specialty and other retail pharmacies. In addition to agreements with Customers, the Company entered into arrangements with third-party payors that provided

for government-mandated and/or privately-negotiated rebates, chargebacks and discounts for the purchase of the Company’s products.

The goods promised in the Company’s product sales contracts represented a single performance obligation. The Company recognized revenue from product sales at the point the Customer obtained control of the product, which occurred upon delivery. The transaction price (“net sales price”) that was recognized as revenue for product sales included the selling price to the Customer and an estimate of variable consideration. Components of variable consideration included prompt pay and other discounts, product returns, government rebates, third-party payor rebates, coverage gap rebates, incentives such as patient co-pay assistance, and other fees paid to Customers and other third-party payors where a distinct good or service was not received. Variable consideration was recorded on the condensed consolidated balance sheet as either a reduction of accounts receivable, if payable to a Customer, or as a current liability, if payable to a third-party other than a Customer. The Company considered all relevant information when estimating variable consideration such as assessment of its then current and anticipated sales and demand forecasts, actual payment history, information from third parties regarding the payor mix for products, information from third parties regarding the units remaining in the distribution channel, specific known market events and trends, industry data and current contractual and statutory requirements that were reasonably available. The Company included estimated amounts for variable consideration in the net sales price to the extent it was determined probable that a significant reversal of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration was resolved.

Payment terms with Customers did not exceed one year and, therefore, the Company did not account for a significant financing component in its arrangements. The Company expensed the incremental cost of obtaining a contract with a Customer when incurred as the period of benefit was generally less than one year.

Reserves for Variable Consideration:

Trade Discounts and Allowances

The Company provided its Customers with certain trade discounts and allowances including discounts for prompt payments and other discounts and fees paid for distribution, data and administrative services. These discounts and fees were based on contractually-determined percentages and were recorded as a reduction of revenue and accounts receivable in the period in which the related product revenue was recognized.

Chargebacks

Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchased the product from the Company. Customers charged the Company for the difference between what they paid for the product and the ultimate selling price to the qualified healthcare providers. These components of variable consideration were established in the same period that the related revenue was recognized, resulting in a reduction of product revenue and accounts receivable. Reserves for chargebacks consisted of credits the Company expected to issue for units that remained in the distribution channel at the end of each reporting period and that the Company expected would be sold to qualified healthcare providers, as well as chargebacks that Customers had claimed, but for which the Company had not yet issued a credit.

Product Returns

Consistent with industry practice, the Company has a product returns policy that provides Customers right of return for product purchased within a specified period prior to and subsequent to the product’s expiration date. The

Company estimated the amount of its products that may be returned and presented this amount as a reduction of revenue in the period the related product revenue was recognized, in addition to establishing a liability. The Company’s estimates for product returns were based upon available industry data and its own sales information, including its visibility into the inventory remaining in the distribution channel as well as historical returns, which developed over time.

Commercial Payor and Medicare Part D Rebates

The Company contracted with certain third-party payors, primarily pharmacy benefit managers (“PBMs”) and health plans (“Plans”), for the payment of rebates with respect to utilization of its product. These rebates were based on contractual percentages applied to the amount of product prescribed to patients who were covered by the PBMs or the Plans with which it contracted. The Company estimated the rebates for commercial and Medicare Part D payors based on the contractual discount percentage, the various payor mix for EYSUVIS and INVELTYS as well as future rebates that would be made for product that had been recognized as revenue but remained in the distribution channel at the end of each reporting period. The Company also estimated the number of patients in the prescription drug coverage gap for whom it would owe an additional liability under the Medicare Part D program. Such estimates were recorded in the same period the related revenue was recognized, resulting in a reduction of product revenue and the establishment of a current liability.

Government Rebates

The Company was subject to discount obligations under Medicaid and other government programs. For Medicaid, reserves were based on actual payment history, and estimates of future Medicaid beneficiary utilization applied to the Medicaid unit rebate formula established by the Centers for Medicaid and Medicare Services. The Company’s liability for these rebates consisted of estimates of claims for the current period and estimated future claims that would be made for product that had been recognized as revenue but remained in the distribution channel at the end of each reporting period. These reserves were recorded in the same period the related revenue was recognized, resulting in a reduction of product revenue and the establishment of a current liability.

Co-pay Assistance Programs

The Company offered co-pay assistance programs (the “co-pay programs”), which were intended to provide financial assistance to patients who may or may not be covered by commercial insurance or, with respect to INVELTYS, who opt out of Medicare Part D programs. The calculation of accruals for the co-pay programs was based on actual claims processed during the period as well as an estimate of the number and cost per claim that the Company expected to receive associated with product that had been recognized as revenue but remained in the distribution channel at the end of each reporting period. Allowances for estimated co-pay claims were recorded in the same period the related revenue was recognized, resulting in a reduction of product revenue and the establishment of a current liability.

The following tables summarize activity in each of the Company’s product revenue provision and allowance categories for the three months ended March 31, 2023 and 2022:


	Trade Discounts,
	Allowances and				Rebates and
	Chargebacks (1)		Product Returns (2)		Incentives (3)
Balance as of December 31, 2022	$	11	$	518	$	772
Credit/payments made		(2)		(49)		(484)
Balance as of March 31, 2023	$	9	$	469	$	288


	Trade Discounts,
	Allowances and				Rebates and
	Chargebacks (1)		Product Returns (2)		Incentives (3)
Balance as of December 31, 2021	$	2,672	$	1,140	$	11,280
Provision related to current period sales		2,133		210		13,359
Changes in estimate related to prior period sales		(1)		(138)		(242)
Credit/payments made		(3,261)		(415)		(10,108)
Balance as of March 31, 2022	$	1,543	$	797	$	14,289

(1)

Trade discounts, allowances and chargebacks included fees for distribution service fees, prompt pay and other discounts, and chargebacks. Estimated trade discounts, allowances and chargebacks were deducted from gross revenue at the time revenues were recognized and were recorded as a reduction to accounts receivable on the Company’s condensed consolidated balance sheets.

(2)	Estimated provisions for product returns were deducted from gross revenues at the time revenues were recognized and were included in accrued expenses and other current liabilities on the Company’s condensed consolidated balance sheets.

(3)

Rebates and incentives included managed care rebates, government rebates, co-pay program incentives, and sales incentives and allowances. Estimated provisions for rebates and discounts were deducted from gross revenues at the time revenues were recognized and were included in accrued expenses and other current liabilities on the Company’s condensed consolidated balance sheets.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI https://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

+ Details

PREPAID EXPENSES AND OTHER CURRENT ASSETS

3 Months Ended

Mar. 31, 2023

PREPAID EXPENSES AND OTHER CURRENT ASSETS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets, consists of the following:


	March 31,		December 31,
	2023		2022

Due from Alcon	$	683	$	5,394
Insurance		467		698
Non-trade receivables		280		908
Trade receivables, net		115		195
Other		808		657
Prepaid expenses and other current assets	$	2,353	$	7,852

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

3 Months Ended

Mar. 31, 2023

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:


	March 31,		December 31,
	2023		2022

Professional services	$	1,440	$	948
Compensation and benefits		1,089		3,334
Accrued revenue reserves (1)		757		807
Development costs		499		446
Commercial costs		262		271
Contract manufacturing		211		453
Due to third parties in connection with Transition Agreement (2)		41		2,244
Other		777		407
Accrued expenses	$	5,076	$	8,910

(1) There were additional revenue reserves included in accounts payable of $483 as of December 31, 2022. There were no such amounts included in accounts payable as of March 31, 2023.

(2) There were additional amounts due to third parties in connection with the Transition Agreement included in accounts payable of $1,737 as of December 31, 2022. There were no such amounts included in accounts payable as of March 31, 2023.

LEASES

3 Months Ended

Mar. 31, 2023

LEASES

LEASES

9. LEASES

Operating leases

Terminated Vehicle Fleet Lease

During the year ended December 31, 2019, the Company entered into a master fleet lease agreement (the “Vehicle Fleet Lease”), pursuant to which it leased vehicles. The Vehicle Fleet Lease commenced upon the delivery of the initial vehicles in March 2019 and had been subject to modifications as the number of leased vehicles increased or decreased. During the year ended December 31, 2022, in connection with the closing of the Alcon Transaction, the Company terminated the Vehicle Fleet Lease and, as of December 31, 2022, there was no remaining right-of-use asset or corresponding lease liability. In connection with the Vehicle Fleet Lease, the Company issued a letter of credit for $450 which was released in September 2022. As of December 31, 2022, the Company had a receivable of $775 due from the vendor for the sale of used vehicles following the lease termination, which was included within prepaid expenses and other current assets on the consolidated balance sheet. The remaining receivable from the vendor as of March 31, 2023 is de minimis.

The components of lease expense and related cash flows were as follows:


	Three Months Ended
	March 31,
	2023		2022
Lease cost
Operating lease cost	$	10	$	176
Short-term lease cost		20		40
Variable lease cost		6		447
Total lease cost	$	36	$	663

Operating cash outflows from operating leases	$	10	$	719

The weighted average remaining lease term and weighted average discount rate of operating leases are as follows:


	March 31,	December 31,
	2023	2022
Weighted average remaining lease term	0.3 years	0.5 years
Weighted average discount rate	10.4%	10.4%

DEBT

3 Months Ended

Mar. 31, 2023

DEBT

DEBT

10. DEBT

On May 4, 2021 (the “Closing Date”), the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Oxford Finance, in its capacity as lender (in such capacity, the “Lender”), and in its capacity as collateral agent (in such capacity, the “Agent”), pursuant to which a term loan of up to an aggregate principal amount of $125,000 was available to the Company, consisting of a tranche A term loan that was disbursed on the Closing Date in the aggregate principal amount of $80,000 and additional tranches that are no longer available to the Company. The Company utilized substantially all of the proceeds from the tranche A term loan to repay a prior credit facility.

The term loans bear interest at a floating rate equal to the greater of (i) 30-day LIBOR and (ii) 0.11%, plus 7.89%. The Loan Agreement, prior to the Second Loan Amendment and Third Loan Amendment (as defined below), provided for interest-only payments until December 1, 2024 if neither the tranche B term loan nor the tranche C term loan are made, and until June 1, 2025 if either the tranche B term loan or the tranche C term loan is made (the “Amortization Date”). The aggregate outstanding principal balance of the term loans were required to be repaid in monthly installments starting on the Amortization Date based on a repayment schedule equal to (i) 18 months if neither the tranche B term loan nor the tranche C term loan is made and (ii) 12 months if either the tranche B term loan or the tranche C term loan is made. All unpaid principal and accrued and unpaid interest with respect to each term loan is due and payable in full on May 1, 2026 (the “Maturity Date”).

The Company paid a facility fee of $400 on the Closing Date and has agreed to pay a facility fee of $100 upon closing of the tranche B term loan and a $125 facility fee upon the closing of the tranche C term loan. The Company will be required to make a final payment fee of 7.00% of the original principal amount of any funded term loan payable on the earlier of (i) the prepayment of the term loan in full or (ii) the Maturity Date. At the Company’s option, the Company may elect to make partial repayments of the term loan to the Lender, subject to specified conditions, including the payment of applicable fees and accrued and unpaid interest on the principal amount of the term loan being repaid.

In connection with its entry into the Loan Agreement, the Company granted the Agent a security interest in substantially all of the Company’s personal property owned or later acquired, including intellectual property and the Commercial Business. The Loan Agreement also contains customary representations and warranties and affirmative and

negative covenants, as well as customary events of default. Certain of the customary negative covenants limit the ability of the Company and certain of its subsidiaries, among other things, to incur future debt, grant liens, make investments, make acquisitions, distribute dividends, make certain restricted payments and sell assets, subject in each case to certain exceptions.

The Loan Agreement includes features requiring (i) additional interest rate upon an event of default accrued at an additional 5%, and (ii) the Lender’s right to declare all outstanding principal and interest immediately payable upon an event of default. These two features were analyzed and determined to be embedded derivatives to be valued as separate financial instruments. These embedded derivatives were bundled and valued as one compound derivative in accordance with the applicable accounting guidance for derivatives and hedging transactions. The Company determined that, due to the unlikely event of default, the embedded derivatives have a de minimis value as of March 31, 2023. The derivative liability will be remeasured at fair value at each reporting date, with changes in fair value being recorded as other income (expense) in the condensed consolidated statements of operations and comprehensive loss.

On May 21, 2022, in connection with its entry into the Asset Purchase Agreement with Alcon, the Company entered into an amendment to the Loan Agreement (the “Second Loan Amendment”). Pursuant to the Second Loan Amendment, the Lender and Agent consented to the entry by the Company into the Asset Purchase Agreement and the sale of the Commercial Business to Alcon and agreed to release its liens on the Commercial Business in consideration for the payment by the Company at the closing of the Alcon Transaction of an aggregate amount of $40,000 (the “Second Amendment Prepayment”) to the Lender and Agent, representing a partial prepayment of principal in the amount of $36,697 of the $80,000 principal amount outstanding under the term loan advanced by the Lender under the Loan Agreement, plus a prepayment fee of $734 and a final payment fee of $2,569. In addition, the Company was required to pay all accrued and unpaid interest on the principal amount of the term loan being repaid.

In addition, under the Second Loan Amendment, the Lender and Agent agreed that, following the closing of the Alcon Transaction and the Second Amendment Prepayment, the Amortization Date would be extended from December 1, 2024 to January 1, 2026, at which time the aggregate principal balance of the term loan then outstanding under the Loan Agreement is required to be repaid in five monthly installments. Pursuant to the Second Loan Amendment, the Company may also make partial prepayments of the term loan to the Lender, subject to specified conditions, including the payment of applicable fees and accrued and unpaid interest on the principal amount of the term loan being repaid.

On July 8, 2022, the Second Amendment Prepayment was paid in connection with the closing of Alcon Transaction, and as such, the Amortization Date was extended to January 1, 2026. The transaction resulted in a loss on extinguishment of debt of $2,583 for the year ended December 31, 2022, consisting of the prepayment premium, a pro-rata portion of the unamortized debt discount and issuance costs and the unaccreted exit fee due upon the Second Amendment Prepayment.

On December 27, 2022, the Company entered into an amendment to the Loan Agreement (the “Third Loan Amendment”). Pursuant to the Third Loan Amendment, the Lender and Agent agreed to amend certain provisions of the Loan Agreement to permit the transfer of the listing of the Company’s common stock from The Nasdaq Global Select Market to The Nasdaq Capital Market. Pursuant to the Third Loan Amendment, the Company agreed (A) to make partial prepayments of the principal amount of the term loan outstanding under the Loan Agreement as follows (the “Third Amendment Prepayments”): (1) a payment of $5,000 on or before June 30, 2023, representing a partial prepayment of principal in the amount of $4,673, plus a final payment fee of $327 and (2) a payment of $5,000 on or before January 31, 2024, representing a partial prepayment of principal in the amount of $4,673, plus a final payment fee of $327 and (B) that the Amortization Date under the Loan Agreement shall be changed from January 1, 2026 to January 1, 2025.

Pursuant to the Third Loan Amendment, in addition to the Third Amendment Prepayments, if the Company makes an additional prepayment under the Loan Agreement equal to $5,000 (inclusive of the final payment fee) on or

prior to December 31, 2024 (the “First Extension Prepayment”), the Amortization Date will be automatically changed to July 1, 2025, and the maturity date of the Loan Agreement will be automatically changed from May 1, 2026 to November 1, 2026. If, in addition to the Third Amendment Prepayments and the First Extension Prepayment, the Company makes an additional prepayment under the Loan Agreement equal to $2,500 (inclusive of the final payment fee) on or prior to June 30, 2025 (the “Second Extension Prepayment”), the Amortization Date will be automatically changed to January 1, 2026, and the maturity date of the Loan Agreement will be automatically changed to May 1, 2027.

Under the Third Loan Amendment, the Lender and Agent also agreed to waive the prepayment fees for the Third Amendment Prepayments, the First Extension Prepayment, the Second Extension Prepayment and any other prepayments under the Loan Agreement. Pursuant to the Loan Agreement, the Company also will be required to pay all accrued and unpaid interest on the principal amounts of the term loan being repaid at the time of repayment. The Company paid the Third Amendment Prepayments on January 25, 2023. The principal loan balance under the Loan Agreement following the Third Amendment Prepayments was $33,957.

In addition, in connection with the Loan Agreement, the Company paid certain fees to the Lender and other third-party service providers. The fees paid to the Lender were recorded as a debt discount while the fees paid to other third-party service providers were recorded as debt issuance cost. These costs are being amortized using the effective interest method over the term of the Loan Agreement. The amortization of debt discount and debt issuance cost is included in interest expense within the condensed consolidated statements of operations and comprehensive loss. As of March 31, 2023, the effective interest rate was 16.44%, which takes into consideration the non-cash accretion of the exit fee and the amortization of the debt discount and issuance costs.

During the three months ended March 31, 2023 and 2022, the Company recognized interest expense of $1,475 and $2,032, respectively, for the Loan Agreement. This consisted of amortization of debt discount of $71 and $113 for the three months ended March 31, 2023 and 2022, respectively, accretion of the final payment fee of $258 and $319 for the three months ended March 31, 2023 and 2022, respectively, and the contractual coupon interest expense of $1,146 and $1,600 for the three months ended March 31, 2023 and 2022, respectively.

The components of the carrying value of the debt as of March 31, 2023 and December 31, 2022 are detailed below:


	March 31,		December 31,
	2023		2022
Principal loan balance	$	33,957	$	43,303
Unamortized debt discount and issuance cost		(735)		(806)
Cumulative accretion of exit fee		44		440
Total debt	$	33,266	$	42,937
Less: current portion of long-term debt		—		(5,000)
Long-term debt, net	$	33,266	$	37,937

The annual principal payments due under the Loan Agreement as of March 31, 2023 were as follows:


Years Ending December 31,
2023 (remaining nine months)	$	—
2024		—
2025		23,970
2026		9,987
2027		—
Total	$	33,957

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

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+ Details

WARRANTS

3 Months Ended

Mar. 31, 2023

WARRANTS.

WARRANTS

11. WARRANTS

The following table summarizes the common stock warrants outstanding as of March 31, 2023 and December 31, 2022, each exercisable into the number of shares of common stock set forth below as of the specified dates:


					Shares Exercisable at
	Exercise		Expiration	Exercisable	March 31,	December 31,
Issued	Price Per Share		Date	From	2023	2022
2014	$	375.00	November 2024	July 2017	320	320
2016	$	413.50	October 2026	September 2017	290	290
2018	$	609.23	October 2025	October 2018	3,693	3,693
					4,303	4,303

EQUITY FINANCINGS

3 Months Ended

Mar. 31, 2023

EQUITY FINANCINGS

EQUITY FINANCINGS

12. EQUITY FINANCINGS

On May 7, 2020, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on May 19, 2020 (the “2020 Shelf Registration”). Under the 2020 Shelf Registration, the Company may offer and sell up to $350,000 of a variety of securities including common stock, preferred stock, warrants, depositary shares, debt securities or units during the three-year period that commenced upon the 2020 Shelf Registration becoming effective. In connection with the filing of the 2020 Shelf Registration, the Company entered into an amended and restated sales agreement (the “Amended and Restated Sales Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which the Company could issue and sell, from time to time, up to an aggregate of $75,000 of its common stock in an at-the-market equity offering through Jefferies, as a sales agent. From January 1, 2023 to January 10, 2023, the Company sold 245,887 shares of its common stock under the ATM Offering pursuant to the terms of the Amended and Restated Sales Agreement, resulting in net proceeds of $9,994. The Company did not sell any shares of its common stock under the at-the-market offering pursuant to the terms of the Amended and Restated Sales Agreement during the three months ended March 31, 2022. On January 10, 2023, the Amended and Restated Sales Agreement terminated in accordance with its terms when the Company completed the sale of $75,000 of its shares of common stock thereunder. As of the date of termination of the Amended and Restated Sales Agreement, the Company had sold an aggregate of 565,974 shares of its common stock under such agreement for aggregate gross proceeds of $75,000. The Company did not sell any shares of its common stock under the at-the-market offering pursuant to the terms of the Amended and Restated Sales Agreement during the three months ended March 31, 2022.

On January 19, 2023, the Company entered into an Open Market Sale Agreement with Jefferies (the “Open Market Sale Agreement”), pursuant to which the Company may issue and sell, from time to time, shares its common stock under an at-the-market equity offering. The Company filed a prospectus supplement relating to the Open Market Sale Agreement under its 2020 Shelf Registration (the “ATM Prospectus Supplement”), pursuant to which the Company may offer and sell shares of common stock having an aggregate offering price of up to $40,000 under the Open Market Sale Agreement. During the three months ended March 31, 2023, the Company sold 229,378 shares of its common stock under its at-the-market offering pursuant to the Open Market Sale Agreement, resulting in net proceeds of $4,899. In the

aggregate, during the three months ended March 31, 2023, the Company sold an aggregate of 475,265 shares of its common stock pursuant to the Amended and Restated Sales Agreement and the Open Market Sale Agreement for total net proceeds of $14,893.

On November 28, 2022, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional investors named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a private placement priced at-the-market under Nasdaq rules, shares of common stock and shares of Series E Convertible Non-Redeemable Preferred Stock, par value $0.001 per share, of the Company (the “Series E Preferred Stock”), in two tranches for aggregate gross proceeds of up to $31,000 (collectively, the “Private Placement”). Pursuant to the Securities Purchase Agreement, on December 1, 2022, the Company issued and sold to the Purchasers at the first closing of the Private Placement, (i) 76,813 shares of common stock, at a price per common share equal to $5.75 and (ii) 9,666 shares of Preferred Stock, at a price per share equal to $575.00, for aggregate gross proceeds of approximately $6,000. On December 27, 2022, following the certification by the Chief Executive Officer of the Company that the FDA accepted the Company’s IND for KPI-012, the Company issued and sold to the Purchasers at a second closing of the Private Placement a total of 43,478 Preferred Shares, at a price per share equal to $575.00, for aggregate gross proceeds of approximately $25,000. Costs incurred in connection with the Private Placement were $240, which were recorded as a reduction to additional paid-in capital.

On March 3, 2023, the Company filed a shelf registration statement on Form S-3 with the SEC (the “2023 Shelf Registration”). Under the 2023 Shelf Registration, the Company may offer and sell up to $350,000 of a variety of securities including common stock, preferred stock, warrants, depositary shares, debt securities, subscription rights or units after such time as the shelf registration statement is declared effective by the SEC. Subject to the effectiveness of the 2023 Shelf Registration and in accordance with the terms of the Open Market Sale Agreement, the Company may issue and sell, from time to time, up to $40,000 of its common stock in an at-the-market equity offering through Jefferies, as sales agent. Upon effectiveness of the 2023 Shelf Registration, the Company will not make any further offers or sales of its common stock pursuant to the ATM Prospectus Supplement and the 2020 Shelf Registration.

STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2023

STOCKBASED COMPENSATION

STOCK-BASED COMPENSATION

13. STOCK‑BASED COMPENSATION

During the three months ended March 31, 2023, the Company granted options for the purchase of 4,200 shares of common stock and 143,825 restricted stock units. In January 2023, employees of the Company purchased an aggregate of 461 shares under the Employee Stock Purchase Plan.

The assumptions used in determining fair value of the stock options granted during the three months ended March 31, 2023 are as follows:


	Three Months Ended March 31,
	2023
Expected volatility	121.9%
Risk-free interest rate	3.72%
Expected dividend yield	0%
Expected term (in years)	6.10

During the three months ended March 31, 2023, the weighted average grant-date fair value of options granted was $14.80.

In January 2022, the Company granted stock options to purchase up to 14,850 shares of common stock to certain executives tied to certain performance criteria. On March 14, 2023, the Compensation Committee of the Company’s Board of Directors determined that certain of the performance conditions were achieved at specific levels of

achievement, resulting in vesting of options to purchase 3,960 shares of common stock. As of March 31, 2023, the Compensation Committee had made no determination with respect to certain performance metrics, which could result in the further vesting of up to 2,970 shares of common stock underlying the option. The Company has assessed the probability of achievement of the remaining performance criteria and has recorded related stock compensation expense to the extent the performance metrics were determined to be achieved or probable of achievement as of March 31, 2023.

As of March 31, 2023, a total of 148,093 RSUs were outstanding, consisting of 144,633 unvested shares and 3,460 vested and deferred shares by directors.

Stock-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows for the three months ended March 31, 2023 and 2022:


	Three Months Ended
	March 31,
	2023		2022
Cost of product revenues	$	—	$	48
Research and development		385		525
Selling, general and administrative		939		2,232
Total	$	1,324	$	2,805

LOSS PER SHARE

3 Months Ended

Mar. 31, 2023

LOSS PER SHARE

LOSS PER SHARE

14. LOSS PER SHARE

Basic and diluted net loss per share attributable to common stockholders was calculated as follows for the three months ended March 31, 2023 and 2022:


	Three Months Ended
	March 31,
	2023		2022
Numerator:
Net loss attributable to common stockholders	$	(14,455)	$	(32,941)
Denominator:
Weighted-average common shares outstanding, basic and diluted(1)		2,069,186		1,485,168

Net loss per share attributable to common stockholders, basic and diluted	$	(6.99)	$	(22.18)

(1)

Included in the weighted-average common shares outstanding, basic and diluted for the three months ended March 31, 2022 is an aggregate of 19,350 shares of common stock that were held back by the Company as partial security for the satisfaction of indemnification obligations and other payment obligations of the Combangio Equityholders and were issued in March 2023.

The following potential common stock equivalents, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:


	Three Months Ended
	March 31,
	2023		2022
Options to purchase shares of common stock		191,475		256,924
Unvested RSUs and PSUs		144,633		20,373
Unexercised warrants		4,303		4,303
Convertible preferred stock (as converted to common shares)		5,314,400		—
		5,654,811		281,600

INCOME TAXES

3 Months Ended

Mar. 31, 2023

INCOME TAXES

INCOME TAXES

15. INCOME TAXES

The Company did not record a provision or benefit for income taxes during the three months ended March 31, 2023 and 2022. The Company continues to maintain a full valuation allowance for its U.S. federal and state deferred tax assets.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its generation of limited revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Management reevaluates the positive and negative evidence at each reporting period.

Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended, certain substantial changes in the Company’s ownership, including a sale of the Company, or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards, which could be used annually to offset future taxable income. The Company previously completed an analysis and determined that an ownership change materially limited the net operating loss carryforwards. During December 2022, an additional ownership change occurred as a result of the Company’s entry into the Securities Purchase Agreement. As a result of the most recent ownership change, the utilization of the Company’s net operating loss carryforwards is subject to an annual limitation of $222.

The Company files its corporate income tax returns in the United States and various states. All tax years since the date of incorporation remain open to examination by the major taxing jurisdictions (state and federal) to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (“IRS”) or other authorities if they have or will be used in a future period. The Company is not currently under examination by the IRS or any other jurisdictions for any tax year.

As of March 31, 2023 and December 31, 2022, the Company had no uncertain tax positions. The Company’s policy is to recognize interest and penalties related to income tax matters as a component of income tax expense, of which no interest or penalties were recorded for the three months ended March 31, 2023 and 2022.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

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+ Details

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2023

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES.

16. COMMITMENTS AND CONTINGENCIES

Stanford License Agreement— In October 2019, Combangio entered into a license agreement with The Board of Trustees of The Leland Stanford Junior University (“Stanford”), which was amended in February 2020 and subsequently transferred to the Company by operation of law upon the Combangio Acquisition. Pursuant to the license agreement with Stanford (the “Stanford Agreement”), the Company has a worldwide, exclusive, sublicensable license under certain patent rights (“licensed patents”), directed to methods to promote eye wound healing, to make, have made, use, import, offer to sell and sell products (“licensed products”) that are covered by the licensed patents for use in all fields. Under the Stanford Agreement, the Company is required to pay Stanford annual license maintenance fees and milestone payments upon the achievement of specified development, regulatory and sales milestones, as well as tiered royalties on net sales of licensed products that are covered by a valid claim of a licensed patent. Amounts paid to Stanford in the three months ended March 31, 2023 and 2022 were de minimis. The Company is obligated to pay Stanford a $175 milestone payment which was triggered by the beginning of the CHASE Phase 2b clinical trial of KPI-012 for PCED in the United States which has been included within accounts payable on the consolidated balance sheet as of March 31, 2023.

Litigation— The Company is not currently subject to any material legal proceedings.

Contingencies related to the Merger Agreement— In connection with the Combangio Acquisition, the Company agreed to make additional payments based on the achievement of certain milestone events related to KPI-012. The Company recognized certain contingent consideration liabilities at fair value on the acquisition date, and revalues the remaining obligations each reporting period. The total potential maximum payout for the milestone payments, which have been recorded as liabilities at fair value, is $40,000 and the milestone payments are contingent upon the achievement of specified development, regulatory and commercialization milestones. Following the achievement of the Dosing Milestone in February 2023, the Company paid an aggregate of $2,500 in cash and $2,354 in shares of the Company’s common stock (representing an aggregate of 105,038 shares of the Company’s common stock) to the former Combangio Equityholders in March 2023. The Company will pay the remaining amount due in connection with the Dosing Milestone of $146 in cash in January 2024. Additionally, pursuant to the Merger Agreement, the Company could trigger potential future sales-based milestone payments of up to $65,000. Because the achievement of these sales-based milestones related to KPI-012 was not considered probable as of March 31, 2023 or December 31, 2022, such contingencies have not been recorded in the Company’s condensed consolidated financial statements. Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory or commercial milestones.

SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2023

SUBSEQUENT EVENTS.

SUBSEQUENT EVENTS

17. SUBSEQUENT EVENTS

Executed Combangio Lease

In April 2023, Combangio, a wholly owned subsidiary of the Company, entered into a lease agreement with Menlo Prepi I, LLC, pursuant to which Combangio will lease approximately 6,135 square feet of office, laboratory and research and development space in Menlo Park, California. The Company entered into a guaranty of lease agreement guarantying the obligations of Combangio under the lease agreement. The term of the lease commences on July 1, 2023. The initial term of the lease will be for 62 months commencing on the lease commencement date, unless earlier terminated. The lease provides Combangio with an option to extend the lease for an additional five-year term. Combangio was required to make a payment in the amount of $144, as a security deposit pursuant to the lease in April 2023. As the lease had not commenced as of March 31, 2023, the Company has not recorded an operating lease right of use asset or lease liability for this lease in the accompanying condensed consolidated balance sheets. The initial estimate of the minimum amount of undiscounted lease payments due under this lease is $3,077.

Option Exchange Program

On May 1, 2023, the Company commenced a one-time stock option exchange program (the “Option Exchange Program”), under which the Company’s eligible executive officers, other employees and non-employee directors are being given the opportunity to exchange options to purchase shares of the Company’s common stock held by them for an equal number of restricted stock units, which will be subject to vesting conditions. The Option Exchange Program is scheduled to expire at 11:59 p.m., Eastern Time on May 30, 2023, unless extended. For additional information regarding the Option Exchange Program, please refer to the Company’s Tender Offer Statement on Schedule TO filed with the Securities and Exchange Commission on May 1, 2023 and any amendments or supplements thereto.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2023

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

Recent Accounting Pronouncements

SALE OF COMMERCIAL BUSINESS TO ALCON (Tables)

3 Months Ended

Mar. 31, 2023

SALE OF COMMERCIAL BUSINESS TO ALCON

Schedule of dispositions of business


Gross consideration from the sale of the Commercial Business	$	65,027
Closing and transaction costs		2,119
Net proceeds from the sale of the Commercial Business		62,908
Book value of assets transferred
Inventories		8,915
Prepaid expenses and other current assets		556
Property and equipment, net		1,819
Other long-term assets		434
Total book value of assets transferred		11,724
Gain on sale of Commercial Business		51,184
Deferred gain on sale of Commercial Business		4,189
Net gain on sale of Commercial Business	$	46,995

ASSETS HELD FOR SALE (Tables)

3 Months Ended

Mar. 31, 2023

ASSETS HELD FOR SALE

Schedule of the major categories of assets that have been reclassified to held for sale


	March 31,		December 31,
	2023		2022
Inventories	$	5,355	$	7,544
Property and equipment, net		—		51
Total assets held for sale	$	5,355	$	7,595

- Definition

Tabular disclosure of information related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component.

+ References

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+ Details

FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2023

FAIR VALUE OF FINANCIAL INSTRUMENTS

Schedule of assets and liabilities measured at fair value on a recurring basis


	March 31, 2023
	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	62,514	$	62,514	$	—	$	—
Total Assets	$	62,514	$	62,514	$	—	$	—
Liabilities:
Contingent consideration	$	5,234	$	—	$	—	$	5,234
Total Liabilities	$	5,234	$	—	$	—	$	5,234


	December 31, 2022
	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	31,587	$	31,587	$	—	$	—
Total Assets	$	31,587	$	31,587	$	—	$	—
Liabilities:
Deferred purchase consideration	$	595	$	—	$	—	$	595
Contingent consideration		8,370		—		—		8,370
Total Liabilities	$	8,965	$	—	$	—	$	8,965

Schedule of fair values of warrants, using the Black Scholes option pricing model


	Fair Value at
	March 31,				Range
Financial Instrument	2023		Valuation Technique	Unobservable Input	(Average)
Contingent consideration	$	5,234	Probability-adjusted	Period of expected milestone achievement	2024 - 2027 (2026)
			discounted cash flow model	Probabilities of achievement	21.0% - 45.0% (29.7%)
				Discount rate	18.0%


	Fair Value at
	December 31,				Range
Financial Instrument	2022		Valuation Technique	Unobservable Input	(Average)
Deferred purchase consideration	$	595	Option pricing model	Discount for lack of marketability	20%

Contingent consideration	$	8,370	Probability-adjusted	Period of expected milestone achievement	2023 - 2027 (2025)
			discounted cash flow model	Probabilities of achievement	19.9% - 95.0% (44.9%)
				Discount rate	19.0%
				Discount for lack of marketability	20.0%

Schedule of changes in Level 3 fair value measurements


Deferred purchase consideration
Balance at January 1, 2023	$	595
Fair value adjustments		(230)
Settlements		(365)
Balance at March 31, 2023	$	—

Contingent consideration
Balance at January 1, 2023	$	8,370
Fair value adjustments		1,847
Settlements		(4,854)
Reclassification to accrued expenses and other current liabilities		(129)
Balance at March 31, 2023	$	5,234

Deferred purchase consideration
Balance at January 1, 2022	$	7,892
Fair value adjustments		1,051
Settlements		(7,935)
Balance at March 31, 2022	$	1,008

Contingent consideration
Balance at January 1, 2022	$	8,658
Fair value adjustments		(988)
Balance at March 31, 2022	$	7,670

REVENUE (Tables)

3 Months Ended

Mar. 31, 2023

REVENUE

Schedule of product revenue provision and allowance categories


	Trade Discounts,
	Allowances and				Rebates and
	Chargebacks (1)		Product Returns (2)		Incentives (3)
Balance as of December 31, 2022	$	11	$	518	$	772
Credit/payments made		(2)		(49)		(484)
Balance as of March 31, 2023	$	9	$	469	$	288


	Trade Discounts,
	Allowances and				Rebates and
	Chargebacks (1)		Product Returns (2)		Incentives (3)
Balance as of December 31, 2021	$	2,672	$	1,140	$	11,280
Provision related to current period sales		2,133		210		13,359
Changes in estimate related to prior period sales		(1)		(138)		(242)
Credit/payments made		(3,261)		(415)		(10,108)
Balance as of March 31, 2022	$	1,543	$	797	$	14,289

(1)

(2)	Estimated provisions for product returns were deducted from gross revenues at the time revenues were recognized and were included in accrued expenses and other current liabilities on the Company’s condensed consolidated balance sheets.

(3)

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)

3 Months Ended

Mar. 31, 2023

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Schedule of prepaid expenses and other current assets

Prepaid expenses and other current assets, consists of the following:


	March 31,		December 31,
	2023		2022

Due from Alcon	$	683	$	5,394
Insurance		467		698
Non-trade receivables		280		908
Trade receivables, net		115		195
Other		808		657
Prepaid expenses and other current assets	$	2,353	$	7,852

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)

3 Months Ended

Mar. 31, 2023

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Schedule of accrued expenses and other current liabilities


	March 31,		December 31,
	2023		2022

Professional services	$	1,440	$	948
Compensation and benefits		1,089		3,334
Accrued revenue reserves (1)		757		807
Development costs		499		446
Commercial costs		262		271
Contract manufacturing		211		453
Due to third parties in connection with Transition Agreement (2)		41		2,244
Other		777		407
Accrued expenses	$	5,076	$	8,910

(1) There were additional revenue reserves included in accounts payable of $483 as of December 31, 2022. There were no such amounts included in accounts payable as of March 31, 2023.

LEASES (Tables)

3 Months Ended

Mar. 31, 2023

LEASES

Schedule of lease cost


	Three Months Ended
	March 31,
	2023		2022
Lease cost
Operating lease cost	$	10	$	176
Short-term lease cost		20		40
Variable lease cost		6		447
Total lease cost	$	36	$	663

Operating cash outflows from operating leases	$	10	$	719

Schedule of weighted average remaining lease term and weighted average discount rate of operating leases


	March 31,	December 31,
	2023	2022
Weighted average remaining lease term	0.3 years	0.5 years
Weighted average discount rate	10.4%	10.4%

DEBT (Tables)

3 Months Ended

Mar. 31, 2023

DEBT

Schedule of carrying value of debt


	March 31,		December 31,
	2023		2022
Principal loan balance	$	33,957	$	43,303
Unamortized debt discount and issuance cost		(735)		(806)
Cumulative accretion of exit fee		44		440
Total debt	$	33,266	$	42,937
Less: current portion of long-term debt		—		(5,000)
Long-term debt, net	$	33,266	$	37,937

Schedule of maturities of long-term debt


Years Ending December 31,
2023 (remaining nine months)	$	—
2024		—
2025		23,970
2026		9,987
2027		—
Total	$	33,957

WARRANTS (Tables)

3 Months Ended

Mar. 31, 2023

WARRANTS.

Schedule of outstanding warrants


					Shares Exercisable at
	Exercise		Expiration	Exercisable	March 31,	December 31,
Issued	Price Per Share		Date	From	2023	2022
2014	$	375.00	November 2024	July 2017	320	320
2016	$	413.50	October 2026	September 2017	290	290
2018	$	609.23	October 2025	October 2018	3,693	3,693
					4,303	4,303

STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2023

STOCKBASED COMPENSATION

Schedule of assumptions used in determining fair value of the stock options granted


	Three Months Ended March 31,
	2023
Expected volatility	121.9%
Risk-free interest rate	3.72%
Expected dividend yield	0%
Expected term (in years)	6.10

Schedule of stock based compensation expense


	Three Months Ended
	March 31,
	2023		2022
Cost of product revenues	$	—	$	48
Research and development		385		525
Selling, general and administrative		939		2,232
Total	$	1,324	$	2,805

LOSS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2023

LOSS PER SHARE

Schedule of computation of basic and diluted net loss per share


	Three Months Ended
	March 31,
	2023		2022
Numerator:
Net loss attributable to common stockholders	$	(14,455)	$	(32,941)
Denominator:
Weighted-average common shares outstanding, basic and diluted(1)		2,069,186		1,485,168

Net loss per share attributable to common stockholders, basic and diluted	$	(6.99)	$	(22.18)

(1)

Schedule of outstanding securities excluded from the computation of diluted weighted average shares outstanding as they would have been anti-dilutive


	Three Months Ended
	March 31,
	2023		2022
Options to purchase shares of common stock		191,475		256,924
Unvested RSUs and PSUs		144,633		20,373
Unexercised warrants		4,303		4,303
Convertible preferred stock (as converted to common shares)		5,314,400		—
		5,654,811		281,600

NATURE OF BUSINESS AND BASIS OF PRESENTATION (Details) $ in Thousands		3 Months Ended		12 Months Ended
	Oct. 20, 2022 shares	Mar. 31, 2023 USD ($) shares	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($) shares	Oct. 19, 2022 shares	Jul. 08, 2022 USD ($)
Acquisition of Combangio, Inc
Reverse stock split	0.02
Common stock, shares issued \| shares	1	2,309,287		1,706,971	50
Common stock, shares outstanding \| shares	1	2,309,287		1,706,971	50
Common stock, authorized \| shares	120,000,000	120,000,000		120,000,000
Net loss		$ (14,455)	$ (32,941)
Cash used in operations		(9,684)	$ (24,089)
Accumulated deficit		$ 601,665		$ 587,210
Proceeds from private placement				$ 31,000
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations
Acquisition of Combangio, Inc
Amount receivable upon the achievement of specified commercial sales-based milestones						$ 325,000

SALE OF COMMERCIAL BUSINESS TO ALCON (Details) $ in Thousands		3 Months Ended
	Jul. 08, 2022 USD ($) item	Mar. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)
Dispositions disclosures
Number of milestone payments \| item	1
Deferred gain on sale of Commercial Business		$ 4,189	$ 4,189
Due from Alcon		683	5,394
Due from third parties			26
Due to third parties		41	2,244
Accounts payable
Dispositions disclosures
Due to third parties		0	1,737
Transition Service Agreement
Dispositions disclosures
Due from Alcon		26
Due to third parties		41	3,981
Net receivables		668	1,439
Transition Service Agreement \| Other income
Dispositions disclosures
Collaborative arrangement other income		157
Transition Service Agreement \| Prepaid expenses and other current assets
Dispositions disclosures
Due from Alcon for reimbursement for services		669
Due from Alcon for payment on Alcon's behalf		14
Due from Alcon		683
Transition Service Agreement \| Accrued expenses and other current liabilities
Dispositions disclosures
Due to third parties			2,244
Transition Service Agreement \| Accounts payable
Dispositions disclosures
Due to third parties			1,737
Commercial Business Sale to Alcon
Dispositions disclosures
Upfront payment	$ 60,000
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations
Dispositions disclosures
Number of commercial-based sales milestone payments \| item	4
Amount receivable upon the achievement of specified commercial sales-based milestones	$ 325,000
Proceeds from inventory transfer	5,027
Deferred gain on sale of Commercial Business	4,189	$ 4,189	$ 4,189
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations \| Achievement of $50,000 or more in aggregate worldwide net sales
Dispositions disclosures
Sales based milestone achievement	50,000
Amount receivable upon the achievement of specified commercial sales-based milestones	25,000
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations \| Achievement of $100,000 or more in aggregate worldwide net sales
Dispositions disclosures
Sales based milestone achievement	100,000
Amount receivable upon the achievement of specified commercial sales-based milestones	65,000
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations \| Achievement of $175,000 or more in aggregate worldwide net sales
Dispositions disclosures
Sales based milestone achievement	175,000
Amount receivable upon the achievement of specified commercial sales-based milestones	75,000
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations \| Achievement of $250,000 or more in aggregate worldwide net sales
Dispositions disclosures
Sales based milestone achievement	250,000
Amount receivable upon the achievement of specified commercial sales-based milestones	$ 160,000

SALE OF COMMERCIAL BUSINESS TO ALCON - Net Gain on Sale of Commercial Business (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Mar. 31, 2023	Jul. 08, 2022
Book value of assets transferred
Inventories	$ 7,544	$ 5,355
Deferred gain on sale of Commercial Business	4,189	4,189
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations
Dispositions Disclosures [Line Items]
Gross consideration from the sale of the Commercial Business	65,027
Closing and transaction costs	2,119
Net proceeds from the sale of the Commercial Business	62,908
Book value of assets transferred
Inventories	8,915
Prepaid expenses and other current assets	556
Property and equipment, net	1,819
Other long-term assets	434
Total book value of assets transferred	11,724
Gain on sale of Commercial Business	51,184
Deferred gain on sale of Commercial Business	4,189	$ 4,189	$ 4,189
Net gain on sale of Commercial Business	$ 46,995

ASSETS HELD FOR SALE - Major Categories of Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Jul. 08, 2022
Major categories of assets that have been reclassified to held for sale on the condensed consolidated balance sheet
Inventories	$ 5,355	$ 7,544
Property and equipment, net		51
Total assets held for sale	5,355	7,595
Deferred gain on sale of Commercial Business	4,189	4,189
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations
Major categories of assets that have been reclassified to held for sale on the condensed consolidated balance sheet
Inventories		8,915
Deferred gain on sale of Commercial Business	$ 4,189	$ 4,189	$ 4,189

- Definition

Amount classified as assets attributable to disposal group held for sale or disposed of, expected to be disposed of within one year or the normal operating cycle, if longer.

+ References + Details

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands		1 Months Ended		3 Months Ended
	Nov. 15, 2021	Mar. 31, 2023	Feb. 28, 2023	Mar. 31, 2023	Mar. 31, 2022	Jan. 31, 2024
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Settled liability				$ 365	$ 7,935
(Gain) loss on fair value remeasurement of deferred purchase consideration				(230)	$ 1,051
Contingent milestone consideration paid in shares value				2,354
Contingent Consideration
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Reclassification to accrued expenses and other current liabilities				$ 129
Shares Not Issued Until Escrow Release date of February 15, 2023
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of shares					19,350
Combangio, Inc
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of shares	155,664
Combangio, Inc \| Shares Issued on January 3, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of shares	136,314
Combangio, Inc \| Shares Not Issued Until Escrow Release date Of March 2023
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of shares	19,350
Combangio, Inc \| First Patient Dosed With Any Product in Phase 2 Clinical Trial, Dosing Milestone
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent milestone consideration paid			$ 2,500
Contingent milestone consideration paid in shares value			$ 2,354
Contingent milestone consideration paid in shares		105,038		105,038
Combangio, Inc \| First Patient Dosed With Any Product in Phase 2 Clinical Trial, Dosing Milestone \| Subsequent Events
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent milestone consideration						$ 146
Combangio, Inc \| Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent milestone consideration	$ 105,000

FAIR VALUE OF FINANCIAL INSTRUMENTS - Recurring and Nonrecurring Fair value Measurements Within Hierarchy (Details) - Fair Value - Recurring - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Fair Value Assets Measured on Recurring and Non recurring Basis
Financial assets by level within fair value hierarchy	$ 62,514	$ 31,587
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	5,234	8,965
Deferred purchase consideration
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy		595
Contingent Consideration
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	5,234	8,370
Cash equivalents
Fair Value Assets Measured on Recurring and Non recurring Basis
Financial assets by level within fair value hierarchy	62,514	31,587
Level 1
Fair Value Assets Measured on Recurring and Non recurring Basis
Financial assets by level within fair value hierarchy	62,514	31,587
Level 1 \| Cash equivalents
Fair Value Assets Measured on Recurring and Non recurring Basis
Financial assets by level within fair value hierarchy	62,514	31,587
Level 3
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	5,234	8,965
Level 3 \| Deferred purchase consideration
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy		595
Level 3 \| Contingent Consideration
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	$ 5,234	$ 8,370

FAIR VALUE OF FINANCIAL INSTRUMENTS - Quantitative Information and Assumptions (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Gain) loss on fair value remeasurement of deferred purchase consideration	$ (230)	$ 1,051
Level 3 \| Deferred purchase consideration
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Financial liabilities by level within fair value hierarchy			$ 595
Business Combination, Contingent Consideration, Liability, Valuation Technique [Extensible Enumeration]			Option pricing model
Business Combination, Contingent Consideration, Liability, Measurement Input [Extensible Enumeration]			Discount for lack of marketability
Level 3 \| Deferred purchase consideration \| Option pricing model \| Discount for lack of marketability \| Minimum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input			0.20
Level 3 \| Contingent Consideration
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Financial liabilities by level within fair value hierarchy	$ 5,234		$ 8,370
Level 3 \| Contingent Consideration \| Discounted cash flow model \| Discount for lack of marketability
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input			0.200
Level 3 \| Contingent Consideration \| Discounted cash flow model \| Probabilities of achievement \| Minimum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input	0.210		0.199
Level 3 \| Contingent Consideration \| Discounted cash flow model \| Probabilities of achievement \| Maximum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input	0.450		0.950
Level 3 \| Contingent Consideration \| Discounted cash flow model \| Probabilities of achievement \| Average
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input	(0.297)		(0.449)
Level 3 \| Contingent Consideration \| Discounted cash flow model \| Discount rate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input	0.180		0.190

FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair Value Measurement Levels (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Transfer from level 1 to level 2, Assets	$ 0		$ 0
Transfer from level 2 to level 1, Assets	0		0
Transfer from level 1 to level 2, Liability	0		0
Transfer from level 2 to level 1, Liability	0		0
Transfer into level 3, Assets	0		0
Transfer out of level 3, Assets	0		0
Transfer into level 3, Liability	0		0
Transfer out of level 3, Liability	0		0
Settlements	(365)	$ (7,935)
Contingent Consideration
Reclassification to accrued expenses and other current liabilities	(129)
Level 3 \| Deferred purchase consideration
Beginning balance	595	7,892	7,892
Fair value adjustments	(230)	1,051
Settlements	(365)	(7,935)
Ending balance		1,008	595
Level 3 \| Contingent Consideration
Beginning balance	8,370	8,658	8,658
Fair value adjustments	1,847	(988)
Settlements	(4,854)
Reclassification to accrued expenses and other current liabilities	(129)
Ending balance	$ 5,234	$ 7,670	$ 8,370

REVENUE - Co-pay Assistance Program (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Trade Discounts, Allowances and Chargebacks
Beginning balance	$ 11	$ 2,672
Provision related to current period sales		2,133
Changes in estimate related to prior period sales		(1)
Credit/payments made	(2)	(3,261)
Ending balance	9	1,543
Product Returns
Beginning balance	518	1,140
Provision related to current period sales		210
Changes in estimate related to prior period sales		(138)
Credit/payments made	(49)	(415)
Ending balance	469	797
Rebates and Incentives
Beginning balance	772	11,280
Provision related to current period sales		13,359
Changes in estimate related to prior period sales		(242)
Credit/payments made	(484)	(10,108)
Ending balance	$ 288	$ 14,289

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Due from Alcon	$ 683	$ 5,394
Insurance	467	698
Non-trade receivables	280	908
Trade receivables, net	115	195
Other	808	657
Prepaid expenses and other current assets	$ 2,353	$ 7,852

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Professional services	$ 1,440	$ 948
Compensation and benefits	1,089	3,334
Accrued revenue reserves	757	807
Development costs	499	446
Commercial costs	262	271
Contract manufacturing	211	453
Due to third parties in connection with Transition Agreement	41	2,244
Other	777	407
Accrued expenses	5,076	8,910
Accounts payable
Accrued revenue reserves	0	483
Due to third parties in connection with Transition Agreement	$ 0	$ 1,737

LEASES (Details) - USD ($) $ in Thousands	3 Months Ended
LEASES (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022	Dec. 31, 2019
Leases
Right-of-use assets	$ 6		$ 16
Lease liability			$ 0
Amount borrowed				$ 450
Lease cost
Operating lease cost	10	$ 176
Short-term lease cost	20	40
Variable lease cost	6	447
Total lease cost	36	663
Operating cash outflows from operating leases	$ 10	$ 719
Weighted average remaining lease term	3 months 18 days		6 months
Weighted average discount rate	10.40%		10.40%
Vehicle Fleet Lease
Leases
Right-of-use assets			$ 0
Prepaid expenses and other current assets \| Vehicle Fleet Lease
Leases
Due from vendor			$ 775

DEBT - Oxford Finance Loan and Security Agreement (Details) $ in Thousands					3 Months Ended		12 Months Ended
	Dec. 27, 2022 USD ($)	May 21, 2022 USD ($) installment	May 04, 2021 USD ($)	Oct. 01, 2018	Mar. 31, 2023 USD ($) item	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)
Debt instruments
Effective interest rate					16.44%
Amount of principal outstanding					$ 33,957		$ 43,303
Interest expense					1,474	$ 2,035
Athyrium Credit Facility
Debt instruments
Amount of principal outstanding					33,957
Accretion of final prepayment fee					258	319
Interest expense					1,475	2,032
Amortization of debt discount					71	113
Contractual coupon interest					$ 1,146	$ 1,600
Athyrium
Debt instruments
Number of derivatives \| item					1
Athyrium \| Athyrium Credit Facility
Debt instruments
Additional interest rate upon an event of default accrued (as a percent)				5.00%
Loan and Security Agreement
Debt instruments
Aggregate principal amount			$ 125,000
Floating interest rate (as a percent)			0.11%
Facility fees paid			$ 400
Percentage of final payment fees			7.00%
Debt repayments		$ 40,000
Partial prepayment		36,697
Amount of principal outstanding		80,000					33,957
Prepayment fees paid		734
Final prepayment fee		$ 2,569
Number of monthly installments \| installment		5
Loss on extinguishment of debt							$ (2,583)
Loan and Security Agreement \| Neither the tranche B term loan nor the tranche C term loan is made
Debt instruments
Duration of periodic monthly payment installments under a scenario			18 months
Loan and Security Agreement \| Either tranche B term loan nor tranche C term loan is made
Debt instruments
Duration of periodic monthly payment installments under a scenario			12 months
Loan and Security Agreement \| Payment on or before June 30, 2023
Debt instruments
Debt repayments	$ 5,000
Partial prepayment	4,673
Final prepayment fee	327
Loan and Security Agreement \| Payment on or before January 31, 2024.
Debt instruments
Debt repayments	5,000
Partial prepayment	4,673
Final prepayment fee	327
Loan and Security Agreement \| Payment on or prior to December 31, 2024
Debt instruments
Debt repayments	5,000
Loan and Security Agreement \| Payment on or prior to June 30, 2025
Debt instruments
Debt repayments	$ 2,500
Loan and Security Agreement \| 30-day LIBOR
Debt instruments
Spread on variable rate			7.89%
Tranche A term loan
Debt instruments
Aggregate principal amount			$ 80,000
Contingent tranche B term loan
Debt instruments
Facility fees paid			100
Contingent tranche C term loan
Debt instruments
Facility fees paid			$ 125

DEBT- Carrying Value (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
DEBT
Principal loan balance	$ 33,957	$ 43,303
Unamortized debt discount and issuance cost	(735)	(806)
Cumulative accretion of exit fee	44	440
Total debt	33,266	42,937
Less: current portion of long-term debt		(5,000)
Long-term debt, net	$ 33,266	$ 37,937

- Definition

Amount, excluding unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

DEBT - Future Annual Principal Payments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Maturities of long-term debt
Total	$ 33,957	$ 43,303
Athyrium Credit Facility
Maturities of long-term debt
2025	23,970
2026	9,987
Total	$ 33,957

- Definition

Amount, excluding unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

WARRANTS (Details) - $ / shares	3 Months Ended	12 Months Ended
WARRANTS (Details) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
Preferred stock warrants
Shares Exercisable	4,303	4,303
Warrants 2014
Preferred stock warrants
Exercise Price Per Share	$ 375.00
Shares Exercisable	320	320
Warrants 2016
Preferred stock warrants
Exercise Price Per Share	$ 413.50
Shares Exercisable	290	290
Warrants 2018
Preferred stock warrants
Exercise Price Per Share	$ 609.23
Shares Exercisable	3,693	3,693

EQUITY FINANCINGS (Details) $ / shares in Units, $ in Thousands								3 Months Ended
	Mar. 03, 2023 USD ($)	Jan. 10, 2023 USD ($) shares	Jan. 10, 2023 USD ($) shares	Dec. 27, 2022 USD ($) $ / shares shares	Dec. 01, 2022 USD ($) $ / shares shares	Nov. 28, 2022 USD ($) tranche $ / shares	May 07, 2020 USD ($)	Mar. 31, 2023 USD ($) $ / shares shares	Jan. 19, 2023 USD ($)	Dec. 31, 2022 $ / shares
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares) \| shares			565,974
Stock offering, net of issuance cost and underwriting fees			$ 75,000
Preferred stock, par value \| $ / shares								$ 0.001		$ 0.001
Maximum
Equity Offerings
Additional authorized value of securities	$ 350,000
Share authorized value (ATM)	$ 40,000
Series E preferred shares
Equity Offerings
Stock offering, net of issuance cost and underwriting fees						$ 31,000
Preferred stock, par value \| $ / shares						$ 0.001
Number of tranches \| tranche						2
Shelf Registration
Equity Offerings
Registration period							3 years
Shelf Registration \| Maximum
Equity Offerings
Additional authorized value of securities							$ 350,000
2020 Shelf Registration \| Maximum
Equity Offerings
Additional authorized value of securities									$ 40,000
ATM
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares) \| shares		245,887
Stock offering, net of issuance cost and underwriting fees		$ 9,994
ATM \| Maximum
Equity Offerings
Additional authorized value of securities							$ 75,000
Open Market Sale Agreement
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares) \| shares								229,378
Stock offering, net of issuance cost and underwriting fees								$ 4,899
Amended and Restated Sales Agreement and the Open Market Sale Agreement in aggregate
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares) \| shares								475,265
Stock offering, net of issuance cost and underwriting fees								$ 14,893
Securities Purchase Agreement, Tranche One
Equity Offerings
Stock offering, net of issuance cost and underwriting fees					$ 6,000
Securities Purchase Agreement, Tranche One \| Preferred stock
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares) \| shares					9,666
Share price (in dollars per share) \| $ / shares					$ 575.00
Securities Purchase Agreement, Tranche One \| Common Stock
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares) \| shares					76,813
Share price (in dollars per share) \| $ / shares					$ 5.75
Securities Purchase Agreement Tranche Two \| Preferred stock
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares) \| shares				43,478
Stock offering, net of issuance cost and underwriting fees				$ 25,000
Share price (in dollars per share) \| $ / shares				$ 575.00
Offering costs				$ 240

STOCK-BASED COMPENSATION - Fair Value Assumptions (Details)	3 Months Ended
	Mar. 31, 2023
Assumptions used in determining fair value of the stock options granted
Expected volatility	121.90%
Risk-free interest rate	3.72%
Expected dividend yield	0.00%
Expected term (in years)	6 years 1 month 6 days

STOCK-BASED COMPENSATION - Inducement Stock Option Awards (Details) - $ / shares	1 Months Ended		3 Months Ended
	Jan. 31, 2023	Jan. 31, 2022	Mar. 31, 2023
Stock-based compensation
Weighted average grant date fair value of options granted			$ 14.80
Stock Options
Stock-based compensation
Granted, options (in shares)			4,200
Conditional vesting of shares			3,960
Expected conditional vesting of shares			2,970
Stock Options \| Executive Officer \| Maximum
Stock-based compensation
Granted, options (in shares)		14,850
ESPP
Stock-based compensation
Issuance of common stock under employee stock purchase plan (in shares)	461
RSU
Stock-based compensation
Granted, other than options (in shares)			143,825

STOCK-BASED COMPENSATION - RSUs and PSUs (Details)	3 Months Ended
STOCK-BASED COMPENSATION - RSUs and PSUs (Details)	Mar. 31, 2023 USD ($) shares
RSU
Stock-based compensation
Granted, other than options (in shares)	143,825
RSU and PSU
Stock-based compensation
Outstanding balance at end of period (in shares)	148,093
Unvested outstanding balance at end of period (in shares) \| $	144,633
Vested and deferred (in shares)	3,460

STOCK-BASED COMPENSATION - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Stock-based compensation
Stock based compensation expense	$ 1,324	$ 2,805
Cost of product revenues
Stock-based compensation
Stock based compensation expense		48
Research and development
Stock-based compensation
Stock based compensation expense	385	525
Selling, general and administrative
Stock-based compensation
Stock based compensation expense	$ 939	$ 2,232

LOSS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Numerator:
Net loss attributable to common stockholders	$ (14,455)	$ (32,941)
Denominator:
Weighted average shares outstanding-basic (in shares)	2,069,186	1,485,168
Weighted average shares outstanding-diluted (in shares)	2,069,186	1,485,168
Net income (loss) per share attributable to common stockholders, basic	$ (6.99)	$ (22.18)
Net income (loss) per share attributable to common stockholders, diluted	$ (6.99)	$ (22.18)
Shares Not Issued Until Escrow Release date of February 15, 2023
Denominator:
Number of shares		19,350

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 3
-URI https://asc.fasb.org/extlink&oid=124431687&loc=d3e22583-107794

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599

+ Details

LOSS PER SHARE - Antidilutive Securities (Details) - shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Outstanding securities excluded from the computation of diluted weighted average shares outstanding as they would have been anti dilutive:
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)	5,654,811	281,600
Stock Options
Outstanding securities excluded from the computation of diluted weighted average shares outstanding as they would have been anti dilutive:
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)	191,475	256,924
RSU and PSU
Outstanding securities excluded from the computation of diluted weighted average shares outstanding as they would have been anti dilutive:
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)	144,633	20,373
Warrants
Outstanding securities excluded from the computation of diluted weighted average shares outstanding as they would have been anti dilutive:
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)	4,303	4,303
Convertible preferred stock.
Outstanding securities excluded from the computation of diluted weighted average shares outstanding as they would have been anti dilutive:
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)	5,314,400

INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended
INCOME TAXES (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
INCOME TAXES
Annual limitation amount of tax credit carryforward			$ 222
Uncertain tax positions	$ 0		$ 0
Interest or penalties recorded	$ 0	$ 0

COMMITMENTS AND CONTINGENCIES - Contingencies Related to Stanford and Merger Agreement (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended
	Mar. 31, 2023	Feb. 28, 2023	Mar. 31, 2023	Jan. 31, 2024	Nov. 15, 2021
Other Commitments [Line Items]
Contingent milestone consideration paid in shares value			$ 2,354
CHASE Phase 2b clinical trial of KPI-012
Other Commitments [Line Items]
Contingent upon specified development, regulatory and commercialization milestones	$ 175,000		$ 175,000
Combangio, Inc
Other Commitments [Line Items]
Contingent upon specified development, regulatory and commercialization milestones					$ 40,000
Combangio, Inc \| First Patient Dosed With Any Product in Phase 2 Clinical Trial, Dosing Milestone
Other Commitments [Line Items]
Potential maximum payout for contingent consideration					$ 65,000
Contingent milestone consideration paid		$ 2,500
Contingent milestone consideration paid in shares value		$ 2,354
Contingent milestone consideration paid in shares	105,038		105,038
Combangio, Inc \| First Patient Dosed With Any Product in Phase 2 Clinical Trial, Dosing Milestone \| Subsequent Events
Other Commitments [Line Items]
Contingent milestone consideration				$ 146

SUBSEQUENT EVENTS (Details) $ in Thousands	1 Months Ended
SUBSEQUENT EVENTS (Details) $ in Thousands	Apr. 30, 2023 USD ($) ft²	Dec. 31, 2022 USD ($)
Subsequent Events
Lease liability		$ 0
Subsequent Events
Subsequent Events
Area of property leased \| ft²	6,135
Lease term	62 months
Existence of option to extend	true
Renewal term	5 years
Security Deposit	$ 144
Lease liability	$ 3,077