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Document and Entity Information - USD ($) $ in Millions	12 Months Ended
Document and Entity Information - USD ($) $ in Millions	Dec. 31, 2018	Mar. 06, 2019	Jun. 29, 2018
Document and Entity Information
Entity Registrant Name	Kala Pharmaceuticals, Inc.
Entity Central Index Key	0001479419
Trading Symbol	kala
Document Type	10-K
Document Period End Date	Dec. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Shell Company	false
Entity Ex Transition Period	true
Entity Public Float			$ 205.9
Entity Common Stock, Shares Outstanding		33,882,872
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Current assets:
Cash	$ 170,898	$ 114,565
Inventory	4,095
Prepaid expenses and other current assets	2,035	648
Total current assets	177,028	115,213
Noncurrent assets:
Property and equipment, net	2,166	786
Right-of-use assets	29,566	413
Restricted cash	12,206	134
Total assets	220,966	116,546
Current liabilities:
Accounts payable	5,446	1,202
Accrued expenses	11,101	6,606
Lease liabilities	463	397
Current portion of long-term debt		6,667
Total current liabilities	17,010	14,872
Long-term liabilities:
Long-term lease liability - less current portion	28,752
Long-term debt - less current portion	70,226	11,987
Other long-term liabilities		8
Total long-term liabilities	98,978	11,995
Total liabilities	115,988	26,867
Commitments and Contingencies (Note 15)
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized as of December 31, 2018 and December 31, 2017; no shares issued or outstanding as of December 31, 2018 or December 31, 2017
Common stock, $0.001 par value; 120,000,000 shares authorized as of December 31, 2018 and December 31, 2017; 33,863,077 and 24,538,309 shares issued and outstanding as of December 31, 2018 and December 31, 2017, respectively	34	25
Additional paid-in capital	306,053	224,025
Accumulated deficit	(201,109)	(134,371)
Total stockholders' equity	104,978	89,679
Total liabilities and stockholders' equity	$ 220,966	$ 116,546

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, authorized	120,000,000	120,000,000
Common stock, shares issued	33,863,077	24,538,309
Common stock, shares outstanding	33,863,077	24,538,309

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Operating expenses:
Research and development	$ 29,290	$ 29,008
Selling, general and administrative	35,431	10,867
Total operating expenses	64,721	39,875
Loss from operations	(64,721)	(39,875)
Other income (expense):
Interest income	1,687	527
Interest expense	(3,314)	(1,019)
Loss on extinguishment of debt	(390)
Change in fair value of warrant liability		(1,844)
Total other income (expense)	(2,017)	(2,336)
Net loss	$ (66,738)	$ (42,211)
Net loss per share—basic and diluted	$ (2.49)	$ (3.71)
Weighted average shares outstanding—basic and diluted	26,753,906	11,375,000

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) - USD ($) $ in Thousands	Series Seed convertible preferred stock	Series A convertible preferred stock	Series B convertible preferred stock	Series B-1 convertible preferred stock	Series C convertible preferred stock	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Balance as of beginning of period at Dec. 31, 2016	$ 11,065	$ 10,736	$ 22,185	$ 6,885	$ 67,520
Balance as of beginning of period (in shares) at Dec. 31, 2016	11,243,209	9,583,432	15,624,999	4,629,629	42,782,688
Temporary Equity
Conversion of preferred stock upon IPO	$ (11,065)	$ (10,736)	$ (22,185)	$ (6,885)	$ (67,520)
Conversion of preferred stock upon IPO (in shares)	(11,243,209)	(9,583,432)	(15,624,999)	(4,629,629)	(42,782,688)
Balance as of beginning of period at Dec. 31, 2016						$ 1	$ 4,374	$ (92,137)	$ (87,762)
Balance as of beginning of period (in shares) at Dec. 31, 2016						1,181,429
Stockholders' Equity
Conversion of preferred stock upon IPO						$ 16	118,375		118,391
Conversion of preferred stock upon IPO (in shares)						16,101,970
Issuance of common stock, net of underwriters discount and offering costs						$ 7	93,998		94,005
Issuance of common stock, net of underwriters discount and offering costs (in shares)						6,900,000
Reclassification of preferred warrant liability							2,883		2,883
Exercise of warrants							379		379
Exercise of warrants (in shares)						106,576
Exercise of stock options						$ 1	422		423
Exercise of stock options (in shares)						248,334
Stock-based compensation expense							3,571		3,571
Net loss								(42,211)	(42,211)
Balance as of end of period at Dec. 31, 2017						$ 25	224,025	(134,371)	89,679
Balance as of end of period (in shares) at Dec. 31, 2017						24,538,309
Stockholders' Equity
Cumulative effect of a change in accounting policy							23	(23)
Issuance of common stock, net of underwriters discount and offering costs						$ 9	66,123		66,132
Issuance of common stock, net of underwriters discount and offering costs (in shares)						8,625,000
At-the-market offering, net of sales agent commission							4,634		4,634
At-the-market offering, net of sales agent commission (in shares)						518,135
Issuance of equity classified warrants, net of issuance cost							1,900		1,900
Exercise of stock options							530		530
Exercise of stock options (in shares)						181,633
Stock-based compensation expense							8,841		8,841
Net loss								(66,738)	(66,738)
Balance as of end of period at Dec. 31, 2018						$ 34	$ 306,053	$ (201,109)	$ 104,978
Balance as of end of period (in shares) at Dec. 31, 2018						33,863,077

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) - (Parenthetical) $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($)
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
Underwriters discount and offering costs	$ 5,000
Sales agent commission	$ 100

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Cash flows from operating activities:
Net loss	$ (66,738)	$ (42,211)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation	352	287
Amortization of right-of-use assets	603	356
Change in fair value of warrant liability		1,844
Loss of extinguishment of debt	390
Amortization of debt discount and other non-cash interest	274	111
Stock-based compensation	8,615	3,571
Change in operating assets and liabilities
Prepaid expenses and other current assets	(1,387)	(494)
Inventory	(3,868)
Accounts payable	4,088	205
Accrued expenses	3,968	2,601
Lease liabilities and other long-term liabilities	(418)	(368)
Lease liabilities and other long-term liabilities		(361)
Net cash used in operating activities	(54,121)	(34,098)
Cash flows from investing activities:
Purchases of property and equipment	(1,578)	(480)
Net cash used in investing activities	(1,578)	(480)
Cash flows from financing activities:
Proceeds from common stock offerings, net of underwriters' discounts and offering cost	70,766	94,005
Proceeds from venture debt, net of debt issuance costs of $50 and $0	2,728	10,000
Proceeds from issuance of debt and warrants, net of debt issuance costs of $3,073	71,927
Payment of principal and prepayment penalty on venture debt	(21,847)	(1,111)
Proceeds from exercise of warrants		379
Proceeds from exercise of stock options	530	423
Net cash provided by financing activities	124,104	103,696
Net increase in cash and restricted cash	68,405	69,118
Cash and restricted cash at beginning of period	114,699	45,581
Cash and restricted cash at end of period	183,104	114,699
Reconciliation of cash and restricted cash:
Cash and restricted cash at end of period	183,104	114,699
Less restricted cash	(12,206)	(134)
Cash at end of period	170,898	114,565
Non-cash investing and financing activities:
Conversion of convertible preferred stock into common stock		118,391
Right-of-use asset obtained in exchange for operating lease obligation	29,427
Reclassification of warrants to additional paid-in capital		2,883
Cashless exercise of warrants		411
Purchases of property and equipment in accounts payable	155
Supplemental disclosure:
Cash paid for interest	$ 3,041	$ 863

CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Debt issuance costs	$ 3,073
Venture debt
Debt issuance costs	$ 50	$ 0

Nature of business	12 Months Ended
Nature of business	Dec. 31, 2018
Nature of business
Nature of business	Note 1: Nature of business Nature of Business—Kala Pharmaceuticals, Inc. (the “Company”) was incorporated on July 7, 2009, and is a biopharmaceutical company focused on the development and commercialization of therapeutics using its AMPPLIFY™ mucus-penetrating particle (“MPP”) Drug Delivery Technology (“AMPPLIFY”), with an initial focus on the treatment of eye diseases. The Company has applied the AMPPLIFY technology to loteprednol etabonate, (“LE”), a corticosteroid designed for ocular applications, resulting in the August 2018 U.S. Food and Drug Administration’s (the “FDA”), approval of INVELTYS™ (loteprednol etabonate ophthalmic suspension) 1% as a twice-daily ocular corticosteroid for treatment of post-operative inflammation and pain following ocular surgery on August 22, 2018, and the development of its lead product candidate, KPI-121 0.25%, for the temporary relief of the signs and symptoms of dry eye disease. On October 16, 2018, the Company submitted a New Drug Application (“NDA”) to the FDA for KPI-121 0.25%, for which the FDA has granted a target action date under the Prescription Drug User Fee Act (“PDUFA”) of August 15, 2019. In addition, based upon the recommendation of the FDA, the Company initiated an additional Phase 3 clinical trial (“STRIDE 3”) ( STRIDE- S hort T erm R elief I n D ry E ye), in the third quarter of 2018 evaluating KPI-121 0.25% for the temporary relief of the signs and symptoms of dry eye disease. The Company expects to receive top-line results for STRIDE 3 in the fourth quarter of 2019. The Company is evaluating opportunities for MPP nanosuspensions of LE with less frequent daily dosing regimens for the temporary relief of the signs and symptoms of dry eye disease and for potential chronic treatment of dry eye disease. The Company is also evaluating compounds in its receptor Tyrosine Kinase Inhibitor program (the “ rTKI program”), that inhibit the vascular endothelial growth factor, (“VEGF”), pathway, for the potential treatment of a number of retinal diseases. The Company is engaged in commercializing a product, research and development activities, raising capital and recruiting skilled personnel. The Company is subject to a number of risks similar to those of other companies conducting high‑risk, early‑stage research and development of pharmaceutical product candidates. Principal among these risks are dependence on key individuals and intellectual property, competition from other products and companies and the technical risks associated with the successful research, development and marketing of its product candidates. The Company’s success is dependent upon its ability to raise additional capital in order to fund ongoing research and development, obtain regulatory approval of its product candidates, successfully commercialize its products, generate revenue, meet its obligations, and, ultimately, attain profitable operations. Initial Public Offering—On July 25, 2017, the Company completed its initial public offering (“IPO”) of common stock pursuant to its registration statement on Form S‑1, as amended (File No. 333‑218936), which was declared effective by the Securities and Exchange Commission (the “SEC”) on July 19, 2017. Pursuant to the registration statement, the Company issued and sold 6,900,000 shares of $0.001 par value common stock at an initial offering price of $15.00 per share, which included 900,000 shares of common stock pursuant to the underwriters’ option to purchase additional shares. The Company’s shares began trading on the Nasdaq Global Select Market under the symbol “KALA” on July 20, 2017. Proceeds from the Company’s IPO were approximately $94.0 million after deducting underwriting discounts and commissions of $7.3 million and offering costs of $2.2 million. Upon the closing of the IPO, all of the Company’s outstanding shares of convertible preferred stock automatically converted into 16,101,970 shares of common stock at the applicable conversion ratio then in effect. All of the Company’s outstanding warrants to purchase preferred stock automatically converted into warrants to purchase 202,020 shares of common stock. October 2018 Financings— On August 9, 2018, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on August 27, 2018 (the “Shelf Registration”). Under the Shelf Registration, the Company may offer and sell up to $250.0 million of a variety of securities including common stock, preferred stock, warrants, depositary shares, debt securities, purchase contracts, purchase units or any combination of such securities during the three-year period that commenced upon the Shelf Registration becoming effective. On October 5, 2018, the Company sold 7,500,000 shares of the Company’s common stock (the “Shares”) in an underwritten offering pursuant to the Shelf Registration at a public offering price of $8.25 per share, before underwriting discounts and commissions. In addition, the underwriters were granted an overallotment option to purchase an additional 1,125,000 shares of the common stock at the same public offering price, less underwriting discounts and commissions (the “Overallotment Shares”). On October 11, 2018, the underwriters exercised in full their option to purchase the Overallotment Shares. The total number of Shares and Overallotment Shares sold by the Company in the offering was 8,625,000 shares, resulting in net proceeds to the Company, after underwriting discounts and offering expenses, of approximately $66.1 million. In connection with the filing of the Shelf Registration, the Company entered into a sales agreement with Jefferies, LLC (the “Sales Agreement”) pursuant to which the Company may issue and sell, from time to time, up to an aggregate of $50.0 million of its common stock in an at-the-market equity offering (“ATM Offering”) through Jefferies, LLC, as sales agent. As of December 31, 2018 the Company issued 518,135 shares of its common stock under the ATM Offering at the average price of $9.41 per share, resulting in net proceeds to the Company of approximately $4.6 million. Under the Shelf Registration, the Company may periodically offer one or more types of securities in amounts, at prices and on terms announced, if and when the securities are ever offered, of up to an additional $174.0 million. On October 1, 2018, the Company entered into a credit agreement (the “Athyrium Credit Facility”), with Athyrium Opportunities III Acquisition LP (“Athyrium”). The Athyrium Credit Facility provides for a Term Loan A in the aggregate principal amount of $75.0 million (the “Athyrium Term Loan A”), and a Term Loan B in the aggregate principal amount of $35.0 million (the “Athyrium Term Loan B”). On October 1, 2018, the Company borrowed the entire principal amount of the Athyrium Term A Loan. The Company may draw down the Athyrium Term Loan B upon either (i) FDA approval of KPI-121 0.25% for a dry eye disease indication or (ii) reaching certain net product revenues for INVELTYS, in each case on or prior to June 30, 2020.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2018

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 2: Summary of Significant Accounting Policies

Principles of consolidation—The accompanying consolidated financial statements include the accounts of Kala Pharmaceuticals, Inc. and its wholly owned subsidiary, Kala Pharmaceuticals Security Corporation, which is a Massachusetts subsidiary created to buy, sell and hold securities. All intercompany transactions and balances have been eliminated.

Basis of Presentation—The accompanying consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Since inception, the Company has not generated revenue from the sale of products and has incurred recurring losses and negative cash flows from operations, including a net loss of $66.7 million and $42.2 million, for the years ended December 31, 2018 and 2017, respectively, and used cash in operations of $54.1 million and $34.1 million, in the years ended December 31, 2018 and 2017, respectively. The Company has financed its operations to date primarily through the issuance of common stock, convertible preferred stock, convertible promissory notes and debt. The Company expects to incur additional operating losses and negative operating cash flows for the foreseeable future. The Company expects that the existing cash on hand as of December 31, 2018 will enable it to fund its planned operating expenses, debt service obligations and capital expenditure requirements for at least 12 months from the date these 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 consolidated financial statements are issued. As a result, the Company could deplete its available capital resources sooner than it expects.

Common Stock Reverse Stock Split and Adjustment to Preferred Stock Conversion Ratios—On July 7, 2017, the Company effected a one-for-5.2083 reverse stock split of the Company’s issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for the Company’s convertible preferred stock. The par value per share and authorized shares of common and convertible preferred stock were not adjusted as a result of the reverse stock split. All common stock and common stock per share amounts within the financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.

Automatic Conversion of Preferred Stock—On July 7, 2017, the Company effected an amendment to its Amended and Restated Certificate of Incorporation, as amended. This amendment eliminated the minimum price per share of Common Stock for an underwritten public offering that would result in the automatic conversion of all outstanding shares of the Company’s Series Seed, Series A, Series B, Series B-1 and Series C Preferred Stock.

Use of Estimates—The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“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 relied upon in preparing these consolidated financial statements relate to, but are not limited to, the present value of lease liabilities and the corresponding right-of-use assets, the fair value of warrants, stock compensation, accrued expenses 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.

Cash and Concentration of Credit Risk—Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company deposits its cash in financial institutions that it believes have high credit quality and has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Restricted Cash—As of December 31, 2018 and 2017, the Company had restricted cash of $12.2 million and $0.1 million, respectively, which represents cash held in money market accounts to satisfy our financial covenant (See Note 8) and serve as collateral for the Company’s credit cards and facility leases. This cash is classified as a non-current asset in the accompanying consolidated balance sheets.

Inventory—Inventory is stated at the lower of cost or net realizable value, on a first-in, first-out (“FIFO”) method. Costs include amounts related to third party manufacturing, transportation, internal labor and overhead. Capitalization of costs as inventory begins when the product has received regulatory approval in the U.S. We expense inventory costs related to product candidates as research and development expenses prior to regulatory approval in the respective territory, even if this inventory may later be sold. For INVELTYS, capitalization of costs as inventory began upon U.S. regulatory approval on August 22, 2018. Inventory also includes costs of product samples prior to shipment.

Leases—At the inception of an arrangement the Company determines whether the arrangement is or contains a lease based on the unique and circumstances present. Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one-year or less. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

The components of a lease should be split into three categories: lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, maintenance, consumables, etc.), and non-components (e.g., property taxes, insurance, etc.). Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components. Although separation of lease and non-lease components is required, certain practical expedients are available to entities. Entities electing the practical expedient would not separate lease and non-lease components. Rather, they would account for each lease component and the related non-lease component together as a single component. The Company’s facilities operating leases have lease and non-lease components which the Company has elected to use the practical expedient and account for each lease component and related non-lease component as one single component. The lease component results in a right-of-use asset being recorded on the balance sheet and amortized as lease expense on a straight-line basis to the statements of operations.

Property and Equipment, net—Property and equipment are recorded at cost. Depreciation is provided using the straight‑line method over the estimated useful lives of the related assets. Depreciation expense is included in operations. Laboratory equipment and office and computer equipment is depreciated over three to five years. Leasehold improvements are depreciated over the shorter of their useful life or the life of the lease. Major additions and upgrades are capitalized; maintenance and repairs, which do not improve or extend the life of the respective assets, are expensed as incurred. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in loss from operations.

Patent Costs—Costs to secure and defend patents are expensed as incurred and are classified as selling, general and administrative expenses in the Company’s consolidated statements of operations.

Impairment of Long‑Lived Assets—Long‑lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If the undiscounted cash flows are insufficient to recover the carrying value, the assets are recorded at the lesser of the carrying value or fair value. For the years ended December 31, 2018 and 2017, no impairments were recorded.

Fair Value Measurements—Certain assets and liabilities are carried at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

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 preferred stock warrant liability, prior to conversion to common stock warrants, was carried at fair value determined according to the fair value hierarchy described above and classified as a Level 3 measurement. Upon the completion of the IPO, the Company’s outstanding warrants to purchase preferred stock converted into warrants to purchase common stock and the Company reclassified the fair value of the warrant liability to additional paid-in capital (Note 10).The carrying value of accounts payable and accrued expenses approximate their fair value due to the short‑term nature of these assets and liabilities. Management believes that the Company’s long‑term debt (See Note 8 ) bears interest at the prevailing market rate for instruments with similar characteristics and, accordingly, the carrying value of long‑term debt, including the current portion, also approximates its fair value. The fair value of the outstanding debt was estimated using a discounted cash flow analysis based on current market interest rates for debt issuances with similar remaining years to maturity, adjusted for credit risk, which represents a Level 3 measurement.

Segment Information—Operating segments are identified as components of an enterprise about which separate discrete financial information is made available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The CODM is the Company’s Chief Executive Officer. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is on the development and commercialization of therapeutics using its proprietary AMPPLIFY technology. All of the Company’s tangible assets are held in the United States. To date, all of the Company’s revenue has been generated in the United States.

Research and Development Costs—Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits for full‑time research and development employees, an allocation of facilities expenses, overhead expenses, payments to universities under the Company’s license agreements and other outside expenses. Research and development costs are expensed as incurred. Research and development costs that are paid in advance of performance, including nonrefundable prepayments for goods or services, are deferred and capitalized as a prepaid expense. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.

Accrued Expenses—The Company accrues expenses related to development activities performed by third parties based on an evaluation of services received and efforts expended pursuant to the terms of the contractual arrangements. Payments under some of these contracts depend on clinical trial milestones. There may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of expenses. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual or prepaid expense accordingly.

Stock‑Based Compensation—The Company accounts for all stock‑based payment awards granted to employees and non‑employees as compensation expense at fair value. The Company’s stock‑based payments include stock options and grants of common stock, including common stock subject to vesting. The measurement date for employee awards is the date of grant, and stock‑based compensation costs are recognized as expense over the employees’ requisite service period, which is the vesting period, on a straight‑line basis. The measurement date for nonemployee awards is generally the date the services are completed, resulting in periodic adjustments to stock‑based compensation during the vesting terms for changes in the fair value of the awards. Stock‑based compensation costs for nonemployees are recognized as expense over the vesting period on a straight‑line basis. Stock‑based compensation is classified in the accompanying consolidated statements of operations based on the function to which the related services are provided, or capitalized with inventory until related expense is recognized.

The Company recognizes compensation expense for the portion of awards that have vested. After the adoption of Accounting Standards Update (“ASU”) 2016-09, described in further detail below, forfeitures are recorded as they occur.

The fair value of each stock option grant is estimated on the date of grant using the Black‑Scholes option‑pricing model. The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates. The Company lacks sufficient company‑specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and will continue to do so until it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain‑vanilla” options. The expected term of stock options granted to non‑employees is equal to the contractual term of the option award. The risk‑free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

Common Stock Valuation Prior to the IPO—Through the consummation of the IPO in July 2017, due to the absence of an active market for the Company’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately‑Held Company Equity Securities Issued as Compensation, to estimate the fair value of its common stock. In determining the exercise prices for options granted, the Company has considered the estimated fair value of the common stock as of the measurement date. The estimated fair value of the common stock has been determined at each grant date based upon a variety of factors, including the illiquid nature of the common stock, arm’s‑length sales of the Company’s capital stock (including redeemable convertible preferred stock), the effect of the rights and preferences of the preferred shareholders, and the prospects of a liquidity event. Among other factors are the Company’s financial position and historical financial performance, the status of technological developments within the Company’s research, the composition and ability of the current research and management team, an evaluation or benchmark of the Company’s competition, and the current business climate in the marketplace. Significant changes to the key assumptions underlying the factors used could have resulted in different fair values of common stock at each valuation date.

Preferred Stock Warrants—Prior to the completion of the IPO in July 2017, the Company classified warrants to purchase shares of its Series Seed Preferred Stock, Series A Convertible Preferred Stock (“Series A Preferred Stock”), Series B Preferred Stock (“Series B Preferred Stock”), and Series C Preferred Stock (“Series C Preferred Stock”) as a liability on its consolidated balance sheets as these warrants were free‑standing financial instruments that were exercisable for contingently redeemable shares. The warrants were recorded in long‑term liabilities at fair value, estimated using the Black‑Scholes model, and marked to market at each balance sheet date. The change in carrying value was reported as the change in fair value of warrant liability in the accompanying consolidated statements of operations. The Company continued to adjust the liability for changes in fair value until conversion of the preferred stock warrants to warrants to purchase common stock (see Note 10).

Income Taxes—Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the Company’s consolidated financial statements and tax returns. Deferred tax assets and liabilities are determined based upon the differences between the consolidated financial statement carrying amounts and the tax bases of existing assets and liabilities and for loss and credit carryforwards using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As a result, reserves are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present.

Tax Incentives—The Company recognizes tax incentives when there is reasonable assurance that the Company will comply with the conditions attached to the tax incentive agreement and the tax incentive will be received. The Company evaluates the conditions of each individual tax incentive as of each reporting period to ensure that the Company has reached reasonable assurance of meeting the conditions of each tax incentive agreement and that it is expected that the tax incentive will be received as a result of meeting the necessary conditions. When tax incentives are related to reimbursements for cost of revenues or operating expenses, the tax incentives are recognized as a reduction of the related expense in the consolidated statements of operations when the related expense has been incurred.

The Company records tax incentive receivables in the consolidated balance sheets in prepaid expenses and other current assets or long-term tax incentive receivable, depending on when the amounts are expected to be received from the funding agency. As of December 31, 2018 and 2017, the Company had recorded no receivable from tax incentives.

Net Loss per Share—Basic net loss per share is computed using the weighted‑average number of common shares outstanding during the period. Diluted net loss per share is computed using the 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. Net loss per share attributable to common stockholders is calculated using the two‑class method, which is an earnings allocation formula that determines net loss per share for the holders of the Company’s common shares and participating securities. The Company’s convertible preferred stock contains participation rights in any dividend paid by the Company and is deemed to be a participating security. Net loss attributable to common stockholders and participating preferred shares are allocated to each share on an as‑converted basis as if all of the earnings for the period had been distributed. The participating securities do not include a contractual obligation to share in losses of the Company and are not included in the calculation of net loss per share in the periods in which a net loss is recorded.

Diluted net loss per share is computed using the more dilutive of (a) the two‑class method or (b) the if converted method. The Company allocates earnings first to preferred stockholders based on dividend rights and then to common and preferred stockholders based on ownership interests. 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, preferred stock and the potential issuance of stock upon the conversion of the Company’s convertible notes. Common stock equivalent shares are excluded from the computation of diluted net loss per share 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. When a gain had been recorded pursuant to a change in fair value of the warrant liability during the period, the Company assessed whether the impact of reversing the gain and including the additional securities was dilutive, and if so, adjusted dilutive EPS. The Company reported a net loss attributable to common stockholders for the years ended December 31, 2018 and 2017.

The Company previously reported weighted average shares outstanding – basic and diluted of 6,903,239 shares and net loss per share attributable to common stockholders – basic and diluted of $6.11 for the year ended December 31, 2017. Subsequent to reporting the Company’s financial statements as of and for the year ended December 31, 2017, an immaterial error was identified resulting in a correction of the weighted average shares outstanding – basic and diluted to 11,375,000 shares and net loss per share – basic and diluted of $3.71 for the year ended December 31, 2017. These financial statements include the corrected amounts.

Comprehensive Loss—Comprehensive loss is equal to net loss for the periods presented.

Recently Adopted Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016‑09, Improvements to Employee Share‑Based Payment Accounting (“ASU 2016‑09”), which simplifies share‑based payment accounting through a variety of amendments. The standard is effective for annual periods beginning after December 15, 2016 and for interim periods within those fiscal years. The changes resulting from the adoption of this standard impact the accounting for income taxes, accounting for forfeitures, statutory tax withholding and the presentation of statutory tax withholding on the consolidated statement of cash flows. The Company adopted this standard on January 1, 2017. Under guidance within ASU 2016‑09, excess tax benefits and deficiencies are to be recognized as income tax expense or benefit in the consolidated statement of operations in the period in which they occur rather than as an increase or decrease in stockholders’ equity (deficit). Since the Company maintains a full valuation allowance on its net deferred tax assets, there was no net impact to its accumulated deficit or its net loss resulting from the adoption of this standard. Also under the guidance in ASU 2016‑09, an entity may elect to account for forfeitures as they occur or continue to estimate the total number of awards that are vested or expected to vest. The Company elected to account for forfeitures as they occur and applied the accounting change on a modified retrospective basis as a cumulative effect adjustment to accumulated deficit as of the date of adoption, January 1, 2017. The adoption of this standard did not have a material impact on the Company’s financial position, results of operations or consolidated statement of cash flows.

In November 2016, the FASB issued ASU 2016‑18, Statement of Cash Flows Restricted Cash (“ASU 2016‑18”). This new standard requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning‑of‑period and end‑of‑period total amounts shown on the consolidated statement of cash flows. This guidance was effective for annual and interim reporting periods beginning after December 15, 2017, and required retrospective application. The Company elected to early adopt this guidance as of December 31, 2017. The adoption of this standard did not have a material impact on the consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU No. 2016‑15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (“ASU 2016‑15”), to address diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard was effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. ASU 2016-15 should be applied retrospectively and early adoption is permitted, including adoption in an interim period. The Company has adopted this new standard as of January 1, 2018. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (“Topic 718”): Scope of Modification Accounting (“ASU 2017-09”), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments in ASU 2017-09 are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. The Company has prospectively adopted this new standard as of January 1, 2018. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which provides guidance to enhance the transparency and comparability of financial reporting related to leasing arrangements. Under this new lease standard, most leases are required to be recognized on the balance sheet as right-of-use assets and corresponding lease liabilities. Disclosure requirements have been enhanced with the objective of enabling financial statement users to assess the amount, timing, and uncertainty of cash flows arising from leases.

The Company elected to early adopt ASU 2016-02, effective January 1, 2018. The standard has been implemented using the required modified retrospective approach and the Company has also elected to utilize the available practical expedients. In using the modified retrospective approach, the Company was required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented. Prior period results have been restated resulting in adjustments to the consolidated balance sheets and the consolidated statement of cash flows. The adoption of this standard did not have a material impact on the consolidated statement of operations. The impact on the consolidated balance sheet as of December 31, 2017 and the consolidated statement of cash flows for the year ended December 31, 2017 is shown below.

Impact to Previously Reported Results

From December 31, 2017 consolidated balance sheet (in thousands):


	As Previously Reported		New Lease Standard Adjustment		As Restated
Right-of-use asset	$	—	$	413	$	413
Accrued expenses	$	6,589	$	17	$	6,606
Other current and long-term liabilities	$	9	$	(1)	$	8
Lease liabilities	$	—	$	397	$	397

For the year ended December 31, 2017 consolidated statement of cash flows (in thousands):


	As Previously Reported		New Lease Standard Adjustment		As Restated
Amortization of right-of-use asset	$	—	$	356	$	356
Accrued expenses	$	2,596		5	$	2,601
Lease liabilities	$	—	$	(361)	$	(361)

Recently Issued Accounting Pronouncements

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation Improvements to Nonemployee Share-Based Payment Accounting (“Topic 718”). The ASU substantially aligns accounting for share-based payments to employees and non-employees. This ASU will become effective for annual periods beginning after December 15, 2018, including interim periods within that period, and early adoption is permitted. The Company does not expect this ASU to have a material effect on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement ( “Topic 820”) . The ASU is intended to improve the effectiveness of disclosures in the notes to financial statements related to fair value measurements in Topic 820. This ASU will become effective for annual periods beginning after December 15, 2019, including interim periods within that period, and early adoption is permitted. The Company is currently evaluating the effect of this new guidance on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“Subtopic 350-40”). This ASU aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. This ASU will become effective for annual periods beginning after December 15, 2019, including interim periods within that period, and early adoption is permitted. The Company does not expect this ASU to have a material effect on its consolidated financial statements.

Prepaid Expenses and Other Current Assets

12 Months Ended

Dec. 31, 2018

Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other Current Assets

Note 3: Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other Current Assets, consists of the following (in thousands):


	December 31,		December 31,
	2018		2017

Insurance	$	532	$	452
Receivable for construction related to facility		1,026		—
Other		477		196
Prepaid expenses and other current assets	$	2,035	$	648

Property and Equipment, Net

12 Months Ended

Dec. 31, 2018

Property and Equipment, Net

Property and Equipment, Net

Note 4: Property and Equipment, Net

Property and equipment, net, consists of the following (in thousands):


	December 31,		December 31,
	2018		2017

Equipment	$	2,400	$	2,084
Leasehold improvements		114		114
Computer hardware and software		599		87
Furniture and office equipment		67		41
Construction in progress		804		—
Property and equipment—at cost		3,984		2,326
Less: Accumulated depreciation		(1,818)		(1,540)
Property and equipment—net	$	2,166	$	786

Depreciation expense for the years ended December 31, 2018 and 2017 was $0.4 million and $0.3 million respectively.

Inventory

12 Months Ended

Dec. 31, 2018

Inventory

Inventory

Note 5: Inventory

Inventory consists of the following (in thousands):


	December 31,		December 31,
	2018		2017

Raw materials	$	350	$	—
Work in progress		3,357		—
Finished goods		388		—
Inventory	$	4,095	$	—

Accrued Expenses

12 Months Ended

Dec. 31, 2018

Accrued Expenses

Accrued Expenses

Note 6: Accrued Expenses

Accrued expenses consist of the following (in thousands):


	December 31,		December 31,
	2018		2017

Development costs	$	1,223	$	3,054
Compensation and benefits		5,352		2,402
Contract manufacturing		434		—
Commercialization cost		1,722		—
Professional services		1,019		895
Payable related to construction of facility		1,026		—
Other		325		255
Accrued expenses	$	11,101	$	6,606

Lease

12 Months Ended

Dec. 31, 2018

Lease

Lease

Note 7: Lease

The Company entered into a three‑year lease agreement for its former headquarters (the “Waltham Lease”) on September 30, 2013, with a commencement date of February 1, 2014. On June 30, 2016, the Waltham Lease was amended to extend the term from January 31, 2017 to January 31, 2019. In connection with the lease agreement, the Company issued a letter of credit to the landlord for $84,000. The Company secured the letter of credit for the full amount of the letter with cash on deposit, which is reported as restricted cash. With the adoption of ASU 2016-02, the Company has recorded a right-of-use asset and corresponding lease liability. As of December 31, 2018, and December 31, 2017, the remaining lease term on the operating lease for the Waltham Lease was 0.08 years and 1.08 years, respectively. As of December 31, 2018, and December 31, 2017, the discount rate was 6.50% for the Waltham Lease. Amortization of the operating lease right-of-use asset for the Waltham Lease amounted to $0.4 million for the year ended December 31, 2018 and was included in operating expense.

On February 28, 2018, the Company entered into a lease agreement with 480 Arsenal Group LLC (the “Arsenal Group”) for the lease of a portion of the building located at 490 Arsenal Way Watertown, Massachusetts (the “Watertown Lease”). The initial term of the Watertown Lease is eight years with an option to extend for an additional five years, which are recognized as part of our right of use asset and lease liability. The Company has begun to occupy the premises in Watertown in early 2019 as its new corporate headquarters and for research and development. The lease commencement date was November 15, 2018 and the Company has concluded that it controls the space, as defined in ASU 2016-02, as of the lease commencement date.

The Company identified and assessed the following significant assumptions in recognizing the right-of-use asset and corresponding liability.

Expected lease term - The expected lease term includes both contractual lease periods and, when applicable, cancelable option periods where failure to exercise such options would result in an economic penalty.

Incremental borrowing rate- As the Company’s lease does not provide an implicit rate, the Company estimated the incremental borrowing rate based on a yield curve analysis, utilizing the interest rate derived from the fair value analysis of the Company’s recent Athyrium Credit Facility and adjusting it for factors that reflect the profile of secured borrowing over the expected term of the lease.

The Company recognized the right-of-use asset and corresponding lease liability on November 15, 2018, by calculating the present value of lease payments, discounted at 9.9%, the Company’s estimated incremental borrowing rate, over the 13 year expected term. Amortization of the operating lease right-of-use asset for the Watertown Lease amounted to $0.2 million for the year ended December 31, 2018 and was included in operating expense. The variable lease expense, which includes common area maintenance and real estate taxes was $82,600 as of December 31, 2018. As of December 31, 2018 the remaining lease term on the Arsenal Lease was 12.83 years.

In connection with the Watertown Lease, the Company issued a letter of credit to the Arsenal Group for $2.0 million. The Company secured the letter of credit for the full amount of the letter with cash on deposit, which is reported as restricted cash.

On March 15, 2018, the Company entered into a lease agreement with Duffy Associates, LLC for the lease of a portion of the building located at 465 Waverley Oaks Road, Suite 301, Waltham, Massachusetts (the “Waverley Oaks Lease”). The term of the Waverley Oaks Lease is one-year, and as such a right-of-use asset and corresponding lease liability has not been recorded in accordance with the Company’s accounting policy election to exclude short-tern leases. The Company used this location for additional corporate offices before moving to its new corporate headquarters in Watertown, Massachusetts.

The components of lease expense and related cash flows were as follows (in thousands):


	For the year ended December 31,
	2018		2017
Lease cost
Operating lease cost	$	1,099	$	396
Short-term lease cost		183		—
Total lease cost	$	1,282	$	396

Operating cash flows from operating leases	$	905	$	396

Maturities of lease liability due under these lease agreements as of December 31, 2018 are as follows (in thousands):


Years Ending December 31,		Operating Lease Obligation		Other Lease Obligations		Total
2019	$	3,376	$	52	$	3,428
2020		3,624		—		3,624
2021		3,733		—		3,733
2022		3,845		—		3,845
2023		3,960		—		3,960
Thereafter		35,416		—		35,416
Present value adjustment		(24,739)		—		(24,739)
Present value of lease payments	$	29,215	$	52	$	29,267

Debt

12 Months Ended

Dec. 31, 2018

Debt

Debt

Note 8: Debt

2014 Debt Facility

In November 2014, the Company entered into a venture debt facility (“2014 Debt Facility”) for a total loan commitment of $10.0 million. On October 13, 2016, the Company entered into a First Amendment to the 2014 Debt Facility the (''First Amendment''), which reaffirmed the initial commitment to a total of $10.0 million of funding (“Term Loan A”) and increased the Company’s total borrowing capacity by an additional $10.0 million (“Term Loan B” and together with Term Loan A, ''Term Loans''). On September 28, 2017, the Company drew the additional $10.0 million available under Term Loan B. On November 22, 2017, the Company entered into a Second Amendment to the 2014 Debt Facility to account for the formation of the Company’s wholly-owned subsidiary. On March 29, 2018, the Company entered into a Third Amendment to the 2014 Debt Facility (the “Third Amendment”), which reaffirmed the initial commitment to a total of $20.0 million of funding, increased the Company’s total borrowing capacity by an additional $5.0 million and extended the interest-only end date for 12 months following the execution of the Third Amendment. The maturity date of the 2014 Debt Facility was also extended from October 13, 2020 to March 29, 2022.

The 2014 Debt Facility, as amended, was senior debt and was secured by substantially all of the assets of the Company other than intellectual property. In the event the Company was determined to be in default under the 2014 Debt Facility, the outstanding balance were to accrue interest at five percentage points above the interest rate applicable immediately prior to the occurrence of the event of default and the lender had the right to declare all outstanding principal and interest payable. Under the terms of the 2014 Debt Facility, certain events including but not limited to, the Company’s failure to pay obligations when due, failure to perform obligations under the agreement, insolvency or the occurrence of any circumstance that could reasonably be expected to have a material adverse effect on the Company, constituted events of default.

In connection with the 2014 Debt Facility and the initial borrowing of $5.0 million under Term Loan A, the Company issued warrants to the lender to purchase 138,889 shares of Series B Preferred Stock at an exercise price of $1.44 per share (the “2014 Warrants”). During 2015 the Company borrowed an additional $5.0 million under Term Loan A and the number of exercisable shares underlying the 2014 Warrants increased to 277,778 shares of Series B Preferred Stock or 53,333 shares of common stock at an exercise price of $7.50 per share on an as-converted basis (see Note 9). Upon executing the First Amendment, the Company issued warrants to purchase up to 251,951 shares of Series C Preferred Stock at an exercise price of $1.59 per share (the “2016 Warrants”), or 48,374 shares of common stock at an exercise price of $8.27 per share on an as-converted basis (see Note 9). Consistent with the warrants issued under the original 2014 Debt Facility, the number of shares of Series C Preferred Stock that become exercisable would increase in proportion to the amount of Term Loan B borrowings. Upon the September 28, 2017 draw down of Term Loan B, the 2016 Warrants became exercisable into 48,374 shares of common stock.

Under the terms of the 2014 Debt Facility, the borrowings accrued interest at an annual rate equal to 3.00% above the Prime Rate then in effect. The applicable interest rate for the outstanding principal balance was 8.25% as of the repayment date of October 1, 2018 and 7.50% as of December 31, 2017. The Company recognized interest expense of $1.2 million and $1.0 million, related to the 2014 Debt Facility during the years ended December 31, 2018 and 2017, respectively, which consisted of the amortization of the debt discount of $74,000 and $0.1 million, respectively, and contractual coupon interest of $1.1 million and $0.9 million, respectively.

As of December 31, 2017, the unpaid principal balance under the 2014 Debt Facility was $18.9 million and the unamortized discount was $0.2 million. On October 1, 2018, the Company repaid the outstanding principal balance under the 2014 Debt Facility of $20.0 million. In connection with the repayment of the 2014 Debt Facility, the Company paid a prepayment fee of $0.2 million.

Athyrium Credit Facility

On October 1, 2018, the Company entered into a $110.0 million Athyrium Credit Facility with Athyrium. The Athyrium Credit Facility provides for an Athyrium Term Loan A in the aggregate principal amount of $75.0 million, and an Athyrium Term Loan B in the aggregate principal amount of $35.0 million. On October 1, 2018, the Company borrowed the entire principal amount of the Athyrium Term Loan A. The Company may draw down the Athyrium Term Loan B upon either (i) FDA approval of KPI-121 0.25% for a dry eye disease indication or (ii) reaching certain net product revenues for INVELTYS, in each case on or prior to June 30, 2020. The maturity date of the Athyrium Credit Facility is October 1, 2024, the six-year anniversary of the close.

The Athyrium Term Loan A bears interest at a rate of 9.875% per annum, with quarterly, interest-only payments until the fourth anniversary of the Athyrium Term Loan A. The unpaid principal amount of the Athyrium Term Loan A is due and payable in quarterly installments starting on the fourth anniversary of the loan. The Company may make voluntary prepayments, in whole or in part, and subject to certain exceptions, is required to make mandatory prepayments upon the occurrence of certain events of default as defined in the agreement, including but not limited to , the occurrence of a change of control. In addition, upon payment or repayment of any outstanding balance under the Athyrium Credit Facility, the Company will have to pay a 1% exit fee of the total principal payments (whether mandatory, voluntary, or at maturity) made throughout the term. The exit fee of $0.7 million based on the $75 million principal amount outstanding, will be accreted to the carrying amount of the debt using the effective interest method over the term of the loan.

All mandatory and voluntary prepayments of the Athyrium Credit Facility are subject to the payment of prepayment premiums as follows: (i) if prepayment occurs prior to the second anniversary of the applicable date of issuance, an amount equal to the amount by which (a) the present value of 105% of the principal prepaid plus all interest that would have accrued on such principal through such second anniversary exceeds (b) the amount of principal prepaid, (ii) if prepayment occurs on or after the second anniversary of the applicable date of issuance but prior to the third anniversary of such issuance, an amount equal to 3% of the principal prepaid, and (iii) if prepayment occurs on or after the third anniversary of the applicable date of issuance but prior to the fourth anniversary of such issuance, an amount equal to 2% of the principal prepaid. No prepayment premium is due on any principal prepaid after the fourth anniversary of the applicable date of issuance.

The Athyrium Credit Facility includes two features upon the event of default requiring (1) additional interest rate upon an event of default accrued at an additional 3%, or a total interest rate of 12.875%, and (2) the lender has a right to declare all outstanding principal and interest immediately payable. 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. The Company determined that, due to the unlikely event of default, the embedded derivatives have a de minimus value as of December 31, 2018. The derivative liability will be remeasured at fair value at each reporting date, with changes in fair value being recorded as other income (expense) in the consolidated statements of operations.

The Athyrium Credit Facility is secured by a pledge of substantially all of the Company’s assets and contains affirmative and negative covenants customary for financings of this type, including limitations on the Company’s and its subsidiaries’ ability to, among other things, incur and prepay additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, change in the nature of business, enter into sale and leaseback transactions, make distributions, and enter into affiliate transactions, in each case, subject to certain exceptions. In addition, the Athyrium Credit Facility also contains a financial covenant requiring the Company to maintain at least $10.0 million of cash and cash equivalents. As of December 31, 2018, the Company was in compliance with the covenants.

In connection with the Athyrium Credit Facility, the Company issued a warrant (“Warrant”), to purchase up to 270,835 shares of the Company’s common stock, at an exercise price per share of $12.18456. The Warrant is immediately exercisable as to 184,660 shares and will become exercisable as to the remaining 86,175 shares only upon the Company’s draw of the Athyrium Term Loan B. The Warrant is exercisable through October 1, 2025. The Warrant is considered equity classified and as such, the Company allocated the proceeds from the Athyrium Term Loan A to the Warrant using the relative fair value method. The initial fair value of the Warrant of $1.9 million is recorded in equity and creates a debt discount.

In addition, the Company paid certain fees to Athyrium and other third party service provider in the aggregate amount of $3.0 million. These fees paid Athyrium were recorded as a debt discount while the fees paid to other third party service provider were recorded as debt issuance cost, respectively, in the aggregate amount of $3.0 million. These costs, along with the fair value of Warrant of $1.9 million are being amortized using the effective interest method over the term of the Athyrium Credit Facility. The amortization of debt discount and debt issuance cost is included in interest expense within the Consolidated Statements of Operations. As of December 31, 2018, the effective interest rate was 11.42%, which takes into consideration the non-cash accretion of the exit fee and the amortization of the debt discount and issuance costs.

The components of the carrying value of the debt as of December 31, 2018, are detailed below (in thousands):


	December 31,
	2018
Principal loan balance	$	75,000
Debt discount and issuance cost		(4,806)
Exit fee		32
Long-term debt, net	$	70,226

The future annual principal payments due under the Athyrium Credit Facility as of December 31, 2018 were as follows (in thousands):


Years Ending December 31,
2019		—
2020		—
2021		—
2022		16,665
2023		33,330
Thereafter		25,005
Total	$	75,000

Warrants

12 Months Ended

Dec. 31, 2018

Warrants

Warrants

Note 9: Warrants

The Company has issued warrants in connection with debt transactions that were completed prior to 2017 (see Note 8). Upon the completion of the IPO, the Company’s outstanding warrants to purchase preferred stock converted into warrants to purchase common stock.

In connection with and in consideration for the commitment of the Athyrium Credit Facility, on October 1, 2018, the Company issued to Athyrium the Warrant as described in Note 8.

The following table summarizes the common stock warrants outstanding as of December 31, 2018 and December 31, 2017, each exercisable into the number of shares of common stock set forth below as of the specified dates:


					Shares Exercisable at
	Exercise		Expiration	Exercisable	December 31,		December 31,
Issued	Price		Date	From	2018		2017
2013	$	7.50	April 2021	July 2017	82,816		82,816
2014	$	7.50	November 2024	July 2017	16,000		16,000
2016	$	8.27	October 2026	September 2017	14,512		14,512
2018	$	12.18	October 2025	October 2018	184,660		—
2018	$	12.18	October 2025	(1)	—	(1)	—
					297,988		113,328

(1)

As of December 31, 2018, warrants outstanding to acquire 86,175 of common stock are not exercisable and are only exercisable upon draw down of Athyrium Term Loan B.

Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2018

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Note 10: Fair Value of Financial Instruments

The Company classifies fair value based measurements using a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1, quoted market prices in active markets for identical assets or liabilities; Level 2, observable inputs other than quoted market prices included in Level 1, such as quoted market prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data; and Level 3, unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including estimates and assumptions developed by the Company, reflective of those that a market participant would use, as inputs to certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Cash, cash equivalents and restricted cash are Level 1 assets which are comprised of funds held in checking and money market accounts. The carrying value of accounts payable and accrued expenses approximate their fair value due to the short‑term nature of these assets and liabilities. Management believes that the Company’s long‑term debt (See Note 8) bears interest at the prevailing market rate for instruments with similar characteristics and, accordingly, the carrying value of long‑term debt, including the current portion, also approximates its fair value. The fair value of the outstanding debt was estimated using a discounted cash flow analysis based on current market interest rates for debt issuances with similar remaining years to maturity, adjusted for credit risk, which represents a Level 3 measurement. There were no transfers between fair value measurement levels during the year ended December 31, 2018 or December 31, 2017.

The Company has historically classified the value of the warrant liability as a Level 3 measurement within the fair value hierarchy because the fair value is derived using significant unobservable inputs, which included the estimated volatility, the estimated fair value of the underlying preferred stock, and to the extent that the number of exercisable shares underlying the warrants were adjustable based on the amount of the 2014 Term Loans drawn down or the probability that the Company would draw down on the 2014 Debt Facility. Upon the completion of the IPO, the Company’s outstanding warrants to purchase preferred stock converted into warrants to purchase common stock and the Company reclassified the fair value of the warrant liability to additional paid-in capital. All warrants are currently classified as equity and they are no longer re-measured to their fair value.

The following table provides a summary of changes in the fair value of the Company’s warrant liability, which is included as a component of other (income) expense which was subsequently remeasured to the fair value at the date of the IPO and reclassified to additional paid-in capital at that time (in thousands):


		Year Ended
		December 31,
	2018		2017
	Warrant		Warrant
	Liability		Liability

Fair value - December 31,	$	—	$	1,039
Change in fair value of warrant liability		—		1,844
Reclassification of preferred warrant liability		—		(2,883)
Fair value - December 31,	$	—	$	—

- 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

Preferred Stock

12 Months Ended

Dec. 31, 2018

Preferred Stock

Preferred Stock

Note 11: Preferred Stock

Adjustment to Conversion Ratios

Convertible preferred stock consisted of the following as of December 31, 2016 (in thousands, except share amounts):


								Common
								Stock
			Shares Issued					Issuable
	Designated		and	Liquidation		Carrying		Upon
	Shares	Issuance Dates	Outstanding	Value		Value		Conversion (1)
Series Seed	11,323,209	December 2009	2,000,001
		October 2010	2,000,003
		February 2012	7,243,205
			11,243,209	$	11,243	$	11,065	2,158,708
Series A	9,583,432	February 2013	4,791,716
		July 2013	4,791,716
			9,583,432	$	11,500	$	10,736	1,840,029
Series B	16,597,221	April 2014	15,624,999	$	22,500	$	22,185	3,000,017
Series B-1	4,629,629	August 2015	4,629,629	$	7,000	$	6,885	888,894
Series C	43,034,639	April 2016	42,782,688	$	67,922	$	67,520	8,214,322

(1)

No fractional shares of Common Stock were issuable upon conversion of the preferred stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company paid cash equal to such fraction multiplied by the fair market value of a share of common stock as determined in good faith by the Board of Directors (the “Board”) of the Company. Whether or not payments for fractional shares would be made upon such conversion was determined on the basis of the total number of shares of preferred stock the holder was at the time converting into common stock and the aggregate number of shares of common stock issuable upon such conversion.

Upon the closing of the Company’s IPO on July 25, 2017, all outstanding shares of convertible preferred stock converted into 16,101,970 shares of the Company’s common stock. Following the closing of the Company’s IPO, the Company is authorized to issue 5.0 million shares of undesignated preferred stock in one or more series. As of December 31, 2017 and December 31, 2018, no shares of preferred stock were issued or outstanding.

Series Seed Convertible Preferred Stock

In December 2009, the Company issued an aggregate of 2,000,001 shares of Series Seed Preferred Stock for gross proceeds of $2.0 million or $1.00 per share. In October 2010, the Company issued an aggregate of 2,000,003 shares of Series Seed Preferred Stock to existing investors for gross proceeds of $2.0 million or $1.00 per share. In February 2012, the Company issued an aggregate of 7,243,205 shares of Series Seed Preferred Stock to existing and new investors, which included 6,150,000 shares for gross proceeds of $6.2 million and 1,093,205 shares converted from convertible debt of $1.0 million principal and $93,000 accrued interest. Costs incurred in connection with each of the individual issuances of Series Seed Preferred Stock were $124,000, $39,000 and $15,000 respectively, which have been recorded as a reduction to the carrying amount of the Series Seed Preferred Stock. On July 25, 2017, upon the closing of the Company's IPO, all outstanding shares of Series Seed Preferred Stock converted into 2,158,708 shares of the Company's common stock. As such, there were no outstanding shares of Series Seed Preferred Stock as of December 31, 2017 or December 31, 2018.

Series A Convertible Preferred Stock

In February 2013, the Company issued 4,791,716 shares of Series A Preferred Stock, at a purchase price of $1.20 per share for gross proceeds of $5.8 million. Additionally, in accordance with the terms of the Series A Preferred Stock Purchase Agreement, investors were granted the right to purchase up to an additional 4,791,716 shares of Series A Preferred Stock, at a price of $1.20 per share, upon the Company meeting certain milestone criteria by December 31, 2013, approval of the Board and approval of the investors holding a majority of the outstanding shares of Series A Preferred Stock. In June 2013, the Board approved waiving one of the milestone events provided for in the Series A Preferred Stock Purchase Agreement. Accordingly, the second tranche of Series A Preferred Stock closed on July 15, 2013 and the Company issued 4,791,716 shares of Series A Preferred Stock for gross proceeds of $5.8 million, or $1.20 per share. Costs incurred in connection with the issuance of the Series A Preferred Stock were $93,000, which have been recorded as a reduction in the carrying amount of the Series A Preferred Stock. On July 25, 2017, upon the closing of the Company's IPO, all outstanding shares of Series A Preferred Stock converted into 1,840,029 shares of the Company's common stock. As such, there were no outstanding shares of Series A Preferred Stock as of December 31, 2017 or December 31, 2018.

Series B Convertible Preferred Stock

In April 2014, the Company issued 15,624,999 shares of Series B Preferred Stock for gross proceeds of $22.5 million or $1.44 per share which included conversion of the outstanding principal and interest on the 2013 Notes of $5.1 million, which converted into 3,562,785 shares of Series B Preferred Stock pursuant to the terms of the Notes. Costs incurred in connection with the issuance of the Series B Preferred Stock were $315, which have been recorded as a reduction in the carrying amount of the Series B Preferred Stock. On July 25, 2017, upon the closing of the Company's IPO, all outstanding shares of Series B Preferred Stock converted into 3,000,017 shares of the Company's common stock. As such, there were no outstanding shares of Series B Preferred Stock as of December 31, 2017 or December 31, 2018.

Series B‑1 Convertible Preferred Stock

On August 17, 2015, the Company issued 4,629,629 shares of Series B‑1 Senior Convertible Preferred Stock (“Series B‑1 Preferred Stock”) for gross proceeds of $7.0 million or $1.512 per share. Costs incurred in connection with the issuance of the Series B‑1 Preferred Stock were $115,000, which have been recorded as a reduction in the carrying amount of the Series B‑1 Preferred Stock. On July 25, 2017, upon the closing of the Company's IPO, all outstanding shares of Series B-1 Preferred Stock converted into 888,894 shares of the Company's common stock. As such, there were no outstanding shares of Series B-1 Preferred Stock as of December 31, 2017 or December 31, 2018.

Series C Convertible Preferred Stock

On April 5, 2016, the Company issued 42,782,688 shares of Series C Preferred Stock for gross proceeds of $67.9 million or $1.5876 per share. Costs incurred in connection with the issuance of the Series C Preferred Stock were $402,000, which have been recorded as a reduction in the carrying amount of the Series C Preferred Stock. On July 25, 2017, upon the closing of the Company's IPO, all outstanding shares of Series C Preferred Stock converted into 8,214,322 shares of the Company's common stock. As such, there were no outstanding shares of Series C Preferred Stock as of December 31, 2017 or December 31, 2018.

Terms Applicable to Each Series of Preferred Stock

The Series Seed Preferred Stock, Series A Preferred Stock, Series B Preferred Stock, Series B‑1 Preferred Stock and Series C Preferred Stock were classified outside of stockholders’ equity (deficit) because the shares contained certain redemption features that are not solely within the control of the Company.

The rights, preferences, and privileges of the preferred stock were as follows:

Voting

Preferred stockholders were entitled to vote on all matters and are entitled to the number of votes equal to the number of shares of common stock into which each share of preferred stock converted.

Dividends

Preferred stockholders were entitled to receive, when and if declared by the Board out of any funds legally available, dividends at the rate of 8% of the original issue price per share. No such dividends were declared or paid through July 25, 2017, the date on which all of the Company’s preferred stock was converted to common stock in connection with the closing of the Company’s IPO.

Liquidation Rights

Prior to the IPO, upon any liquidation, dissolution, or winding‑up of the Company, whether voluntary or involuntary, each holder of the then outstanding Series C Preferred Stock and then Series B Preferred Stock and Series B‑1 Preferred Stock was entitled to distribution, before any distribution of payments is made to holders of Series Seed Preferred Stock or Series A Preferred Stock or common stockholders, an amount equal to the greater of (i) (A) in the case of the Series C Preferred Stock, $1.5876 per share (B) in the case of the Series B Preferred Stock, $1.44 per share and (C) in the case of the Series B‑1 Preferred Stock, $1.512 per share, plus, in each case, any declared but unpaid dividends and (ii) the amount such holder would have received if such holder had converted its shares into common stock immediately prior to such liquidation, dissolution, or winding‑up of the Company. After the payment of the preferential amounts to the holders of the Series C Preferred Stock, then Series B Preferred Stock and the Series B‑1 Preferred Stock, the holders of the Series Seed Preferred Stock and Series A Preferred Stock were entitled to a distribution of an amount equal to the greater of (i) (A) in the case of the Series Seed Preferred Stock $1.00 per share, (B) in the case of the Series A Preferred Stock $1.20 per share, plus, in each case, an amount equal to all declared but unpaid dividends; and (ii) the amount such holder would have received if such holder had converted its shares into common stock immediately prior to such liquidation, dissolution, or winding‑up of the Company.

If there were insufficient assets legally available to make the distribution to the holders of the Series Seed Preferred Stock, Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, and Series C Preferred Stock in full, then the available assets would have been distributed on a pro rata basis, first to the holders of the Series C Preferred Stock and then to Series B Preferred Stock and Series B-1 Preferred Stock, then any remaining assets available will be distributed on a pro rata basis to the holders of the Series Seed Preferred Stock and Series A Preferred Stock. Any remaining assets legally available for distribution after satisfaction of the liquidation preferences of the preferred stock would have been distributed to the holders of common stock on a pro-rata basis based upon the number of shares of common stock held by the common stockholders.

Conversion

Each share of preferred stock was convertible into common stock, at any time, at the option of the holder, at the then applicable conversion rate for each series of preferred stock and subject to adjustment in accordance with anti‑dilution provisions. Following the Company’s reverse stock split on July 7, 2017, each share of preferred stock was convertible into 0.1920 shares of common stock. Each share of preferred stock would automatically convert into common stock at the then applicable conversion rate for each series of preferred stock upon the earlier of (i) the closing of the Company’s first underwritten public offering of its common stock in which the Company receives aggregate gross proceeds of at least $30.0 million, and that is listed on the New York Stock Exchange or Nasdaq Stock Market or (ii) a date specified by vote or written consent of the majority of the outstanding preferred stock. In addition, in the event that any holder of at least 500,000 shares of preferred stock did not participate in a Qualified Financing, as defined in the Company’s Certificate of Incorporation, in effect prior to the prior to the consummation of the IPO (the “Charter”), effective upon the consummation of the Qualified Financing, a portion of the holder’s preferred stock (as determined in accordance with the Charter) would automatically convert into a new series of preferred stock with the conversion price for such new series fixed at the applicable conversion price in effect immediately prior to the consummation of the Qualified Financing, and such conversion price would be subject to any adjustment thereafter.

Common Stock

12 Months Ended

Dec. 31, 2018

Common Stock

Common Stock

Note 12: Common Stock

Common Stock

The Company was authorized to issue up to 120,000,000 shares of common stock with a $0.001 par value per share as of December 31, 2018 and 2017. The Company had 33,863,077 and 24,538,309 shares of common stock issued and outstanding as of December 31, 2018 and 2017, respectively.

Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. Each election of directors by our stockholders will be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our Board, subject to any preferential dividend rights of outstanding preferred stock.

In the event of our liquidation or dissolution, the holders of our common stock are entitled to receive proportionately all assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any of our outstanding preferred stock. Holders of our common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of our common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.

Voting, dividend and liquidation rights of the holders of the common stock is subject to and qualified by the rights, powers and preferences of the holders of the preferred stock.

Voting

Each holder of outstanding shares of common stock shall be entitled to one vote in respect of each share. The holders of outstanding shares of common stock, voting together as a single class, shall be entitled to elect one director. The number of authorized shares of common stock may be increased or decreased by the affirmative vote of a majority of the outstanding shares of common stock and preferred stock voting together as a single class.

Dividends

Subject to the payment in full of all preferential dividends to which the holders of the preferred stock are entitled hereunder, the holders of common stock shall be entitled to receive dividends out of funds legally available therefor at such times and in such amounts as the Board may determine in its sole discretion, with holders of preferred stock and common stock sharing pari passu in such dividends.

Liquidation Rights

Upon any liquidation, after the payment or provision for payment of all debts and liabilities of the Company and all preferential amounts to which the holders of preferred stock are entitled with respect to the distribution of assets in liquidation, the holders of common stock shall be entitled to share ratably in the remaining assets of the Company available for distribution.

Reverse Stock Split

On July 7, 2017, the Company effected a one-for-5.2083 reverse stock split of the Company’s issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for the Company’s convertible preferred stock. The par value per share and authorized shares of common and convertible preferred stock were not adjusted as a result of the reverse stock split. All common stock and common stock per share amounts within the financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.

Reserved Shares

As of December 31, 2018 and 2017, the Company has reserved shares of common stock for issuance upon exercise of rights under warrants, under the Amended and Restated 2017 Employee Stock Purchase Plan ( “A&R ESPP”) and upon the exercise of stock options as follows (see Note 13):


	December 31,	December 31,
	2018	2017

Warrant rights to acquire Common Stock	384,163	113,328
A&R ESPP	223,341	—
Shares reserved for outstanding inducement stock option awards	498,000	—
2009 Plan	2,563,072	2,868,449
2017 Plan	3,130,910	2,025,633
Total	6,799,486	5,007,410

Stock-based Compensation

12 Months Ended

Dec. 31, 2018

Stock-based Compensation

Stock-based Compensation

Note 13: Stock-based Compensation

Stock Incentive Plans

In December 2009, the Board adopted the 2009 Employee, Director and Consultant Equity Incentive Plan (the “2009 Plan”) for the issuance of common stock and stock options to employees, officers, directors, consultants, and advisors.

In July 2017, the Company’s 2017 Equity Incentive Plan (the “2017 Plan”) became effective, and as a result no further awards will be made under the 2009 Plan. The 2017 Plan was established to provide equity based ownership opportunities for employees, officers, directors, consultants, and advisors. As of December 31, 2018, there were 3,130,910 shares of common stock available for grant under the 2017 Plan. In addition, any shares of common stock subject to awards under the 2009 Plan that expire, are forfeited, or are otherwise surrendered, without having been fully exercised or resulting in any common stock being issued will become available for issuance under the 2017 Plan, up to an additional 2,563,072 shares, which is the number of shares issuable pursuant to outstanding awards granted under the 2009 Plan.

Also approved under the 2017 Plan is an annual increase for each of the years through December 31, 2027, equal to the least of (i) 3,573,766 shares of common stock, (ii) 4% of the shares of common stock outstanding on December 31 of the prior year and (iii) an amount determined by the Board.

Under the plans, the Board determines the number of shares of common stock to be granted pursuant to the awards, as well as the exercise price and terms of such awards. The exercise price of incentive stock options could not be less than the fair value of the common stock on the date of grant. Stock options awarded under the plans expire 10 years after the grant date, unless the Board sets a shorter term. Options granted under the plans generally vest over a four‑year period. A portion of the unvested stock options will vest upon the sale of all or substantially all of the stock or assets of the Company.

In the past, the Company had granted stock options which contain performance‑based vesting criteria. These criteria were milestone events that were specific to the Company’s corporate goals. Stock‑based compensation expense associated with performance‑based stock options is recognized if the achievement of the performance condition is considered probable using management’s best estimates. As of December 31, 2018 and December 31, 2017 there were no performance-based awards outstanding.

Employee Stock Purchase Plan

In 2017, the Company approved the 2017 Employee Stock Purchase Plan, under which participating employees can authorize the Company to withhold a portion of their base pay during consecutive six-month payment periods for the purchase of shares of the Company’s common stock. At the conclusion of the period, participating employees can purchase shares of the Company’s common stock at 85% of the lesser of the closing price of the common stock on (i) the first business day of the plan period or (ii) the exercise date. The initial six-month period commenced on January 1, 2019.

Inducement Stock Option Awards

During the year ended December 31, 2018, the Company granted non-statutory stock options to purchase an aggregate of 498,000 shares of the Company’s common stock to new employees. These stock options will vest over a four-year period, with 25% of the shares underlying each option award vesting on the one-year anniversary of the applicable employees’ hire date and the remaining 75% of the shares underlying each option award vesting monthly thereafter for three-years. Vesting of each option is subject to such employee’s continued service with the Company through the applicable vesting dates. These stock options were granted outside of the 2017 Plan as an inducement material to each employee’s acceptance of employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4).

A summary of option activity for employee and non-employee consultant awards under the 2009 Plan, the 2017 Plan and inducement grants for the year ended December 31, 2018 is as follows:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price		Term	Value
				(Years)		(in thousands)
Outstanding at January 1, 2018	3,738,928	$	6.93	8.4	$	44,578
Granted	1,728,190		12.47
Exercised	(181,633)		2.92
Forfeited	(173,795)		6.40
Outstanding at December 31, 2018	5,111,690	$	8.96	8.0	$	3,771
Vested or expected to vest at December 31, 2018	5,111,690	$	8.96	8.0	$	3,771
Options exercisable at December 31, 2018	2,644,374	$	5.96	7.2	$	3,175

The Company records stock‑based compensation related to stock options granted at fair value. The Company utilizes the Black‑Scholes option‑pricing model to estimate the fair value of stock option grants and to determine the related compensation expense. The assumptions used in calculating the fair value of stock‑based payment awards represent management’s best estimates. The assumptions used in determining fair value of the stock options granted in the years ended December 31, 2018 and 2017 are as follows:


	Year Ended December 31,
	2018			2017
Expected volatility	80%	–	115%	102%	–	122%
Risk-free interest rate	2.63%	–	2.96%	1.81%	–	2.29%
Expected dividend yield		0%			0%
Expected term (in years)	5.27	–	6.13	5.04	–	9.82

The Company derived the risk-free interest rate assumption from the U.S. Treasury rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the awards being valued. The Company based the assumed dividend yield on its expectation of not paying dividends in the foreseeable future. The Company calculated the expected term of options using the simplified method, as the Company lacks relevant historical data due to the Company’s limited operating experience. The estimated volatility is based upon the historical volatility of comparable companies with publicly available share prices. The impact of forfeitures on compensation expense is recorded as they occur.

The weighted average grant-date fair value of options granted during the years ended December 31, 2018 and 2017, was $9.05 and $13.87, respectively. The fair value is being recognized over the vesting period of the options on a straight-line basis as the services are being provided. As of December 31, 2018 and 2017, there was $21.1 million and $15.4 million of unrecognized compensation cost related to the stock options granted, which is expected to be recognized over a weighted-average period of 2.84 years and 3.11 years, respectively. Stock-based compensation recognized was classified in the consolidated statements of operations as follows (in thousands):


	Year Ended
	December 31,
	2018		2017

Research and development	$	2,660	$	1,267
Selling, general and administrative		5,955		2,304
Total	$	8,615	$	3,571

For the year ended December 31, 2018, stock-based compensation expense for the Company’s manufacturing employees related to INVELTYS manufactured since the FDA approval of $0.2 million, has been capitalized into inventory as a component of overhead expense.

The Company received cash proceeds from the exercise of stock options of $0.5 million and $0.4 million during the years ended December 31, 2018 and 2017, respectively. The total intrinsic value of options exercised for the year ended December 31, 2018 and 2017, was $1.3 million and $4.7 million, respectively.

Income Taxes

12 Months Ended

Dec. 31, 2018

Income Taxes

Income Taxes

Note 14: Income Taxes

The Company has had no income tax expense due to operating losses incurred for the years ended December 31, 2018 and 2017. The Company has also not recorded any income tax benefits for the net operating losses incurred in each period due to its uncertainty of realizing a benefit from those items. All of the Company’s losses before income taxes were generated in the United States.

Tax Reform Language Definition—On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including but not limited to, (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (6) creating the base erosion anti-abuse tax (BEAT), a new minimum tax; (7) creating a new limitation on deductible interest expense; and (8) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:


	Year Ended
	December 31,
	2018			2017
Federal statutory income tax rate		21.0	%		35.0	%
Effect of:
Change in valuation allowance		(23.0)			3.5
Impact on changes in tax laws		—			(42.5)
State income taxes, net of federal benefit		5.9			3.9
Research and development tax credits		2.7			3.2
Other		(6.6)			(3.1)
Effective income tax rate		—	%		—	%

Net deferred tax assets as of December 31, 2018 and 2017 consisted of the following (in thousands):


	December 31,
	2018		2017
Net operating loss carryforwards	$	46,933	$	33,689
Research and development tax credit carryforwards		5,070		4,470
Start-up costs and other		4,580		2,024
Total deferred tax assets		56,583		40,183
Depreciation and amortization		—		(9)
Total deferred tax liabilities		—		(9)
Valuation allowance		(56,583)		(40,174)
Net 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 lack of commercialization of any products or generation of any 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. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2018 and 2017. The valuation allowance increased by $16.4 million in 2018 due to an increase in the net operating loss carryforwards and research and development tax credits and decreased by $0.9 million in 2017 due to the tax legislation included in the Tax Act. Management reevaluates the positive and negative evidence at each reporting period.

At December 31, 2018 and 2017, the Company has federal net operating loss carryforwards of $165.0 million and $120.9 million, respectively, which may be available to offset future federal tax liabilities and expire at various dates beginning in 2030 through 2038. At December 31, 2018 and 2017, the Company has state net operating loss carryforwards of $156.4 million and $104.0 million, respectively, which may be available to offset future state income tax liabilities and expire at various dates beginning in 2030 through 2038. As of December 31, 2018 and 2017, the Company also had federal and state research and development credit carryforwards of approximately $5.1 million and $4.5 million, respectively, which are available to reduce future income taxes, if any, from 2030 through 2038 (federal) and 2025 through 2033 (state).

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, certain substantial changes in the Company’s ownership, including a sale of the Company, or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards, which could be used annually to offset future taxable income. The Company has determined that ownership changes have occurred as of April 2016, and such changes have not materially impacted the Company’s ability to utilize its net operating loss carryforwards and research and development tax credits to offset future tax liabilities. The Company may be further limited by any changes that may have occurred or may occur subsequent to December 31, 2017.

The Company files its corporate income tax returns in the United States and Massachusetts, California, Illinois, Kentucky, North Carolina, New Hampshire, New York, Pennsylvania and Texas. All tax years since the date of incorporation remain open to examination by the major taxing jurisdictions (state and federal) to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (‘‘IRS’’) or other authorities if they have or will be used in a future period. The Company is not currently under examination by the IRS or any other jurisdictions for any tax year.

As of December 31, 2018 and 2017 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 years ended December 31, 2018 and 2017.

Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies.

Commitments and Contingencies

Note 15: Commitments and Contingencies

License Agreement — In 2009, the Company entered into an exclusive license agreement with The Johns Hopkins University (“JHU”), as amended in November 2012, May 2014, August 2014, October 2014 and June 2018, which licensed to the Company a portfolio of specified patent rights and remains in full force and effect. Pursuant to the terms of the agreement, as amended, the Company agreed to pay an initial license fee, minimum annual payments beginning in 2017, certain development and commercial milestone payments, royalties on product sales and reimburse all or a portion of the costs associated with the preparation, filing, prosecution and maintenance of the agreed-upon patents and patent applications to JHU.

After 2016 and until the first commercial sale of product, the minimum annual payment will be $37,500. If the Company achieves the first commercial sale of the product in the United States, European Union, or Japan, the annual minimum payment will increase to $0.1 million. The Company is obligated to pay JHU low single‑digit running royalties based upon a percentage of net sales of the licensed products. The Company also has an obligation to pay JHU certain one‑time development and commercial milestone payments. The Company recorded research and development expenses related to the JHU agreement of $0.3 million and $0.1 million for the years ended December 31, 2018 and 2017, respectively.

In 2015, the Company entered into a non‑exclusive license agreement with Massachusetts Eye and Ear Infirmary, which licensed to the Company a certain questionnaire called “Symptom Assessment in Dry Eye” for use in its clinical trials. Pursuant to the terms of the agreement, the Company agreed to pay an initial license fee of $10,000. The company has made annual payments of $5,000 for each year ended December 31, 2018 and 2017. The agreement terminated in 2018.

The Company’s minimum obligations due under its license agreements as of December 31, 2018, are as follows (in thousands):


Year Ended December 31,
2019	$	413
2020		113
2021		113
2022		113
2023		113
Thereafter		1,125
Total minimum license payments	$	1,990

Other Commitments — The Company entered into a commercial supply agreement with Catalent Pharma Solutions, LLC to manufacture commercial supplies of INVELTYS and KPI-121 0.25%, with annual minimum purchase requirements. The Company is subject to these minimum purchase requirements upon receiving an approval for commercial sale for the approved product.

The Company has the following minimum purchase obligations for INVELTYS (in thousands):


Year Ended December 31,
2019	$	606
2020		801
2021		1,173
2022		1,173
2023		1,173
Thereafter		2,035
Total minimum purchase commitments	$	6,961

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

Guarantees and Indemnifications—The Company’s Certificate of Incorporation authorizes the Company to indemnify and advance expenses to its officers and directors and agents to the fullest extent permitted by law. The Company leases office space under non-cancelable operating leases. Under the leases the Company is required to indemnify the landlord against claims, actions, or damages incurred in connection with, among other items, the Company’s occupancy and use of the premises.

The Company’s equity agreements and certain other arrangements include standard indemnifications against claims, actions, or other matters that may arise in connection with these arrangements.

As of December 31, 2018 and 2017, the Company had not experienced any losses related to these indemnification obligations, and no claims with respect thereto were outstanding. The Company does not expect significant claims related to these indemnification obligations and has no amount accrued related to these contingencies. The Company does not expect these indemnifications to have a material adverse effect on these consolidated financial statements.

Defined Contribution Plan	12 Months Ended
Defined Contribution Plan	Dec. 31, 2018
Defined Contribution Plan
Defined Contribution Plan	Note 16: Defined Contribution Plan The Company has a 401(k) defined contribution plan (the ‘‘401(k) Plan’’) for substantially all of its employees. Eligible employees may make pretax contributions to the 401(k) Plan up to statutory limits. The Company made discretionary matching contributions of $0.2 million and $83,000 to the 401(k) Plan during for the year ended December 31, 2018 and 2017, respectively.

Related Parties	12 Months Ended
Related Parties	Dec. 31, 2018
Related Parties
Related Parties	Note 17: Related Parties The Company has engaged in the following related‑party transactions: A founder, who is also a stockholder and director, served as a consultant to the Company. The individual is employed by a university, which has no relationship to the Company. For the years ended December 31, 2017, the Company paid the individual $35,000, for the consulting services which are included in research and development expense in the accompanying consolidated statements of operations. Immediately prior to the effectiveness of the Company’s registration statement on Form S-1 for the Company’s IPO in July 2017, the Company terminated the consulting services agreement with the individual.

Selected Quarterly Financial Data

12 Months Ended

Dec. 31, 2018

Selected Quarterly Financial Data

Selected Quarterly Financial Data

Note 18: Selected Quarterly Financial Data

Selected quarterly financial data is as follows (in thousands, except per share data):


	Three months ended
	March 31,		June 30,		September 30,		December 31,
	2017		2017		2017		2017
	(in thousands, except per share data)
Total operating expenses	$	9,571	$	9,630	$	9,534	$	11,140
Total other income (expense)		(188)		(1,356)		(641)		(150)
Net loss attributable to common stockholders	$	(9,759)	$	(10,986)	$	(10,175)	$	(11,290)
Net loss per share attributable to common stockholders—basic and diluted	$	(8.26)	$	(9.30)	$	(0.56)	$	(0.46)

	Three months ended
	March 31,		June 30,		September 30,		December 31,
	2018		2018		2018		2018
	(in thousands, except per share data)
Total operating expenses	$	11,139	$	14,519	$	15,496	$	23,567
Total other income (expense)		(158)		(101)		(107)		(1,651)
Net loss attributable to common stockholders	$	(11,297)	$	(14,620)	$	(15,603)		(25,218)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.46)	$	(0.60)	$	(0.63)		(0.76)

Subsequent Events	12 Months Ended
Subsequent Events	Dec. 31, 2018
Subsequent Events
Subsequent Events	Note 19: Subsequent Events The Company has evaluated all events and transactions that occurred after the balance sheet date through the date of this filing. During this period, the Company did not have any material subsequent events that impacted its consolidated financial statements or disclosures.

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Summary of Significant Accounting Policies

Principles of consolidation

Basis of Presentation

Common Stock Reverse Stock Split and Adjustment to Preferred Stock Conversion Ratios

Automatic Conversion of Preferred Stock

Use of Estimates

Cash and Concentration of Credit Risk

Restricted Cash

Inventory

Leases

Property and Equipment, net

Patent Costs

Patent Costs—Costs to secure and defend patents are expensed as incurred and are classified as selling, general and administrative expenses in the Company’s consolidated statements of operations.

Impairment of Long-Lived Assets

Fair Value Measurements

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

Segment Information

Research and Development Costs

Accrued Expenses

Stock-Based Compensation

Common Stock Valuation Prior to the IPO

Preferred Stock Warrants

Income Taxes

Net Loss per Share

Comprehensive Loss

Comprehensive Loss—Comprehensive loss is equal to net loss for the periods presented.

Recently Adopted Accounting Pronouncements

Impact to Previously Reported Results

From December 31, 2017 consolidated balance sheet (in thousands):


	As Previously Reported		New Lease Standard Adjustment		As Restated
Right-of-use asset	$	—	$	413	$	413
Accrued expenses	$	6,589	$	17	$	6,606
Other current and long-term liabilities	$	9	$	(1)	$	8
Lease liabilities	$	—	$	397	$	397

For the year ended December 31, 2017 consolidated statement of cash flows (in thousands):


	As Previously Reported		New Lease Standard Adjustment		As Restated
Amortization of right-of-use asset	$	—	$	356	$	356
Accrued expenses	$	2,596		5	$	2,601
Lease liabilities	$	—	$	(361)	$	(361)

Recently Issued Accounting Pronouncements

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2018

Summary of Significant Accounting Policies

Schedule of the impacts to previously reported results

From December 31, 2017 consolidated balance sheet (in thousands):


	As Previously Reported		New Lease Standard Adjustment		As Restated
Right-of-use asset	$	—	$	413	$	413
Accrued expenses	$	6,589	$	17	$	6,606
Other current and long-term liabilities	$	9	$	(1)	$	8
Lease liabilities	$	—	$	397	$	397

For the year ended December 31, 2017 consolidated statement of cash flows (in thousands):


	As Previously Reported		New Lease Standard Adjustment		As Restated
Amortization of right-of-use asset	$	—	$	356	$	356
Accrued expenses	$	2,596		5	$	2,601
Lease liabilities	$	—	$	(361)	$	(361)

Prepaid Expenses and Other Current Assets (Tables)

12 Months Ended

Dec. 31, 2018

Prepaid Expenses and Other Current Assets

Schedule of prepaid expenses and other current assets

Prepaid Expenses and Other Current Assets, consists of the following (in thousands):


	December 31,		December 31,
	2018		2017

Insurance	$	532	$	452
Receivable for construction related to facility		1,026		—
Other		477		196
Prepaid expenses and other current assets	$	2,035	$	648

Property and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2018

Property and Equipment, Net

Schedule of property and equipment, net

Property and equipment, net, consists of the following (in thousands):


	December 31,		December 31,
	2018		2017

Equipment	$	2,400	$	2,084
Leasehold improvements		114		114
Computer hardware and software		599		87
Furniture and office equipment		67		41
Construction in progress		804		—
Property and equipment—at cost		3,984		2,326
Less: Accumulated depreciation		(1,818)		(1,540)
Property and equipment—net	$	2,166	$	786

Inventory (Tables)

12 Months Ended

Dec. 31, 2018

Inventory

Schedule of Inventory

Inventory consists of the following (in thousands):


	December 31,		December 31,
	2018		2017

Raw materials	$	350	$	—
Work in progress		3,357		—
Finished goods		388		—
Inventory	$	4,095	$	—

Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2018

Accrued Expenses

Schedule of accrued expenses

Accrued expenses consist of the following (in thousands):


	December 31,		December 31,
	2018		2017

Development costs	$	1,223	$	3,054
Compensation and benefits		5,352		2,402
Contract manufacturing		434		—
Commercialization cost		1,722		—
Professional services		1,019		895
Payable related to construction of facility		1,026		—
Other		325		255
Accrued expenses	$	11,101	$	6,606

Lease (Tables)

12 Months Ended

Dec. 31, 2018

Lease

Schedule of components of lease expense and related cash flows

The components of lease expense and related cash flows were as follows (in thousands):


	For the year ended December 31,
	2018		2017
Lease cost
Operating lease cost	$	1,099	$	396
Short-term lease cost		183		—
Total lease cost	$	1,282	$	396

Operating cash flows from operating leases	$	905	$	396

Schedule of maturities of lease liability

Maturities of lease liability due under these lease agreements as of December 31, 2018 are as follows (in thousands):


Years Ending December 31,		Operating Lease Obligation		Other Lease Obligations		Total
2019	$	3,376	$	52	$	3,428
2020		3,624		—		3,624
2021		3,733		—		3,733
2022		3,845		—		3,845
2023		3,960		—		3,960
Thereafter		35,416		—		35,416
Present value adjustment		(24,739)		—		(24,739)
Present value of lease payments	$	29,215	$	52	$	29,267

Debt (Tables)

12 Months Ended

Dec. 31, 2018

Debt

Schedule of carrying value of debt

The components of the carrying value of the debt as of December 31, 2018, are detailed below (in thousands):


	December 31,
	2018
Principal loan balance	$	75,000
Debt discount and issuance cost		(4,806)
Exit fee		32
Long-term debt, net	$	70,226

Schedule of maturities of long-term debt

The future annual principal payments due under the Athyrium Credit Facility as of December 31, 2018 were as follows (in thousands):


Years Ending December 31,
2019		—
2020		—
2021		—
2022		16,665
2023		33,330
Thereafter		25,005
Total	$	75,000

Warrants (Tables)

12 Months Ended

Dec. 31, 2018

Warrants

Schedule of outstanding warrants


					Shares Exercisable at
	Exercise		Expiration	Exercisable	December 31,		December 31,
Issued	Price		Date	From	2018		2017
2013	$	7.50	April 2021	July 2017	82,816		82,816
2014	$	7.50	November 2024	July 2017	16,000		16,000
2016	$	8.27	October 2026	September 2017	14,512		14,512
2018	$	12.18	October 2025	October 2018	184,660		—
2018	$	12.18	October 2025	(1)	—	(1)	—
					297,988		113,328

As of December 31, 2018, warrants outstanding to acquire 86,175 of common stock are not exercisable and are only exercisable upon draw down of Athyrium Term Loan B.

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

+ References + Details

Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2018

Fair Value of Financial Instruments

Schedule of changes in Level 3 fair value measurements


		Year Ended
		December 31,
	2018		2017
	Warrant		Warrant
	Liability		Liability

Fair value - December 31,	$	—	$	1,039
Change in fair value of warrant liability		—		1,844
Reclassification of preferred warrant liability		—		(2,883)
Fair value - December 31,	$	—	$	—

Preferred Stock (Tables)

12 Months Ended

Dec. 31, 2018

Preferred Stock

Schedule of preferred stock

Convertible preferred stock consisted of the following as of December 31, 2016 (in thousands, except share amounts):


								Common
								Stock
			Shares Issued					Issuable
	Designated		and	Liquidation		Carrying		Upon
	Shares	Issuance Dates	Outstanding	Value		Value		Conversion (1)
Series Seed	11,323,209	December 2009	2,000,001
		October 2010	2,000,003
		February 2012	7,243,205
			11,243,209	$	11,243	$	11,065	2,158,708
Series A	9,583,432	February 2013	4,791,716
		July 2013	4,791,716
			9,583,432	$	11,500	$	10,736	1,840,029
Series B	16,597,221	April 2014	15,624,999	$	22,500	$	22,185	3,000,017
Series B-1	4,629,629	August 2015	4,629,629	$	7,000	$	6,885	888,894
Series C	43,034,639	April 2016	42,782,688	$	67,922	$	67,520	8,214,322

(1)

Common Stock (Tables)

12 Months Ended

Dec. 31, 2018

Common Stock

Schedule of reserved common stock shares upon exercise of rights under equity compensation plans


	December 31,	December 31,
	2018	2017

Warrant rights to acquire Common Stock	384,163	113,328
A&R ESPP	223,341	—
Shares reserved for outstanding inducement stock option awards	498,000	—
2009 Plan	2,563,072	2,868,449
2017 Plan	3,130,910	2,025,633
Total	6,799,486	5,007,410

Stock-based Compensation (Tables)

12 Months Ended

Dec. 31, 2018

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


	Year Ended December 31,
	2018			2017
Expected volatility	80%	–	115%	102%	–	122%
Risk-free interest rate	2.63%	–	2.96%	1.81%	–	2.29%
Expected dividend yield		0%			0%
Expected term (in years)	5.27	–	6.13	5.04	–	9.82

Schedule of reserved common stock shares upon exercise of rights under equity compensation plans


	December 31,	December 31,
	2018	2017

Warrant rights to acquire Common Stock	384,163	113,328
A&R ESPP	223,341	—
Shares reserved for outstanding inducement stock option awards	498,000	—
2009 Plan	2,563,072	2,868,449
2017 Plan	3,130,910	2,025,633
Total	6,799,486	5,007,410

Schedule of stock based compensation expense

Stock-based compensation recognized was classified in the consolidated statements of operations as follows (in thousands):


	Year Ended
	December 31,
	2018		2017

Research and development	$	2,660	$	1,267
Selling, general and administrative		5,955		2,304
Total	$	8,615	$	3,571

2009 plan

Summary of option activity for employee and non employee awards


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price		Term	Value
				(Years)		(in thousands)
Outstanding at January 1, 2018	3,738,928	$	6.93	8.4	$	44,578
Granted	1,728,190		12.47
Exercised	(181,633)		2.92
Forfeited	(173,795)		6.40
Outstanding at December 31, 2018	5,111,690	$	8.96	8.0	$	3,771
Vested or expected to vest at December 31, 2018	5,111,690	$	8.96	8.0	$	3,771
Options exercisable at December 31, 2018	2,644,374	$	5.96	7.2	$	3,175

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Taxes

Schedule of income tax reconciliation based on federal statutory rate


	Year Ended
	December 31,
	2018			2017
Federal statutory income tax rate		21.0	%		35.0	%
Effect of:
Change in valuation allowance		(23.0)			3.5
Impact on changes in tax laws		—			(42.5)
State income taxes, net of federal benefit		5.9			3.9
Research and development tax credits		2.7			3.2
Other		(6.6)			(3.1)
Effective income tax rate		—	%		—	%

Schedule of net deferred tax assets


	December 31,
	2018		2017
Net operating loss carryforwards	$	46,933	$	33,689
Research and development tax credit carryforwards		5,070		4,470
Start-up costs and other		4,580		2,024
Total deferred tax assets		56,583		40,183
Depreciation and amortization		—		(9)
Total deferred tax liabilities		—		(9)
Valuation allowance		(56,583)		(40,174)
Net deferred tax assets	$	—	$	—

Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies.

Schedule of minimum obligations due


Year Ended December 31,
2019	$	413
2020		113
2021		113
2022		113
2023		113
Thereafter		1,125
Total minimum license payments	$	1,990

Schedule of minimum purchase obligations

The Company has the following minimum purchase obligations for INVELTYS (in thousands):


Year Ended December 31,
2019	$	606
2020		801
2021		1,173
2022		1,173
2023		1,173
Thereafter		2,035
Total minimum purchase commitments	$	6,961

Selected Quarterly Financial Data (Tables)

12 Months Ended

Dec. 31, 2018

Selected Quarterly Financial Data

Quarterly Financial Information

Selected quarterly financial data is as follows (in thousands, except per share data):


	Three months ended
	March 31,		June 30,		September 30,		December 31,
	2017		2017		2017		2017
	(in thousands, except per share data)
Total operating expenses	$	9,571	$	9,630	$	9,534	$	11,140
Total other income (expense)		(188)		(1,356)		(641)		(150)
Net loss attributable to common stockholders	$	(9,759)	$	(10,986)	$	(10,175)	$	(11,290)
Net loss per share attributable to common stockholders—basic and diluted	$	(8.26)	$	(9.30)	$	(0.56)	$	(0.46)

	Three months ended
	March 31,		June 30,		September 30,		December 31,
	2018		2018		2018		2018
	(in thousands, except per share data)
Total operating expenses	$	11,139	$	14,519	$	15,496	$	23,567
Total other income (expense)		(158)		(101)		(107)		(1,651)
Net loss attributable to common stockholders	$	(11,297)	$	(14,620)	$	(15,603)		(25,218)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.46)	$	(0.60)	$	(0.63)		(0.76)

Nature of business (Details) - USD ($) $ / shares in Units, $ in Thousands					7 Months Ended	12 Months Ended
	Oct. 11, 2018	Oct. 05, 2018	Aug. 09, 2018	Jul. 25, 2017	Jul. 25, 2017	Dec. 31, 2018	Dec. 31, 2017	Oct. 01, 2018
Equity Offerings
Common stock, par value						$ 0.001	$ 0.001
Net proceeds						$ 70,766	$ 94,005
Underwriters discount and offering costs						5,000	9,495
Common stock shares issued				16,101,970
Accumulated deficit						(201,109)	$ (134,371)
Net proceeds						$ 30,000
Common stock.
Equity Offerings
Shares warrants may purchase				202,020	202,020
IPO
Equity Offerings
Issuance of common stock, net of underwriters discount and offering costs (in shares)				6,900,000
Share price (in dollars per share)				$ 15.00	$ 15.00
Net proceeds				$ 94,000
IPO \| Common stock.
Equity Offerings
Common stock, par value				$ 0.001	0.001
Underwriter's option
Equity Offerings
Issuance of common stock, net of underwriters discount and offering costs (in shares)		1,125,000		900,000
Share price (in dollars per share)				$ 15.00	$ 15.00
Underwriters discount and offering costs				$ 7,300
Offering costs					$ 2,200
Shelf
Equity Offerings
Issuance of common stock, net of underwriters discount and offering costs (in shares)	8,625,000	7,500,000
Additional authorized value of shares		$ 174,000
Net proceeds	$ 66,100
Share authorized value			$ 250,000
Registration period			3 years
Sales agreement		$ 50,000
Price per share		$ 8.25
ATM
Equity Offerings
Issuance of common stock, net of underwriters discount and offering costs (in shares)						518,135
Share price (in dollars per share)						$ 9.41
Net proceeds						$ 4,600
Athyrium \| Term Loan A
Equity Offerings
Aggregate principal amount								$ 75,000
Athyrium \| Term Loan B
Equity Offerings
Aggregate principal amount								$ 35,000

Summary of Significant Accounting Policies (Details) $ in Thousands		3 Months Ended								12 Months Ended
	Jul. 07, 2017	Dec. 31, 2018 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Sep. 30, 2017 USD ($)	Jun. 30, 2017 USD ($)	Mar. 31, 2017 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Property and Equipment, net
Net loss attributable to common stockholders		$ (25,218)	$ (15,603)	$ (14,620)	$ (11,297)	$ (11,290)	$ (10,175)	$ (10,986)	$ (9,759)	$ (66,738)	$ (42,211)
Cash used in operations										(54,121)	(34,098)
Cash		183,104				114,699				183,104	114,699	$ 45,581
Restricted Cash
Restricted cash		12,200				100				12,200	100
Impairment of Long-Lived Assets
Long-lived asset impairment										0	0
Current Prepaid Expense and Other Assets
Tax incentive receivable		$ 0				$ 0				$ 0	$ 0
Reverse Stock Split
Reverse stock split	0.1920
Laboratory Equipment \| Minimum
Property and Equipment, net
Useful life (in years)										3 years
Laboratory Equipment \| Maximum
Property and Equipment, net
Useful life (in years)										5 years
Office equipment \| Minimum
Property and Equipment, net
Useful life (in years)										3 years
Office equipment \| Maximum
Property and Equipment, net
Useful life (in years)										5 years
Computer hardware and software \| Minimum
Property and Equipment, net
Useful life (in years)										3 years
Computer hardware and software \| Maximum
Property and Equipment, net
Useful life (in years)										5 years

Summary of Significant Accounting Policies - Net Loss Per Share (Details) - $ / shares	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Weighted average shares outstanding—basic and diluted									26,753,906	11,375,000
Net loss per share—basic and diluted	$ 0.76	$ 0.63	$ 0.60	$ 0.46	$ 0.46	$ 0.56	$ 9.30	$ 8.26	$ 2.49	$ 3.71
As Previously Reported
Weighted average shares outstanding—basic and diluted										6,903,239
Net loss per share—basic and diluted										$ 6.11

Summary of Significant Accounting Policies - Recently Adopted Accounting Pronouncements (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Sep. 30, 2013
Lease term			3 years
Impacts to Previously Reported Results
Right-of-use assets	$ 29,566	$ 413
Accrued expenses	11,101	6,606
Other current and long-term liabilities		8
Lease liabilities	463	397
Amortization of right-of-use assets	603	356
Accrued expenses	$ 3,968	2,601
Lease liabilities and other long-term liabilities		(361)
As Previously Reported \| Accounting Standards Update 2016-02
Impacts to Previously Reported Results
Accrued expenses		6,589
Other current and long-term liabilities		9
Accrued expenses		2,596
Adjustment \| Accounting Standards Update 2016-02
Impacts to Previously Reported Results
Right-of-use assets		413
Accrued expenses		17
Other current and long-term liabilities		(1)
Lease liabilities		397
Amortization of right-of-use assets		356
Accrued expenses		5
Lease liabilities and other long-term liabilities		$ (361)
Minimum
Lease term	1 year

Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Prepaid Expenses and Other Current Assets
Insurance	$ 532	$ 452
Receivable for construction related to facility	1,026
Other	477	196
Prepaid expenses and other current assets	$ 2,035	$ 648

Property and Equipment, Net (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Property and Equipment, net
Property and equipment—at cost	$ 3,984	$ 2,326
Less: Accumulated depreciation	(1,818)	(1,540)
Property and equipment—net	2,166	786
Depreciation	352	287
Equipment
Property and Equipment, net
Property and equipment—at cost	2,400	2,084
Leasehold improvements
Property and Equipment, net
Property and equipment—at cost	114	114
Computer hardware and software
Property and Equipment, net
Property and equipment—at cost	599	87
Construction in Progress
Property and Equipment, net
Property and equipment—at cost	804
Furniture and office equipment
Property and Equipment, net
Property and equipment—at cost	$ 67	$ 41

Inventory (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Inventory
Raw Materials	$ 350
Work in Progress	3,357
Finished Goods	388
Inventory	$ 4,095

Accrued Expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Accrued Expenses
Development costs	$ 1,223	$ 3,054
Compensation and benefits	5,352	2,402
Contract manufacturing	434
Commercialization cost	1,722
Professional fees	1,019	895
Payable related to construction of facility	1,026
Other	325	255
Accrued expenses	$ 11,101	$ 6,606

Lease (Details) - USD ($)		12 Months Ended
Lease (Details) - USD ($)	Feb. 28, 2018	Dec. 31, 2018	Dec. 31, 2017	Nov. 15, 2018	Jun. 15, 2018	Sep. 30, 2013
Leases
Lease term						3 years
Restricted cash		$ 12,206,000	$ 134,000
Lease cost
Operating lease cost		1,099,000	396,000
Short-term lease cost		183,000
Total lease cost		1,282,000	396,000
Operating cash flows from operating leases		905,000	396,000
Amortization of right-of-use assets		603,000	$ 356,000
Watertown Lease
Leases
Lease term	8 years			13 years
Restricted cash		2,000,000				$ 84,000
Existence of option to extend	true
Renewal term	5 years
Lease cost
Operating lease cost		$ 82,600
Remaining lease term		12 years 9 months 29 days
Present value of lease payments, discounted				9.90%
Amortization of right-of-use assets		$ 200,000
Waltham Lease
Lease cost
Remaining lease term		29 days	1 year 29 days
Discount rate (as a percent)		6.50%	6.50%
Amortization of right-of-use assets		$ 400,000
Waverley Oaks Lease
Leases
Lease term					1 year

Lease - Future Minimum Commitments Due (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Future Minimum Lease Payments
2019	$ 3,428
2020	3,624
2021	3,733
2022	3,845
2023	3,960
Thereafter	35,416
Present value adjustment	(24,739)
Total minimum lease payments	29,267
Operating Lease Obligations
Future Minimum Lease Payments
2019	3,376
2020	3,624
2021	3,733
2022	3,845
2023	3,960
Thereafter	35,416
Present value adjustment	(24,739)
Total minimum lease payments	29,215
Short-Term Lease Obligations
Future Minimum Lease Payments
2019	52
Total minimum lease payments	$ 52

Debt (Details)					2 Months Ended	12 Months Ended
Debt (Details)	Oct. 01, 2018 USD ($)	Mar. 29, 2018 USD ($)	Sep. 28, 2017 USD ($) shares	Oct. 13, 2016 USD ($) $ / shares shares	Dec. 31, 2014 USD ($) $ / shares shares	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2015 USD ($) $ / shares shares	Nov. 30, 2014 USD ($)
Debt instruments
Term loan						$ 71,927,000
Interest expense						3,314,000	$ 1,019,000
2014 Debt Facility
Debt instruments
Total loan commitment									$ 10,000,000
Additional borrowing capacity		$ 5,000,000		$ 10,000,000
Interest rate (as a percent)	8.25%						7.50%
Unpaid principal balance							$ 18,900,000
Unamortized discount							200,000
Interest expense						1,200,000	1,000,000
Amortization of debt discount						74,000	100,000
Contractual coupon interest						$ 1,100,000	900,000
Debt repayments	$ 20,000,000
Percentage points over and above the applicable interest rate in case of default						5
Prepayment fees paid	$ 200,000
2014 Debt Facility \| Prime Rate
Debt instruments
Variable rate of interest				3.00%
Term Loan A
Debt instruments
Total loan commitment		$ 20,000,000		$ 10,000,000
Amount borrowed								$ 5,000,000
Proceeds from borrowing					$ 5,000,000
Term Loan B
Debt instruments
Term loan			$ 10,000,000
Series B convertible preferred stock
Debt instruments
Warrant liability						$ 0	0
Series B convertible preferred stock \| Term Loan A \| 2014 Series B Warrants
Debt instruments
Class of Warrant or Right, Exercise Price of Warrants or Rights \| $ / shares					$ 1.44
Class of Warrant or Right, Number of Securities Called by Warrants or Rights \| shares					138,889			277,778
Series C convertible preferred stock
Debt instruments
Warrant liability						$ 0	$ 0
Class of Warrant or Right, Number of Securities Called by Warrants or Rights \| shares			48,374
Series C convertible preferred stock \| Term Loan B \| 2016 Series C Warrants
Debt instruments
Class of Warrant or Right, Exercise Price of Warrants or Rights \| $ / shares				$ 1.59
Series C convertible preferred stock \| Term Loan B \| 2016 Series C Warrants \| Maximum
Debt instruments
Class of Warrant or Right, Number of Securities Called by Warrants or Rights \| shares				251,951
Common Stock \| Term Loan A \| 2014 Series B Warrants
Debt instruments
Class of Warrant or Right, Exercise Price of Warrants or Rights \| $ / shares								$ 7.50
Class of Warrant or Right, Number of Securities Called by Warrants or Rights \| shares								53,333
Common Stock \| Term Loan B \| 2016 Series C Warrants
Debt instruments
Class of Warrant or Right, Exercise Price of Warrants or Rights \| $ / shares				$ 8.27
Common Stock \| Term Loan B \| 2016 Series C Warrants \| Maximum
Debt instruments
Class of Warrant or Right, Number of Securities Called by Warrants or Rights \| shares				48,374

Debt - Athyrium Credit Facility (Details) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
	Oct. 01, 2018	Dec. 31, 2018	Dec. 31, 2017
Debt instruments
Warrant exercisable		297,988	113,328
Warrants 2018
Debt instruments
Exercise Price		$ 12.18
Warrant exercisable		184,660
Athyrium
Debt instruments
Remaining warrant exercisable upon condition		86,175
Athyrium \| Warrants 2018
Debt instruments
Exercise Price		$ 12.18
Athyrium \| Athyrium Credit Facility
Debt instruments
Aggregate principal amount	$ 110,000	$ 75,000
Debt term (in years)	6 years
Exit fee of the total principal payments		$ 32
Fees to service provider	$ 3,000
Effective interest rate		11.42%
Athyrium \| Athyrium Credit Facility \| Warrants 2018
Debt instruments
Warrant to purchase shares of common stock	270,835
Exercise Price	$ 12.18456
Warrant exercisable	184,660
Remaining warrant exercisable upon condition	86,175
Initial fair value of the Warrant	$ 1,900
Athyrium \| Term Loan A
Debt instruments
Aggregate principal amount	$ 75,000
Line of Credit Facility, Interest Rate During Period	9.875%
Exit fee of the total principal payments (as apercent)	1.00%
Exit fee of the total principal payments	$ 700
Present value of prepayments if prepayment occurs prior to the second anniversary (as a percent)	105.00%
Prepayments if prepayment occurs on or after the second anniversary of the applicable date of issuance but prior to the third anniversary (as a percent)	3.00%
Prepayments if prepayment occurs on or after the third anniversary (as a percent)	2.00%
Prepayments if prepayment occurs after the fourth anniversary (as a percent)	0.00%
Additional interest rate upon an event of default accrued	3.00%
Total interest rate	12.875%
Financial covenant amount	$ 10,000
Athyrium \| Term Loan B
Debt instruments
Aggregate principal amount	$ 35,000

Debt - Carrying Value (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Oct. 01, 2018	Dec. 31, 2017
Debt instruments
Debt discount and issuance cost	$ (3,073)
Long-term debt, net	70,226		$ 11,987
Athyrium \| Athyrium Credit Facility
Debt instruments
Principal Loan Balance	75,000	$ 110,000
Debt discount and issuance cost	(4,806)
Exit fee	32
Long-term debt, net	$ 70,226

Debt - Future annual principal payments (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Maturities of long-term debt
2022	$ 16,665
2023	33,330
Thereafter	25,005
Total	$ 75,000

Warrants (Details) - $ / shares	12 Months Ended
Warrants (Details) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
Preferred stock warrants
Shares Exercisable	297,988	113,328
Warrants 2013
Preferred stock warrants
Exercise Price	$ 7.50
Shares Exercisable	82,816	82,816
Warrants 2014
Preferred stock warrants
Exercise Price	$ 7.50
Shares Exercisable	16,000	16,000
Warrants 2016
Preferred stock warrants
Exercise Price	$ 8.27
Shares Exercisable	14,512	14,512
Warrants 2018
Preferred stock warrants
Exercise Price	$ 12.18
Shares Exercisable	184,660
Athyrium
Preferred stock warrants
Shares Exercisable upon condition	86,175
Athyrium \| Warrants 2018
Preferred stock warrants
Exercise Price	$ 12.18

Fair Value of Financial Instruments - Fair value measurement levels (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Fair Value of Financial Instruments
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, Liabilities	0	0
Transfer from level 2 to level 1, Liabilities	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

Fair Value of Financial Instruments - Derivative liability (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)
Reconciliation of Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)
Balance at beginning of period	$ 1,039
Change in fair value of warrant liability	1,844
Reclassification of preferred warrant liability	(2,883)
Balance at end of period	$ 2,883

Preferred Stock - Shares issued (Details) $ in Thousands	Jul. 07, 2017	Dec. 31, 2016 USD ($) shares
Reverse Stock Split
Reverse stock split	0.1920
Series Seed convertible preferred stock
Temporary Equity
Designated Shares		11,323,209
Shares Issued		11,243,209
Shares Outstanding		11,243,209
Liquidation Value \| $		$ 11,243
Carrying Value \| $		$ 11,065
Common Stock Issuable Upon Conversion		2,158,708
Series Seed convertible preferred stock \| December 2009
Temporary Equity
Shares Issued		2,000,001
Shares Outstanding		2,000,001
Series Seed convertible preferred stock \| October 2010
Temporary Equity
Shares Issued		2,000,003
Shares Outstanding		2,000,003
Series Seed convertible preferred stock \| February 2012
Temporary Equity
Shares Issued		7,243,205
Shares Outstanding		7,243,205
Series A convertible preferred stock
Temporary Equity
Designated Shares		9,583,432
Shares Issued		9,583,432
Shares Outstanding		9,583,432
Liquidation Value \| $		$ 11,500
Carrying Value \| $		$ 10,736
Common Stock Issuable Upon Conversion		1,840,029
Series A convertible preferred stock \| February 2013
Temporary Equity
Shares Issued		4,791,716
Shares Outstanding		4,791,716
Series A convertible preferred stock \| July 2013
Temporary Equity
Shares Issued		4,791,716
Shares Outstanding		4,791,716
Series B convertible preferred stock
Temporary Equity
Designated Shares		16,597,221
Shares Outstanding		15,624,999
Liquidation Value \| $		$ 22,500
Carrying Value \| $		$ 22,185
Common Stock Issuable Upon Conversion		3,000,017
Series B convertible preferred stock \| April 2014
Temporary Equity
Shares Issued		15,624,999
Shares Outstanding		15,624,999
Series B-1 convertible preferred stock
Temporary Equity
Designated Shares		4,629,629
Liquidation Value \| $		$ 7,000
Carrying Value \| $		$ 6,885
Common Stock Issuable Upon Conversion		888,894
Series B-1 convertible preferred stock \| August 2015
Temporary Equity
Shares Issued		4,629,629
Shares Outstanding		4,629,629
Series C convertible preferred stock
Temporary Equity
Designated Shares		43,034,639
Shares Outstanding		42,782,688
Liquidation Value \| $		$ 67,922
Carrying Value \| $		$ 67,520
Common Stock Issuable Upon Conversion		8,214,322
Series C convertible preferred stock \| April 2016
Temporary Equity
Shares Issued		42,782,688
Shares Outstanding		42,782,688

Preferred Stock - Shares converted (Details)						1 Months Ended						12 Months Ended
Preferred Stock - Shares converted (Details)	Jul. 25, 2017 $ / shares shares	Jul. 07, 2017	Apr. 05, 2016 USD ($) $ / shares shares	Aug. 17, 2015 USD ($) $ / shares shares	Jul. 15, 2013 USD ($) $ / shares shares	Apr. 30, 2014 USD ($) $ / shares shares	Jun. 30, 2013 item	Feb. 28, 2013 USD ($) $ / shares shares	Feb. 29, 2012 USD ($) shares	Oct. 31, 2010 USD ($) $ / shares shares	Dec. 31, 2009 USD ($) $ / shares shares	Dec. 31, 2018 USD ($) shares	Dec. 31, 2017 USD ($) $ / shares shares	Dec. 31, 2013 $ / shares shares	Dec. 31, 2016 shares
Temporary equity
Gross proceeds from shares issued upon conversion \| $													$ 118,391,000
Dividend rate (as a percent)													8.00%
Dividend declared (in dollars per share) \| $ / shares	$ 0.00
Common stock shares issued \| shares	16,101,970
Preferred stock, authorized \| shares	5,000,000											5,000,000	5,000,000
Preferred stock, shares issued \| shares												0	0
Preferred stock, shares outstanding \| shares												0	0
Gross proceeds \| $												$ 30,000,000
Reverse stock split		0.1920
Minimum
Temporary equity
Number of preferred shares \| shares												500,000
Convertible preferred stock.
Temporary equity
Common stock shares issued \| shares	16,101,970
Reverse stock split		0.1920
Series Seed convertible preferred stock
Temporary equity
Shares Issued \| shares															11,243,209
Shares issued upon conversion of convertible debt \| $									$ 93,000
Issuance cost \| $									$ 15,000		$ 124,000
Liquidation rights (in dollars per share) \| $ / shares													$ 1.00
Common stock shares issued \| shares	2,158,708
Warrant liability \| $												$ 0	$ 0
Series A convertible preferred stock
Temporary equity
Shares Issued \| shares															9,583,432
Issuance cost \| $					$ 93,000
Number of milestones approved by the board \| item							1
Liquidation rights (in dollars per share) \| $ / shares													$ 1.20
Common stock shares issued \| shares	1,840,029
Warrant liability \| $												0	$ 0
Price per share \| $ / shares								$ 1.20
Series B convertible preferred stock
Temporary equity
Issuance cost \| $										$ 39,000
Liquidation rights (in dollars per share) \| $ / shares													$ 1.44
Common stock shares issued \| shares	3,000,017
Warrant liability \| $												0	$ 0
Series B-1 convertible preferred stock
Temporary equity
Liquidation rights (in dollars per share) \| $ / shares													$ 1.512
Common stock shares issued \| shares	888,894
Warrant liability \| $												0	$ 0
Series C convertible preferred stock
Temporary equity
Liquidation rights (in dollars per share) \| $ / shares													$ 1.5876
Common stock shares issued \| shares	8,214,322
Warrant liability \| $												$ 0	$ 0
December 2009 \| Series Seed convertible preferred stock
Temporary equity
Gross proceeds \| $											$ 2,000,000
Convertible preferred stock par value (in dollars per share) \| $ / shares											$ 1.00
Common stock shares issued \| shares											2,000,001
October 2010 \| Series Seed convertible preferred stock
Temporary equity
Common stock shares issued \| shares										2,000,003
Price per share \| $ / shares										$ 1.00
Gross proceeds \| $										$ 2,000,000
February 2012 \| Series Seed convertible preferred stock
Temporary equity
Common stock shares issued \| shares									7,243,205
February 2013 \| Series Seed convertible preferred stock
Temporary equity
Shares issued upon conversion (in shares) \| shares									6,150,000
Gross proceeds from shares issued upon conversion \| $									$ 6,200,000
Shares issued upon conversion of convertible debt (in shares) \| shares									1,093,205
Shares issued upon conversion of convertible debt \| $									$ 1,000,000
February 2013 \| Series A convertible preferred stock
Temporary equity
Common stock shares issued \| shares								4,791,716						4,791,716
Price per share \| $ / shares								$ 1.20						$ 1.20
Gross proceeds \| $								$ 5,800,000
July 2013 \| Series A convertible preferred stock
Temporary equity
Common stock shares issued \| shares					4,791,716
Price per share \| $ / shares					$ 1.20
Gross proceeds \| $					$ 5,800,000
April 2014 \| Series B convertible preferred stock
Temporary equity
Gross proceeds \| $						$ 22,500,000
Shares issued upon conversion of convertible debt (in shares) \| shares						3,562,785
Shares issued upon conversion of convertible debt \| $						$ 315,000
Issuance cost \| $						$ 5,100,000
Common stock shares issued \| shares						15,624,999
Price per share \| $ / shares						$ 1.44
August 2015 \| Series B-1 convertible preferred stock
Temporary equity
Shares issued upon conversion of convertible debt \| $				$ 115,000
Common stock shares issued \| shares				4,629,629
Price per share \| $ / shares				$ 1.512
Gross proceeds \| $				$ 7,000,000
April 2016 \| Series C convertible preferred stock
Temporary equity
Shares issued upon conversion of convertible debt \| $			$ 402,000
Common stock shares issued \| shares			42,782,688
Price per share \| $ / shares			$ 1.5876
Gross proceeds \| $			$ 67,900,000

Common Stock (Details)		12 Months Ended
Common Stock (Details)	Jul. 07, 2017	Dec. 31, 2018 director Vote $ / shares shares	Dec. 31, 2017 $ / shares shares	Jul. 25, 2017 shares
Common stock and preferred stock
Common stock, authorized		120,000,000	120,000,000
Common stock, par value \| $ / shares		$ 0.001	$ 0.001
Common stock, shares issued		33,863,077	24,538,309
Common stock, shares outstanding		33,863,077	24,538,309
Preferred stock, authorized		5,000,000	5,000,000	5,000,000
Preferred stock, shares issued		0	0
Preferred stock, shares outstanding		0	0
Closing price of common stock (as percent)		85.00%
Employee basic pay holding period		6 months
Number of votes per common share for each outstanding share \| Vote		1
Number of directors granted \| director		1
Reverse stock split	0.1920
Common stock shares reserved for future issuance		6,799,486	5,007,410
Warrant rights to acquire Common Stock
Common stock and preferred stock
Common stock shares reserved for future issuance		384,163	113,328
Employee and Non-Employee Stock Options
Common stock and preferred stock
Common stock shares reserved for future issuance		223,341
2009 stock option plan
Common stock and preferred stock
Common stock shares reserved for future issuance		2,563,072	2,868,449
2017 stock option plan
Common stock and preferred stock
Common stock shares reserved for future issuance		3,130,910	2,025,633
Stock Options
Common stock and preferred stock
Common stock shares reserved for future issuance		498,000
Convertible preferred stock.
Common stock and preferred stock
Reverse stock split	0.1920
Common stock.
Common stock and preferred stock
Number of votes entitled to each share held \| Vote		1
2017 Equity Incentive Plan
Common stock and preferred stock
Common stock shares reserved for future issuance		3,130,910
2017 Equity Incentive Plan \| Maximum
Common stock and preferred stock
Common stock shares reserved for future issuance		2,563,072
2017 Equity Incentive Plan \| Minimum
Common stock and preferred stock
Common stock shares reserved for future issuance		3,573,766
Percentage of aggregate number of common shares reserved for future issuance (as a percent)		4.00%

Stock-based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Stock-based compensation
Anniversary of the share-based compensation arrangement	1 year
Weighted average grant date fair value of options granted	$ 9.05	$ 13.87
Stock based compensation expense	$ 8,615	$ 3,571
Cash proceeds from the exercise of stock options	530	423
Total intrinsic value of options exercised	$ 1,300	$ 4,700
2009 plan
Stock-based compensation
Number of shares outstanding	5,111,690	3,738,928
Options granted	1,728,190
Unrecognized compensation expense	$ 21,100	$ 15,400
Weighted average expense recognition period	2 years 10 months 2 days	3 years 1 month 10 days
Weighted average period	8 years	8 years 4 months 24 days
Employee and Non-Employee Stock Options \| 2009 plan
Stock-based compensation
Options Expiry Term	10 years
Vesting Period	4 years
Performance Stock Options
Stock-based compensation
Number of shares outstanding	0	0
Non-statutory Stock Options \| Employee
Stock-based compensation
Number of common stock issuable upon exercise of rights under equity compensation plans	498,000
Options Expiry Term	4 years
Vesting Period	3 years
Percentage of vesting of share-based compensation awards on the one year anniversary of the grant date	25.00%
Percentage of vesting of share-based compensation awards after the year anniversary of the grant date	75.00%

Stock-based Compensation - Stock Options (Details) - 2009 plan - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Number of Shares
Outstanding at the beginning of the period (in shares)	3,738,928
Granted (in shares)	1,728,190
Exercised (in shares)	(181,633)
Forfeited	(173,795)
Outstanding at the end of the period (in shares)	5,111,690	3,738,928
Vested and expected to vest (in shares)	5,111,690
Options exercisable (in shares)	2,644,374
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 6.93
Granted (in dollars per share)	12.47
Exercised (in dollars per share)	2.92
Forfeited (in dollars per share)	6.40
Outstanding at the end of the period (in dollars per share)	8.96	$ 6.93
Vested and expected to vest (in dollars per share )	8.96
Options exercisable (in dollars per shares)	$ 5.96
Weighted Average Remaining Contractual Term
Weighted average period	8 years	8 years 4 months 24 days
Vested and expected to vest	8 years
Options exercisable	7 years 2 months 12 days
Aggregate Intrinsic Value
Outstanding at the beginning of the period (in dollars)	$ 44,578
Outstanding at the end of the period (in dollars)	3,771	$ 44,578
Vested and expected to vest (in dollars)	3,771
Options exercisable (in dollars)	$ 3,175

Stock-based Compensation - Fair Value Assumptions (Details)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Assumptions used in determining fair value of the stock options granted
Expected volatility (minimum)	80.00%	102.00%
Expected volatility (maximum)	115.00%	122.00%
Risk-free interest rate (minimum)	2.63%	1.81%
Risk-free interest rate (maximum)	2.96%	2.29%
Expected dividend yield	0.00%	0.00%
Minimum
Assumptions used in determining fair value of the stock options granted
Expected term (in years)	5 years 3 months 7 days	5 years 15 days
Maximum
Assumptions used in determining fair value of the stock options granted
Expected term (in years)	6 years 1 month 17 days	9 years 9 months 26 days

Stock-based Compensation - Stock-based compensation expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Stock-based compensation
Stock based compensation expense	$ 8,615	$ 3,571
Research and development
Stock-based compensation
Stock based compensation expense	2,660	1,267
General and administrative
Stock-based compensation
Stock based compensation expense	5,955	$ 2,304
INVELTYS \| Inventories
Stock-based compensation
Stock based compensation expense	$ 200

Income Taxes - Reconciliation of the U.S. federal statutory income tax rate (Details)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Income Taxes
Federal statutory income tax rate	21.00%	35.00%
Change in valuation allowance	(23.00%)	3.50%
Impact of change in tax laws		(42.50%)
State income taxes, net of federal benefit	5.90%	3.90%
Research and development tax credits	2.70%	3.20%
Other	(6.60%)	(3.10%)

Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Income tax expense	$ 0	$ 0
Change in valuation allowance	16,400	(900)
Uncertain tax positions	0	0
Interest or penalties recorded	0	0
Federal
Net operating loss carryforwards	165,000	120,900
State
Net operating loss carryforwards	$ 156,400	$ 104,000

Income Taxes - Net deferred tax assets (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Income Taxes
Net operating loss carryforwards	$ 46,933	$ 33,689
Research and development tax credit carryforwards	5,070	4,470
Start-up costs and other	4,580	2,024
Total deferred tax assets	56,583	40,183
Depreciation and amortization		(9)
Total deferred tax liabilities		(9)
Valuation allowance	$ (56,583)	$ (40,174)

Commitments and Contingencies - Future minimum commitments (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Future Minimum Lease Payments
2019	$ 3,428
2020	3,624
2021	3,733
2022	3,845
2023	3,960
Thereafter	35,416
Total minimum lease payments	$ 29,267

Commitments and Contingencies - License Agreement (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2015
Contingencies
Minimum annual payment	$ 37,500
License fee, if the company achieves the first commercial sale	100,000
Research and development expenses	29,290,000	$ 29,008,000
The Johns Hopkins University (“JHU”)
Contingencies
Research and development expenses	300,000	100,000
Massachusetts Eye and Ear Infirmary (“MEEI”)
Contingencies
Initial payment of license fee			$ 10,000
Annual license fee	$ 5,000	$ 5,000

Commitments and Contingencies - Future minimum obligations (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Minimum obligations due under its license agreements
2019	$ 413
2020	113
2021	113
2022	113
2023	113
Thereafter	1,125
Total minimum license payments	$ 1,990

Commitments and Contingencies - Purchase obligations (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Commitments and Contingencies.
2019	$ 606
2020	801
2021	1,173
2022	1,173
2023	1,173
Thereafter	2,035
Total minimum purchase commitments	$ 6,961

Commitments and Contingencies - Guarantees and Indemnifications (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Indemnification obligations
Indemnification obligations	$ 0	$ 0
Accrued contingencies

Defined Contribution Plan (Details) - USD ($)	12 Months Ended
Defined Contribution Plan (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Defined Contribution Plan
Matching contribution by employer	$ 200,000	$ 83,000

Related Parties (Details)	12 Months Ended
Related Parties (Details)	Dec. 31, 2017 USD ($)
Company founder \| Research and development
Related Party Transactions
Amount paid for consultancy services	$ 35,000

Selected Quarterly Financial Data (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Selected Quarterly Financial Data
Total operating expenses	$ 23,567	$ 15,496	$ 14,519	$ 11,139	$ 11,140	$ 9,534	$ 9,630	$ 9,571	$ 64,721	$ 39,875
Total other income (expense)	(1,651)	(107)	(101)	(158)	(150)	(641)	(1,356)	(188)	(2,017)	(2,336)
Net loss	$ (25,218)	$ (15,603)	$ (14,620)	$ (11,297)	$ (11,290)	$ (10,175)	$ (10,986)	$ (9,759)	$ (66,738)	$ (42,211)
Net loss per share attributable to common stockholders—basic and diluted	$ (0.76)	$ (0.63)	$ (0.60)	$ (0.46)	$ (0.46)	$ (0.56)	$ (9.30)	$ (8.26)	$ (2.49)	$ (3.71)