0001558370-22-016848 | 10-Q | XBRL Viewer

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Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2022	Nov. 07, 2022
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	001-38150
Entity Registrant Name	KALA PHARMACEUTICALS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	27-0604595
Entity Address, Address Line One	1167 Massachusetts Avenue
Entity Address, City or Town	Arlington
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02476
City Area Code	781
Local Phone Number	996-5252
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	KALA
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		1,518,424
Entity Central Index Key	0001479419
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Amendment Flag	false

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 52,393	$ 92,136
Short-term restricted cash		2,042
Accounts receivable, net	190	15,345
Inventory	0	8,639
Prepaid expenses and other current assets (Note 8)	22,576	6,204
Current assets held for sale (Note 4)	9,513	0
Total current assets	84,672	124,366
Non-current assets:
Property and equipment, net	517	2,722
Long-term inventory		9,578
Right-of-use assets	34	1,299
Restricted cash and other long-term assets	475	1,462
Total assets	85,698	139,427
Current liabilities:
Accounts payable	7,348	4,899
Accrued expenses and other current liabilities	25,368	20,986
Deferred gain on sale of commercial business	3,408
Current portion of lease liabilities	32	711
Current portion of contingent consideration	3,923	3,817
Current portion of deferred purchase consideration	162	7,009
Total current liabilities	40,241	37,422
Long-term liabilities:
Long-term lease liabilities		548
Long-term debt	42,642	78,929
Long-term contingent consideration	3,783	4,841
Long-term deferred purchase consideration		883
Total long-term liabilities	46,425	85,201
Total liabilities	86,666	122,623
Commitments and Contingencies (Note 17)
Stockholders' equity:
Common stock, $0.001 par value; 120,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 1,464,177 and 1,320,003 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	1	1
Additional paid-in capital	573,398	559,191
Accumulated deficit	(574,367)	(542,388)
Total stockholders' (deficit) equity	(968)	16,804
Total liabilities and stockholders' (deficit) equity	85,698	139,427
Series D redeemable preferred stock
Mezzanine equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 73,208 and 0 Series D redeemable preferred shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2022	Dec. 31, 2021
Common stock, par value	$ 0.001	$ 0.001
Common stock, authorized	120,000,000	120,000,000
Common stock, shares issued	1,476,637	1,322,464
Common stock, shares outstanding	1,476,637	1,322,464
Series D Redeemable Preferred Stock [Member]
Redeemable preferred stock, par value	$ 0.001	$ 0.001
Redeemable preferred stock, authorized	5,000,000	5,000,000
Redeemable preferred stock, issued	73,208	0
Redeemable preferred stock, outstanding	73,208	0

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Product revenues, net	$ 420	$ 3,067	$ 3,892	$ 9,384
Costs and expenses:
Cost of product revenues	11	908	2,560	2,679
Selling, general and administrative	9,549	25,349	59,204	81,034
Research and development	5,391	2,881	14,330	9,101
(Gain) loss on fair value remeasurement of deferred purchase consideration	(57)		205
Loss (gain) on fair value remeasurement of contingent consideration	95		(952)
Total costs and expenses	14,989	29,138	75,347	92,814
Loss from operations	(14,569)	(26,071)	(71,455)	(83,430)
Other income (expense):
Interest income	234	16	310	92
Interest expense	(1,447)	(2,072)	(5,689)	(6,304)
Loss on extinguishment of debt	(2,583)		(2,583)	(5,395)
Gain on sale of commercial business	46,995		46,995
Other income (expense), net	443		443
Total interest and other income (expense)	43,642	(2,056)	39,476	(11,607)
Net income (loss)	$ 29,073	$ (28,127)	$ (31,979)	$ (95,037)
Net income (loss) per share-basic (in dollar per share)	$ 19.39	$ (21.41)	$ (21.46)	$ (73.80)
Net income (loss) per share- diluted (in dollar per share)	$ 19.25	$ (21.41)	$ (21.46)	$ (73.80)
Weighted average shares outstanding-basic (in shares)	1,499,001	1,313,466	1,490,159	1,287,772
Weighted average shares outstanding-diluted (in shares)	1,510,421	1,313,466	1,490,159	1,287,772
Statement of Comprehensive Income (Loss)
Net income (loss)	$ 29,073	$ (28,127)	$ (31,979)	$ (95,037)
Other comprehensive income (loss):
Change in unrealized gains on investments	1			(4)
Total other comprehensive income (loss)	1			(4)
Total comprehensive income (loss)	$ 29,074	$ (28,127)	$ (31,979)	$ (95,041)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income	Accumulated Deficit	Series D redeemable preferred stock	Total
Balance as of beginning of period at Dec. 31, 2020	$ 1	$ 499,773	$ 4	$ (399,783)		$ 99,995
Balance as of beginning of period (in shares) at Dec. 31, 2020	1,190,763
Stockholders' Equity
At the market offering, net of sales agent commission		41,063				41,063
At the market offering, net of sales agent commission (in shares)	113,950
Exercise of stock options		248				248
Exercise of stock options (in shares)	1,778
Issuance of common stock for vested restricted stock units (in shares)	2,156
Issuance of common stock under employee stock purchase plan		1,337				1,337
Issuance of common stock under employee stock purchase plan (in shares)	5,515
Stock-based compensation expense		13,867				13,867
Change in fair value of investments			(4)			(4)
Net income (loss)				(95,037)		(95,037)
Balance as of end of period at Sep. 30, 2021	$ 1	556,288		(494,820)		61,469
Balance as of end of period (in shares) at Sep. 30, 2021	1,314,162
Balance as of beginning of period at Jun. 30, 2021	$ 1	550,962		(466,693)		84,270
Balance as of beginning of period (in shares) at Jun. 30, 2021	1,307,860
Stockholders' Equity
At the market offering, net of sales agent commission		333				333
At the market offering, net of sales agent commission (in shares)	2,283
Issuance of common stock under employee stock purchase plan		906				906
Issuance of common stock under employee stock purchase plan (in shares)	4,019
Stock-based compensation expense		4,087				4,087
Net income (loss)				(28,127)		(28,127)
Balance as of end of period at Sep. 30, 2021	$ 1	556,288		(494,820)		61,469
Balance as of end of period (in shares) at Sep. 30, 2021	1,314,162
Balance as of beginning of period at Dec. 31, 2021
Balance as of beginning of period (in shares) at Dec. 31, 2021					0
Mezzanine equity:
Issuance of redeemable non-controlling Series D preferred stock (in shares)					73,208
Balance as of end of period at Sep. 30, 2022
Balance as of end of period (in shares) at Sep. 30, 2022					73,208
Balance as of beginning of period at Dec. 31, 2021	$ 1	559,191		(542,388)		16,804
Balance as of beginning of period (in shares) at Dec. 31, 2021	1,322,464
Stockholders' Equity
Exercise of stock options		3				3
Exercise of stock options (in shares)	102
Issuance of common stock for vested restricted stock units (in shares)	3,966
Issuance of common stock to satisfy deferred purchase consideration		7,936				7,936
Issuance of common stock to satisfy deferred purchase consideration (in shares)	136,314
Issuance of common stock under employee stock purchase plan		298				298
Issuance of common stock under employee stock purchase plan (in shares)	13,791
Stock-based compensation expense		5,970				5,970
Net income (loss)				(31,979)		(31,979)
Balance as of end of period at Sep. 30, 2022	$ 1	573,398		(574,367)		(968)
Balance as of end of period (in shares) at Sep. 30, 2022	1,476,637
Mezzanine equity:
Issuance of redeemable non-controlling Series D preferred stock (in shares)					73,208
Balance as of end of period at Sep. 30, 2022
Balance as of end of period (in shares) at Sep. 30, 2022					73,208
Balance as of beginning of period at Jun. 30, 2022	$ 1	571,886	(1)	(603,440)		(31,554)
Balance as of beginning of period (in shares) at Jun. 30, 2022	1,465,949
Stockholders' Equity
Issuance of common stock under employee stock purchase plan		138				138
Issuance of common stock under employee stock purchase plan (in shares)	10,688
Stock-based compensation expense		1,374				1,374
Change in fair value of investments			$ 1			1
Net income (loss)				29,073		29,073
Balance as of end of period at Sep. 30, 2022	$ 1	$ 573,398		$ (574,367)		$ (968)
Balance as of end of period (in shares) at Sep. 30, 2022	1,476,637

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2021
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT)
Sales agent commission	$ 9
Offering costs		$ 1,161

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2022	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Cash flows from operating activities:
Net loss		$ (31,979)	$ (95,037)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		457	763
Non-cash operating lease cost		421	1,711
Gain on sale of commercial business	$ (46,995)	(46,995)
Loss on extinguishment of debt	2,583	2,583	5,395
Loss on fair value remeasurement of deferred purchase consideration	(57)	205
Gain on fair value remeasurement of contingent consideration	95	(952)
Amortization of debt discount and other non-cash interest		1,130	1,080
Stock-based compensation		6,048	13,340
Other non-cash (gains) losses, net		76	8
Change in operating assets and liabilities:
Accounts receivable		15,143	(3,026)
Prepaid expenses and other current assets		(16,928)	(1,239)
Inventory		(1,011)	(6,772)
Accounts payable		2,433	4,251
Accrued expenses and other current liabilities		4,531	495
Lease liabilities and other long-term liabilities		(335)	(1,300)
Net cash used in operating activities		(65,173)	(80,331)
Cash flows from investing activities:
Proceeds from sale of commercial business, net of transaction costs		62,908
Purchases of property and equipment and other assets		(291)	(874)
Proceeds from sale of property and equipment		41	50
Purchases of short-term investments		(4,992)
Proceeds from sales or maturities of short-term investments		5,000	76,250
Net cash provided by investing activities		62,666	75,426
Cash flows from financing activities:
Proceeds from issuance of debt, net of debt issuance costs of $2,218			77,782
Payment of principal, prepayment premium and final payment fee on debt		(40,000)	(78,010)
Proceeds from common stock offerings, net of offering costs			41,063
Payment of principal on finance lease		(29)	(26)
Proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan		301	1,585
Net cash (used in) provided by financing activities		(39,728)	42,394
Net (decrease) increase in cash, cash equivalents and restricted cash:		(42,235)	37,489
Cash, cash equivalents and restricted cash at beginning of period		94,878	89,756	$ 89,756
Cash, cash equivalents and restricted cash at end of period	52,643	52,643	127,245	94,878
Reconciliation of cash, cash equivalents and restricted cash:
Cash, cash equivalents, and restricted cash at end of period	52,643	52,643	127,245	94,878
Less restricted cash (Notes 10 and 11)	(250)	(250)	(2,742)
Cash and cash equivalents at end of period	$ 52,393	52,393	124,503	$ 92,136
Non-cash investing and financing activities:
Purchases of property and equipment in accounts payable and accrued expenses		16
Supplemental disclosure:
Cash paid for interest		4,747	5,200
Right-of-use assets obtained in exchange of operating lease obligations		$ 424	$ 1,211

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) $ in Thousands	Sep. 30, 2021 USD ($)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Debt issuance costs	$ 2,218

NATURE OF BUSINESS AND BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2022

NATURE OF BUSINESS AND BASIS OF PRESENTATION

NATURE OF BUSINESS AND BASIS OF PRESENTATION

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

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

On November 15, 2021, the Company and its newly formed, direct wholly owned subsidiary, Ceres Merger Sub, Inc. (the “Merger Subsidiary”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Combangio, Inc. (“Combangio”) and Fortis Advisors LLC, solely in its capacity as Combangio Equityholder Representative in connection with the Merger Agreement, pursuant to which on November 15, 2021, the Merger Subsidiary merged with and into Combangio with Combangio surviving such merger and becoming a direct wholly owned subsidiary of the Company (the “Combangio Acquisition”). Combangio was a clinical-stage biotechnology company focused on developing regenerative biotherapeutics for severe ocular diseases based on mesenchymal stem cell secretomes (“MSC-S”) platform, including its lead product candidate, CMB-012 for the treatment of persistent corneal epithelial defects (“PCED”), which the Company now refers to as KPI-012. The Company expects to commercialize in the United States any of its product candidates that receive marketing approval.

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

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

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

Reverse Stock Split— On October 20, 2022, the Company effected a 1-for-50 reverse stock split of the Company’s shares of common stock either issued and outstanding or held by the Company as treasury stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, every 50 shares of issued and outstanding common stock were automatically combined into one issued and outstanding share of common stock, without any change in the par value per share. No fractional shares were issued as a result of the Reverse Stock Split. Any fractional shares that would otherwise have resulted from the Reverse Stock Split were rounded up to the next whole number. The number of authorized shares of common stock under the Company’s Restated Certificate of Incorporation, as amended, remained unchanged at 120,000,000 shares. All historical share and per share amounts reflected throughout these financial statements have been adjusted to reflect the Reverse Stock Split. Proportionate adjustments were made to the per share

exercise price and the number of shares of common stock that may be purchased upon exercise of outstanding stock options and warrants, and the number of shares of common stock reserved for future issuance under our 2017 Equity Incentive Plan and Employee Stock Purchase Plan.

Series D Preferred Stock—On August 18, 2022, the Board of Directors (the “Board”) declared a dividend of one one-thousandth of a share of the Company’s Series D Preferred Stock (“Series D Preferred Stock”) for each outstanding share of the Company’s common stock held of record as of 5:00 p.m. Eastern Time on August 29, 2022. The Certificate of Designation of Series D Preferred Stock was filed with the Delaware Secretary of State and became effective on August 19, 2022. The dividend was based on the number of outstanding shares of common stock prior to the Reverse Stock Split. The outstanding shares of Series D Preferred Stock were entitled to vote together with the outstanding shares of common stock, as a single class, exclusively with respect to a proposal giving the Board the authority, as it determined appropriate, to implement a reverse stock split within twelve months following the approval of such proposal by the Company’s stockholders (the “Reverse Stock Split Proposal”), as well as any proposal to adjourn any meeting of stockholders called for the purpose of voting on the Reverse Stock Split Proposal (the “Adjournment Proposal”).

The Company held a special meeting of stockholders on October 19, 2022 (the “Special Meeting”) for the purpose of voting on the Reverse Stock Split Proposal and an Adjournment Proposal. All shares of Series D Preferred Stock that were not present in person or by proxy at the Special Meeting were automatically redeemed by the Company immediately prior to the opening of the polls at Special Meeting (the “Initial Redemption”). All shares that were not redeemed pursuant to the Initial Redemption were redeemed automatically upon the approval by the Company’s stockholders of the Reverse Stock Split Proposal at the Special Meeting (the “Subsequent Redemption” and, together with the Initial Redemption, the “Redemption”). Each share of Series D Preferred Stock was entitled to receive $0.10 in cash for each 100 whole shares of Series D Preferred Stock immediately prior to the Redemption. As of September 30, 2022, there were 73,208 shares of Series D Preferred Stock issued and outstanding. As of November 7, 2022, both the Initial Redemption and the Subsequent Redemption have occurred. As a result, no shares of Series D Preferred Stock remain outstanding.

The Company was not solely in control of the Redemption of the shares of Series D Preferred Stock since the holders had the option of deciding whether to return a proxy card for the Special Meeting, which determined whether a given holder’s shares of Series D Preferred Stock were redeemed in the Initial Redemption or the Subsequent Redemption. Since the Redemption of the Series D Preferred Stock was not solely in the control of the Company, the shares of Series D Preferred Stock are classified within mezzanine equity in the Company’s unaudited condensed consolidated balance sheet. The shares of Series D Preferred Stock were initially measured at redemption value. The value of the shares of Series D Preferred Stock as of September 30, 2022 was de minimis.

Liquidity— Since inception, the Company has incurred significant losses from operations and negative cash flows from operations. As of September 30, 2022, the Company had an accumulated deficit of $574,367. As the Company commenced a full promotional launch of EYSUVIS in early January 2021 and commercially launched its first product, INVELTYS, in January 2019, the Company generated only limited revenues from product sales prior to the sale of its Commercial Business to Alcon in July 2022. The Company has financed its operations primarily through proceeds from its initial public offering of common stock, follow-on public common stock offerings and sales of its common stock under its at-the-market offering (“ATM Offering”) facility, private placements of preferred stock, borrowings under credit facilities and the Loan and Security Agreement with Oxford Finance LLC (“Oxford Finance”), convertible promissory notes and warrants. The Company has devoted substantially all of its financial resources and efforts to research and development, including preclinical studies and clinical trials, and, prior to the sale of its Commercial Business to Alcon in July 2022, engaging in activities to launch and commercialize EYSUVIS and INVELTYS. As a result of the Combangio Acquisition and the sale of the Company’s Commercial Business to Alcon, the Company intends to devote substantial financial resources to the research and development and potential commercialization of KPI-012. Although the Company is eligible to receive up to $325,000 in payments from Alcon based upon the

achievement of specified commercial sales-based milestones with respect to EYSUVIS and INVELTYS, there can be no assurance when the Company may receive such milestone payments or the amount of milestone payments the Company may receive, if any. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future, including in connection with its continued development, regulatory approval efforts and commercialization, if any, of KPI-012. The Company may never achieve or maintain profitability. Net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

The Company expects that its cash and cash equivalents as of September 30, 2022, will enable it to fund its operating expenses, debt service obligations and capital expenditure requirements for at least twelve months from the date these condensed consolidated financial statements were issued. This evaluation is based on relevant conditions and events that are known and reasonably knowable at the date that the condensed consolidated financial statements are issued. To the extent these conditions or events change, the Company could deplete its available capital resources sooner than it currently expects. This evaluation also assumes that the Company remains in compliance with the covenants under the Loan Agreement (defined below), including the covenant that the Company’s common stock remain listed on the Nasdaq Global Select Market. A delisting of the Company’s common stock from the Nasdaq Global Select Market is an event of default under the Loan Agreement, and the occurrence of an event of default would permit the lender to accelerate the amounts due under the Loan Agreement. On May 24, 2022, the Company received a deficiency letter from the Nasdaq Stock Market LLC (“Nasdaq”) notifying it that, for 30 consecutive business days, the bid price of its common stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on Nasdaq pursuant to Nasdaq Listing Rule 5450(a)(1), and on July 6, 2022, the Company received another deficiency letter from Nasdaq notifying it that it was not in compliance with Nasdaq Listing Rules 5450(b)(2)(A), as the market value of its common stock was less than $50.0 million for each of the previous 30 consecutive business days, 5450(b)(1)(A), as its stockholders’ equity was less than $10.0 million and 5450(b)(3)(A) as its total assets and total revenue for the most recently completed fiscal year or for two of the three most recently completed fiscal years were less than $50.0 million. On November 4, 2022, the Company received a letter from Nasdaq notifying the Company that it had regained compliance with the $1.00 per share minimum bid price requirement. The letter noted that the Company’s common stock had a closing bid price of at least $1.00 per share for a minimum of ten consecutive business days from October 21, 2022 through November 3, 2022, and the Company had regained compliance with Nasdaq Listing Rule 5450(a)(1). The Company remains out of compliance with Nasdaq Listing Rule 5450(b). A company that has its primary equity security listed on the Nasdaq Global Select Market must satisfy at least one of the standards in Nasdaq Listing Rule 5450(b). If the Company is unable to cure such deficiency or otherwise regain compliance with Nasdaq Listing Rule 5450(b) by January 2, 2023, the Company’s common stock will be subject to delisting.

The matters described above may impact the Company’s ability to remain in compliance with the covenants under the Loan Agreement beginning January 3, 2023. If an event of default or a breach of the covenants under the Loan Agreement occurs, including as a result of the delisting of the Company's common stock from the Nasdaq Global Select Market, and the Company fails to secure a waiver or forbearance from the third-party lender, such breach or failure would accelerate the repayment of the outstanding indebtedness under the Loan Agreement. In such event, the Company may not be able to make accelerated payments, and the lender could seek to enforce security interests in the collateral securing such indebtedness. Acceleration of the repayment of the outstanding indebtedness would raise substantial doubt about the Company’s ability to continue as a going concern, shorten the period for which the Company will be able to fund its operations and capital expenditure requirements and would adversely affect its financial condition and ability to pursue our business strategy.

COVID-19— In order to safeguard the health of its employees from COVID-19, the Company is following, and will continue to follow, recommendations from the U.S. Centers for Disease Control and Prevention, as well as federal, state and local governments, regarding working-from-home practices for non-essential employees.

In addition, government restrictions have at times led to moratoria on elective ocular surgeries in many jurisdictions, which had significantly reduced the demand for INVELTYS, which is indicated for the treatment of post-operative inflammation and pain following ocular surgery. While surgeries have returned to historical levels, the COVID-19 pandemic had negatively impacted revenues from INVELTYS in prior periods. In addition, the COVID-19 pandemic has generally had an adverse impact on the launch of pharmaceutical products, and the Company believes the pandemic impacted the launch of EYSUVIS. The Company cannot predict whether the COVID-19 pandemic will impact Alcon’s ability to commercialize EYSUVIS and INVELTYS, and as a result, it cannot be certain whether the COVID-19 pandemic might adversely affect when the Company may receive milestone payments from Alcon, which milestone payments the Company may receive and if the Company will receive any milestone payments at all. The Company also does not know the extent to which the COVID-19 pandemic will impact its development of KPI-012 or any other product candidate it develops. Any impact of COVID-19 on Alcon’s commercialization efforts of EYSUVIS and INVELTYS, the Company’s development of KPI-012 and any other product candidate it may develop in the future and the Company’s operational and financial performance will depend on certain developments, including the length and severity of this pandemic, the timing and extent of any resurgence of the COVID-19 virus or any variant strains of the virus, the availability and effectiveness of vaccines, and the impact of the foregoing on customers, employees, vendors and government agencies, all of which are uncertain and cannot be predicted. The Company cannot reasonably estimate the extent to which the disruption may materially impact its condensed consolidated results of operations or financial position.

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

Net Income (Loss) per Share—Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (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 and the issuance of unvested restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”).

The weighted average number of common shares included in the computation of diluted net income (loss) gives effect to all potentially dilutive common equivalent shares, including outstanding stock options, warrants and unvested RSUs and PSUs. Common stock equivalent shares are excluded from the computation of diluted net income (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. The Company reported net income attributable to common stockholders for the three months ended September 30, 2022 and a net loss attributable to common stockholders for the nine months ended September 30, 2022 and the three and nine months ended September 30, 2021. (See Note 15).

Unaudited Interim Financial Information—The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements

prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. The accompanying condensed consolidated financial statements reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations, statement of stockholders’ equity and cash flows for the interim periods presented. Interim results are not necessarily indicative of results for a full year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “Annual Report”).

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements included in the Annual Report. There have been no material changes to the significant accounting policies during the nine months ended September 30, 2022, other than as described below.

Assets Held for Sale

The Company classifies its long-lived assets to be sold as held for sale, as specified by ASC 360, Property, Plant, and Equipment, in the period (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale. Upon designation as an asset held for sale, the Company stops recording depreciation and amortization expense on long-lived assets. The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is no longer classified as held for sale.

As of September 30, 2022, certain assets met the criteria to be classified as held for sale and the Company concluded there was an impairment loss of $91 related to held for sale assets for the three and nine months ended September 30, 2022. Fair value was determined based on the estimated proceeds from the sale of the assets. The Company reclassified the inventory and property and equipment, which had a combined carrying value of $9,513, to current assets held for sale on the condensed consolidated balance sheet as of September 30, 2022. See Note 4, “Assets Held for Sale”, for additional information. There were no assets that met the criteria for classification as held for sale as of December 31, 2021.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. In November 2019, the FASB issued ASU 2019-10, Financial

Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) (“ASU 2019-10”), which is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be Smaller Reporting Companies (“SRCs”) as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years and for all other entities, including SRCs, for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of ASU 2016-13, beginning January 1, 2023, on its consolidated financial statements and related disclosures. The Company does not expect that the adoption of this standard will have a material impact on its condensed consolidated financial statements or related disclosures.

SALE OF COMMERCIAL BUSINESS TO ALCON

9 Months Ended

Sep. 30, 2022

SALE OF COMMERCIAL BUSINESS TO ALCON

SALE OF COMMERCIAL BUSINESS TO ALCON

3. SALE OF COMMERCIAL BUSINESS TO ALCON

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

Pursuant to the Asset Purchase Agreement, on July 8, 2022, the Company entered into supply and commercial agreements under which the Company agreed to supply EYSUVIS and INVELTYS to Alcon and distribute EYSUVIS and INVELTYS to third-party customers of the Commercial Business on behalf of Alcon for a period of six months following the closing of the Alcon Transaction, subject to early termination. In addition, the Company entered into a transition services agreement under which the Company agreed to provide agreed upon transition services to Alcon on a cost-plus pricing arrangement for up to six months following the closing of the Alcon Transaction. Pursuant to the supply agreement, Alcon purchased from the Company, at the closing of the Alcon Transaction, $5,027 of EYSUVIS and INVELTYS inventory on-hand at the Company. Together, the supply, commercial and transition services agreements will be referred to herein as the “Transition Agreement.”

The Company has determined that the disposition of these assets does not qualify for reporting as a discontinued operation as it was not considered a component of an entity that comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company. During the three and nine months ended September 30, 2022, the Company recognized a net gain on the sale of the Commercial Business as follows:


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

Alcon has the right to purchase any remaining inventory owned by the Company (“Remaining Inventory”) at an agreed upon discounted price upon termination or expiration of the Supply Agreement. As the overall components of the Alcon Transaction should be reflected at fair value, the Company has deferred a portion of the gross consideration related to the discounted pricing on the Remaining Inventory. The deferred gain on the sale of the Commercial Business of $4,189 was recorded on the condensed consolidated balance sheet as of the transaction date as deferred gain on sale of Commercial Business. As of September 30, 2022, the deferred gain on the sale of the Commercial Business recorded as of the transaction date was reduced by $781 as a result of the subsequent write off of $2,605 of expiring Remaining Inventory in the three and nine-months ended September 30, 2022.

The Company collected and will continue to collect cash on behalf of Alcon for revenue generated by sales of EYSUVIS and INVELTYS from July 8, 2022 through the transition period and the Company is obligated to transfer cash generated by such sales to Alcon. The Company’s condensed consolidated balance sheet as of September 30, 2022 reflected $2,808 of cash collected on behalf of Alcon and a receivable within prepaid and other current assets of $10,083 for cash to be collected on behalf of Alcon for units of EYSUVIS and INVELTYS sold through September 30, 2022. The combined total of $12,891 was recorded within accrued expenses and other current liabilities on the condensed consolidated balance sheet as of September 30, 2022 and $11,964 represents a payable to Alcon and $927 represents a payable to third parties on behalf of Alcon.

The receivables due from Alcon for reimbursement for services performed under the Transition Agreement and invoices processed on Alcon’s behalf were $2,361 and $7,536, respectively, for a total receivable of $9,897 included in prepaid and other current assets on the condensed consolidated balance sheet as of September 30, 2022. The Company recorded income from the Transition Agreement of $2,361 which is presented in other income on the condensed consolidated statement of operations for the three and nine months ended September 30, 2022 and which offsets $2,293 of operating expenses related to the Transition Agreement captured within loss from operations. The Company’s condensed consolidated balance sheet as of September 30, 2022 reflected an additional $8,287 in payables to third parties of which $4,775 was included within accounts payable and $3,512 was included within accrued expenses and other current liabilities related to invoices the Company will pay on Alcon’s behalf.

ASSETS HELD FOR SALE

9 Months Ended

Sep. 30, 2022

ASSETS HELD FOR SALE

ASSETS HELD FOR SALE

4. ASSETS HELD FOR SALE

As of September 30, 2022, the Company presented assets to be disposed of that met the criteria as held for sale as a single asset in its condensed consolidated financial statements. The inventory classified as held for sale represents the carrying value of the Remaining Inventory which Alcon, and solely Alcon, has the right to purchase. As noted in Note 3, “Sale of Commercial Business to Alcon” above, the Company deferred a portion of the gain on the sale of the Commercial Business related to the discounted pricing on the Remaining Inventory. As such, inventory was recorded and presented at its carrying value and the Company determined that there was no impairment loss related to held for sale inventory for the three months and nine months ended September 30, 2022. The Company concluded that the carrying value of the fixed assets held for sale outside of the Alcon Transaction exceeded its fair value less costs to sell and as such, recorded impairment of $91 during the three and nine months ended September 30, 2022. There were no assets that met the criteria to be presented as held for sale as of December 31, 2021.

The following is a summary of the major categories of assets that have been reclassified to held for sale on the condensed consolidated balance sheet as of September 30, 2022:


	September 30,
	2022
Inventories	$	9,454
Property and equipment, net		59
Total assets held for sale	$	9,513

See Note 2, “Summary of Significant Accounting Policies”, and Note 3, “Sale of Commercial Business to Alcon”, for further information on the sale of the Company’s Commercial Business.

FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2022

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

●

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

●

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

●

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

The Company’s financial instruments as of September 30, 2022 and December 31, 2021 consisted primarily of cash equivalents and contingent consideration. Cash equivalents, short-term investments, if any, and contingent consideration are reported at their respective fair values on the Company’s condensed consolidated balance sheets.

The Company acquired Combangio in November 2021 and in connection with the closing of the Combangio Acquisition, the Company agreed to issue an aggregate of 155,799 shares (the “Deferred Purchase Consideration”) of the Company’s common stock to former Combangio stockholders and other equityholders (the “Combangio Equityholders”) consisting of (i) an aggregate of 136,314 shares of common stock issued on January 3, 2022 (the “Upfront Shares”) and (ii) an aggregate of 19,485 shares of common stock that have been held back by the Company and will be issuable subject to the terms of the Merger Agreement to the Combangio Equityholders on the date that is fifteen months after the closing (the “Escrow Release Date”). The Company established liabilities for the Deferred Purchase Consideration. The Deferred Purchase Consideration related to the Combangio Acquisition is measured at fair value each reporting period using Level 3 unobservable inputs. The fair value of the Deferred Purchase Consideration was based on the fair value of the underlying stock and a discount for lack of marketability. Changes in these estimates and assumptions could have a significant impact on the fair value of the Deferred Purchase Consideration. Any change in the fair value of the Deferred Purchase Consideration is included in loss from operations in the condensed consolidated statements of operations and comprehensive loss. During the nine months ended September 30, 2022, the Company settled $7,935 of the liability upon the issuance of the Upfront Shares. The change in the fair value of the Deferred Purchase Consideration was a gain of $57 and a loss of $205 during the three and nine months ended September 30, 2022, respectively, primarily due to the change in the fair value of the underlying stock price and is recognized as the (gain) loss on fair value remeasurement of deferred purchase consideration in the condensed consolidated statements of operations and comprehensive loss.

Additionally, the purchase price in connection with the Combangio Acquisition included potential future payments of up to $105,000 that are contingent upon the achievement of specified development, regulatory and commercialization milestones and are required to be recorded at fair value. Contingent consideration liabilities related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs. The fair values of the contingent consideration liabilities were based on a probability-adjusted discounted cash flow calculation using Level 3 fair value measurements. Changes in these estimates and assumptions could have a significant impact on the fair value of the contingent consideration liabilities. Any changes in the fair value of these contingent consideration liabilities are included in loss from operations in the condensed consolidated statements of operations and comprehensive loss. During the three and nine months ended September 30, 2022, the change in fair value of the contingent consideration liabilities was a loss of $95 and a gain of $952, respectively, primarily due to changes in discount rates, partially offset by the passage of time, and were recognized as a (gain) loss on fair value remeasurement of contingent consideration in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022.

The following tables set forth the fair value of the Company’s financial instruments by level within the fair value hierarchy as of September 30, 2022 and December 31, 2021:


	September 30, 2022
	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	36,329	$	36,329	$	—	$	—
Total Assets	$	36,329	$	36,329	$	—	$	—
Liabilities:
Deferred purchase consideration	$	162	$	—	$	—	$	162
Contingent consideration		7,706		—		—		7,706
Total Liabilities	$	7,868	$	—	$	—	$	7,868


	December 31, 2021
	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	86,135	$	86,135	$	—	$	—
Total Assets	$	86,135	$	86,135	$	—	$	—
Liabilities:
Deferred purchase consideration	$	7,892	$	—	$	—	$	7,892
Contingent consideration		8,658		—		—		8,658
Total Liabilities	$	16,550	$	—	$	—	$	16,550

The following tables summarize quantitative information and assumptions pertaining to the fair value measurement of the Level 3 inputs as of September 30, 2022 and December 31, 2021:


	Fair Value at
	September 30,				Range
Financial Instrument	2022		Valuation Technique	Unobservable Input	(Average)
Deferred purchase consideration	$	162	Option pricing model	Discount for lack of marketability	25%

Contingent consideration	$	7,706	Probability-adjusted	Period of expected milestone achievement	2022 - 2027 (2025)
			discounted cash flow model	Probabilities of achievement	18.9% - 90.0% (42.5%)
				Discount rate	17.5%
				Discount for lack of marketability	20.0%


	Fair Value at
	December 31,				Range
Financial Instrument	2021		Valuation Technique	Unobservable Input	(Average)
Deferred purchase consideration	$	7,892	Option pricing model	Discount for lack of marketability	15.0% - 25.0% (20.0%)

Contingent consideration	$	8,658	Probability-adjusted	Period of expected milestone achievement	2022 - 2027 (2025)
			discounted cash flow model	Probabilities of achievement	18.9% - 90.0% (42.5%)
				Discount rate	10.3%
				Discount for lack of marketability	12.0%

The following table summarizes the changes in the Deferred Purchase Consideration and contingent consideration liabilities measured at fair value using Level 3 inputs for the three and nine months ended September 30, 2022:


Deferred purchase consideration
Balance at January 1, 2022	$	7,892
Fair value adjustments		1,051
Settlements		(7,935)
Balance at March 31, 2022	$	1,008
Fair value adjustments		(789)
Balance at June 30, 2022	$	219
Fair value adjustments		(57)
Balance at September 30, 2022	$	162

Contingent consideration
Balance at January 1, 2022	$	8,658
Fair value adjustments		(988)
Balance at March 31, 2022	$	7,670
Fair value adjustments		(59)
Balance at June 30, 2022	$	7,611
Fair value adjustments		95
Balance at September 30, 2022	$	7,706

During the three and nine months ended September 30, 2022 and the year ended December 31, 2021, there were no transfers between Level 1, Level 2, and Level 3.

- Definition

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

+ References + Details

REVENUE & ACCOUNTS RECEIVABLE, NET

9 Months Ended

Sep. 30, 2022

REVENUE & ACCOUNTS RECEIVABLE, NET

REVENUE & ACCOUNTS RECEIVABLE, NET

6. REVENUE & ACCOUNTS RECEIVABLE, NET

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

Product revenues, net

The Company sold EYSUVIS and INVELTYS primarily to wholesalers in the United States (collectively, “Customers”). These Customers subsequently resold the Company’s products to specialty and other retail pharmacies. In addition to agreements with Customers, the Company entered into arrangements with third-party payors that provided for government-mandated and/or privately-negotiated rebates, chargebacks and discounts for the purchase of the Company’s products.

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

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

Reserves for Variable Consideration:

Trade Discounts and Allowances

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

Chargebacks

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

Product Returns

Consistent with industry practice, the Company has a product returns policy that provides Customers right of return for product purchased within a specified period prior to and subsequent to the product’s expiration date. The Company estimated the amount of its products that may be returned and presented this amount as a reduction of revenue in the period the related product revenue was recognized, in addition to establishing a liability. The Company’s estimates

for product returns were based upon available industry data and its own sales information, including its visibility into the inventory remaining in the distribution channel as well as historical returns, which developed over time.

Commercial Payor and Medicare Part D Rebates

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

Government Rebates

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

Co-pay Assistance Programs

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

The following tables summarize activity in each of the Company’s product revenue provision and allowance categories for the three and nine months ended September 30, 2022 and 2021:


	Trade Discounts,
	Allowances and				Rebates and
	Chargebacks (1)		Product Returns (2)		Incentives (3)
Balance as of December 31, 2021	$	2,672	$	1,140	$	11,280
Provision related to current period sales		2,133		210		13,359
Changes in estimate related to prior period sales		(1)		(138)		(242)
Credit/payments made		(3,261)		(415)		(10,108)
Balance as of March 31, 2022	$	1,543	$	797	$	14,289
Provision related to current period sales		2,602		214		15,413
Changes in estimate related to prior period sales		(41)		(199)		(107)
Credit/payments made		(2,041)		(112)		(14,878)
Balance as of June 30, 2022	$	2,063	$	700	$	14,717
Provision related to current period sales		91		4		525
Changes in estimate related to prior period sales		176		150		(680)
Credit/payments made		(2,310)		(263)		(9,562)
Balance as of September 30, 2022	$	20	$	591	$	5,000


	Trade Discounts,
	Allowances and				Rebates and
	Chargebacks (1)		Product Returns (2)		Incentives (3)
Balance as of December 31, 2020	$	1,157	$	600	$	4,904
Provision related to current period sales		2,201		245		10,216
Changes in estimate related to prior period sales		3		30		(26)
Credit/payments made		(1,823)		(419)		(7,880)
Balance as of March 31, 2021	$	1,538	$	456	$	7,214
Provision related to current period sales		2,103		356		11,193
Changes in estimate related to prior period sales		30		142		(353)
Credit/payments made		(2,260)		(253)		(9,801)
Balance as of June 30, 2021	$	1,411	$	701	$	8,253
Provision related to current period sales		2,137		490		11,686
Changes in estimate related to prior period sales		18		109		(647)
Credit/payments made		(2,110)		(632)		(9,861)
Balance as of September 30, 2021	$	1,456	$	668	$	9,431

(1)

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

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

(3)

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

Accounts Receivable, net

Accounts receivable are reported on the condensed consolidated balance sheets at outstanding amounts due from customers for product sales. The Company deducted sales discounts for prompt payments and other discounts, contractual fees for service arrangements and chargebacks from accounts receivable. The Company evaluates the collectability of accounts receivable on a regular basis, by reviewing the financial condition and payment history of customers, an overall review of collections experience on other accounts, and economic factors or events expected to affect future collections experience. An allowance for doubtful accounts is recorded when a receivable is deemed to be uncollectible.

The Company recorded no allowance for doubtful accounts as of September 30, 2022 or December 31, 2021. The Company recorded an allowance of $20 and $2,672 for expected sales discounts, related to prompt pay discounts and other discounts, contractual fee for service arrangements and chargebacks, to wholesalers and distributors as of September 30, 2022 and December 31, 2021, respectively.

- Definition

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

+ References

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

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

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Section 50
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-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

+ Details

INVENTORY

9 Months Ended

Sep. 30, 2022

INVENTORY

INVENTORY

7. INVENTORY

Inventory held and used consisted of the following:


	September 30,		December 31,
	2022		2021

Raw materials	$	—	$	1,328
Work in progress		—		9,799
Finished goods		—		7,090
Total inventory	$	—	$	18,217

As of September 30, 2022, the Company had no held and used inventory and had $9,454 of inventory classified as held for sale (see Note 4, “Assets Held for Sale”). As of December 31, 2021, the Company had $8,639 of current inventory and $9,578 of long-term inventory.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

9 Months Ended

Sep. 30, 2022

PREPAID EXPENSES AND OTHER CURRENT ASSETS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

8. PREPAID EXPENSES AND OTHER CURRENT ASSETS

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


	September 30,		December 31,
	2022		2021

Due from third parties in connection with Transition Agreement	$	10,083	$	—
Due from Alcon		9,897		—
Insurance		1,003		1,307
Other non-trade receivables		836		2,110
Deposits		149		911
Other		608		1,876
Prepaid expenses and other current assets	$	22,576	$	6,204

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

9 Months Ended

Sep. 30, 2022

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:


	September 30,		December 31,
	2022		2021

Due to Alcon	$	11,964	$	—
Due to third parties in connection with Transition Agreement (1)		4,439		—
Compensation and benefits		3,465		6,324
Accrued revenue reserves (2)		2,046		10,300
Professional services		1,268		881
Contract manufacturing		759		396
Development costs		591		127
Commercial costs		414		2,134
Other		422		824
Accrued expenses	$	25,368	$	20,986

(1) There were additional amounts due to third parties in connection with the Transition Agreement included in accounts payable of $4,775 as of September 30, 2022.

(2) There were additional revenue reserves included in accounts payable of $3,545 and $2,120, as of September 30, 2022 and December 31, 2021, respectively.

LEASES

9 Months Ended

Sep. 30, 2022

LEASES

LEASES

10. LEASES

Operating leases

Terminated Watertown Lease

On February 28, 2018, the Company entered into a lease agreement with 480 Arsenal Group LLC 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 was eight years with an option to extend for an additional five years, which were recognized as part of the Company’s right-of-use asset and lease liability. The Company occupied the premises in Watertown in early 2019 as its corporate headquarters and for research and development.The lease commencement date was November 15, 2018 and the Company concluded that it controlled the space as of the lease commencement date.

On November 12, 2021, the Company entered into a lease termination agreement (the “Lease Termination Agreement”) with the landlord of the Watertown Lease, which Lease Termination Agreement was amended on December 22, 2021, which modified the lease to accelerate the lease termination date to January 11, 2022 (the “Lease Termination Date”). Under the terms of the Lease Termination Agreement, the Company was entitled to receive a payment of $2,000 due from the landlord in January 2022, which was collected during the nine months ended September 30, 2022. The Company was obligated to make rent payments outlined in the lease agreement until the Lease Termination Date.

In connection with the signing of the Lease Termination Agreement, the Company remeasured the lease liability and right-of-use asset and recognized a gain of approximately $1,311, which was included in gain on lease modification in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2021. Additionally, pursuant to the Lease Termination Agreement, $2,042 of restricted cash was released during the nine months September 30, 2022 that was pledged as collateral under a letter of credit with cash on deposit. The restricted cash was included within short-term restricted cash on the consolidated balance sheet as of December 31, 2021.

Vehicle Fleet lease

During the year ended December 31, 2019, the Company entered into a master fleet lease agreement (the “Vehicle Fleet Lease”). The Vehicle Fleet Lease commenced upon the delivery of the initial vehicles in March 2019 and has been subject to modifications as the number of leased vehicles has increased or decreased. As of September 30, 2022 and in connection with the closing of the Alcon Transaction, the Company initiated the termination of the Vehicle Fleet Lease and there is no remaining right-of-use asset or corresponding lease liability. In connection with the Vehicle Fleet Lease, the Company issued a letter of credit for $450. The letter of credit was released in September 2022 and was reported as restricted cash on the condensed consolidated balance sheet as of December 31, 2021.

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Lease cost
Operating lease cost	$	9	$	1,266	$	404	$	3,750
Short-term lease cost		49		—		143		—
Variable lease cost		114		528		740		1,621
Total lease cost	$	172	$	1,794	$	1,287	$	5,371

Operating cash outflows from operating leases	$	338	$	1,675	$	1,308	$	4,918

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


	September 30,	December 31,
	2022	2021
Weighted average remaining lease term	0.5 years	2.4 years
Weighted average discount rate	10.3%	2.6%

DEBT

9 Months Ended

Sep. 30, 2022

DEBT

DEBT

11. DEBT

Athyrium Credit Facility

On October 1, 2018, the Company entered into a credit agreement (the “Athyrium Credit Facility”) with Athyrium Opportunities III Acquisition LP (“Athyrium”) for up to $110,000. The Athyrium Credit Facility provided for a Term Loan A in the aggregate principal amount of $75,000 (the “Term Loan A”), and a Term Loan B in the aggregate principal amount of $35,000 (the “Term Loan B”). On October 1, 2018, the Company borrowed the entire principal amount of the Term Loan A, which bore interest at a rate of 9.875% per annum, with quarterly, interest-only payments until the fourth anniversary of the Term Loan A. The maturity date of the Athyrium Credit Facility was October 1, 2024, the six-year anniversary of the close.

As of March 31, 2021, the unpaid principal balance on the Athyrium Credit Facility was $75,000. On May 4, 2021, the Company repaid all amounts owed under the Athyrium Credit Facility and terminated all commitments by Athyrium to extend further credit thereunder and all guarantees and security interests granted by the Company to the lenders thereunder. In connection with the termination of the Athyrium Credit Facility, the Company paid to the lenders a prepayment premium of $2,250 and an exit fee of $750. The transaction resulted in a loss on extinguishment of debt of $5,395 for the year ended December 31, 2021, consisting of the prepayment premium, the unamortized debt discount

and issuance costs and the unaccreted exit fee. Additionally, in May 2021, the Company released $10,000 of restricted cash previously recorded to comply with a financial covenant required by the Athyrium Credit Facility.

Loan and Security Agreement

On May 4, 2021 (the “Closing Date”), the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Oxford Finance, in its capacity as lender (in such capacity, the “Lender”), and in its capacity as collateral agent (in such capacity, the “Agent”), pursuant to which a term loan of up to an aggregate principal amount of $125,000 is available to the Company, consisting of (i) a tranche A term loan that was disbursed on the Closing Date in the aggregate principal amount of $80,000; (ii) a contingent tranche B term loan in the aggregate principal amount of $20,000 available to the Company through June 30, 2023 and within 90 days of the Company achieving trailing 6-month product revenue equal to or greater than $75,000, subject to certain other terms and conditions; and (iii) a contingent tranche C term loan in the aggregate principal amount of $25,000 available to the Company through December 31, 2023 and within 90 days of the Company achieving trailing 6-month product revenue equal to or greater than $100,000, subject to certain other terms and conditions. The Company utilized substantially all of the proceeds from the tranche A term loan to repay the Athyrium Credit Facility (as more fully described above).

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

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

In connection with its entry into the Loan Agreement, the Company granted the Agent a security interest in substantially all of the Company’s personal property owned or later acquired, including intellectual property and the Commercial Business. The Loan Agreement also contains customary representations and warranties and affirmative and negative covenants, as well as customary events of default, including the delisting of its common stock from The Nasdaq Global Select Market. On May 24, 2022, the Company received a deficiency letter from the Nasdaq Stock Market LLC (“Nasdaq”) notifying it that, for 30 consecutive business days, the bid price of its common stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on Nasdaq pursuant to Nasdaq Listing Rule 5450(a)(1), and on July 6, 2022, the Company received another deficiency letter from Nasdaq notifying it that it was not in compliance with Nasdaq Listing Rules 5450(b)(2)(A), as the market value of its common stock was less than $50,000,000 for the previous 30 consecutive business days, 5450(b)(1)(A), as its Stockholders’ Equity was less than $10 million and 5450(b)(3)(A) as its total assets and total revenue for the most recently completed fiscal year or for two of the three most recently completed fiscal years were less than $50 million. A company that has its primary equity security listed on the Nasdaq Global Select Market must continue to substantially meet all of the requirements set forth in Rule 5450(a) and at least one of the standards in Rule 5450(b). Each of the deficiency letters indicated that if the Company is unable to cure such deficiency or otherwise regain compliance with the Nasdaq Listing Rules within 180 calendar days

from the date of the respective deficiency letter, the Company’s common stock will be subject to delisting. Certain of the customary negative covenants limit the ability of the Company and certain of its subsidiaries, among other things, to incur future debt, grant liens, make investments, make acquisitions, distribute dividends, make certain restricted payments and sell assets, subject in each case to certain exceptions.

The Loan Agreement includes features requiring (i) additional interest rate upon an event of default accrued at an additional 5%, and (ii) the Lender’s right to declare all outstanding principal and interest immediately payable upon an event of default. These two features were analyzed and determined to be embedded derivatives to be valued as separate financial instruments. These embedded derivatives were bundled and valued as one compound derivative in accordance with the applicable accounting guidance for derivatives and hedging transactions. The Company determined that the value of the embedded derivatives is not material as of September 30, 2022. The derivative liability will be remeasured at fair value at each reporting date, with changes in fair value being recorded as other income (expense) in the condensed consolidated statements of operations and comprehensive loss.

In addition, in connection with the Loan Agreement, the Company paid certain fees to the Lender and other third-party service providers. The fees paid to the Lender were recorded as a debt discount while the fees paid to other third-party service providers were recorded as debt issuance cost. These costs are being amortized using the effective interest method over the term of the Loan Agreement. The amortization of debt discount and debt issuance cost is included in interest expense within the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2022, the effective interest rate was 13.05%, which takes into consideration the non-cash accretion of the exit fee and the amortization of the debt discount and issuance costs.

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

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

On July 8, 2022, the Prepayment was paid in connection with the closing of Alcon Transaction, and as such, the Amortization Date was extended to January 1, 2026. The transaction resulted in a loss on extinguishment of debt of $2,583 for the three and nine months ended September 30, 2022, consisting of the prepayment premium, a pro-rata portion of the unamortized debt discount and issuance costs and the unaccreted exit fee due upon the Prepayment.

During the three months ended September 30, 2022 and 2021, the Company recognized interest expense of $1,447 and $2,071, respectively, for the Loan Agreement. This consisted of amortization of debt discount of $52 and $110 for the three months ended September 30, 2022 and September 30, 2021, respectively, accretion of the final payment fee of $206 and $325 for the three months ended September 30, 2022 and September 30, 2021, respectively, and the contractual coupon interest expense of $1,189 and $1,636 for the three months ended September 30, 2022 and

September 30, 2021, respectively. During the nine months ended September 30, 2022, the Company recognized interest expense of $5,703 for the Loan Agreement and during the nine months ended September 30, 2021, the Company recognized interest expense of $6,277 for the Loan Agreement and Athyrium Credit Facility. This consisted of amortization of debt discount of $281 and $501 for the nine months ended September 30, 2022 and September 30, 2021, respectively, accretion of the final payment fee of $849 and $579 for the nine months ended September 30, 2022 and September 30, 2021, respectively, and the contractual coupon interest expense of $4,573 and $5,197 for the nine months ended September 30, 2022 and September 30, 2021, respectively.

The components of the carrying value of the debt as of September 30, 2022 and December 31, 2021 are detailed below:


	September 30,		December 31,
	2022		2021
Principal loan balance	$	43,303	$	80,000
Unamortized debt discount and issuance cost		(867)		(1,927)
Cumulative accretion of exit fee		206		856
Long-term debt, net	$	42,642	$	78,929

The annual principal payments due under the Loan Agreement as of September 30, 2022 were as follows:


Years Ending December 31,
2022 (remaining three months)	$	—
2023		—
2024		—
2025		—
2026		43,303
Total	$	43,303

- Definition

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

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Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
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+ Details

WARRANTS

9 Months Ended

Sep. 30, 2022

WARRANTS.

WARRANTS

12. WARRANTS

The following table summarizes the common stock warrants outstanding as of September 30, 2022 and December 31, 2021, each exercisable into the number of shares of common stock set forth below as of the specified dates:


					Shares Exercisable at
	Exercise		Expiration	Exercisable	September 30,	December 31,
Issued	Price Per Share		Date	From	2022	2021
2014	$	375.00	November 2024	July 2017	320	320
2016	$	413.50	October 2026	September 2017	290	290
2018	$	609.23	October 2025	October 2018	3,693	3,693
					4,303	4,303

EQUITY FINANCINGS

9 Months Ended

Sep. 30, 2022

EQUITY FINANCINGS

EQUITY FINANCINGS

13. EQUITY FINANCINGS

On August 9, 2018, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on August 27, 2018 (the “2018 Shelf Registration”) and registered up to $250,000 of a variety of securities, including common stock. Under the 2018 Shelf Registration, which expired in August 2021, the Company issued an aggregate of 611,000 shares of common stock, including under the ATM Offering, resulting in aggregate gross proceeds of $231,666.

On May 7, 2020, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on May 19, 2020 (the “2020 Shelf Registration”). Under the 2020 Shelf Registration, the Company may offer and sell up to $350,000 of a variety of securities including common stock, preferred stock, warrants, depositary shares, debt securities or units during the three-year period that commenced upon the 2020 Shelf Registration becoming effective. In connection with the filing of the 2020 Shelf Registration, the Company entered into an amended and restated sales agreement with Jefferies pursuant to which it may issue and sell, from time to time, up to an aggregate of $75,000 of its common stock under its ATM Offering through Jefferies, as a sales agent. Through December 31, 2021, the Company issued and sold an aggregate of 171,626 shares of its common stock under the ATM Offering, resulting in net proceeds of $61,843, which included 2,283 and 113,950 shares of common stock issued and sold during the three and nine months ended September 30, 2021, respectively, resulting in net proceeds of $332 and $41,063, respectively. The Company did not sell any shares of its common stock under the ATM Offering during the nine months ended September 30, 2022. As of September 30, 2022, there were $11,344 of shares of common stock remaining under the ATM Offering and, excluding the shares of common stock that may be offered under the ATM Offering, there was approximately $275,000 of securities available to be issued under the 2020 Shelf Registration.

STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2022

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

14. STOCK‑BASED COMPENSATION

During the nine months ended September 30, 2022, the Company granted options for the purchase of 81,561 shares of common stock, including options with performance criteria as described below, options to directors and inducement grant options to purchase 2,800 shares of common stock to new employees made outside of our 2017 Equity Incentive Plan and 6,910 restricted stock units. In January and July 2022, employees of the Company purchased an aggregate of 3,074 and 10,657 shares, respectively, under the Employee Stock Purchase Plan.

The assumptions used in determining fair value of the stock options granted during the nine months ended September 30, 2022 are as follows:


	Nine Months Ended September 30, 2022
Expected volatility	72.9%	–	84.5%
Risk-free interest rate	1.43%	–	3.59%
Expected dividend yield		0%
Expected term (in years)	5.50	–	6.10

During the nine months ended September 30, 2022, the weighted average grant-date fair value of options granted was $41.12.

In January 2022, the Company granted stock options to purchase up to 14,850 shares of common stock to certain executives tied to certain performance criteria. The options will vest, if at all, upon satisfying the performance criteria. The Company has assessed the probability of achievement of the performance criteria and has recorded related stock compensation expense to the extent they are determined to be probable as of September 30, 2022.

In June 2020, the Company issued 13,854 PSUs to certain executives and other employees tied to certain performance criteria, which vested as to 50% of the PSUs in October 2021 on the first anniversary of satisfying the performance criteria and the remaining 50% will vest upon the second anniversary of satisfying the performance criteria. The Company has determined that the performance criteria for these awards has been achieved but not all of the awards have vested as of September 30, 2022. As of September 30, 2022, a total of 14,879 RSUs and PSUs were outstanding, consisting of 11,420 unvested shares and 3,460 vested and deferred shares by directors.

Stock-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Cost of product revenues	$	4	$	38	$	166	$	109
Research and development		238		869		1,085		2,821
Selling, general and administrative		1,085		3,021		4,797		10,410
Total	$	1,327	$	3,928	$	6,048	$	13,340

INCOME (LOSS) PER SHARE

9 Months Ended

Sep. 30, 2022

INCOME (LOSS) PER SHARE

INCOME (LOSS) PER SHARE

15. INCOME (LOSS) PER SHARE

Basic and diluted net income (loss) per share attributable to common stockholders was calculated as follows for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Numerator:
Net income (loss) attributable to common stockholders	$	29,073	$	(28,127)	$	(31,979)	$	(95,037)
Denominator:
Weighted-average common shares outstanding, basic (1)		1,499,001		1,313,466		1,490,159		1,287,772
Effect of dilutive securities		11,420		—		—		—
Weighted-average common shares outstanding, diluted (1)		1,510,421		1,313,466		1,490,159		1,287,772

Net income (loss) per share attributable to common stockholders, basic	$	19.39	$	(21.41)	$	(21.46)	$	(73.80)
Net income (loss) per share attributable to common stockholders, diluted	$	19.25	$	(21.41)	$	(21.46)	$	(73.80)

(1)

Included in the weighted-average common shares outstanding, basic and diluted for the three and nine months ended September 30, 2022 is an aggregate of 19,485 shares of common stock that have been held back by the Company and will be issuable subject to the terms of the Merger Agreement to the Combangio Equityholders on the Escrow Release Date of February 15, 2023.

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Options to purchase shares of common stock		221,747		203,250		242,234		202,035
Unvested RSUs and PSUs		—		25,007		11,328		25,958
Unexercised warrants		4,303		4,303		4,303		4,525
		226,050		232,560		257,865		232,518

INCOME TAXES

9 Months Ended

Sep. 30, 2022

INCOME TAXES

INCOME TAXES

16. INCOME TAXES

The Company did not record a provision or benefit for income taxes during the three and nine months ended September 30, 2022 and 2021. The Company continues to maintain a full valuation allowance for its U.S. federal and state deferred tax assets.

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

Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended, certain substantial changes in the Company’s ownership, including a sale of the Company, or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards, which could be used annually to offset future taxable income. The Company previously completed an analysis and determined that an ownership change has materially limited the net operating loss carryforwards and research and development tax credits available 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, 2021.

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

As of September 30, 2022 and December 31, 2021, the Company had no uncertain tax positions. The Company’s policy is to recognize interest and penalties related to income tax matters as a component of income tax expense, of which no interest or penalties were recorded for the three and nine months ended September 30, 2022 and 2021.

- Definition

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

+ References

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-Name Accounting Standards Codification
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+ Details

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2022

COMMITMENTS AND CONTINGENCIES.

COMMITMENTS AND CONTINGENCIES

17. COMMITMENTS AND CONTINGENCIES

Johns Hopkins University 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, June 2018 and July 2020, which licensed to the Company a portfolio of specified patent rights and remains in full force and effect. Pursuant to the terms of the agreement, as amended, the Company agreed to pay an initial license fee, minimum annual payments beginning in 2017, certain development and commercial milestone payments, royalties on product sales and reimburse all or a portion of the costs associated with the preparation, filing, prosecution and maintenance of the agreed-upon patents and patent applications to JHU.

After 2016 and until the first commercial sale of product, which occurred in January 2019, the minimum annual payment was $38. Upon the first commercial sale of INVELTYS, the annual minimum payment increased to $113. The Company was obligated to pay JHU low single-digit running royalties based upon a percentage of net sales of the licensed products, which was applied to the annual minimum payment. During the three and nine months ended September 30, 2022 and 2021, amounts paid to JHU for royalties were de minimis. The Company also had an obligation to pay JHU certain one-time development and commercial milestone payments. The Company paid JHU a $150 milestone payment during the nine months ended September 30, 2021, which was triggered by the first

commercial sale of EYSUVIS in the United States in December 2020. Additional amounts paid to JHU during the three and nine months ended September 30, 2022 and 2021 were de minimis. In connection with the closing of the Alcon Transaction on July 8, 2022 the exclusive license agreement with JHU was assigned to Alcon, and the Company has no further obligations under the agreement.

Stanford License Agreement— In October 2019, Combangio entered into a license agreement with The Board of Trustees of The Leland Stanford Junior University (“Stanford”), which was amended in February 2020 and subsequently transferred to the Company by operation of law upon the Combangio Acquisition. Pursuant to the license agreement with Stanford (the “Stanford Agreement”), the Company has a worldwide, exclusive, sublicensable license under certain patent rights (“licensed patents”), directed to methods to promote eye wound healing, to make, have made, use, import, offer to sell and sell products (“licensed products”) that are covered by the licensed patents for use in all fields. Under the Stanford Agreement, the Company is required to pay Stanford annual license maintenance fees and milestone payments upon the achievement of specified development, regulatory and sales milestones, as well as tiered royalties on net sales of licensed products that are covered by a valid claim of a licensed patent. Amounts paid to Stanford in the three and nine months ended September 30, 2022 were de minimis. There were no amounts paid to Stanford in the three and nine months ended September 30, 2021.

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

Other Commitments— The Company entered into a commercial supply agreement with Woodstock Sterile Solutions, Inc. (formerly known as Catalent Pharma Solutions, LLC) to manufacture commercial supplies of EYSUVIS and INVELTYS. The commercial supply agreement contains annual minimum purchase requirements, which follow the contract year from July 1st to June 30th. The commitments due under the commercial supply agreement for 2023 and beyond were transferred to Alcon upon the closing of the Alcon Transaction and the Company’s remaining commitment under the commercial supply agreement as of September 30, 2022 is $1,466, which represents purchase orders placed prior to June 30, 2022 under which Woodstock still has services to provide.

Contingencies related to the Merger Agreement— In connection with the Combangio Acquisition, the Company agreed to make additional payments based on the achievement of certain milestone events related to KPI-012. The Company recognized certain contingent consideration liabilities at fair value on the acquisition date, and revalues the remaining obligations each reporting period. The total potential maximum payout for the milestone payments, which have been recorded as liabilities at fair value, is $40,000 and the milestone payments are contingent upon the achievement of specified development, regulatory and commercialization milestones. Additionally, pursuant to the Merger Agreement, the Company could trigger potential future sales-based milestone payments of up to $65,000. Because the achievement of these sales-based milestones related to KPI-012 was not considered probable as of September 30, 2022, such contingencies have not been recorded in the Company’s financial statements. Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory or commercial milestones.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	Sep. 30, 2022
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Assets Held for Sale	Assets Held for Sale The Company classifies its long-lived assets to be sold as held for sale, as specified by ASC 360, Property, Plant, and Equipment, in the period (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale. Upon designation as an asset held for sale, the Company stops recording depreciation and amortization expense on long-lived assets. The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is no longer classified as held for sale. As of September 30, 2022, certain assets met the criteria to be classified as held for sale and the Company concluded there was an impairment loss of $91 related to held for sale assets for the three and nine months ended September 30, 2022. Fair value was determined based on the estimated proceeds from the sale of the assets. The Company reclassified the inventory and property and equipment, which had a combined carrying value of $9,513, to current assets held for sale on the condensed consolidated balance sheet as of September 30, 2022. See Note 4, “Assets Held for Sale”, for additional information. There were no assets that met the criteria for classification as held for sale as of December 31, 2021.
Recent Accounting Pronouncements	Recent Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. In November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) (“ASU 2019-10”), which is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be Smaller Reporting Companies (“SRCs”) as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years and for all other entities, including SRCs, for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of ASU 2016-13, beginning January 1, 2023, on its consolidated financial statements and related disclosures. The Company does not expect that the adoption of this standard will have a material impact on its condensed consolidated financial statements or related disclosures.

SALE OF COMMERCIAL BUSINESS TO ALCON (Tables)

9 Months Ended

Sep. 30, 2022

SALE OF COMMERCIAL BUSINESS TO ALCON

Schedule of dispositions of business


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

ASSETS HELD FOR SALE (Tables)

9 Months Ended

Sep. 30, 2022

ASSETS HELD FOR SALE

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


	September 30,
	2022
Inventories	$	9,454
Property and equipment, net		59
Total assets held for sale	$	9,513

- Definition

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

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+ Details

FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2022

FAIR VALUE OF FINANCIAL INSTRUMENTS

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


	September 30, 2022
	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	36,329	$	36,329	$	—	$	—
Total Assets	$	36,329	$	36,329	$	—	$	—
Liabilities:
Deferred purchase consideration	$	162	$	—	$	—	$	162
Contingent consideration		7,706		—		—		7,706
Total Liabilities	$	7,868	$	—	$	—	$	7,868


	December 31, 2021
	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	86,135	$	86,135	$	—	$	—
Total Assets	$	86,135	$	86,135	$	—	$	—
Liabilities:
Deferred purchase consideration	$	7,892	$	—	$	—	$	7,892
Contingent consideration		8,658		—		—		8,658
Total Liabilities	$	16,550	$	—	$	—	$	16,550

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


	Fair Value at
	September 30,				Range
Financial Instrument	2022		Valuation Technique	Unobservable Input	(Average)
Deferred purchase consideration	$	162	Option pricing model	Discount for lack of marketability	25%

Contingent consideration	$	7,706	Probability-adjusted	Period of expected milestone achievement	2022 - 2027 (2025)
			discounted cash flow model	Probabilities of achievement	18.9% - 90.0% (42.5%)
				Discount rate	17.5%
				Discount for lack of marketability	20.0%


	Fair Value at
	December 31,				Range
Financial Instrument	2021		Valuation Technique	Unobservable Input	(Average)
Deferred purchase consideration	$	7,892	Option pricing model	Discount for lack of marketability	15.0% - 25.0% (20.0%)

Contingent consideration	$	8,658	Probability-adjusted	Period of expected milestone achievement	2022 - 2027 (2025)
			discounted cash flow model	Probabilities of achievement	18.9% - 90.0% (42.5%)
				Discount rate	10.3%
				Discount for lack of marketability	12.0%

Schedule of changes in Level 3 fair value measurements


Deferred purchase consideration
Balance at January 1, 2022	$	7,892
Fair value adjustments		1,051
Settlements		(7,935)
Balance at March 31, 2022	$	1,008
Fair value adjustments		(789)
Balance at June 30, 2022	$	219
Fair value adjustments		(57)
Balance at September 30, 2022	$	162

Contingent consideration
Balance at January 1, 2022	$	8,658
Fair value adjustments		(988)
Balance at March 31, 2022	$	7,670
Fair value adjustments		(59)
Balance at June 30, 2022	$	7,611
Fair value adjustments		95
Balance at September 30, 2022	$	7,706

REVENUE & ACCOUNTS RECEIVABLE, NET (Tables)

9 Months Ended

Sep. 30, 2022

REVENUE & ACCOUNTS RECEIVABLE, NET

Schedule of co-pay assistance program


	Trade Discounts,
	Allowances and				Rebates and
	Chargebacks (1)		Product Returns (2)		Incentives (3)
Balance as of December 31, 2021	$	2,672	$	1,140	$	11,280
Provision related to current period sales		2,133		210		13,359
Changes in estimate related to prior period sales		(1)		(138)		(242)
Credit/payments made		(3,261)		(415)		(10,108)
Balance as of March 31, 2022	$	1,543	$	797	$	14,289
Provision related to current period sales		2,602		214		15,413
Changes in estimate related to prior period sales		(41)		(199)		(107)
Credit/payments made		(2,041)		(112)		(14,878)
Balance as of June 30, 2022	$	2,063	$	700	$	14,717
Provision related to current period sales		91		4		525
Changes in estimate related to prior period sales		176		150		(680)
Credit/payments made		(2,310)		(263)		(9,562)
Balance as of September 30, 2022	$	20	$	591	$	5,000


	Trade Discounts,
	Allowances and				Rebates and
	Chargebacks (1)		Product Returns (2)		Incentives (3)
Balance as of December 31, 2020	$	1,157	$	600	$	4,904
Provision related to current period sales		2,201		245		10,216
Changes in estimate related to prior period sales		3		30		(26)
Credit/payments made		(1,823)		(419)		(7,880)
Balance as of March 31, 2021	$	1,538	$	456	$	7,214
Provision related to current period sales		2,103		356		11,193
Changes in estimate related to prior period sales		30		142		(353)
Credit/payments made		(2,260)		(253)		(9,801)
Balance as of June 30, 2021	$	1,411	$	701	$	8,253
Provision related to current period sales		2,137		490		11,686
Changes in estimate related to prior period sales		18		109		(647)
Credit/payments made		(2,110)		(632)		(9,861)
Balance as of September 30, 2021	$	1,456	$	668	$	9,431

(1)

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

(3)

INVENTORY (Tables)

9 Months Ended

Sep. 30, 2022

INVENTORY

Schedule of Inventory


	September 30,		December 31,
	2022		2021

Raw materials	$	—	$	1,328
Work in progress		—		9,799
Finished goods		—		7,090
Total inventory	$	—	$	18,217

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)

9 Months Ended

Sep. 30, 2022

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Schedule of prepaid expenses and other current assets

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


	September 30,		December 31,
	2022		2021

Due from third parties in connection with Transition Agreement	$	10,083	$	—
Due from Alcon		9,897		—
Insurance		1,003		1,307
Other non-trade receivables		836		2,110
Deposits		149		911
Other		608		1,876
Prepaid expenses and other current assets	$	22,576	$	6,204

ACCRUED EXPENSES (Tables)

9 Months Ended

Sep. 30, 2022

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Schedule of accrued expenses


	September 30,		December 31,
	2022		2021

Due to Alcon	$	11,964	$	—
Due to third parties in connection with Transition Agreement (1)		4,439		—
Compensation and benefits		3,465		6,324
Accrued revenue reserves (2)		2,046		10,300
Professional services		1,268		881
Contract manufacturing		759		396
Development costs		591		127
Commercial costs		414		2,134
Other		422		824
Accrued expenses	$	25,368	$	20,986

(1) There were additional amounts due to third parties in connection with the Transition Agreement included in accounts payable of $4,775 as of September 30, 2022.

(2) There were additional revenue reserves included in accounts payable of $3,545 and $2,120, as of September 30, 2022 and December 31, 2021, respectively.

LEASES (Tables)

9 Months Ended

Sep. 30, 2022

LEASES

Schedule of lease cost


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Lease cost
Operating lease cost	$	9	$	1,266	$	404	$	3,750
Short-term lease cost		49		—		143		—
Variable lease cost		114		528		740		1,621
Total lease cost	$	172	$	1,794	$	1,287	$	5,371

Operating cash outflows from operating leases	$	338	$	1,675	$	1,308	$	4,918

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


	September 30,	December 31,
	2022	2021
Weighted average remaining lease term	0.5 years	2.4 years
Weighted average discount rate	10.3%	2.6%

DEBT (Tables)

9 Months Ended

Sep. 30, 2022

DEBT

Schedule of carrying value of debt


	September 30,		December 31,
	2022		2021
Principal loan balance	$	43,303	$	80,000
Unamortized debt discount and issuance cost		(867)		(1,927)
Cumulative accretion of exit fee		206		856
Long-term debt, net	$	42,642	$	78,929

Schedule of maturities of long-term debt


Years Ending December 31,
2022 (remaining three months)	$	—
2023		—
2024		—
2025		—
2026		43,303
Total	$	43,303

WARRANTS (Tables)

9 Months Ended

Sep. 30, 2022

WARRANTS.

Schedule of outstanding warrants


					Shares Exercisable at
	Exercise		Expiration	Exercisable	September 30,	December 31,
Issued	Price Per Share		Date	From	2022	2021
2014	$	375.00	November 2024	July 2017	320	320
2016	$	413.50	October 2026	September 2017	290	290
2018	$	609.23	October 2025	October 2018	3,693	3,693
					4,303	4,303

STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2022

STOCK-BASED COMPENSATION

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


	Nine Months Ended September 30, 2022
Expected volatility	72.9%	–	84.5%
Risk-free interest rate	1.43%	–	3.59%
Expected dividend yield		0%
Expected term (in years)	5.50	–	6.10

Schedule of stock based compensation expense


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Cost of product revenues	$	4	$	38	$	166	$	109
Research and development		238		869		1,085		2,821
Selling, general and administrative		1,085		3,021		4,797		10,410
Total	$	1,327	$	3,928	$	6,048	$	13,340

INCOME (LOSS) PER SHARE (Tables)

9 Months Ended

Sep. 30, 2022

INCOME (LOSS) PER SHARE

Schedule of computation of basic and diluted net loss per share


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Numerator:
Net income (loss) attributable to common stockholders	$	29,073	$	(28,127)	$	(31,979)	$	(95,037)
Denominator:
Weighted-average common shares outstanding, basic (1)		1,499,001		1,313,466		1,490,159		1,287,772
Effect of dilutive securities		11,420		—		—		—
Weighted-average common shares outstanding, diluted (1)		1,510,421		1,313,466		1,490,159		1,287,772

Net income (loss) per share attributable to common stockholders, basic	$	19.39	$	(21.41)	$	(21.46)	$	(73.80)
Net income (loss) per share attributable to common stockholders, diluted	$	19.25	$	(21.41)	$	(21.46)	$	(73.80)

(1)

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Options to purchase shares of common stock		221,747		203,250		242,234		202,035
Unvested RSUs and PSUs		—		25,007		11,328		25,958
Unexercised warrants		4,303		4,303		4,303		4,525
		226,050		232,560		257,865		232,518

NATURE OF BUSINESS AND BASIS OF PRESENTATION (Details) $ / shares in Units, $ in Thousands	Oct. 22, 2022 shares	Oct. 19, 2022 $ / shares shares	Nov. 03, 2022 shares	Sep. 30, 2022 USD ($) shares	Aug. 18, 2022	Jul. 08, 2022 USD ($)	Dec. 31, 2021 USD ($) shares
Acquisition of Combangio, Inc
Common stock, authorized				120,000,000			120,000,000
Accumulated deficit \| $				$ 574,367			$ 542,388
Subsequent Events
Acquisition of Combangio, Inc
Reverse stock split	0.02
Common stock, authorized	120,000,000
Series D redeemable preferred stock
Acquisition of Combangio, Inc
Shares Issued				73,208			0
Shares Outstanding				73,208			0
Redeemable preferred stock dividend declared ratio					0.001
Series D redeemable preferred stock \| Subsequent Events
Acquisition of Combangio, Inc
Shares Outstanding			0
Aggregate dividends paid during the period for each whole share of redeemable preferred stock outstanding \| $ / shares		$ 0.10
Number of shares in whole shares		100
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations
Acquisition of Combangio, Inc
Amount receivable upon the achievement of specified commercial sales-based milestones \| $						$ 325,000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2022	Dec. 31, 2021
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets reclassified to current assets held for sale	$ 9,513	$ 9,513
Assets Held for sale	9,513	9,513	$ 0
Disposed of by sale not discontinued operations \| Commercial Business Sale to Alcon
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Impairment loss related to held for sale assets	91	91
Assets reclassified to current assets held for sale	$ 9,513	$ 9,513	$ 0

- Definition

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

+ References + Details

SALE OF COMMERCIAL BUSINESS TO ALCON (Details) $ in Thousands		3 Months Ended	9 Months Ended
	Jul. 08, 2022 USD ($) item	Sep. 30, 2022 USD ($)	Sep. 30, 2022 USD ($)
Dispositions disclosures
Number Of Milestone Payments \| item	1
Deferred gain on sale of Commercial Business		$ 3,408	$ 3,408
Due to Alcon		11,964	11,964
Due from third parties in connection with TSA Agreement		9,897	9,897
Due to third parties		4,439	4,439
Accounts payable
Dispositions disclosures
Due to third parties		4,775	4,775
Transition Service Agreement
Dispositions disclosures
Due to third parties		8,287	8,287
Transition Service Agreement \| Other income
Dispositions disclosures
Collaborative arrangement other income		2,361	2,361
Transition Service Agreement \| Loss from operations
Dispositions disclosures
Collaborative arrangement expenses		2,293	2,293
Transition Service Agreement \| Prepaid expenses and other current assets
Dispositions disclosures
Cash collected on behalf of Alcon		2,808	2,808
Cash to be collected collected on behalf of Alcon		10,083	10,083
Due from Alcon for reimbursement for services		2,361	2,361
Due from Alcon for payment on Alcon's behalf		7,536	7,536
Due from third parties in connection with TSA Agreement		9,897	9,897
Transition Service Agreement \| Accrued expenses and other current liabilities
Dispositions disclosures
Due to Alcon		12,891	12,891
Payable to Alcon		11,964	11,964
Due to third parties		3,512	3,512
Payable to third parties on behalf of Alcon		927	927
Transition Service Agreement \| Accounts payable
Dispositions disclosures
Due to third parties		4,775	4,775
Commercial Business Sale to Alcon
Dispositions disclosures
Upfront payment	$ 60,000
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations
Dispositions disclosures
Number of commercial-based sales milestone payments \| item	4
Amount receivable upon the achievement of specified commercial sales-based milestones	$ 325,000
Proceeds from inventory transfer	5,027
Deferred gain on sale of Commercial Business		4,189	4,189
Deferred gain			781
Write off		$ 2,605	$ 2,605
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations \| Achievement of $50,000 or more in aggregate worldwide net sales
Dispositions disclosures
Sales based milestone achievement	50,000
Amount receivable upon the achievement of specified commercial sales-based milestones	25,000
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations \| Achievement of $100,000 or more in aggregate worldwide net sales
Dispositions disclosures
Sales based milestone achievement	100,000
Amount receivable upon the achievement of specified commercial sales-based milestones	65,000
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations \| Achievement of $175,000 or more in aggregate worldwide net sales
Dispositions disclosures
Sales based milestone achievement	175,000
Amount receivable upon the achievement of specified commercial sales-based milestones	75,000
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations \| Achievement of $250,000 or more in aggregate worldwide net sales
Dispositions disclosures
Sales based milestone achievement	250,000
Amount receivable upon the achievement of specified commercial sales-based milestones	$ 160,000

SALE OF COMMERCIAL BUSINESS TO ALCON - Net Gain on Sale of Commercial Business (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2022 USD ($)	Sep. 30, 2022 USD ($)
Book value of assets transferred
Inventories	$ 9,454	$ 9,454
Deferred gain on sale of Commercial Business	3,408	3,408
Net gain on sale of the Commercial Business	46,995	46,995
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations
Dispositions Disclosures [Line Items]
Gross consideration from the sale of the Commercial Business	65,027	65,027
Closing and transaction costs		2,119
Net proceeds from the sale of the Commercial Business		62,908
Book value of assets transferred
Inventories	8,915	8,915
Prepaid expenses and other current assets	556	556
Property and equipment, net	1,819	1,819
Other long-term assets	434	434
Total book value of assets transferred	11,724	11,724
Gain on sale of the Commercial Business		51,184
Deferred gain on sale of Commercial Business	$ 4,189	4,189
Net gain on sale of the Commercial Business		$ 46,995

ASSETS HELD FOR SALE (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
ASSETS HELD FOR SALE (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Sep. 30, 2022	Dec. 31, 2021
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets reclassified to current assets held for sale	$ 9,513	$ 9,513
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets reclassified to current assets held for sale	9,513	9,513	$ 0
Impairment loss related to held for sale assets	91	91
impairment of long-Lived assets to be disposed of inventory held for sale	$ 0	$ 0

- Definition

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

+ References + Details

ASSETS HELD FOR SALE - Major Categories of Assets (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Major categories of assets that have been reclassified to held for sale on the condensed consolidated balance sheet a
Inventories	$ 9,454
Property and equipment, net	59
Total assets held for sale	$ 9,513

- Definition

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

+ References + Details

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands		3 Months Ended	9 Months Ended
	Nov. 15, 2021	Sep. 30, 2022	Sep. 30, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Settled liability upon the issuance of Upfront Shares			$ 7,935
Gain (loss) on fair value remeasurement of deferred purchase consideration		$ 57	$ (205)
Shares Not Issued Until Escrow Release date of February 15, 2023
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of shares		19,485	19,485
Combangio, Inc
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of shares	155,799
Combangio, Inc \| Shares Issued on January 3, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of shares	136,314
Combangio, Inc \| Shares Not Issued Until Escrow Release date of February 15, 2023
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of shares	19,485
Combangio, Inc \| Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent milestone consideration	$ 105,000

FAIR VALUE OF FINANCIAL INSTRUMENTS - Recurring and Nonrecurring Fair value Measurements Within Hierarchy (Details) - Fair Value - Recurring - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Fair Value Assets Measured on Recurring and Non recurring Basis
Financial assets by level within fair value hierarchy	$ 36,329	$ 86,135
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	7,868	16,550
Deferred purchase consideration
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	162	7,892
Contingent Consideration
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	7,706	8,658
Cash equivalents
Fair Value Assets Measured on Recurring and Non recurring Basis
Financial assets by level within fair value hierarchy	36,329	86,135
Level 1
Fair Value Assets Measured on Recurring and Non recurring Basis
Financial assets by level within fair value hierarchy	36,329	86,135
Level 1 \| Cash equivalents
Fair Value Assets Measured on Recurring and Non recurring Basis
Financial assets by level within fair value hierarchy	36,329	86,135
Level 3
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	7,868	16,550
Level 3 \| Deferred purchase consideration
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	162	7,892
Level 3 \| Contingent Consideration
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	$ 7,706	$ 8,658

FAIR VALUE OF FINANCIAL INSTRUMENTS - Quantitative Information and Assumptions (Details) - Level 3 $ in Thousands	Sep. 30, 2022 USD ($)	Dec. 31, 2021 USD ($)
Deferred purchase consideration
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Financial liabilities by level within fair value hierarchy	$ 162	$ 7,892
Measurement input	0.25
Business Combination, Contingent Consideration, Liability, Valuation Technique [Extensible Enumeration]	Option pricing model	Option pricing model
Business Combination, Contingent Consideration, Liability, Measurement Input [Extensible Enumeration]	Discount for lack of marketability	Discount for lack of marketability
Deferred purchase consideration \| Option pricing model \| Discount for lack of marketability \| Minimum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input		0.150
Deferred purchase consideration \| Option pricing model \| Discount for lack of marketability \| Maximum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input		0.250
Deferred purchase consideration \| Option pricing model \| Discount for lack of marketability \| Average
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input		0.200
Contingent Consideration
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Financial liabilities by level within fair value hierarchy	$ 7,706	$ 8,658
Contingent Consideration \| Discounted cash flow model \| Discount for lack of marketability
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input	0.200	0.120
Contingent Consideration \| Discounted cash flow model \| Probabilities of achievement \| Minimum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input	0.189	0.189
Contingent Consideration \| Discounted cash flow model \| Probabilities of achievement \| Maximum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input	0.900	0.900
Contingent Consideration \| Discounted cash flow model \| Probabilities of achievement \| Average
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input	0.425	0.425
Contingent Consideration \| Discounted cash flow model \| Discount rate
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Measurement input	0.175	0.103

FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair Value Measurement Levels (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended	12 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2022	Dec. 31, 2021
Transfer from level 1 to level 2, Assets	$ 0			$ 0	$ 0
Transfer from level 2 to level 1, Assets	0			0	0
Transfer from level 1 to level 2, Liability	0			0	0
Transfer from level 2 to level 1, Liability	0			0	0
Transfer into level 3, Assets	0			0	0
Transfer out of level 3, Assets	0			0	0
Transfer into level 3, Liability	0			0	0
Transfer out of level 3, Liability	0			0	0
Settlements				(7,935)
Level 3 \| Deferred purchase consideration
Beginning balance	219	$ 1,008	$ 7,892	7,892
Fair value adjustments	(57)	(789)	1,051
Settlements			(7,935)
Ending balance	162	219	1,008	162	7,892
Level 3 \| Contingent Consideration
Beginning balance	7,611	7,670	8,658	8,658
Fair value adjustments	95	(59)	(988)
Settlements	95			(952)
Ending balance	$ 7,706	$ 7,611	$ 7,670	$ 7,706	$ 8,658

REVENUE & ACCOUNTS RECEIVABLE, NET - Product Revenue Provision and Allowance Categories (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021
Trade Discounts, Allowances and Chargebacks
Product Information [Line Items]
Beginning balance	$ 2,063	$ 1,543	$ 2,672	$ 1,411	$ 1,538	$ 1,157
Provision related to current period sales	91	2,602	2,133	2,137	2,103	2,201
Changes in estimate related to prior period sales	176	(41)	(1)	18	30	3
Credit/payments made	(2,310)	(2,041)	(3,261)	(2,110)	(2,260)	(1,823)
Ending balance	20	2,063	1,543	1,456	1,411	1,538
Product Returns
Product Information [Line Items]
Beginning balance	700	797	1,140	701	456	600
Provision related to current period sales	4	214	210	490	356	245
Changes in estimate related to prior period sales	150	(199)	(138)	109	142	30
Credit/payments made	(263)	(112)	(415)	(632)	(253)	(419)
Ending balance	591	700	797	668	701	456
Rebates and Incentives
Product Information [Line Items]
Beginning balance	14,717	14,289	11,280	8,253	7,214	4,904
Provision related to current period sales	525	15,413	13,359	11,686	11,193	10,216
Changes in estimate related to prior period sales	(680)	(107)	(242)	(647)	(353)	(26)
Credit/payments made	(9,562)	(14,878)	(10,108)	(9,861)	(9,801)	(7,880)
Ending balance	$ 5,000	$ 14,717	$ 14,289	$ 9,431	$ 8,253	$ 7,214

REVENUE & ACCOUNTS RECEIVABLE, NET (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Product Information [Line Items]
Allowance for doubtful accounts	$ 0	$ 0
Sales discounts and contractual fee for service arrangements
Product Information [Line Items]
Product revenue provision and allowance	$ 20	$ 2,672

INVENTORY (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
INVENTORY
Raw Materials		$ 1,328
Work in Progress		9,799
Finished Goods		7,090
Total inventory		18,217
Current inventory	$ 0	8,639
Inventories classified as held for sale	$ 9,454
Long-term inventory		$ 9,578

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Due from third parties in connection with Transition Agreement	$ 10,083
Due from Alcon	9,897
Insurance	1,003	$ 1,307
Other non-trade receivables	836	2,110
Deposits	149	911
Other	608	1,876
Prepaid expenses and other current assets	$ 22,576	$ 6,204

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Due to Alcon	$ 11,964
Due to third parties in connection with Transition Agreement (1)	4,439
Compensation and benefits	3,465	$ 6,324
Accrued revenue reserves (2)	2,046	10,300
Professional services	1,268	881
Contract manufacturing	759	396
Commercial costs	414	2,134
Development costs	591	127
Other	422	824
Accrued expenses	25,368	20,986
Accounts payable
Due to third parties in connection with Transition Agreement (1)	4,775
Accrued revenue reserves (2)	$ 3,545	$ 2,120

LEASES (Details) - USD ($)		1 Months Ended	3 Months Ended		9 Months Ended
LEASES (Details) - USD ($)	Feb. 28, 2018	Jan. 31, 2022	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Leases
Short-term restricted cash							$ 2,042,000
Right-of-use assets			$ 34,000		$ 34,000		$ 1,299,000
Lease liability			0		0
Amount borrowed			450,000		450,000
Lease cost
Operating lease cost			9,000	$ 1,266,000	404,000	$ 3,750,000
Short-term lease cost			49,000		143,000
Variable lease cost			114,000	528,000	740,000	1,621,000
Total lease cost			172,000	1,794,000	1,287,000	5,371,000
Operating cash outflows from operating leases			$ 338,000	$ 1,675,000	$ 1,308,000	$ 4,918,000
Weighted average remaining lease term			6 months		6 months		2 years 4 months 24 days
Weighted average discount rate			10.30%		10.30%		2.60%
Vehicle Fleet Lease
Leases
Right-of-use assets			$ 0		$ 0
Watertown Lease
Leases
Lease term	8 years
Existence of option to extend	true
Payment received from lease termination		$ 2,000,000
Restricted cash			$ 2,042,000		2,042,000
Renewal term	5 years
Watertown Lease \| Gain on lease termination
Leases
Remeasured the lease liability and right-of-use asset and recognized					$ 1,311,000

DEBT- Athyrium Credit Facility (Details) $ in Thousands			3 Months Ended	9 Months Ended		12 Months Ended
DEBT- Athyrium Credit Facility (Details) $ in Thousands	May 04, 2021 USD ($)	Oct. 01, 2018 USD ($)	Sep. 30, 2022 USD ($) item	Sep. 30, 2022 USD ($) item	Sep. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)	Mar. 31, 2021 USD ($)
Debt Instrument [Line Items]
Aggregate principal amount			$ 43,303	$ 43,303		$ 80,000
Restricted Cash, Statement of Financial Position [Extensible Enumeration]	Restricted Cash And Other Assets Noncurrent
Loss on extinguishment of debt			$ 2,583	$ 2,583	$ 5,395
Athyrium Credit Facility
Debt Instrument [Line Items]
Aggregate principal amount							$ 75,000
Restricted Cash	$ 10,000
Prepayment fees paid	2,250
Exit fees paid	$ 750
Loss on extinguishment of debt						$ (5,395)
Athyrium
Debt Instrument [Line Items]
Number of derivatives \| item			1	1
Athyrium \| Athyrium Credit Facility
Debt Instrument [Line Items]
Aggregate principal amount		$ 110,000
Debt term (in years)		6 years
Additional interest rate upon an event of default accrued (as a percent)		5.00%
Athyrium \| Tranche A term loan
Debt Instrument [Line Items]
Aggregate principal amount		$ 75,000
Interest rate (as a percent)		9.875%
Athyrium \| Contingent tranche B term loan
Debt Instrument [Line Items]
Aggregate principal amount		$ 35,000

DEBT - Oxford Finance Loan and Security Agreement (Details) $ in Thousands			3 Months Ended		9 Months Ended		12 Months Ended
	Jul. 08, 2022 USD ($) installment	May 04, 2021 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)	Mar. 31, 2021 USD ($)
Debt instruments
Aggregate principal amount			$ 43,303		$ 43,303		$ 80,000
Loss on extinguishment of debt			(2,583)		(2,583)	$ (5,395)
Interest expense			1,447	$ 2,072	5,689	6,304
Athyrium Credit Facility
Debt instruments
Aggregate principal amount								$ 75,000
Amount of principal outstanding			43,303		43,303
Prepayment fees paid		$ 2,250
Loss on extinguishment of debt							$ 5,395
Accretion of final prepayment fee			206	325	849	579
Interest expense			1,447	2,071	5,703	6,277
Amortization of debt discount			52	110	281	501
Contractual coupon interest			$ 1,189	$ 1,636	$ 4,573	$ 5,197
Loan and Security Agreement with Oxford Finance LLC
Debt instruments
Aggregate principal amount		$ 125,000
Floating interest rate (as a percent)		0.11%
Facility fees paid		$ 400
Percentage of final payment fees		7.00%
Effective interest rate			13.05%		13.05%
Debt repayments	$ 40,000
Partial prepayment	36,697
Amount of principal outstanding	80,000
Prepayment fees paid	734
Final prepayment fee	$ 2,569
Number of monthly installments \| installment	5
Loss on extinguishment of debt			$ 2,583		$ 2,583
Loan and Security Agreement with Oxford Finance LLC \| Neither the tranche B term loan nor the tranche C term loan is made
Debt instruments
Duration of periodic monthly payment installments under a scenario		18 months
Loan and Security Agreement with Oxford Finance LLC \| Either tranche B term loan nor tranche C term loan is made
Debt instruments
Duration of periodic monthly payment installments under a scenario		12 months
Loan and Security Agreement with Oxford Finance LLC \| 30-day LIBOR
Debt instruments
Spread on variable rate		7.89%
Tranche A term loan
Debt instruments
Aggregate principal amount		$ 80,000
Contingent tranche B term loan
Debt instruments
Aggregate principal amount		$ 20,000
Revenue achievement trailing period		6 months
Minimum target revenue		$ 75,000
Facility fees paid		100
Contingent tranche C term loan
Debt instruments
Aggregate principal amount		$ 25,000
Revenue achievement trailing period		6 months
Minimum target revenue		$ 100,000
Facility fees paid		$ 125

DEBT - Carrying Value (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
DEBT
Principal Loan Balance	$ 43,303	$ 80,000
Unamortized debt discount and issuance cost	(867)	(1,927)
Cumulative accretion of exit fee	206	856
Long-term debt, net	$ 42,642	$ 78,929

DEBT - Future Annual Principal Payments (Details) - Athyrium Credit Facility $ in Thousands	Sep. 30, 2022 USD ($)
Maturities of long-term debt
2026	$ 43,303
Total	$ 43,303

- Definition

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

+ References + Details

WARRANTS (Details) - $ / shares	9 Months Ended	12 Months Ended
WARRANTS (Details) - $ / shares	Sep. 30, 2022	Dec. 31, 2021
Preferred stock warrants
Shares Exercisable	4,303	4,303
Warrants 2014
Preferred stock warrants
Exercise Price Per Share	$ 375.00
Shares Exercisable	320	320
Warrants 2016
Preferred stock warrants
Exercise Price Per Share	$ 413.50
Shares Exercisable	290	290
Warrants 2018
Preferred stock warrants
Exercise Price Per Share	$ 609.23
Shares Exercisable	3,693	3,693

EQUITY FINANCINGS (Details) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended	9 Months Ended	12 Months Ended
EQUITY FINANCINGS (Details) - USD ($) $ in Thousands	May 07, 2020	Aug. 31, 2021	Sep. 30, 2021	Sep. 30, 2021	Dec. 31, 2021	Sep. 30, 2022	Aug. 27, 2018
Shelf Registration
Equity Offerings
Additional authorized value of securities						$ 275,000
Common stock offering, net of issuance cost and underwriting fees (in shares)		611,000
Common stock offering, net of issuance cost and underwriting fees		$ 231,666
Registration period	3 years
Shelf Registration \| Maximum
Equity Offerings
Additional authorized value of securities	$ 350,000						$ 250,000
ATM
Equity Offerings
Additional authorized value of securities						$ 11,344
Common stock offering, net of issuance cost and underwriting fees (in shares)			2,283	113,950	171,626
Net proceeds			$ 332	$ 41,063	$ 61,843
ATM \| Maximum
Equity Offerings
Additional authorized value of securities	$ 75,000

STOCK-BASED COMPENSATION - Inducement Stock Option Awards (Details) - $ / shares	1 Months Ended		9 Months Ended
	Jul. 31, 2022	Jan. 31, 2022	Sep. 30, 2022
Stock-based compensation
Granted, options (in shares)			81,561
Weighted average grant date fair value of options granted			$ 41.12
Stock Options
Stock-based compensation
Granted, options (in shares)			2,800
Stock Options \| Executive Officer \| Maximum
Stock-based compensation
Number of common stock issuable upon exercise of rights under equity compensation plans		14,850
ESPP
Stock-based compensation
Issuance of common stock under employee stock purchase plan (in shares)	10,657	3,074

STOCK-BASED COMPENSATION - Fair Value Assumptions (Details)	9 Months Ended
	Sep. 30, 2022
Assumptions used in determining fair value of the stock options granted
Expected volatility (minimum)	72.90%
Expected volatility (maximum)	84.50%
Risk-free interest rate (minimum)	1.43%
Risk-free interest rate (maximum)	3.59%
Expected dividend yield	0.00%
Minimum
Assumptions used in determining fair value of the stock options granted
Expected term (in years)	5 years 6 months
Maximum
Assumptions used in determining fair value of the stock options granted
Expected term (in years)	6 years 1 month 6 days

STOCK-BASED COMPENSATION - RSUs and PSUs (Details)	1 Months Ended	9 Months Ended
STOCK-BASED COMPENSATION - RSUs and PSUs (Details)	Jun. 30, 2020 shares	Sep. 30, 2022 USD ($) shares
RSU
Stock-based compensation
Granted, other than options (in shares)		6,910
RSU and PSU
Stock-based compensation
Outstanding balance at end of period (in shares)		14,879
Unvested outstanding balance at end of period (in shares) \| $		11,420
Vested and deferred (in shares)		3,460
Executive Officer \| PSU \| First anniversary
Stock-based compensation
Granted, other than options (in shares)	13,854
Vesting percentage	50.00%
Executive Officer \| PSU \| Second anniversary
Stock-based compensation
Vesting percentage	50.00%

STOCK-BASED COMPENSATION - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Stock-based compensation
Stock based compensation expense	$ 1,327	$ 3,928	$ 6,048	$ 13,340
Cost of product revenues
Stock-based compensation
Stock based compensation expense	4	38	166	109
Research and development
Stock-based compensation
Stock based compensation expense	238	869	1,085	2,821
Selling, general and administrative
Stock-based compensation
Stock based compensation expense	$ 1,085	$ 3,021	$ 4,797	$ 10,410

INCOME (LOSS) PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Numerator:
Net income (loss) attributable to common stockholders	$ 29,073	$ (28,127)	$ (31,979)	$ (95,037)
Denominator:
Weighted average shares outstanding-basic (in shares)	1,499,001	1,313,466	1,490,159	1,287,772
Effect of dilutive securities	11,420
Weighted average shares outstanding-diluted (in shares)	1,510,421	1,313,466	1,490,159	1,287,772
Net income (loss) per share attributable to common stockholders, basic	$ 19.39	$ (21.41)	$ (21.46)	$ (73.80)
Net income (loss) per share attributable to common stockholders, diluted	$ 19.25	$ (21.41)	$ (21.46)	$ (73.80)
Shares Not Issued Until Escrow Release date of February 15, 2023
Denominator:
Number of shares	19,485		19,485

INCOME (LOSS) PER SHARE - Antidilutive Securities (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Outstanding securities excluded from the computation of diluted weighted average shares outstanding as they would have been anti dilutive:
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)	226,050	232,560	257,865	232,518
Stock Options
Outstanding securities excluded from the computation of diluted weighted average shares outstanding as they would have been anti dilutive:
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)	221,747	203,250	242,234	202,035
RSU and PSU
Outstanding securities excluded from the computation of diluted weighted average shares outstanding as they would have been anti dilutive:
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)		25,007	11,328	25,958
Warrants
Outstanding securities excluded from the computation of diluted weighted average shares outstanding as they would have been anti dilutive:
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)	4,303	4,303	4,303	4,525

INCOME TAXES (Details) - USD ($)	3 Months Ended		9 Months Ended
INCOME TAXES (Details) - USD ($)	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
INCOME TAXES
Uncertain tax positions	$ 0		$ 0		$ 0
Interest or penalties recorded	$ 0	$ 0	$ 0	$ 0

COMMITMENTS AND CONTINGENCIES - License Agreement (Details) - The Johns Hopkins University ("JHU") - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Contingencies
Minimum annual payment	$ 38
License fee, if the company achieves the first commercial sale	$ 113
Milestone payment		$ 150

COMMITMENTS AND CONTINGENCIES - Contingencies Related to Merger Agreement (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Nov. 15, 2021
Supply Commitment \| Woodstock Sterile Solutions, Inc.
Other Commitments [Line Items]
Remaining amount due	$ 1,466
Combangio, Inc
Other Commitments [Line Items]
Contingent upon specified development, regulatory and commercialization milestones		$ 40,000
Combangio, Inc \| Achievement of sales based milestone relating to KPI-012 product
Other Commitments [Line Items]
Potential maximum payout for contingent consideration		$ 65,000