BEDFORD, Mass., May 03, 2024 (GLOBE NEWSWIRE) -- Ocular Therapeutix, Inc. (NASDAQ:OCUL, "Ocular", the "Company"))), a biopharmaceutical company committed to enhancing people's vision and quality of life through the development and commercialization of innovative therapies for wet age-related macular degeneration (wet AMD), diabetic retinopathy, and other diseases and conditions of the eye, announced multiple presentations at the Ophthalmology Innovation Source (OIS) Retina 2024 (May 4th) and the Association ...

First quarter 2024 financial results to be reported on Tuesday, May 7, 2024 Investor Day to replace first quarter 2024 earnings conference call; quarterly calls to resume regular cadence with second quarter 2024 financial results BEDFORD, Mass., May 01, 2024 (GLOBE NEWSWIRE) -- Ocular Therapeutix, Inc. (NASDAQ:OCUL, "Ocular", the "Company"))), a biopharmaceutical company committed to enhancing people's vision and quality of life through the development and commercialization of innovative therapies for wet a ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-36554 (781) 357-4000 (Registrant's telephone number, including area code) | Securities registered pursuant to Secti ...

[Overview and Business Highlights](index=1&type=section&id=Overview%20and%20Business%20Highlights) Ocular Therapeutix has strategically advanced its retinal care pipeline, marked by key appointments, successful financing, and upcoming clinical data [Recent Achievements & Strategic Direction](index=1&type=section&id=Recent%20Achievements%20%26%20Strategic%20Direction) Ocular Therapeutix has made significant strategic moves to position itself as a leader in retinal care, highlighted by key leadership appointments, including **Pravin Dugel, MD** as Executive Chairman. The company successfully initiated the **Phase 3 SOL-1 trial** for its lead candidate, **AXPAXLI™** in **wet AMD**, and secured over **$440 million** in gross proceeds from recent financings to fund its clinical development programs - Appointed key strategic and clinical experts, including **Pravin Dugel, MD**, as Executive Chairman, to lead the company's focus on retinal care[3](index=3&type=chunk) - Initiated the **Phase 3 SOL-1 trial** for **AXPAXLI™** in **wet AMD**, with the first subjects screened[1](index=1&type=chunk)[3](index=3&type=chunk) - Raised over **$440 million** in gross proceeds from two recent financings to fund clinical development for **AXPAXLI™** in **wet AMD** and **diabetic retinopathy**[2](index=2&type=chunk)[3](index=3&type=chunk) [Anticipated Milestones](index=2&type=section&id=Anticipated%20Upcoming%20Milestones) The company anticipates several key clinical data readouts in the second quarter of 2024, including topline results for **PAXTRAVA™** in **glaucoma** and **Phase 1 results** for **AXPAXLI™** in **diabetic retinopathy**. An Investor Day is also planned for Q2 2024 to outline the updated corporate strategy - Topline results from the Phase 2 trial of **PAXTRAVA™** in **glaucoma** are expected at ASCRS on April 5-8[11](index=11&type=chunk) - Topline **Phase 1 results** from the HELIOS trial for **AXPAXLI™** in **diabetic retinopathy** are expected in Q2 2024[1](index=1&type=chunk)[11](index=11&type=chunk) - The company plans to host an Investor Day in Q2 2024 to provide updates on its corporate strategy[1](index=1&type=chunk)[2](index=2&type=chunk)[11](index=11&type=chunk) [Financial Results](index=2&type=section&id=Financial%20Results) The company reported increased revenue for FY2023, a widened net loss, and a strengthened cash position, detailed in its consolidated financial statements [Fourth Quarter and Full Year 2023 Performance](index=2&type=section&id=Fourth%20Quarter%20and%20Year%20End%20December%2031%2C%202023%20Financial%20Results) Ocular Therapeutix reported a 13.4% increase in total net revenue for the full year 2023, reaching $58.4 million, driven by DEXTENZA sales. The company's net loss widened to $(80.7) million for the year, influenced by increased R&D spending on clinical trials. The company ended 2023 with a strong cash position of $195.8 million, further bolstered by a $325 million financing in February 2024, providing a cash runway into at least 2028 - Cash and cash equivalents were **$195.8 million** at year-end 2023. A subsequent financing in February 2024 added **$325 million** in gross proceeds, extending the cash runway into at least 2028[1](index=1&type=chunk)[4](index=4&type=chunk) | Metric | Q4 2023 (in millions) | Q4 2022 (in millions) | YoY Change | FY 2023 (in millions) | FY 2022 (in millions) | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Net Revenue | $14.8M | $14.1M | +5.0% | $58.4M | $51.5M | +13.4% | | R&D Expenses | $16.2M | $13.5M | +20.0% | $61.1M | $53.5M | +14.2% | | Net Loss | $(29.2)M | $(15.5)M | +88.4% | $(80.7)M | $(71.0)M | +13.7% | | Net Loss per Share (basic) | $(0.35) | $(0.20) | - | $(1.01) | $(0.92) | - | [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements detail the company's financial position and performance. The balance sheet shows a significant increase in total assets to $252.1 million in 2023 from $149.3 million in 2022, primarily due to a rise in cash. The statement of operations reflects revenue growth alongside increased operating expenses and a larger net loss for the full year 2023 compared to 2022 [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2023, the company's balance sheet strengthened significantly, with cash and cash equivalents nearly doubling to $195.8 million. Total assets grew to $252.1 million, while total liabilities increased to $160.9 million, driven by changes in derivative liabilities and notes payable. Total stockholders' equity rose to $91.1 million from $35.4 million in the prior year | Balance Sheet Item (in thousands) | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $195,807 | $102,300 | | Total current assets | $232,235 | $129,627 | | Total assets | $252,060 | $149,289 | | Total liabilities | $160,929 | $113,910 | | Total stockholders' equity | $91,131 | $35,379 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For the full year 2023, total net revenue increased by 13.4% to $58.4 million. However, total costs and operating expenses also rose to $140.8 million, leading to a loss from operations of $(82.4) million. The net loss for 2023 was $(80.7) million, or $(1.01) per basic share, compared to a net loss of $(71.0) million, or $(0.92) per basic share, in 2022 | Statement of Operations (in thousands) | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Total revenue, net | $58,443 | $51,494 | | Total costs and operating expenses | $140,825 | $130,148 | | Loss from operations | $(82,382) | $(78,654) | | Net loss | $(80,736) | $(71,038) | | Net loss per share, basic | $(1.01) | $(0.92) | [Company and Product Information](index=3&type=section&id=Company%20and%20Product%20Information) Ocular Therapeutix is a biopharmaceutical company focused on eye disease therapies using its ELUTYX™ technology, including its commercial product DEXTENZA [About Ocular Therapeutix, Inc.](index=3&type=section&id=About%20Ocular%20Therapeutix%2C%20Inc.) Ocular Therapeutix is a biopharmaceutical company focused on developing and commercializing therapies for eye diseases using its proprietary **ELUTYX™ bioresorbable hydrogel technology**. Its clinical pipeline is led by **AXPAXLI™** for **wet AMD** and **diabetic retinopathy**, and **PAXTRAVA™** for **glaucoma**. The company also has several other clinical and preclinical programs - The company's lead product candidate for retinal disease is **AXPAXLI™**, which is currently in **Phase 3 trials** for **wet AMD** and a **Phase 1 trial** for **diabetic retinopathy**[13](index=13&type=chunk) - The clinical portfolio also includes **PAXTRAVA™** for primary open-angle **glaucoma** or ocular hypertension, currently in a **Phase 2 trial**[13](index=13&type=chunk) - The company's proprietary **ELUTYX™ bioresorbable hydrogel technology** is the foundation for its product candidates and its commercial product, **DEXTENZA®**[13](index=13&type=chunk)[14](index=14&type=chunk) [About DEXTENZA](index=3&type=section&id=About%20DEXTENZA) **DEXTENZA** is an **FDA-approved** corticosteroid intracanalicular insert for treating ocular inflammation and pain after ophthalmic surgery and ocular itching from allergic conjunctivitis. It is designed to deliver **dexamethasone** for up to **30 days** and resorbs naturally without needing removal - **DEXTENZA** is **FDA-approved** for treating ocular inflammation and pain post-ophthalmic surgery and for ocular itching associated with allergic conjunctivitis[14](index=14&type=chunk)[16](index=16&type=chunk) - It is a preservative-free insert that delivers **dexamethasone** to the ocular surface for up to **30 days** and resorbs without requiring removal[16](index=16&type=chunk)

Financial Data and Key Metrics Changes - The company reported a net loss of $0.5 million for Q3 2023, a significant improvement compared to a net loss of $24.2 million in Q3 2022 [76] - Total net revenue for Q3 2023 was $15.1 million, representing a 26% increase from $12 million in Q3 2022 [85] - Research and development expenses increased to $15 million in Q3 2023 from $13.7 million in Q3 2022, driven by clinical trial costs and personnel-related expenses [75] Business Line Data and Key Metrics Changes - DEXTENZA net product revenue reached $15 million in Q3 2023, a 26% increase from $11.9 million in Q3 2022 [14][86] - Units sold for DEXTENZA increased by 38% year-over-year, totaling 36,902 units in Q3 2023 [45] - The company anticipates DEXTENZA's full-year net product revenue to be at the upper end of the $55 million to $60 million range [15][79] Market Data and Key Metrics Changes - The company noted a significant increase in customer order sizes, with 49% of DEXTENZA orders being for 30 or more units in Q3 2023, compared to 29% in Q3 2022 [46] - The FDA's new draft guidance is expected to impact the development of treatments in wet AMD, particularly for products like AXPAXLI that demonstrate extended durability [12][26] Company Strategy and Development Direction - The company is focused on the commercialization of AXPAXLI, an axitinib-containing implant for wet AMD, and has received FDA agreement on a special protocol assessment for its pivotal trial [9][10] - AXPAXLI is positioned to potentially change the standard of care in the wet AMD market, which is valued in the billions [11] - The company is also advancing its OTX-TIC program for glaucoma treatment, aiming to improve patient compliance and outcomes [38][40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory of DEXTENZA, citing clinical efficacy and safety as key drivers [63] - The company remains confident in its long-term prospects despite CMS's decision not to change the status indicator for DEXTENZA's insertion procedure [72] - Management highlighted the importance of strong endorsements from the retina community for AXPAXLI's success [14] Other Important Information - The company had $110.6 million in cash and cash equivalents as of September 30, 2023, providing a runway into 2025 [77] - The company plans to share topline data from the HELIOS trial for AXPAXLI in Q2 2024 [37] Q&A Session Summary Question: What is the plan for enrolling patients with 20/20 vision? - Management confirmed that the plan remains to enroll patients who achieve 20/20 vision after induction with ILEA, and they believe there is a sizable population available for enrollment [49] Question: What data is needed to move forward with the Phase 3 trial for diabetic retinopathy? - Management expects to see a trend in improvement in the DRSS score to proceed with the Phase 3 trial [54] Question: How does the new formulation of AXPAXLI compare to the previous one? - The new formulation has a lower drug load of 450 micrograms but is designed to release the drug faster, matching the delivery seen in earlier trials [102] Question: What percentage of the wet AMD population fits the current enrollment criteria? - Management indicated that the current criteria are designed to capture a significant portion of the treatment-naive wet AMD population [117] Question: What are the expectations for the safety profile of the new formulation? - Management expressed confidence that the safety profile will remain consistent with previous formulations, as the delivery rates are within the safety window [135]

PART I [Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) Unaudited consolidated financial statements for Ocular Therapeutix, Inc. as of and for the periods ended September 30, 2023, are presented [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of September 30, 2023, details total assets of **$162.4 million** and total liabilities of **$154.5 million** | Metric | Sep 30, 2023 ($ thousands) | Dec 31, 2022 ($ thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | 110,550 | 102,300 | | Total Assets | 162,384 | 149,289 | | Total Liabilities | 154,531 | 113,910 | | Total Stockholders' Equity | 7,853 | 35,379 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Q3 2023 saw increased revenue and a significantly reduced net loss of **$0.5 million**, driven by a **$14.2 million** gain on debt extinguishment | Metric ($ thousands) | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Product revenue, net | 14,950 | 11,913 | 43,193 | 36,555 | | Loss from operations | (19,214) | (21,544) | (62,332) | (59,293) | | Gains on extinguishment of debt, net | 14,190 | — | 14,190 | — | | Net loss | (516) | (24,188) | (51,516) | (55,496) | | Net loss per share, basic | (0.01) | (0.31) | (0.66) | (0.72) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2023, net cash used in operations was **$47.8 million**, offset by **$61.7 million** from financing activities | Cash Flow Activity (9 Months Ended Sep 30, $ thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | (47,780) | (42,645) | | Net cash used in investing activities | (5,628) | (1,565) | | Net cash provided by financing activities | 61,658 | 996 | | Net increase (decrease) in cash | 8,250 | (43,214) | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the **$82.5 million** Barings credit facility, **$14.2 million** debt extinguishment gain, and high customer concentration, with cash funding operations into 2025 - The company believes its existing cash of **$110.6 million** as of Sep 30, 2023, will fund operations into 2025, but this does not cover the completion of the SOL trial or initiation of other pivotal trials[31](index=31&type=chunk)[157](index=157&type=chunk)[217](index=217&type=chunk) - In August 2023, the company entered into an **$82.5 million** credit facility with Barings, repaid its **$25 million** MidCap facility, and amended its Convertible Notes, resulting in a net gain on debt extinguishment of **$14.2 million**[53](index=53&type=chunk)[65](index=65&type=chunk)[174](index=174&type=chunk) - For the nine months ended September 30, 2023, three specialty distributor customers accounted for **51%**, **23%**, and **11%** of the company's gross product revenue[71](index=71&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, DEXTENZA commercialization, AXPAXLI clinical progress, and the **$82.5 million** debt refinancing, which funds operations into 2025 - The company is a biopharmaceutical firm focused on eye disease therapies using its proprietary ELUTYX hydrogel technology, with DEXTENZA as its commercial product and AXPAXLI as its lead pipeline candidate for retinal diseases[102](index=102&type=chunk)[106](index=106&type=chunk) - The pivotal Phase 3 SOL trial for AXPAXLI in wet AMD was initiated in September 2023, with FDA agreement under a Special Protocol Assessment (SPA) received in October 2023[109](index=109&type=chunk)[115](index=115&type=chunk) - In-market unit sales for DEXTENZA exceeded **36,000 units** in Q3 2023, an increase of approximately **38%** from Q3 2022[148](index=148&type=chunk) - The company secured an **$82.5 million** credit facility with Barings in August 2023, which it believes will fund operations into 2025, though additional financing is needed to complete the SOL trial and initiate other pivotal trials[151](index=151&type=chunk)[157](index=157&type=chunk)[217](index=217&type=chunk) [Results of Operations](index=56&type=section&id=Results%20of%20Operations) Q3 2023 net product revenue grew **25.5%** to **$15.0 million**, with a significantly reduced net loss of **$0.5 million** due to a **$14.2 million** debt extinguishment gain | Metric ($ thousands) | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Product revenue, net | 14,950 | 11,913 | 3,037 | | Research and development | 15,019 | 13,719 | 1,300 | | Selling and marketing | 9,315 | 10,186 | (871) | | Loss from operations | (19,214) | (21,544) | 2,330 | | Net loss | (516) | (24,188) | 23,672 | | Metric ($ thousands) | 9M 2023 | 9M 2022 | Change | | :--- | :--- | :--- | :--- | | Product revenue, net | 43,193 | 36,555 | 6,638 | | Research and development | 44,860 | 39,919 | 4,941 | | Selling and marketing | 31,304 | 29,390 | 1,914 | | Loss from operations | (62,332) | (59,293) | (3,039) | | Net loss | (51,516) | (55,496) | 3,980 | - Gross-to-net deductions for DEXTENZA increased to **29.8%** of gross sales in Q3 2023 from **24.3%** in Q3 2022, and to **29.2%** for the nine-month period from **23.1%** in the prior year[183](index=183&type=chunk)[195](index=195&type=chunk) [Liquidity and Capital Resources](index=64&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2023, the company held **$110.6 million** in cash, with **$47.8 million** used in operations, and believes current cash funds operations into 2025 but requires additional financing for trials - The company had cash and cash equivalents of **$110.6 million** as of September 30, 2023[207](index=207&type=chunk) - Net cash used in operating activities for the nine months ended Sep 30, 2023 was **$47.8 million**, compared to **$42.6 million** in the prior year period[209](index=209&type=chunk) - The company believes its existing cash will fund operations into 2025 but acknowledges it is not enough to complete the SOL trial or initiate other planned pivotal trials without additional financing[217](index=217&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=74&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity on cash and variable-rate debt, with two derivative liabilities valued at **$12.6 million** and **$11.4 million** - The company's main market risk is interest rate sensitivity on its cash equivalents and SOFR-based debt[226](index=226&type=chunk)[228](index=228&type=chunk) - The company accounts for two derivative liabilities at fair value: the Royalty Fee Derivative Liability (**$12.6 million**) and the Conversion Option Derivative Liability (**$11.4 million**) as of September 30, 2023[229](index=229&type=chunk)[230](index=230&type=chunk) [Controls and Procedures](index=74&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during Q3 2023 - Management concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective at the reasonable assurance level[232](index=232&type=chunk) - There were no changes in internal control over financial reporting during Q3 2023 that materially affected, or are reasonably likely to materially affect, internal controls[233](index=233&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=77&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings, nor is it aware of any threatened against it - The company is not presently a party to any material legal proceedings[236](index=236&type=chunk) [Risk Factors](index=77&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors highlight substantial indebtedness from the **$82.5 million** Barings Credit Agreement, including restrictive covenants and the risk of default - The company's substantial debt from the **$82.5 million** Barings Credit Facility and **$37.5 million** Convertible Notes could limit cash flow for business investment and other corporate purposes[238](index=238&type=chunk)[239](index=239&type=chunk) - The Barings Credit Agreement contains restrictive covenants, including maintaining a minimum liquidity of **$20.0 million**, and is secured by all of the company's assets, including intellectual property[239](index=239&type=chunk) - A failure to comply with debt conditions could result in an event of default and acceleration of debt repayment, which the company may not have sufficient funds to cover[243](index=243&type=chunk) [Other Information](index=77&type=section&id=Item%205.%20Other%20Information) This section is listed in the table of contents but contains no substantive information in the report body [Exhibits](index=79&type=section&id=Item%206.%20Exhibits) This section indexes exhibits filed with the Form 10-Q, including the Barings Credit Agreement, Convertible Note amendment, and officer certifications - Key exhibits filed include the new Credit and Security Agreement with Barings, an amendment to the Convertible Notes, and officer certifications required by the Sarbanes-Oxley Act[247](index=247&type=chunk)

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements for Ocular Therapeutix, Inc. as of June 30, 2023, and for the three and six months ended June 30, 2023 and 2022, highlighting a decrease in cash and stockholders' equity alongside an increase in net loss [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2023, shows a decrease in total assets and a significant reduction in stockholders' equity compared to December 31, 2022, primarily driven by a decline in cash and cash equivalents and an increase in total liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $66,606 | $102,300 | | Total current assets | $100,712 | $129,627 | | Total assets | $122,558 | $149,289 | | Total liabilities | $119,471 | $113,910 | | Total stockholders' equity | $3,087 | $35,379 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company's net product revenue increased year-over-year for both the three and six-month periods, but net loss also widened, particularly for the six-month period, due to higher operating expenses and a significant negative change in the fair value of its derivative liability Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Product revenue, net | $15,029 | $12,144 | $28,243 | $24,642 | | Total revenue, net | $15,186 | $12,266 | $28,561 | $25,453 | | Loss from operations | $(20,570) | $(19,916) | $(43,119) | $(37,748) | | Net loss | $(20,682) | $(18,766) | $(51,000) | $(31,308) | | Net loss per share, basic | $(0.26) | $(0.24) | $(0.66) | $(0.41) | - The significant increase in net loss for the six months ended June 30, 2023, was heavily impacted by a **$5.4 million loss** from the change in fair value of derivative liability, compared to a **$9.7 million gain** in the same period of 2022[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2023, cash used in operating activities increased compared to the prior year, driven by a larger net loss, while investing activities also consumed more cash due to equipment purchases, and financing activities provided a net inflow primarily from a stock offering Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(40,048) | $(29,476) | | Net cash used in investing activities | $(5,369) | $(771) | | Net cash provided by financing activities | $9,723 | $622 | | **Net decrease in cash** | **$(35,694)** | **$(29,625)** | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's business focus on ophthalmology, its history of losses, and its reliance on future financing, including disclosures on licensing agreements, debt facilities, derivative liability valuation, and a new **$82.5 million credit facility** secured in August 2023 - The company has a history of losses, with an **accumulated deficit of $667.8 million** as of June 30, 2023, and expects to continue generating operating losses[31](index=31&type=chunk) - Subsequent to the quarter's end, on August 2, 2023, the company entered into a **new $82.5 million credit facility** with Barings, used the proceeds to repay its existing MidCap facility, and extended the maturity of its Convertible Notes[89](index=89&type=chunk)[90](index=90&type=chunk)[93](index=93&type=chunk) - For the six months ended June 30, 2023, three specialty distributor customers accounted for **55%**, **23%**, and **11%** of the company's gross product revenue[67](index=67&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's business strategy, progress in its clinical pipeline, and commercial performance of DEXTENZA, showing revenue growth but also widening net losses due to increased R&D and S&M spending and non-cash charges, with a new credit facility secured in August 2023 expected to fund operations into 2025 [Overview](index=32&type=section&id=Overview) The company is a biopharmaceutical firm focused on eye diseases using its proprietary ELUTYX hydrogel technology, with its sole commercial product, DEXTENZA, showing strong sales growth, and its clinical pipeline advancing with key programs for wet AMD, NPDR, and glaucoma, including plans to initiate a pivotal trial for OTX-TKI in wet AMD in Q3 2023 - **DEXTENZA in-market unit sales exceeded 36,000** in Q2 2023, a **40% increase year-over-year** and a **6% increase quarter-over-quarter**[135](index=135&type=chunk) - The company plans to initiate the first of two pivotal trials for OTX-TKI in wet AMD in Q3 2023, following 12-month data showing **60% of subjects were rescue-free**[107](index=107&type=chunk)[108](index=108&type=chunk) - Enrollment was completed for the OTX-TKI Phase 1 trial in NPDR (HELIOS) and the OTX-TIC Phase 2 trial in glaucoma, with topline data for both expected in Q1 2024[110](index=110&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) [Results of Operations](index=54&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of financial results for the three and six months ended June 30, 2023, and 2022, showing that net product revenue from DEXTENZA grew 24% in Q2 2023 year-over-year, but operating expenses also rose, with R&D increasing due to clinical trial activities and S&M increasing from sales team expansion, leading to a higher net loss Q2 2023 vs Q2 2022 Expense Changes (in thousands) | Expense Category | Q2 2023 | Q2 2022 | Increase (Decrease) | | :--- | :--- | :--- | :--- | | Research and development | $15,094 | $13,100 | $1,994 | | Selling and marketing | $11,153 | $10,140 | $1,013 | | General and administrative | $8,205 | $7,787 | $418 | H1 2023 vs H1 2022 Financial Summary (in thousands) | Metric | H1 2023 | H1 2022 | Increase (Decrease) | | :--- | :--- | :--- | :--- | | Product revenue, net | $28,243 | $24,642 | $3,601 | | Total costs and operating expenses | $71,680 | $63,201 | $8,479 | | Net loss | $(51,000) | $(31,308) | $(19,692) | [Liquidity and Capital Resources](index=62&type=section&id=Liquidity%20and%20Capital%20Resources) The company ended Q2 2023 with **$66.6 million** in cash, and a significant post-quarter event was securing an **$82.5 million credit facility** from Barings in August 2023, which management believes will **fund planned operations into 2025**, including the initiation of the first OTX-TKI pivotal trial, but not its completion or other pivotal trials without additional capital - As of June 30, 2023, the company had **cash and cash equivalents of $66.6 million** and an **accumulated deficit of $667.8 million**[186](index=186&type=chunk)[187](index=187&type=chunk) - In August 2023, the company secured a **new $82.5 million credit facility**, receiving **$77.8 million** in net proceeds, and used **$26.2 million** to repay its existing MidCap Credit Facility[187](index=187&type=chunk) - The company believes its existing cash and new financing will **fund planned operations into 2025**, sufficient to *initiate* the first pivotal trial for OTX-TKI for wet AMD, but additional financing is needed for completion and other pivotal trials[197](index=197&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to market risks, primarily interest rate sensitivity affecting its cash equivalents and variable-rate debt, and notes the valuation risk of the derivative liability tied to its convertible notes, which is influenced by stock price and volatility, concluding that a 100 basis point change in interest rates would not materially impact its financial position - The company's primary market risk is interest rate sensitivity on its cash equivalents and variable-rate debt[208](index=208&type=chunk) - The derivative liability associated with the Convertible Notes was **valued at $11.8 million** as of June 30, 2023, and while its fair value is sensitive to stock price and volatility, management states a **10% change in these inputs would not have a material effect**[209](index=209&type=chunk)[210](index=210&type=chunk) [Item 4. Controls and Procedures](index=72&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[212](index=212&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[213](index=213&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=73&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not currently involved in any material legal proceedings, nor is it aware of any material legal proceedings being threatened against it - The company is not presently a party to any material legal proceedings[216](index=216&type=chunk) [Item 1A. Risk Factors](index=73&type=section&id=Item%201A.%20Risk%20Factors) This section updates previously disclosed risk factors, with a new primary focus on the substantial indebtedness incurred from the **$82.5 million Barings Credit Facility** obtained in August 2023, highlighting risks such as potential limitation on cash flow for business investment, restrictive covenants like a **$20.0 million minimum liquidity** requirement, and the consequences of a potential default - A new risk factor is the company's substantial indebtedness following the **$82.5 million Barings Credit Facility** entered into on August 2, 2023[218](index=218&type=chunk) - The debt is secured by all company assets and includes restrictive covenants, such as maintaining a **minimum liquidity of $20.0 million**, which could limit operational flexibility[219](index=219&type=chunk) - Failure to comply with the debt conditions could result in an event of default, acceleration of debt repayment, and enforcement of security interests by the lenders[223](index=223&type=chunk) [Item 5. Other Information](index=75&type=section&id=Item%205.%20Other%20Information) This section details significant events occurring after the quarter's end, including entering into a new **$82.5 million credit facility** with Barings on August 2, 2023, using the proceeds to repay the existing MidCap facility, extending the maturity of the company's Convertible Notes, and the board ratifying certain past stock issuances that may not have been properly authorized - On August 2, 2023, the company entered into an **$82.5 million credit facility** with Barings, receiving **net proceeds of $77.8 million** after discounts and fees[224](index=224&type=chunk) - The Barings facility includes a unique "**Royalty Fee**" structure, where the company must pay an amount equal to the total facility, paid in quarterly installments equal to **3.5% of DEXTENZA net sales**[229](index=229&type=chunk) - On August 6, 2023, the board of directors ratified several past issuances of common stock under the 2014 Employee Stock Purchase Plan due to a "Failure of Authorization"[232](index=232&type=chunk) [Item 6. Exhibits](index=79&type=section&id=Item%206.%20Exhibits) This section provides an index of the exhibits filed as part of the Quarterly Report on Form 10-Q, including amendments to credit agreements, the amended 2021 Stock Incentive Plan, and the required certifications by the Principal Executive Officer and Principal Financial Officer - The report includes several exhibits, such as Amendment No. 2 to the MidCap Credit Agreement, the 2021 Stock Incentive Plan (as amended), and certifications from the CEO and CFO[238](index=238&type=chunk)

• One of most common, severe diabetes complications; leading cause of blindness in working-age population *per planned protocol dosing Sources: Eye care of the patient with diabetes mellitus. American Optometric Association, Second Edition; Market Scope - 2022 Retinal Pharmaceuticals Market Report, Global Analysis 2021-2027; Market Scope Q2-2022 US Retina Quarterly Update; AAO DR Preferred Practice Pattern; JAMA Ophthalmol. 2021;139(9):946-955 (PANORAMA); Arcadu F, et al. NPJ Digit Med. 2019;2:92. • Diabeti ...

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Ocular Therapeutix, Inc.'s unaudited condensed consolidated financial statements for Q1 2023 and prior periods [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $128.6 million, liabilities increased, and equity significantly declined to $9.7 million by Q1 2023 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $79,026 | $102,300 | | Total current assets | $107,162 | $129,627 | | Total assets | $128,573 | $149,289 | | **Liabilities & Equity** | | | | Total current liabilities | $29,715 | $31,395 | | Derivative liability | $12,914 | $6,351 | | Total liabilities | $118,862 | $113,910 | | Total stockholders' equity | $9,711 | $35,379 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Net loss surged to $30.3 million in Q1 2023, primarily due to derivative liability changes and increased operating expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Product revenue, net | $13,214 | $12,498 | | Total revenue, net | $13,374 | $13,187 | | Total costs and operating expenses | $35,923 | $31,020 | | Loss from operations | $(22,549) | $(17,833) | | Change in fair value of derivative liability | $(6,563) | $6,958 | | Net loss | $(30,318) | $(12,542) | | Net loss per share, basic & diluted | $(0.39) | $(0.16) / $(0.22) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $20.0 million in Q1 2023, leading to a total cash decrease of $23.3 million Cash Flow Summary (in thousands) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(19,973) | $(18,600) | | Net cash used in investing activities | $(3,379) | $(276) | | Net cash provided by financing activities | $78 | $129 | | **Net decrease in cash, cash equivalents and restricted cash** | **$(23,274)** | **$(18,747)** | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's business, accounting policies, and financial condition, highlighting an accumulated deficit and future capital needs - The company is a biopharmaceutical firm focused on eye therapies using its proprietary ELUTYX hydrogel technology, commercializing DEXTENZA and developing product candidates like OTX-TKI and OTX-TIC[28](index=28&type=chunk)[30](index=30&type=chunk) - As of March 31, 2023, the company had an accumulated deficit of **$647.2 million** and expects continued operating losses, with existing cash of **$79.0 million** funding operations into mid-2024, excluding planned pivotal trials for OTX-TKI which require additional funding[31](index=31&type=chunk) - For Q1 2023, three specialty distributor customers accounted for **52%**, **25%**, and **13%** of gross product revenue, indicating significant customer concentration[60](index=60&type=chunk) - The fair value of the derivative liability associated with the 2026 Convertible Notes increased from **$6.4 million** at year-end 2022 to **$12.9 million** at March 31, 2023, primarily due to an increase in the company's stock price[65](index=65&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, business overview, and strategic direction, covering DEXTENZA, pipeline progress, and liquidity [Overview and Portfolio](index=27&type=section&id=Overview%20and%20Portfolio) The company develops ophthalmic therapies using ELUTYX hydrogel technology, commercializing DEXTENZA and advancing its OTX-TKI and OTX-TIC pipeline - The company's core is its ELUTYX hydrogel technology, which allows for local, programmed drug release in the eye[81](index=81&type=chunk)[82](index=82&type=chunk) - Key clinical programs include OTX-TKI (wet AMD/DR), OTX-TIC (glaucoma), OTX-DED (short-term dry eye), and OTX-CSI (chronic dry eye)[83](index=83&type=chunk)[84](index=84&type=chunk) - Interim 10-month data for the OTX-TKI Phase 1 trial in wet AMD showed the implant was well-tolerated, with **73%** of subjects remaining rescue-free and a **92%** reduction in treatment burden[88](index=88&type=chunk)[89](index=89&type=chunk) - The company plans to initiate the first of two pivotal trials for OTX-TKI in wet AMD as early as Q3 2023, contingent on securing necessary financing[94](index=94&type=chunk) - The Phase 2 trial for OTX-TIC (glaucoma) is ongoing with the 26 µg dose arm after the 5 µg arm was terminated, with topline data expected in Q4 2023[101](index=101&type=chunk) [Results of Operations](index=45&type=section&id=Results%20of%20Operations) Total net revenue was flat at $13.4 million in Q1 2023, but net loss surged to $30.3 million due to higher expenses and derivative liability impact Results of Operations Comparison (in thousands) | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Total revenue, net | $13,374 | $13,187 | $187 | | Research and development | $14,747 | $13,100 | $1,647 | | Selling and marketing | $10,835 | $9,063 | $1,772 | | General and administrative | $9,127 | $7,557 | $1,570 | | Loss from operations | $(22,549) | $(17,833) | $(4,716) | | Net loss | $(30,318) | $(12,542) | $(17,776) | - Net product revenue from DEXTENZA increased to **$13.2 million** in Q1 2023 from **$12.5 million** in Q1 2022[147](index=147&type=chunk) - Gross-to-net deductions for DEXTENZA increased to **28.1%** of gross sales in Q1 2023, up from **21.9%** in Q1 2022[146](index=146&type=chunk) - The increase in R&D expenses was primarily due to a **$2.0 million** increase in clinical and preclinical program costs, particularly for OTX-TKI[149](index=149&type=chunk) - The **$13.1 million** negative change in 'Other Income (Expense), Net' was primarily due to a **$13.5 million** unfavorable change in the fair value of the derivative liability, reflecting an increase in the company's stock price[154](index=154&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) The company ended Q1 2023 with $79.0 million in cash, projecting funds into mid-2024, but additional capital is needed for pivotal trials - As of March 31, 2023, the company had **$79.0 million** in cash and cash equivalents[158](index=158&type=chunk) - Existing cash is projected to fund planned operations, debt service, and capital expenditures into the middle of 2024, explicitly excluding expenses for planned pivotal clinical trials for OTX-TKI[159](index=159&type=chunk)[168](index=168&type=chunk) - Net cash used in operating activities was **$20.0 million** in Q1 2023, driven by a net loss of **$30.3 million**, partially offset by non-cash charges like a **$6.6 million** change in derivative liability value and **$4.6 million** in stock-based compensation[160](index=160&type=chunk) - The company has an Open Market Sale Agreement with Jefferies to sell up to **$100.0 million** in common stock, with no shares sold as of May 4, 2023[119](index=119&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate sensitivity on cash and variable-rate debt, with management concluding no material effect from rate changes - The company's primary market risk is interest rate sensitivity on its **$79.0 million** in cash and cash equivalents and its **$25.0 million** variable interest rate note payable[177](index=177&type=chunk)[181](index=181&type=chunk) - Management concludes that an immediate **100 basis point** change in interest rates would not materially affect the fair market value of its portfolio or cash outflows from its debt[177](index=177&type=chunk)[181](index=181&type=chunk) - The fair value of the derivative liability (**$12.9 million** as of March 31, 2023) is subject to market inputs, but a **10%** change in these inputs is not expected to have a material effect[179](index=179&type=chunk) [Item 4. Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2023, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[182](index=182&type=chunk) - No changes occurred during Q1 2023 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[183](index=183&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings, nor is management aware of any threatened proceedings - The company is not presently a party to any material legal proceedings[186](index=186&type=chunk) [Item 1A. Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) Risk factors highlight the risk of holding cash exceeding FDIC insurance limits, citing the SVB failure as a key example - A key risk is the concentration of cash in deposit accounts at a small number of financial institutions, with balances that exceed FDIC insurance limits[188](index=188&type=chunk)[191](index=191&type=chunk) - The failure of Silicon Valley Bank (SVB) in March 2023 is cited as a direct example of this risk, as the company maintained a significant portion of its cash at SVB at the time[189](index=189&type=chunk) - While the company amended its credit agreement to allow holding up to **50%** of its cash elsewhere, the risk of concentration remains, with no assurance of government protection for uninsured deposits in future bank failures[191](index=191&type=chunk)[192](index=192&type=chunk) [Item 5. Other Information](index=62&type=section&id=Item%205.%20Other%20Information) On May 4, 2023, the company amended its Credit and Security Agreement to permit holding up to 50% of cash outside Silicon Valley Bank - On May 4, 2023, the company amended its credit agreement to allow diversification of its cash holdings, permitting up to **50%** to be held at institutions other than Silicon Valley Bank[195](index=195&type=chunk) [Item 6. Exhibits](index=62&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications and XBRL documents - Lists exhibits filed with the report, including Amendment No. 1 to the Credit and Security Agreement, CEO/CFO certifications (Rules 302 and 906), and XBRL data files[200](index=200&type=chunk)

Financial Data and Key Metrics Changes - The company reported a net loss of $15.5 million for Q4 2022, compared to a net loss of $3.9 million in Q4 2021, reflecting a significant increase in losses [2] - Total net revenue for Q4 2022 was $14.1 million, representing an 18% growth over the prior quarter and a 15% growth over the same period in 2021 [30] - For the full year 2022, the company reported a net loss of $71 million, compared to a net loss of $6.6 million in 2021 [31] Business Line Data and Key Metrics Changes - DEXTENZA net product revenue for Q4 2022 was $13.9 million, up approximately 17% sequentially and 14% year-over-year [15][30] - Total DEXTENZA net product revenue for the full year 2022 was $50.5 million, representing a growth of approximately 20% over the previous year [15] Market Data and Key Metrics Changes - The company anticipates DEXTENZA net product revenue for 2023 to be between $55 million and $60 million, indicating potential growth of approximately 10% to 20% over 2022 [24] - In-market billable units for DEXTENZA were running more than 20% ahead of 2022 levels in January and February 2023 [50] Company Strategy and Development Direction - The company plans to initiate a Phase III program for diabetic retinopathy in Q1 2024, assuming positive results from the ongoing Phase I trial [20] - The company aims to commence pivotal trials for OTX-TKI in wet AMD in Q3 2023, contingent on securing financing and FDA discussions [32][47] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential of OTX-TKI to provide a durable anti-VEGF response, which could set a new standard of care for wet AMD and diabetic retinopathy [44][26] - The company is in active discussions with the FDA regarding pivotal study designs and is encouraged by the potential path forward [47][77] Other Important Information - The company reported general and administrative expenses of $8.3 million for Q4 2022, an increase from $7.5 million in Q4 2021, primarily due to personnel-related costs [58] - Research and development expenses for Q4 2022 were $13.5 million, up from $12.6 million in the same period in 2021 [71] Q&A Session Summary Question: Where do you feel you are in the process of evaluating potential partnership situations for OTX-TKI? - Management indicated they are in discussions with potential partners and are optimistic about reaching an agreement before initiating pivotal studies [4][75] Question: What factors could influence being at the low or high end of the guidance for DEXTENZA? - Management noted that customer capacity and market access coverage would play significant roles in achieving revenue targets [7][64] Question: How much financing would be needed to progress the program for TKI in both wet AMD and DR? - Management stated it would be premature to specify the amount needed until an approved protocol is in place [66]