Ocular Therapeutix(US:OCUL)2023-11-07 21:06PART I Financial Statements (unaudited) Unaudited consolidated financial statements for Ocular Therapeutix, Inc. as of and for the periods ended September 30, 2023, are presented Condensed Consolidated Balance Sheets 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 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 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 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 trials31157217 - 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 million5365174 - For the nine months ended September 30, 2023, three specialty distributor customers accounted for 51%, 23%, and 11% of the company's gross product revenue71 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 diseases102106 - 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 2023109115 - In-market unit sales for DEXTENZA exceeded 36,000 units in Q3 2023, an increase of approximately 38% from Q3 2022148 - 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 trials151157217 Results of Operations 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 year183195 Liquidity and Capital Resources 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, 2023207 - 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 period209 - 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 financing217 Quantitative and Qualitative Disclosures About Market Risk 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 debt226228 - 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, 2023229230 Controls and Procedures 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 level232 - There were no changes in internal control over financial reporting during Q3 2023 that materially affected, or are reasonably likely to materially affect, internal controls233 PART II – OTHER INFORMATION Legal Proceedings 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 proceedings236 Risk Factors 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 purposes238239 - 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 property239 - 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 cover243 Other Information This section is listed in the table of contents but contains no substantive information in the report body Exhibits 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 Act247