OMEROS CORP

Note 1—Organization and Basis of Presentation

General*** ***

Omeros Corporation (“Omeros,” the “Company” or “we”) is a clinical-stage biopharmaceutical company committed to discovering, developing and commercializing small-molecule and protein therapeutics for large-market as well as orphan indications targeting immunologic disorders including complement-mediated diseases, cancers, and addictive and compulsive disorders.

Our clinical-stage development programs include: narsoplimab, our antibody targeting mannan-binding lectin-associated serine protease2 (“MASP-2”), the effector enzyme of the lectin pathway of complement;OMS1029, our long-acting antibody targeting MASP-2; OMS906, our antibody targeting mannan-binding lectin-associated serine protease-3 (“MASP-3”), the key activator of the alternative pathway of complement; andOMS527, our phosphodiesterase7 (“PDE7”) inhibitor program.

Clinical development of narsoplimab is currently focused primarily on hematopoietic stem cell transplant-associated thrombotic microangiopathy (“TA-TMA”). We successfully completed a pivotal clinical trial for narsoplimab in TA-TMA and previously submitted to FDA a biologics license application (“BLA”) seeking marketing approval for narsoplimab in this indication. In late2021, FDA issued a complete response letter (“CRL”) with respect to the BLA in which the agency indicated that additional information would be needed to support regulatory approval. We appealed FDA’s decision to issue the CRL through a formal dispute resolution process that concluded in late2022. Although our appeal was denied, the decision identified potential paths for resubmission of the BLA based on data from our completed pivotal trial and submission of additional evidence and analyses. We are having ongoing discussions with the agency regarding the data and analyses required to be included in a potential resubmission of our BLA. As a result, we are currently unable to estimate when we will submit the BLA or, subsequently, FDA’s timing for a decision regarding approval. There can beno guarantee that FDA's specific recommendations for resubmission will be acceptable to Omeros in terms of the time and/or expenditure required or that any resubmission of the BLA will result in approval of narsoplimab for TA-TMA.

Our lectin pathway program also includesOMS1029, our long-acting antibody targeting MASP-2. This next-generation MASP-2 inhibitor is intended to be complementary to narsoplimab, enabling us to pursue chronic indications in which dosing convenience would be of significant benefit to patients. A Phase1 single-ascending dose clinical trial ofOMS1029 was successfully completed in early2023 and a multiple-ascending dose Phase1 clinical trial is expected to conclude in mid-2024. OMS1029 has been well tolerated to date withno safety concerns identified. We are evaluating several potential indications for Phase2 clinical development ofOMS1029.

Our pipeline of clinical-stage complement-targeted therapeutic candidates also includesOMS906, a proprietary, patented monoclonal antibody targeting MASP-3, the key activator of the alternative pathway of complement. We havethree ongoing Phase2 clinical trials evaluatingOMS906 for the treatment of paroxysmal nocturnal hemoglobinuria (“PNH”). Thefirst is in PNH patients who havenot previously been treated with a complement inhibitor, and thesecond is in PNH patients who have had an unsatisfactory response to ravulizumab. Thethird Phase2 clinical trial is an open-label extension study to assess the long-term efficacy and safety ofOMS906 in patients who have completed either of the othertwo PNH Phase2 clinical trials. We also have an ongoing Phase2 clinical program evaluatingOMS906 for the treatment ofC3G, a rare and debilitating renal disease driven by complement dysregulation.

Our phosphodiesterase7 (“PDE7”) inhibitor program, which we refer to asOMS527, comprises multiplePDE7 inhibitor compounds and is based on our discoveries of previously unknown links betweenPDE7 and any addiction or compulsive disorder, and betweenPDE7 and any movement disorders. In* April 2023,we were awarded a grant from the National Institute on Drug Abuse ("NIDA"), part of the National Institutes of Health, to develop, at NIDA's request, our lead orally administeredPDE7* inhibitor compound, for which we have successfully completed a Phase1 study, for the treatment of cocaine use disorder (“CUD”). NIDA awarded the grant to Omeros for a total of $6.69 million overthree years, of which we have claimed and received $0.7 million of funding to date and recognized $0.2 million into Other Income in our condensed consolidated statement of operations and comprehensive loss. The grant is intended to support preclinical cocaine interaction/toxicology studies to assess safety of the therapeutic candidate in the presence of concomitant cocaine administration, as well as an in-patient, placebo-controlled clinical study evaluating the safety and effectiveness ofOMS527 in adults with CUD who receive concurrent intravenous cocaine. The preclinical study is intended to provide the toxicology data necessary to support the human study ofOMS527 in CUD. The toxicology study is underway and is expected to be completed later this year.

We also have various programs in preclinical research and development.

OMIDRIA Sale and Royalty Monetization Transactions

On* December 23, 2021,we closed an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Rayner Surgical Inc. (“Rayner”) for the sale of our commercial product OMIDRIA and certain related assets including inventory and prepaid expenses. As a result of the divestiture, the results of OMIDRIA activities are classified as discontinued operations in our condensed consolidated statements of operations and comprehensive loss and excluded from continuing operations for all periods presented (See “Note7* — Discontinued Operations – Sale of OMIDRIA”).

On* September 30, 2022,*we sold to DRI Healthcare Acquisition LP (“DRI”) an interest in a portion of our future OMIDRIA royalty receipts and received $125.0 million in cash consideration, which we recorded as an OMIDRIA royalty obligation on our condensed consolidated balance sheet. Interest expense on the royalty obligation is recorded as a component of continuing operations.

On* February 1, 2024,we sold to DRI an expanded interest in our OMIDRIA royalties and received $115.5 million in cash consideration, which we recorded as an addition to the OMIDRIA royalty obligation. The amended and restated royalty purchase agreement with DRI (the “Amendment”) eliminates the previously existing annual caps on royalty payments after January 1, 2024,and provides that DRI now receives all royalties on U.S. net sales of OMIDRIA payable between January 1, 2024and December 31, 2031. (See “Note8* — OMIDRIA Royalty Obligation”). Omeros is entitled to retain all royalties on net sales of OMIDRIA outside of the United States.

Basis of Presentation

Our condensed consolidated financial statements include the financial position and results of operations of Omeros and our wholly owned subsidiaries. All inter-company transactions have been eliminated. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

Liquidity and Capital Resources

As of* March 31, 2024*, we had cash, cash equivalents and short-term investments of $230.3 million. During the quarter ended* March 31, 2024,*our cash used in operations was $41.8 million.

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Historically, we have incurred net losses from continuing operations and negative operating cash flows. We havenot yet established an ongoing source of revenue sufficient to cover our operating costs; therefore, we potentially need to continue to raise additional capital to accomplish our business plan and retire our outstanding convertible senior notes due in* February 2026 (the“2026* Notes”). We plan to continue to fund our operations for at least the nexttwelve months with our existing cash and investments. We have a sales agreement to sell shares of our common stock, from time to time, in an “at the market” equity offering facility through which we* mayoffer and sell shares of our common stock equaling an aggregate amount up to $150.0 million. Should it be determined to be strategically advantageous, we could pursue debt financings as well as public and private offerings of our equity securities, or other strategic transactions, which mayinclude licensing or selling a portion or all ofone* or more of our existing technologies. Should it be necessary to manage our operating expenses, we could also reduce our projected cash requirements by delaying clinical trials, reducing selected research and development efforts, or implementing other restructuring activities.

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant items subject to such estimates include OMIDRIA contract royalty asset valuation, stock-based compensation expense, and accruals for clinical trials and manufacturing of drug product. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances; however, actual results could differ from these estimates.

Note 2—Significant Accounting Policies

Discontinued Operations

We review the presentation of planned or completed business dispositions in the condensed consolidated financial statements based on the available information and events that have occurred. The review consists of evaluating whether the business meets the definition of a component for which the operations and cash flows are clearly distinguishable from the other components of the business and, if so, whether it is anticipated that, after the disposal, the cash flows of the component would be eliminated from continuing operations and whether the disposition represents a strategic shift that has a major effect on operations and financial results.

Planned or completed business dispositions are presented as discontinued operations when all the criteria described above are met. For those divestitures that qualify as discontinued operations, all comparative periods presented are reclassified in the condensed consolidated balance sheets. Additionally, the results of operations of a discontinued operation are reclassified to income from discontinued operations, net of tax, for all periods presented in the condensed consolidated statements of operations and comprehensive income (loss). Results of discontinued operations include all revenues and expenses directly derived from such businesses. General corporate overhead isnot allocated to discontinued operations. The OMIDRIA asset sale to Rayner qualifies as a discontinued operation and has been presented as such for all reporting periods presented.

OMIDRIA Royalties, Milestones and Contract Royalty Assets

We have rights to receive future royalties from Rayner on OMIDRIA net sales at royalty rates that vary based on geography and certain regulatory contingencies. Therefore, future OMIDRIA royalties are treated as variable consideration. The sale of OMIDRIA qualified as an asset sale under GAAP. To measure the OMIDRIA contract royalty asset, we use the expected value approach which is the sum of the discounted probability-weighted royalty payments we would receive using a range of potential outcomes, to the extent that it is probable that a significant reversal in the amount of cumulative income recognized willnot occur. The royalty rate applicable to U.S. net sales of OMIDRIA is 30% until the expiration or termination of the last issued and unexpired U.S. patent, which we expect to occurno earlier than2035. Royalties earned are recorded as a reduction to the OMIDRIA contract royalty asset. The amount recorded in discontinued operations in future periods will reflect interest earned on the outstanding OMIDRIA contract royalty asset at 11.0% and any amounts we receive that are different from the expected royalties. The OMIDRIA contract royalty asset is re-measured quarterly using the expected value approach, which incorporates actual results and future expectations. Any required adjustment to the OMIDRIA contract royalty asset is recorded in discontinued operations.

OMIDRIA Royalty Obligation

On* September 30, 2022,we sold to DRI an interest in a portion of our future OMIDRIA royalty receipts for a purchase price of $125.0 million, which was recorded as an “OMIDRIA royalty obligation” on our condensed consolidated balance sheet. On February 1, 2024,we sold to DRI our remaining U.S. OMIDRIA royalty receipts through December 31, 2031for $115.5 million in cash, which increased the OMIDRIA royalty obligation by the same amount. The OMIDRIA royalty obligation is amortized through December 31, 2031*using the implied effective interest rate of 10.3%. Interest expense is recorded in continuing operations.

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To the extent our estimates of future royalties differ materially from previous estimates, we will adjust the carrying amount of the liability for future OMIDRIA royalties to the present value of the revised estimated cash flows, discounted at the implied effective interest rate of 10.3% utilizing the cumulative catch-up method. The offset to the adjustment would be recognized as a component of net income (loss) from continuing operations (see “Note8 — OMIDRIA Royalty Obligation”).

Inventory

We expense inventory costs related to product candidates as research and development expenses until regulatory approval is reasonably assured in the U.S. or the European Union (“EU”). Once approval is reasonably assured, costs, including amounts related tothird-party manufacturing, transportation and internal labor and overhead, will be capitalized.

Right-of-Use Assets and Related Lease Liabilities

We record operating leases as right-of-use assets and recognize the related lease liabilities equal to the fair value of the lease payments using our incremental borrowing rate when the implicit rate in the lease agreement isnot readily available. We recognize variable lease payments when incurred. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.

We record finance lease obligations as a component of property and equipment and amortize these assets within operating expenses on a straight-line basis to their residual values over the shorter of the term of the underlying lease or the estimated useful life of the equipment. The interest component of finance lease obligations is included in interest expense and recognized using the effective interest method over the lease term.

We account for leases with initial terms of12 months or less as an operating expense.

Stock-Based Compensation

Stock-based compensation expense is recognized for all share-based payments, including grants of stock option awards based on estimated fair values. The fair value of our stock is calculated using the Black-Scholes option-pricing model, which requires judgmental assumptions around volatility, risk-free rates, forfeiture rates and expected term. Compensation expense is recognized over the requisite service periods, which is generally the vesting period, using the straight-line method. Forfeiture expense is estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.

Common Stock Repurchases

We* mayrepurchase shares of our common stock from time to time under authorization made by our Board of Directors. Under Washington State law, repurchased shares are retired andnot* presented as treasury stock on the condensed consolidated financial statements.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax basis. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recognize the effect of income tax positions only if those positions are more likely thannot of being sustained upon an examination. A valuation allowance is established when it is more likely thannot that the deferred tax assets willnot be realized.

Financial Instruments and Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and short-term investments. Cash and cash equivalents are deposited in checking and sweep accounts at financial institutions. At times, our cash and cash equivalents balance held at a financial institution* mayexceed the federally insured limits. To limit the credit risk, we invest our excess cash in high-quality securities such as money market mutual funds, certificates of deposit and U.S. treasury bills. The Company hasnot* experienced any losses on its deposits of cash and cash equivalents. Management believes that the Company isnot currently exposed to significant credit risk as the Company’s short-term investments are held in custody atthird-party financial institutions. The Company’s investment policy limits investments to certain types of securities issued by the U.S. government, its agencies and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and investments, and issuers of the investments to the extent recorded on the unaudited condensed consolidated balance sheets. As of* March 31, 2024,the Company hasno* off-balance sheet concentrations of credit risk.

Note 3—Net Loss Per Share

Basic net income (loss) per share (“Basic EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income per share (“Diluted EPS”) is computed by dividing net income by the weighted average number of common shares and potentially dilutive common shares outstanding during the period using the treasury stock method. In periods where we have a net loss from continuing operations but overall net income, we donot compute Diluted EPS.

Potentially dilutive securities are as follows:

Note 4—Investments and Fair-Value Measurements

All of our investments are held in our name and are classified as short-term and held-to-maturity on the accompanying condensed consolidated balance sheets. Interest income is included as a component of other income on our condensed consolidated statement of operations and comprehensive loss. Interest and other income for thethree months ended* March 31, 2024* and* March 31, 2023*consists primarily of interest earned of $2.8 million and $3.4 million, respectively.

The following tables summarize our investments:

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Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting standard establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available. The following summarizes thethree levels of inputs required:

Level1—Observable inputs for identical assets or liabilities, such as quoted prices in active markets;

Level2—Inputs other than quoted prices in active markets that are either directly or indirectly observable; and

Level3—Unobservable inputs in which little orno market data exists, therefore they are developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

Our fair value hierarchy for our financial assets and liabilities are as follows:

Cash held in demand deposit accounts of $1.8 million and $7.1 million is excluded from our fair-value hierarchy disclosure as of* March 31, 2024* and* December 31, 2023*, respectively. The carrying amounts reported in the accompanying condensed consolidated balance sheets for receivables, accounts payable and accrued liabilities, and other current monetary assets and liabilities approximate fair value.

See “Note6 — Convertible Senior Notes” and “Note8 — OMIDRIA Royalty Obligation” for the carrying amount and estimated fair value of our outstanding convertible senior notes and the OMIDRIA royalty obligation.

**Note5 **—Certain Balance Sheet Accounts

OMIDRIA Contract Royalty Asset

The OMIDRIA contract royalty asset consists of the following:

Receivables

Receivables consist of the following:

See “Note7 — Discontinued Operations – Sale of OMIDRIA” for discussion regarding the estimated fair value of our OMIDRIA contract royalty asset.

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Property and Equipment, Net

Property and equipment, net consists of the following:

For thethree months ended* March 31, 2024and2023*, depreciation and amortization expense was the same at $0.2 million.

Accrued Expenses

Accrued expenses consists of the following:

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Note 6—Convertible Senior Notes

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2023 Convertible Senior Notes

We extinguished the $95.0 million outstanding on our 6.25% convertible senior notes (the*“2023* Notes”) at par upon maturity on* November 15, 2023.For thethree* months ended* March 31, 2023,*we recognized interest expense of $1.5 million and amortization of debt issuance costs of $0.2 million.

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2026 Convertible Senior Notes

We have outstanding unsecured convertible senior notes which accrue interest at an annual rate of 5.25% per annum, payable semi-annually in arrears on* February 15and August 15of each year (the“2026* Notes”). The2026 Notes mature on* February 15, 2026,*unless earlier purchased, redeemed or converted in accordance with their terms.

Amounts outstanding on our2026 Notes are as follows:

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The unamortized debt issuance costs of $2.5 million as of* March 31, 2024*will be amortized to interest expense at an effective interest rate of 5.9% over the remaining term.

The following table sets forth interest expense recognized related to the2026 Notes:

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The initial conversion rate is 54.0906 shares of our common stock per $1,000 of note principal (equivalent to an initial conversion price of approximately $18.4875 per share of common stock), which equals approximately 12.2 million shares issuable upon conversion, subject to adjustment in certain circumstances.

The2026 Notes are convertible at the option of the holders on or after* November 15, 2025at any time prior to the close of business on February 12, 2026,thesecond* scheduled trading day immediately before the stated maturity date of* February 15, 2026.Additionally, holders mayconvert their2026* Notes at their option at specified times prior to the maturity date only if:

(1) during any calendar quarter, the last reported sale price per share of our common stock exceeds 130% of the conversion price of the2026 Notes for each of at least20 trading days, whether ornot consecutive, in the period of30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2) during thefive consecutive business days immediately after anyfive-consecutive-trading-day period (suchfive-consecutive-trading-day period, the “measurement period”) in which the trading price per*$1,000* principal amount of2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;

(3) there is an occurrence ofone or more certain corporate events or distributions of our common stock; or

(4) we call the2026 Notes for redemption.

We will settle any conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, based on the applicable conversion rate(s).

Subject to the satisfaction of certain conditions, we* mayredeem in whole or in part the2026* Notes at our option through the50th scheduled trading day immediately before the maturity date at a cash redemption price equal to the principal amount of the2026 Notes to be redeemed plus any accrued and unpaid interest to, but excluding, the redemption date. The2026 Notes are subject to redemption only if certain requirements are satisfied, including that the last reported sale price per share of our common stock exceeds 130% of the conversion price on (i) each of at least20 trading days, whether ornot consecutive, during the30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice and (ii) the trading day immediately before the date we send such notice.

In order to reduce the dilutive impact or potential cash expenditure associated with the conversion of the2026 Notes, we entered into capped call transactions in connection with the issuances of the2026 Notes (the*“2026* Capped Call”). The2026 Capped Call will cover, subject to anti-dilution adjustments substantially similar to those applicable to the2026 Notes, the number of shares of common stock underlying the2026 Notes when our common stock is trading within the range of approximately $18.49 and$26.10. However, should the market price of our common stock exceed the $26.10 cap, then the conversion of the2026 Notes would have an additional dilutive impact or* mayrequire a cash expenditure to the extent the market price of our common stock exceeds the cap price. The2026* Capped Call will expire on various dates over the50-trading-day period ranging from* December 2, 2025to February 12, 2026,ifnot* exercised earlier. The2026 Capped Call is a separate transaction andnot part of the terms of the2026 Notes and was executed separately from the issuance of the2026 Notes. The amount paid for the2026 Capped Call was recorded as a reduction to additional paid-in capital in the condensed consolidated balance sheet. As of* March 31, 2024,approximately 12.2 million shares remained outstanding under the2026* Capped Call.

Further, we concluded the2026 Capped Call qualifies for a derivative scope exception for instruments that are both indexed to an entity’s own stock and classified in stockholders’ equity in its balance sheet. Consequently, the fair value of the2026 Capped Call of $23.2 million is classified as equity,not accounted for as derivatives, and willnot be subsequently remeasured.

Note 7—Discontinued Operations - Sale of OMIDRIA

On* December 23, 2021,*we sold the rights to OMIDRIA and related assets to Rayner. As a result of the divestiture, the results of OMIDRIA activities are classified as discontinued operations in our condensed consolidated statements of operations and comprehensive loss and excluded from continuing operations for all periods presented.

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In* December 2022,we earned a $200.0 million milestone upon occurrence of the event specified in the Asset Purchase Agreement with Rayner.* The milestone payment was received in February 2023.

Net income from discontinued operations is as follows:

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The following is a roll forward of the OMIDRIA contract royalty asset (in thousands):

We remeasure the OMIDRIA contract royalty asset on a quarterly basis using the expected value approach, which incorporates actual results and future expectations. The OMIDRIA contract royalty asset is classified as a Level3 asset as its valuation requires substantial judgment and estimation of factors that arenot currently observable in the market.

Cash flow from discontinued operations is as follows:

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Net cash provided by discontinued operations primarily represents royalties received and the $200.0 million milestone payment that we collected from Rayner in* February 2023. ​*

Note 8—OMIDRIA Royalty Obligation

In* September 2022,we sold to DRI an interest in our future OMIDRIA royalty receipts and received $125.0 million in cash consideration, which was recorded as an OMIDRIA royalty obligation on our condensed consolidated balance sheet. DRI was entitled to receive royalties on OMIDRIA net sales between September 1, 2022and December 31, 2030,*subject to annual caps.

In* February 2024,Omeros and DRI expanded their royalty purchase agreement under the Amendment, resulting in Omeros receiving an additional $115.5 million in cash consideration, which we accounted for as a modification of our existing debt from DRI. The Amendment eliminated the annual caps on royalty payments and provides that DRI will receive all royalties on U.S. net sales of OMIDRIA payable between January 1, 2024and December 31, 2031.*

Omeros retains the right to receive all royalties payable by Rayner on any net sales of OMIDRIA outside the U.S. payable after* January 1, 2024,as well as royalties on global net sales of OMIDRIA payable from and after December 31, 2031.To date, international royalties havenot* been significant. DRI hasno recourse to our assets other than its interest in OMIDRIA royalties.

We are also entitled to receive a milestone ranging between $10.0 million and $27.5 million if U.S. net sales of OMIDRIA reach applicable thresholds ranging between a total of $156.0 million and $160.0 million for any period offour consecutive quarters prior to* January 1, 2026.In addition, we are entitled to receive a separate milestone ranging between $8.0 million and $27.5 million if U.S. net sales of OMIDRIA reach applicable thresholds ranging between a total of $181.0 million and $185.0 million for any period offour* consecutive quarters prior to* January 1, 2028.*

The following schedule is a roll forward of the OMIDRIA royalty obligation (in thousands):

We account for the OMIDRIA royalty obligation under the catch-up method. The catch-up method requires that we adjust the carrying amount to match the present value of revised estimated cash flows of Rayner’s U.S. net sales of OMIDRIA. We discounted the OMIDRIA royalty obligation at an implied effective interest rate of 10.3%. The OMIDRIA royalty obligation is classified as a Level3 liability as its valuation requires substantial judgment and estimation of factors that arenot currently observable in the market. As of* March 31, 2024*, the approximate fair value of our obligation was equal to its carrying value.

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For thethree months ended* March 31, 2024and2023,* we incurred interest expense of $5.0 million and $3.0 million, respectively.

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As of* March 31, 2024*, future expected principal and interest payments are as follows:

Note 9—Leases

We have an operating lease for our office and laboratory facilities with an initial term that ends in* November 2027andtwo options to extend the lease term by an additional five years each. Restricted investments of $1.1 million represent the security deposit on our office and laboratory facilities. We have finance leases for certain laboratory and office equipment that have lease terms expiring through November 2026.*

Supplemental lease information is as follows:

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Cash paid for amounts included in the measurement of lease liabilities is as follows:

Note 10—Commitments and Contingencies

Good and Service Contracts

We have various agreements withthird parties that collectively require payment of termination fees totaling $23.3 million as of* March 31, 2024* if we cancel the work within specific time frames, either prior to commencing or during performance of the contracted services.

Development Milestones and Product Royalties

We have entered a variety of development, collaboration, licensing or similar agreements withthird parties under which we have accessed technology or services in connection with our development assets and programs. Some of these agreements require milestone payments based on achievements of development, regulatory or sales milestones, and/or low-single to low-double digit royalties on net income or net sales of the relevant product. For thethree months ended* March 31, 2024and2023,* development milestone expenses werenot significant.

Note 11—Shareholders’** Equity (Deficit)**

Common Stock

At the Market Sales Agreement - We have a sales agreement to sell shares of our common stock having an aggregate offering price of up to $150.0 million, from time to time, through an “at the market” equity offering program. As of* March 31, 2024*, we havenot sold any shares under this program.

Share Repurchase Program - On* November 9, 2023,the Board of Directors approved an indefinite term share repurchase program under which we mayrepurchase from time to time up to $50.0 million of our common stock in the open market or through privately negotiated transactions. For thethree* months ended* March 31, 2024,*we repurchased and retired 3.2 million shares of common stock at an average share price of $3.71 for an aggregate repurchase price of $11.9 million. Since inception of the program, we have repurchased and retired 5.0 million shares at an average price of $3.30 per share.

Note 12—Stock-Based Compensation

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Our stock option plans provide for the grant of incentive and non-qualified stock options, restricted stock awards, restricted stock units, and other stock awards to employees, non-employee directors and consultants.

On* April 25, 2024,annual stock option grants of approximately 2.9 million shares of common stock were awarded to eligible participants for the2023* annual performance period. The options have an exercise price of $3.06 per share and vest monthly on a straight-line basis over four years.

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Stock-based compensation is as follows:

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were applied to all stock option grants:

Expected volatility is based on the historical volatility of our stock price weighted by grant issuances over the reporting period. We estimated the expected life of the stock options granted using the historical exercise behavior of option holders. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Forfeiture expense is estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.

Stock option activity for all stock plans and related information is as follows:

Of the 15.2 million common stock options outstanding as of* March 31, 2024*,12.1 million have an exercise price per share above $3.45, which was the closing price of our stock on the Nasdaq exchange on* March 28, 2024.*

As of* March 31, 2024*, there were 4.2 million unvested options outstanding that will vest over a weighted-average period of 2.0 years. The total estimated compensation expense yet to be recognized on outstanding options is $12.1 million.

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