KALA BIO, Inc.

Previous wording

The CHASE trial is comprised of two patient cohorts. On March 27, 2023, we announced positive safety data from the first cohort of the CHASE trial, which is an open-label study to evaluate the safety of the high dose of KPI-012 ophthalmic solution (3 U/mL) dosed topically four times per day, or QID, in two patients. Both patients in the first cohort successfully completed at least one week of dosing with no safety issues observed. We have initiated the second and final patient cohort of the CHASE trial in the United States, which is a multicenter, randomized, double-masked, vehicle-controlled, parallel-group trial to evaluate the safety and tolerability of two doses of KPI-012 ophthalmic solution (3 U/mL and 1 U/mL) versus vehicle dosed topically QID for 56 days in approximately 90 patients. We plan to add trial sites in Latin America, subject to regulatory approval.

Current wording

The CHASE trial is comprised of two patient cohorts. On March 27, 2023, we announced positive safety data from the first cohort of the CHASE trial, which is an open-label study to evaluate the safety of the high dose of KPI-012 ophthalmic solution (3 U/mL) dosed topically four times per day, or QID, in two patients. Both patients in the first cohort successfully completed eight weeks of dosing with no safety issues observed. We have initiated the second and final patient cohort of the CHASE trial in the United States, which is a multicenter, randomized, double-masked, vehicle-controlled, parallel-group trial to evaluate the safety and efficacy of two doses of KPI-012 ophthalmic solution (3 U/mL and 1 U/mL) versus vehicle dosed topically QID for 56 days in approximately 90 adult patients. To date, we have opened 45 trial sites for the CHASE trial in the United States. We have also initiated several clinical trial sites in Argentina for the CHASE trial and we are in the process of initiating additional clinical trial sites in Latin America.

Previous wording

The primary endpoint of the trial is the complete healing of the PCED as measured by corneal fluorescein staining. We are targeting reporting topline safety and efficacy data from the CHASE trial by the end of 2024. If the results are positive, and subject to discussion with regulatory authorities, we believe this trial could serve as the first of two pivotal trials required to support the submission of a Biologics License Application, or BLA, for KPI-012 to the FDA.

Current wording

The primary endpoint of the CHASE trial is the complete healing of the PCED as measured by corneal fluorescein staining. To date, we have randomized 87 patients. Upon review of the only masked screening and baseline data, we have decided to extend enrollment to account for 13 patients who were enrolled and treated based on the investigators’ determination of the presence of a PCED which was subsequently not verified by the central reading center. We are targeting reporting topline safety and efficacy data from the CHASE trial in the third quarter of 2025. If the results are positive, and subject to discussion with regulatory authorities, we believe this trial could serve as the first of two pivotal trials required to support the submission of a Biologics License Application, or BLA, for KPI-012 to the FDA.

Previous wording

We believe the multifactorial mechanism of action of KPI-012 also makes our MSC-S a platform technology. We are evaluating the potential development of KPI-012 for additional rare front-of-the-eye diseases, such as for the treatment of Limbal Stem Cell Deficiency, or LSCD, and other rare corneal diseases that threaten vision. In addition, we have initiated preclinical studies under our KPI-014 program to evaluate the utility of our MSC-S platform for inherited retinal degenerative diseases, such as Retinitis Pigmentosa and Stargardt Disease. In connection with the determination to focus our research and development efforts on KPI-012, in 2022, we determined to cease the development of our preclinical pipeline programs that are unrelated to our MSC-S platform. We expect to commercialize in the United States any of our product candidates that receive marketing approval. For a further description of our acquisition of Combangio, or Combangio Acquisition, see Item 1, “Business,” “Liquidity and Capital Resources” below and Note 3, “Acquisitions and Divestitures” of our consolidated financial statements.

Current wording

We believe the multifactorial mechanism of action of KPI-012 also makes our MSC-S a platform technology. We are evaluating the potential development of KPI-012 for additional rare front-of-the-eye diseases, such as for the treatment of Limbal Stem Cell Deficiency and other rare corneal diseases that threaten vision. In addition, we have initiated preclinical studies under our KPI-014 program to evaluate the utility of our MSC-S platform for inherited retinal degenerative diseases, such as Retinitis Pigmentosa and Stargardt Disease. We expect to commercialize in the United States any of our product candidates that receive marketing approval.

Previous wording

On July 8, 2022, Alcon Pharmaceuticals Ltd. and Alcon Vision, LLC, which we refer to collectively as Alcon, purchased from us the rights to manufacture, sell, distribute, market and commercialize EYSUVIS and INVELTYS and to develop, manufacture, market and otherwise exploit the AMPPLIFY Drug Delivery Technology, which we collectively refer to as the Commercial Business. We refer to this transaction as the Alcon Transaction. Alcon also assumed certain liabilities with respect to the Commercial Business at the closing of the Alcon Transaction. For a further description of the Alcon Transaction, see Item 1, “Business,” “Liquidity and Capital Resources” below and Note 3, “Acquisitions and Divestitures” of our consolidated financial statements.

Current wording

On July 8, 2022, we sold to Alcon Pharmaceuticals Ltd. and Alcon Vision, LLC, which we refer to collectively as Alcon, the rights to manufacture, sell, distribute, market and commercialize EYSUVIS and INVELTYS and to develop, manufacture, market and otherwise exploit the AMPPLIFY Drug Delivery Technology, which we collectively refer to as the Commercial Business. We refer to this transaction as the Alcon Transaction. Alcon also assumed certain liabilities with respect to the Commercial Business at the closing of the Alcon Transaction.

Previous wording

Since inception, we have incurred significant losses from operations and negative cash flows from operations. Our net losses were $42.2 million for the year ended December 31, 2023 and $44.8 million for the year ended December 31, 2022. As of December 31, 2023, we had an accumulated deficit of $629.4 million. We generated only limited revenues from product sales of EYSUVIS and INVELTYS prior to the sale of the Commercial Business to Alcon in July 2022. We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon, our initial public offering, or IPO, follow-on public common stock offerings and sales of our common stock under our sales agreement with Jefferies, LLC, or Jefferies, in at-the-market offerings, private placements of common stock and/or preferred stock (including our private placement of preferred stock for gross proceeds of approximately $2.0 million in December 2023, or our 2023 Private Placement, and $8.6 million in March 2024, or our 2024 Private Placement), borrowings under credit facilities and our Loan Agreement with Oxford Finance, or the Loan Agreement, a grant from California Institute for Regenerative Medicine, or CIRM, convertible promissory notes and warrants.

Current wording

Since inception, we have incurred significant losses from operations and negative cash flows from operations. Our net losses were $38.5 million for the year ended December 31, 2024 and $42.2 million for the year ended December 31, 2023. As of December 31, 2024, we had an accumulated deficit of $667.9 million. We generated only limited revenues from product sales of EYSUVIS and INVELTYS prior to the sale of the Commercial Business to Alcon in July 2022. We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon, our initial public offering, or IPO, follow-on public common stock offerings and sales of our common stock under our sales agreement with Jefferies, LLC, or Jefferies, in at-the-market offerings, private placements of common stock and/or preferred stock (including our most recent private placements resulting in gross proceeds of approximately $8.6 million in March 2024, $12.5 million in June 2024 and $10.8 million in December 2024), borrowings under credit facilities and our Loan Agreement with Oxford Finance, or the Loan Agreement, disbursements under a grant from California Institute for Regenerative Medicine, or CIRM (including our most recent disbursements of $3.2 million and $2.5 million from CIRM in August 2024 and December 2024, respectively, upon the achievement of specified milestones), convertible promissory notes and warrants.

Previous wording

We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and clinical trials and, prior to the sale of our Commercial Business to Alcon in July 2022, engaging in activities to launch and commercialize EYSUVIS and INVELTYS. As a result of our acquisition of Combangio and the sale of our Commercial Business to Alcon, we are devoting substantial financial resources to the research and development and potential commercialization of KPI-012 for PCED and any other indications we determine to pursue, including Limbal Stem Cell Deficiency. We have no revenue-generating commercial products and, as a result of our acquisition of Combangio, we may be required to pay certain milestones and royalty payments to former equityholders of Combangio, which are more fully described in the “Liquidity and Capital Resources” section. Although we are eligible to receive up to $325.0 million in payments from Alcon based upon the achievement of specified commercial sales-based milestones with respect to EYSUVIS and INVELTYS, there can be no assurance when we may receive such milestone payments or of the amount of milestone payments we may receive, if any. We cannot be certain that we will achieve the milestones within the timeframe required by the CIRM award, or at all, and as such we may never receive the remaining $9.1 million under the award. We expect to continue to incur significant expenses and operating losses for the foreseeable future, including in connection with our continued development, regulatory approval efforts and commercialization, if any, of KPI-012. We may never achieve or maintain profitability. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

Current wording

We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and clinical trials and, prior to the sale of our Commercial Business to Alcon in July 2022, engaging in activities to launch and commercialize EYSUVIS and INVELTYS. As a result of our acquisition of Combangio and the sale of our Commercial Business to Alcon, we are devoting substantial financial resources to the research and development and potential commercialization of KPI-012 for PCED and any other indications we determine to pursue, including Limbal Stem Cell Deficiency. We have no revenue-generating commercial products and, as a result of our acquisition of Combangio, we may be required to pay certain milestones and royalty payments to former equityholders of Combangio, which are more fully described in the “Liquidity and Capital Resources” section. Although we are eligible to receive up to $325.0 million in payments from Alcon based upon the achievement of specified commercial sales-based milestones with respect to EYSUVIS and INVELTYS, there can be no assurance when we may receive such milestone payments or of the amount of milestone payments we may receive, if any. Additionally, we cannot be certain that we will achieve the remaining milestones under CIRM award within the required timeframes, or at all, and as such we may never receive the remaining $3.3 million under the award. We expect to continue to incur significant expenses and operating losses for the foreseeable future, including in connection with our continued development, regulatory approval efforts and commercialization, if any, of KPI-012. We may never achieve or maintain profitability. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

Previous wording

Selling, general and administrative expenses consist primarily of salaries, benefits, commissions, stock-based compensation and travel expenses related to our commercial infrastructure and our executive, finance, human resources, legal, compliance, information technology and business development functions. Selling, general and administrative expenses also include external selling and marketing costs related to EYSUVIS and INVELTYS prior to the sale of the Commercial Business to Alcon, costs to manufacture sample units and professional fees for auditing, tax, information technology, consultants, legal services and allocated facility-related costs not otherwise included in research and development expenses.

Current wording

General and administrative expenses consist primarily of salaries, benefits, stock-based compensation and travel expenses related to our executive, finance, human resources, legal, compliance, information technology and business development functions. General and administrative expenses also include professional fees for auditing, tax, information technology, consultants, legal services and allocated facility-related costs not otherwise included in research and development expenses.

Previous wording

We expect that our selling, general and administrative expenses for 2024 will be comparable to such expenses for the year ended December 31, 2023. We anticipate that our selling, general and administrative expenses will stabilize at 2023 expense levels for the next several years. If we obtain marketing approval for KPI-012 or any product candidates we may develop, we expect that our selling, general and administrative expenses will increase substantially if and as we incur commercialization expenses related to product marketing, sales and distribution.

Current wording

We expect that our general and administrative expenses for 2025 will be comparable to such expenses for the year ended December 31, 2024 and expect that our general and administrative expenses will continue at similar levels for the next several years. If we obtain marketing approval for KPI-012 or any product candidates we may develop, we expect that our general and administrative expenses will increase substantially if and as we incur commercialization expenses related to product marketing, sales and distribution.

Previous wording

commercialization of the product candidate is probable and we expect the future economic benefit from sales of the drug to be realized. Research and development costs that are paid in advance of performance are capitalized as a prepaid expense until incurred. We track outsourced development costs by development program but do not allocate personnel costs, payments made under license agreements or other costs to specific product candidates or development programs. These costs are included in employee-related costs and other research and development costs in the line items in the tables under “Results of Operations”.

Current wording

We expense research and development costs as they are incurred. We expense costs relating to the production of inventory for our product candidates, as research and development expenses within our consolidated statements of operations and comprehensive loss in the period incurred, unless we believe regulatory approval and subsequent commercialization of the product candidate is probable and we expect the future economic benefit from sales of the drug to be realized. Research and development costs that are paid in advance of performance are capitalized as a prepaid expense until incurred. We track outsourced development costs by development program but do not allocate personnel costs, payments made under license agreements or other costs to specific product candidates or development programs. These costs are included in employee-related costs and other research and development costs in the line items in the tables under “Results of Operations”.

Previous wording

We expect that our research and development costs will increase in 2024 as compared to such expenses for the year ended December 31, 2023 as we advance the clinical development of KPI-012 and as we conduct any necessary preclinical studies and clinical trials and other development activities for any other product candidate we may develop in the future, including our planned preclinical studies under our KPI-014 program. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. We may never succeed in obtaining marketing approval for any of our product candidates. The probability of success for each product candidate may be affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability and commercial viability.

Current wording

We expect that our research and development costs for 2025 will becomparable to such expenses for the year ended December 31, 2024 as we continue to advance the clinical development of KPI-012, including conducting our ongoing CHASE trial from which we anticipate reporting topline safety and efficacy data in the third quarter of 2025, and as we conduct any necessary preclinical studies and clinical trials and other development activities for any other product candidate we may develop in the future, including our planned preclinical studies under our KPI-014 program. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. We may never succeed in obtaining marketing approval for any of our product candidates. The probability of success for each product candidate may be affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability and commercial viability.

Previous wording

In addition to the Deferred Purchase Consideration, consideration payable to the Combangio Equityholders includes potential payments of up to $105.0 million that are contingent upon the achievement of specified development, regulatory and commercialization milestones. As of December 31, 2023, of the up to $105.0 million in contingent milestone payments, we paid to the Combangio Equityholders an aggregate of $2.5 million in cash and $2.4 million in shares of common stock (representing an aggregate of 105,038 shares of our common stock) as a result of our dosing the first patient in our CHASE trial in February 2023, or the First Dosing Milestone. The remaining amount of $0.1 million due in connection with the First Dosing Milestone was paid in January 2024. All potential milestone payments to the Combangio Equityholders are payable in cash going forward. We recorded an obligation for such contingent consideration at fair value on the acquisition date. We then revalue our contingent consideration obligations each reporting period. Changes in the fair value of our contingent consideration obligations, other than changes due to issuance, are recognized as a gain or loss on fair value remeasurement of contingent consideration in our consolidated statements of operations and comprehensive loss.

Current wording

In addition to the Deferred Purchase Consideration, consideration payable to the Combangio Equityholders includes potential payments of up to $105.0 million that are contingent upon the achievement of specified development, regulatory and commercialization milestones. As of December 31, 2024, of the up to $105.0 million in contingent milestone payments, we paid to the Combangio Equityholders an aggregate of $2.6 million in cash and $2.4 million in shares of common stock (representing an aggregate of 105,038 shares of our common stock) as a result of our dosing the first patient in our CHASE trial in February 2023, or the First Dosing Milestone. All potential milestone payments to the Combangio Equityholders are payable in cash going forward.

Previous wording

The potential payments and milestones are more fully described in Item 1, “Business” and in “Liquidity and Capital Resources” below and Note 3, “Acquisitions and Divestitures” of our consolidated financial statements.

Current wording

The potential payments and milestones are more fully described in Item 1, “Business” and in “Liquidity and Capital Resources” below.

Previous wording

On April 28, 2023, CIRM awarded Combangio a $15.0 million grant, or the CIRM Award, subject to entering into a final award agreement, to support Combangio’s ongoing KPI-012 program for the treatment of PCED as well as product and process characterization and analytical development for the program. On August 2, 2023, Combangio entered into the CIRM Award and became entitled to receive an initial $5.9 million disbursement from CIRM.

Current wording

On April 28, 2023, CIRM awarded Combangio a $15.0 million grant, or the CIRM Award, subject to entering into a final award agreement, to support Combangio’s ongoing KPI-012 program for the treatment of PCED as well as product and process characterization and analytical development for the program. On August 2, 2023, Combangio entered into the CIRM Award and received an initial $5.9 million disbursement from CIRM. In 2024, Combangio received an aggregate of $5.8 million in disbursements from CIRM upon the achievement of specified milestones.

Previous wording

The CIRM Award is subject to a co-funding requirement under which Combangio is obligated to spend a specified minimum amount on the development of KPI-012 to obtain the full award amount. The remaining $9.1 million available under the award is payable to Combangio only upon the achievement of specified milestones that are primarily related to Combangio’s progress in conducting the CHASE clinical trial. CIRM may permanently cease disbursements if the milestones are not met within four months of the scheduled completion dates. Additionally, if CIRM determines, in its sole discretion, that Combangio has not complied with the terms and conditions of the CIRM Award, CIRM may suspend or permanently cease disbursements. Under the terms of the CIRM Award, Combangio is obligated to pay a royalty on net sales of any product, service or approved drug resulting in whole or in part from the CIRM Award in the amount of 0.1% per $1.0 million of funds utilized by us until the earlier of ten years from the date of first commercial sale of such product, service or approved drug and such time as nine times the amount of funds awarded by CIRM has been paid in royalties, or the Base Royalty. In addition, following the satisfaction of the Base Royalty, Combangio is obligated to pay a 1.0% royalty on net sales of any CIRM-funded invention in excess of $500 million per year until the last to expire patent covering such invention expires.

Current wording

The CIRM Award is subject to a co-funding requirement under which Combangio is obligated to spend a specified minimum amount on the development of KPI-012 to obtain the full award amount. The remaining $3.3 million available under the CIRM Award is payable to Combangio only upon the achievement of specified milestones that are primarily related to Combangio’s progress in conducting the CHASE clinical trial. CIRM may permanently cease disbursements if the milestones are not met within four months of the scheduled completion dates or if the delay is not addressed to CIRM’s satisfaction, as determined by CIRM in its sole discretion. Additionally, if CIRM determines, in its sole discretion, that Combangio has not complied with the terms and conditions of the CIRM Award, CIRM may suspend or permanently cease disbursements. Under the terms of the CIRM Award, Combangio is obligated to pay a

Previous wording

The CIRM Award is not in the scope of the contracts with customers accounting guidance as the government entity is not a customer under the agreement. Rather, the CIRM Award is accounted for as a contract to perform research and development activities. As a result, grant income is recognized as the related research and development expenses are incurred.

Current wording

The CIRM Award is not in the scope of the contracts with customers accounting guidance as the government entity is not a customer under the agreement. Rather, the CIRM Awardis accounted for as a contract to perform research and development activities. As a result, grant income is recognized as the related research and development expenses are incurred.

Previous wording

Other (expense) income, net consists of expenses recorded to assets held for sale for the write-off of the remaining inventory balance and the write-off of the deferred gain related to the Alcon Transaction, as well as an

Current wording

Other income (expense), net consists of expenses recorded toassets held for sale for the write-off of the remaining inventory balance related to the Alcon Transaction, as well as an adjustment for the returns reserve associated with our former commercial products, partially offset by reimbursable transition-related services we provided to Alcon following the sale of the Commercial Business.

Previous wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. GAAP. We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Current wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Previous wording

While our significant accounting policies are described in more detail in the notes to our financial statements appearing at the end of this Annual Report on Form 10-K, we believe that the following critical accounting estimates are those most critical to the judgments and estimates used in the preparation of our financial statements andthat involve a significant level of estimation uncertainty.

Current wording

While our significant accounting policies are described in more detail in the notes to our financial statements appearing at the end of this Annual Report on Form 10-K, we believe that the following critical accounting estimates are those most critical to the judgments and estimates used in the preparation of our financial statements and that involve a significant level of estimation uncertainty.

Previous wording

We account for grants received to perform research and development activities in accordance with Accounting Standards Codification Topic 730-20,Research and Development Arrangements, which requires an assessment, at the inception of the grant, of whether the grant is a liability or a contract to perform research and development activities. If we are obligated to repay the grant funds to the grantor regardless of the outcome of the research and development activities, then we are required to estimate and recognize that liability. Alternatively, if we are not required to repay, or if we were required to repay the grant funds only if the research and development activities are successful, then the grant agreement is accounted for as a contract to perform research and development activities, in which case, grant income is recognized as the related research and development expenses are incurred. Costs of grant income are recorded as a component of research and development expenses in our statements of operations and comprehensive loss.

Current wording

We account for grants received to perform research and development activities in accordance with Accounting Standards Codification Topic 730-20,Research and Development Arrangements, which requires an assessment, at the inception of the grant, of whether the grant is a liability or a contract to perform research and development activities. If we are obligated to repay the grant funds to the grantor regardless of the outcome of the research and development activities, then we are required to estimate and recognize that liability. Alternatively, if we are not required to repay, or if we were required to repay the grant funds only if the research and development activities are successful, then the grant agreement is accounted for as a contract to perform research and development activities, in which case, grant income is recognized as the related research and development expenses are incurred. Grant income recognized is based on a calculation derived from the eligible research and development expenses incurred which is, in part, based on estimates, specifically related to costs incurred for services performed by our vendors in connection with research and development activities for which we have not been invoiced. We base our estimates on the best information available at the time. Costs of grant income are recorded as a component of research and development expenses in our consolidated statements of operations and comprehensive loss.

Previous wording

Selling, general and administrative expenses were $20.6 million for the year ended December 31, 2023, compared to $65.0 million for the year ended December 31, 2022, which was a decrease of $44.5 million. The decrease in selling, general and administrative expenses for the year ended December 31, 2023 was primarily due to the sale of our Commercial Business to Alcon and our related workforce reduction completed during the second half of 2022 andincludes a $22.5 million decrease in employee-related expenses and a $17.9 million decrease in external sales and marketing costs. Also contributing to the decrease as compared to the year ended December 31, 2022, was a $3.3 million decrease in administrative and professional service fees and $0.8 million of transaction costs related to the Alcon Transaction which were not incurred in the year ended December 31, 2023.

Current wording

General and administrative expenses were $18.3 million for the year ended December 31, 2024, compared to $20.6 million for the year ended December 31, 2023, which was a decrease of $2.2 million. The decrease in general and administrative expenses for the year ended December 31, 2024 was primarily due to a $1.8 million decrease in administrative and professional service fees and a $0.9 million decrease in employee-related costs, partially offset by a $0.4 million increase in stock-based compensation costs and a$0.1 million net increase in other costs including facility related costs.

Previous wording

Research and development expenses were $18.6 million for the year ended December 31, 2023 compared to $17.7 million for the year ended December 31, 2022, an increase of $0.9 million. The increase was primarily related to a $2.3 million increase in employee-related costs and KPI-012 development costs, as we advance the clinical development of KPI-012, partially offset by a decrease of $1.4 million of other research and development costs, which primarily included preclinical studies related to our former pipeline programs.

Current wording

Research and development expenses were $22.1 million for the year ended December 31, 2024, compared to $18.6 million for the year ended December 31, 2023, an increase of $3.5 million. The increase was primarily related toa $2.5 million increase in KPI-012 development costs, as we advance the clinical development of KPI-012, and a $1.0 million increase in employee-related costs.

Previous wording

Loss (Gain) on Fair Value Remeasurement of Contingent Consideration

Current wording

Gain on fair value remeasurement of Deferred Purchase Consideration

Previous wording

The gain on fair value remeasurement of Deferred Purchase Consideration for the year ended December 31, 2023 was $0.2 million and the loss on fair value remeasurement of Deferred Purchase Consideration for the year ended December 31, 2022 was $0.6 million. The amounts were primarily due to a change in the fair value of our stock price.

Current wording

There was no gain or loss on fair value remeasurement of Deferred Purchase Consideration for the year ended December 31, 2024 due to the final settlement of the liability in March 2023. The gain on fair value remeasurement of Deferred Purchase Consideration for the year ended December 31, 2023 was $0.2 million, which was primarilydue to a change in the fair value of our underlying stock price.

Previous wording

Loss on fair value remeasurement of contingent consideration for the year ended December 31, 2023 was $0.7 million, primarily due to changes in discount rates, partially offset by changes in the expected timing and probability of payment. Gain on fair value remeasurement of contingent consideration for the year ended December 31, 2022 was $0.3 million and was primarily due to changes in discount rates, partially offset by the passage of time.

Current wording

Loss on fair value remeasurement of contingent consideration for the years ended December 31, 2024 and 2023 was $0.5 million and $0.7 million, respectively, primarily due tochanges in discount rates, the passage of time and changes in the expected timing and probability of payment.

Previous wording

Interest income was $2.7 million for the year ended December 31, 2023, compared to $0.7 million for the year ended December 31, 2022, an increase of $2.0 million. Interest income consists of interest earned on our cash, cash equivalents and short-term investments, if any. The increase was attributable to higher interest rates during the year ended December 31, 2023 as well as the mix and quantity of investments during the year ended December 31, 2023.

Current wording

Interest income was $2.1 million for the year ended December 31, 2024, compared to $2.7 million for the year ended December 31, 2023, a decrease of $0.6 million. Interest income consists of interest earned on our cash, cash equivalents and short-term investments, if any. The decrease was attributable toa lower cash balance during the year ended December 31, 2024, partially offset byhigher interest rates during the year ended December 31, 2024, as compared to the year ended December 31, 2023.

Previous wording

Interest expense was $5.8 million for the year ended December 31, 2023, compared to $7.3 million for the year ended December 31, 2022, a decrease of $1.5 million. Interest expense for the years ended December 31, 2023 and 2022 was comprised of the contractual coupon interest expense, the amortization of the debt discount and the accretion of the final payment fee associated with our Loan Agreement with Oxford Finance. During the year ended December 31, 2023, $43.3 million of indebtedness was outstanding under our Loan Agreement until $9.3 million was repaid on January 25, 2023 resulting in an outstanding indebtedness of $34.0 million as of December 31, 2023. During the year ended December 31, 2022, $80.0 million of indebtedness was outstanding under our Loan Agreement until $36.7 million was repaid on July 8, 2022 resulting in an outstanding indebtedness of $43.3 million as of December 31, 2022. While interest expense decreased during the year ended December 31, 2023 due to the lower outstanding principal balance, this decrease was partially offset by the variable rate on the debt and the rising interest rates.

Current wording

Interest expense was $5.8 million for each of the years ended December 31, 2024 and 2023. Interest expense for the years ended December 31, 2024 and 2023 was comprised of the contractual coupon interest expense, the amortization of the debt discount and the accretion of the final payment fee associated with our Loan Agreement with Oxford Finance. During the year ended December 31, 2024, $34.0 million of indebtedness was outstanding under our Loan Agreement until $4.7 million was repaid on December 26, 2024 resulting in an outstanding indebtedness of $29.3 million as of December 31, 2024. During the year ended December 31, 2023, $43.3 million of indebtedness was outstanding under our Loan Agreement until $9.3 million was repaid on January 25, 2023 resulting in an outstanding indebtedness of $34.0 million as of December 31, 2023.

Previous wording

Other income and expense was a net expense of $4.3 million for the year ended December 31, 2023 consisting of a $7.6 million expense recorded to assets held for sale to write-off the remaining inventory balance and $1.1 million related to an adjustment for the returns reserve associated with our former commercial products, partially offset by the $4.2 million write-off related to the deferred gain recorded on the sale of the Commercial Business and $0.2 million of reimbursable transition related services we provided to Alcon following the sale of the Commercial Business.

Current wording

There was no other expense, net for the year ended December 31, 2024. Other expense, net was $4.3 million for the year ended December 31, 2023 and represented a $7.6 million expense recorded to assets held for sale for expiring inventory and $1.1 million related to an adjustment for the returns reserve associated with our former commercial products, partially offset by the $4.2 million write-off related to the deferred gain recorded on the sale of the Commercial Business and $0.2 million of reimbursable transition related services we provided to Alcon following the sale of the Commercial Business.

Previous wording

Since our inception, we have incurred significant operating losses. We only generated limited revenues from product sales of EYSUVIS and INVELTYS prior to the sale of our Commercial Business to Alcon in July 2022. We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon in July 2022, our IPO, follow-on public common stock offerings and sales of our common stock under our at-the-market equity offerings, private placements of common stock and/or preferred stock, borrowings under credit facilities and our Loan and Security Agreement, or the Loan Agreement, with Oxford Finance LLC, or Oxford Finance, a grant from CIRM, convertible promissory notes and warrants.

Current wording

Since our inception, we have incurred significant operating losses. We only generated limited revenues from product sales of EYSUVIS and INVELTYS prior to the sale of our Commercial Business to Alcon in July 2022. We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon in July 2022, our IPO, follow-on public common stock offerings and sales of our common stock under our at-the-market equity offerings, private placements of common stock and/or preferred stock, borrowings under credit facilities andour Loan and Security Agreement, orthe Loan Agreement, with Oxford Finance LLC, or Oxford Finance, disbursements under a grant from CIRM, convertible promissory notes and warrants.

Previous wording

In July 2022, we sold our Commercial Business to Alcon. In addition to the upfront cash payment of $60.0 million we received from Alcon, we are also eligible to receive from Alcon up to four commercial-based sales milestone payments as follows: (1) $25.0 million upon the achievement of $50.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (2) $65.0 million upon the achievement of $100.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (3) $75.0 million upon the achievement of $175.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029 and (4) $160.0 million upon the achievement of $250.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029. Each milestone payment will only become payable once, if at all, upon the first time such milestone is achieved, and only one milestone payment will be paid with respect to a calendar year. In the event that more than one milestone is achieved in a calendar year, the higher milestone payment will become payable and the lower milestone payment will become payable

Current wording

In July 2022, we sold our Commercial Business to Alcon. In addition to the upfront cash payment of $60.0 million we received from Alcon, we are also eligible to receive from Alcon up to four commercial-based sales milestone payments as follows: (1) $25.0 million upon the achievement of $50.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (2) $65.0 million upon the achievement of $100.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (3) $75.0 million upon the achievement of $175.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029 and (4) $160.0 million upon the achievement of $250.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029. Each milestone payment will only become payable once, if at all, upon the first time such milestone is achieved, and only one milestone payment will be paid with respect to a calendar year. In the event that more than one milestone is achieved in a calendar year, the higher milestone payment will become payable and the lower milestone payment will become payable only if the corresponding milestone is achieved again in a subsequent calendar year. To date, we have not received any such milestone payments. We now have no revenue-generating commercial products, and although we are eligible to receive up to $325.0 million in milestone-based payments from Alcon, there can be no assurance as to when we may receive such milestone payments or the amount of milestone payments we may receive, if any.

Previous wording

In connection with the filing of a registration statement on Form S-3 with the SEC, or the 2020 Shelf Registration, we entered into an amended and restated sales agreement with Jefferies, or the Amended and Restated Sales Agreement, pursuant to which we could issue and sell, from time to time, up to an aggregate of $75.0 million of our common stock under our at-the-market offering. During the year ended December 31, 2022, we sold an aggregate of 148,461 shares of our common stock under the Amended and Restated Sales Agreement, resulting in net proceeds of $1.0 million. From January 1, 2023 to January 10, 2023, we sold 245,887 shares of our common stock under the Amended and Restated Sales Agreement, resulting in net proceeds of $10.0 million. On January 10, 2023, the Amended and Restated Sales Agreement terminated in accordance with its terms when we completed the sale of $75.0 million of our shares of common stock thereunder. As of the date of termination of the Amended and Restated Sales Agreement, we had sold an aggregate of 565,974 shares of our common stock under such agreement for aggregate gross proceeds of $75.0 million.

Current wording

In connection with the filing of a registration statement on Form S-3 with the SEC, or the 2020 Shelf Registration, we entered into an amended and restated sales agreement with Jefferies, or the Amended and Restated Sales Agreement, pursuant to which we could issue and sell, from time to time, up to an aggregate of $75.0 million of our common stock under our at-the-market offering. From January 1, 2023 to January 10, 2023, we sold 245,887 shares of our common stock under the Amended and Restated Sales Agreement, resulting in net proceeds of $10.0 million. On January 10, 2023, the Amended and Restated Sales Agreement terminated in accordance with its terms when we completed the sale of $75.0 million of our shares of common stock thereunder. As of the date of termination of the Amended and Restated Sales Agreement, we had sold an aggregate of 565,974 shares of our common stock under such agreement for aggregate gross proceeds of $75.0 million.

Previous wording

On January 19, 2023, we entered into a new sales agreement with Jefferies, or the Open Market Sale Agreement, pursuant to which we may issue and sell, from time to time, shares of our common stock through Jefferies under our at-the-market offering. We filed a prospectus supplement relating to the Open Market Sale Agreement under our 2020 Shelf Registration, or the 2020 Shelf ATM Prospectus Supplement, pursuant to which we could offer and sell shares of common stock having an aggregate offering price of up to $40.0 million under the Open Market Sale Agreement. From January 19, 2023 to May 11, 2023, we sold 229,378 shares of our common stock under our at-the-market offering pursuant to the Open Market Sale Agreement under the 2020 Shelf Registration, resulting in net proceeds of $4.9 million.

Current wording

On January 19, 2023, we entered into a new sales agreement with Jefferies, or the Open Market Sale Agreement, pursuant to which we may issue and sell, from time to time, shares of our common stock through Jefferies under our at-the-market offering. We filed a prospectus supplement relating to the Open Market Sale Agreement under our 2020 Shelf Registration, or the 2020 Shelf ATM Prospectus Supplement, pursuant to which we could offer and sell shares of common stock having an aggregate offering price of up to $40.0 million under the Open Market Sale Agreement. From January 19, 2023 to May 11, 2023, we sold 229,378 shares of our common stock under our at-the-

Previous wording

On March 3, 2023, we filed a shelf registration statement on Form S-3 with the SEC, or the 2023 Shelf Registration, which was declared effective on May 11, 2023. Under the 2023 Shelf Registration we may offer and sell up to $350.0 million of a variety of securities including common stock, preferred stock, warrants, depositary shares, debt securities, subscription rights or units. In accordance with the terms of the Open Market Sale Agreement, we may issue and sell, from time to time, up to an aggregate of $40.0 million of our common stock in an at-the-market equity offering through Jefferies. Upon effectiveness of the 2023 Shelf Registration, we ceased any further offers or sales of our common stock pursuant to the 2020 Shelf ATM Prospectus Supplement and the 2020 Shelf Registration. During the year ended December 31, 2023, we sold 256,256 shares of our common stock under our at-the-market offering pursuant to the 2023 Shelf Registration for total net proceeds of $3.6 million.

Current wording

On March 3, 2023, we filed a shelf registration statement on Form S-3 with the SEC, or the 2023 Shelf Registration, which was declared effective on May 11, 2023. Under the 2023 Shelf Registration we may offer and sell up to $350.0 million of a variety of securities including common stock, preferred stock, warrants, depositary shares, debt securities, subscription rights or units. In accordance with the terms of the Open Market Sale Agreement, we may issue and sell, from time to time, up to an aggregate of $40.0 million of our common stock in an at-the-market equity offering through Jefferies. Upon effectiveness of the 2023 Shelf Registration, we ceased any further offers or sales of our common stock pursuant to the 2020 Shelf ATM Prospectus Supplement and the 2020 Shelf Registration.

Previous wording

During the year ended December 31, 2023, we sold an aggregate of 731,521 shares of our common stock pursuant to (1) our Amended and Restated Sales Agreement and our Open Market Sale Agreement under the 2020 Shelf Registration and (2) the Open Market Sale Agreement under the 2023 Shelf Registration, for total net proceeds of $18.5 million.

Current wording

During the year ended December 31, 2023, we sold (1) an aggregate of 475,265 shares of our common stock pursuant to the Amended and Restated Sales Agreement and the Open Market Sale Agreement under the 2020 Shelf Registration for total net proceeds of $14.9 million and (2) an aggregate of 256,256 shares of our common stock pursuant to the Open Market Sale Agreement under the 2023 Shelf Registration, for total net proceeds of $3.6 million.

Previous wording

On May 4, 2021, we entered into the Loan Agreement with Oxford Finance, in its capacity as lender, or the Lender, and in its capacity as collateral agent, or Agent, pursuant to which a term loan of up to an aggregate principal amount of $125.0 million became available to us, consisting of a tranche A term loan that was disbursed on the closing date of the Loan Agreement in the aggregate principal amount of $80.0 million and additional tranches that are no longer available to us. Through June 30, 2023, the term loan bore interest at a floating rate equal to the greater of 30-day LIBOR and 0.11%, plus 7.89%. Effective July 1, 2023, the term loan bears interest at a floating rate equal to the greater of (a) 8.00% and (b) the sum of (i) the 1-Month CME Term Secured Overnight Financing Rate, or SOFR, (ii) 0.10% and (iii) 7.89%. Certain of the customary negative covenants limit our and certain of our subsidiaries’ ability, among other things, to incur future debt, grant liens, make investments, make acquisitions, distribute dividends, make certain restricted payments and sell assets, subject in each case to certain exceptions. In connection with our entry into the purchase agreement for the sale of our Commercial Business to Alcon, on May 21, 2022, we entered into an amendment

Current wording

On May 4, 2021, we entered into the Loan Agreement with Oxford Finance, in its capacity as lender, or the Lender, and in its capacity as collateral agent, or Agent, pursuant to which a term loan of up to an aggregate principal amount of $125.0 million became available to us, consisting of a tranche A term loan that was disbursed on the closing date of the Loan Agreement in the aggregate principal amount of $80.0 million and additional tranches that are no longer available to us. Through June 30, 2023, the term loan bore interest at a floating rate equal to the greater of 30-day LIBOR and 0.11%, plus 7.89%. Effective July 1, 2023, the term loan bears interest at a floating rate equal to the greater of (a) 8.00% and (b) the sum of (i) the 1-Month CME Term Secured Overnight Financing Rate, or SOFR, (ii) 0.10% and (iii) 7.89%. Certain of the customary negative covenants limit our and certain of our subsidiaries’ ability, among other things, to incur future debt, grant liens, make investments, make acquisitions, distribute dividends, make certain restricted payments and sell assets, subject in each case to certain exceptions. In connection with our entry into the purchase agreement for the sale of our Commercial Business to Alcon, on May 21, 2022, we entered into an amendment to the Loan Agreement, or the Second Loan Amendment, pursuant to which the Lender and Agent consented to the entry by us into the asset purchase agreement and the sale of the Commercial Business to Alcon and agreed to release its liens on the Commercial Business in consideration for the payment by us at the closing of the Alcon Transaction of an aggregate amount of $40.0 million, or the Second Amendment Prepayment, to the Lender and Agent. The Second Amendment Prepayment, which represented a partial prepayment of principal in the amount of $36.7 million of the $80.0 million principal amount outstanding under the term loan advanced by the Lender under the Loan Agreement, plus a prepayment fee of $0.7 million and a final payment fee of $2.6 million, was paid on July 8, 2022 in connection with the closing of the Alcon Transaction.

Previous wording

Pursuant to the Third Loan Amendment, in addition to the Third Amendment Prepayments, if we make an additional prepayment under the Loan Agreement equal to $5.0 million (inclusive of the final payment fee) on or prior to December 31, 2024, or the First Extension Prepayment, the Amortization Date will be automatically changed to July 1, 2025, and the maturity date of the Loan Agreement will be automatically changed from May 1, 2026 to November 1, 2026. If, in addition to the Third Amendment Prepayments and the First Extension Prepayment, we make an additional prepayment under the Loan Agreement equal to $2.5 million (inclusive of the final payment fee) on or prior to June 30, 2025, or the Second Extension Prepayment, the Amortization Date will be automatically changed to January 1, 2026, and the maturity date of the Loan Agreement will be automatically changed to May 1, 2027.

Current wording

Pursuant to the Third Loan Amendment, if we made an additional prepayment under the Loan Agreement equal to $5.0 million (inclusive of the final payment fee) on or prior to December 31, 2024, or the First Extension Prepayment, the Amortization Date would be automatically changed to July 1, 2025, and the maturity date of the Loan Agreement

Previous wording

Under the Third Loan Amendment, the Oxford Finance also agreed to waive the prepayment fees for the Third Amendment Prepayments, the First Extension Prepayment, the Second Extension Prepayment and any other prepayments under the Loan Agreement. Pursuant to the Loan Agreement, we also will be required to pay all accrued and unpaid interest on the principal amounts of the term loan being repaid at the time of repayment.

Current wording

Under the Third Loan Amendment, Oxford Finance also agreed to waive the prepayment fees for the Third Amendment Prepayments, the First Extension Prepayment, the Second Extension Prepayment and any other prepayments under the Loan Agreement. Pursuant to the Loan Agreement, we also will be required to pay all accrued and unpaid interest on the principal amounts of the term loan being repaid at the time of repayment.

Previous wording

On November 28, 2022, we entered into a Securities Purchase Agreement with certain institutional investors named therein, or the Series E Purchasers, pursuant to which we agreed to issue and sell, in a private placement priced at-the-market under Nasdaq rules, shares of our common stock and shares of our Series E Convertible Non-Redeemable Preferred Stock, or the Series E Preferred Stock, in two tranches for aggregate gross proceeds of up to $31.0 million, which we refer collectively as the 2022 Private Placement. At the first closing of the 2022 Private Placement on December 1, 2022, we issued and sold to the Series E Purchasers (i) 76,813 shares of common stock, at a price per share equal to $5.75 and (ii) 9,666 shares of Series E Preferred Stock, at a price per share of Series E Preferred Stock equal to

Current wording

On November 28, 2022, we entered into a Securities Purchase Agreement with certain institutional investors named therein, or the Series E Purchasers, pursuant to which we agreed to issue and sell, in a private placement priced at-the-market under Nasdaq rules, shares of our common stock and shares of our Series E Convertible Non-Redeemable Preferred Stock, or the Series E Preferred Stock, in two tranches for aggregate gross proceeds of up to $31.0 million, which we refer collectively as the 2022 Private Placement. At the first closing of the 2022 Private Placement on December 1, 2022, we issued and sold to the Series E Purchasers (i) 76,813 shares of common stock, at a price per share equal to $5.75 and (ii) 9,666 shares of Series E Preferred Stock, at a price per share of Series E Preferred Stock equal to $575.00, for aggregate gross proceeds of approximately $6.0 million. On December 27, 2022, following the certification by our then Chief Executive Officer that the FDA accepted our IND application for KPI-012, we issued and sold to the Series E Purchasers at a second closing of the 2022 Private Placement a total of 43,478 shares of Series E Preferred Stock, at a price per share of Series E Preferred Stock equal to $575.00, for aggregate gross proceeds of approximately $25.0 million.

Previous wording

On December 21, 2023, we entered into a securities purchase agreement with certain institutional investors named therein pursuant to which we agreed to issue and sell, in a private placement priced at-the-market under Nasdaq rules, 2,928 shares of our Series F Convertible Non-Redeemable Preferred Stock, or the Series F Preferred Stock, at a price per share of $683.00, for aggregate gross proceeds of approximately $2.0 million.

Current wording

On December 21, 2023, we entered into a securities purchase agreement with certain institutional investors named therein pursuant to which we issued and sold, in a private placement priced at-the-market under Nasdaq rules, 2,928 shares of our Series F Convertible Non-Redeemable Preferred Stock, or the Series F Preferred Stock, at a price per share of $683.00, for aggregate gross proceeds of approximately $2.0 million.

Previous wording

On March 25, 2024, we entered into a securities purchase agreement with certain institutional investors named therein pursuant to which we agreed to issue and sell, in a private placement priced at-the-market under Nasdaq rules, 10,901 shares of our Series G Convertible Non-Redeemable Preferred Stock, or the Series G Preferred Stock, at a price per share of $788.90, for aggregate gross proceeds of approximately $8.6 million.

Current wording

On March 25, 2024, we entered into a securities purchase agreement with certain institutional investors named therein pursuant to which we issued and sold, in a private placement priced at-the-market under Nasdaq rules, 10,901 shares of our Series G Convertible Non-Redeemable Preferred Stock, or the Series G Preferred Stock, at a price per share of $788.90, for aggregate gross proceeds of approximately $8.6 million.

Previous wording

On April 28, 2023, CIRM awarded Combangio a $15 million grant, subject to entering into a final award agreement, to support its ongoing KPI-012 program for the treatment of PCED as well as product and process characterization and analytical development for the program. On August 2, 2023, Combangio entered into the CIRM Award and became entitled to receive $5.9 million. For a further description of the CIRM Award and the potential milestone payments we may receive, see “Financial Operations Overview – Grant Income” above.

Current wording

On April 28, 2023, CIRM awarded Combangio a $15.0 million grant, subject to entering into a final award agreement, to support its ongoing KPI-012 program for the treatment of PCED as well as product and process characterization and analytical development for the program. On August 2, 2023, Combangio entered into the CIRM Award and received a $5.9 million disbursement from CIRM, and in August 2024 and December 2024, Combangio received an additional $3.2 million and $2.5 million, respectively, in disbursements from CIRM upon achievement of specified milestones under the CIRM Award. For a further description of the CIRM Award and the potential milestone payments we may receive, see “Financial Operations Overview – Grant Income” above.