Avedro, Inc. AVDR $14.00-$16.00 5 million shares Underwriters:
BofA Merrill Lynch, JP Morgan, Cowen, Guggenheim Securities, SVB Leerink Co-Managers: Proposed
trade date of 2/14. They are a leading commercial-stage ophthalmic medical technology company
focused on treating corneal ectatic disorders and improving vision to reduce
dependency on eyeglasses or contact lenses.
Avedro, Inc.
AVDR
Click here
to view the prospectus.
https://www.sec.gov/Archives/edgar/data/1343304/000119312519026369/d636382ds1a.htm
Company
Overview
They are a leading commercial-stage ophthalmic
medical technology company focused on treating corneal ectatic disorders and
improving vision to reduce dependency on eyeglasses or contact lenses. Their proprietary Avedro Corneal Remodeling
Platform is designed to strengthen, stabilize and reshape the cornea utilizing
corneal cross-linking in minimally invasive
and non-invasive outpatient procedures to treat corneal ectatic
disorders and correct refractive conditions, which are caused by changes in the
shape of the eye that prevent light from focusing on the retina, causing
blurred vision. Their Avedro Corneal Remodeling Platform is comprised of their
KXL and Mosaic systems, each of which delivers ultraviolet A, or UVA, light,
and a suite of proprietary single-use riboflavin drug formulations,
which, when applied together to the cornea, induce a biochemical reaction
called corneal collagen cross-linking, or corneal cross-linking. Their KXL
system in combination with their Photrexa drug formulations, which they
launched in the United States in September 2016, is the first and only
minimally invasive product offering approved by the U.S. Food and Drug Administration,
or the FDA, indicated for the treatment of progressive keratoconus and corneal
ectasia following refractive surgery. Additionally, the FDA granted them
orphan drug designations and they have orphan drug exclusivity until 2023 that
covers their Photrexa formulations used with their KXL system for their
approved indications. They have obtained a Conformité Européene, or CE, mark
for their Mosaic system, which allows it to be marketed throughout the European
Union. The Mosaic system is capable of performing vision correction
procedures and treating corneal ectatic disorders, and they began a targeted
international launch in late 2017. They plan to seek FDA approval for their
Mosaic system and its associated drug formulations for the treatment of presbyopia
as an initial targeted indication. They have invested significantly to
establish the safety and broad clinical utility of their Avedro Corneal
Remodeling Platform and to drive its commercial adoption. They are the only
company to have conducted randomized, sham-controlled clinical trials to
receive marketing approval of a corneal cross-linking solution. They have
conducted and supported more than 15 clinical trials and more than
130 peer-reviewed publications have been published, which provides support
for what they believe are the benefits of their Avedro Corneal Remodeling
Platform. To date, over 400,000 cross-linking procedures have been performed
globally with their products, including more than 18,000 procedures performed
in the United States alone.
Their
Avedro Corneal Remodeling Platform technology uses corneal cross-linking to
strengthen the cornea and modify its shape, a process they refer to as corneal remodeling. Because the cornea
functions as the eye’s outermost lens, responsible for 65% to 75% of the eye’s
total focusing power, they believe corneal remodeling represents a powerful
approach to treating corneal ectatic disorders and correcting vision. They
believe corneal remodeling is a particularly effective treatment for
progressive keratoconus, a disease in which the cornea progressively thins and
weakens, as corneal remodeling strengthens and stabilizes the cornea to slow or
arrest the progression of the disease. Corneal remodeling can also
potentially be used to correct vision for otherwise healthy individuals by
reshaping the cornea through a non-invasive procedure without the
need for corneal surgical procedures.
Their KXL system and its associated Photrexa
formulations were approved by the FDA, based on three pivotal randomized and sham-controlled
Phase 3 U.S. clinical trials involving 205 patients with progressive
keratoconus and 179 patients with corneal ectasia following refractive surgery.
The results showed a clinically significant difference in corneal steepening,
which is a defining indicator of disease progression in keratoconic patients,
in the treatment group in comparison to the control group. They are
currently conducting a pivotal Phase 3 clinical trial pursuant to a
Special Protocol Assessment, or SPA, for a new indication for their latest-
generation KXL system and its associated investigational drug formulations and
their Boost Goggles in a shorter and non-invasive procedure for the treatment
of progressive keratoconus that leaves the corneal epithelium in place, which they
refer to as Epi-On. If approved, they believe this combination and their
Boost Goggles will be the first corneal cross-linking product offering approved
in the United States for an Epi-On procedure and may result in the grant of a
three-year period of market exclusivity. Their CE mark for the KXL system,
which they received in 2011, covers a broader indication and technical range of
use than currently approved in the United States. For example, outside the
United States, their KXL system is marketed to perform other corneal
cross-linking procedures such as Lasik Xtra, a procedure performed in
conjunction with refractive procedures such as
laser in-situ keratomilcusis, or LASIK, to strengthen the cornea and
stabilize procedure results.
Their
Mosaic system, which they believe offers the world’s most advanced and
versatile cross-linking technology, is available outside of the United States
for performing vision correction procedures in addition to treating keratoconus. Unlike the KXL system, which delivers UVA light
across a large portion of the cornea in a fixed pattern, their Mosaic system
uses a digital UVA beam-forming technology in conjunction with real-time eye
tracking to deliver metered UVA light to the cornea in a controllable pattern
and to induce cross-linking in a targeted zone. This zonal corneal
cross-linking induces a change in the shape of the cornea and enables
refractive correction using a procedure they refer to as photorefractive
intrastromal cross-linking, or PiXL. They are generating additional clinical
data to potentially expand applications of the Mosaic system and to increase
physician and patient awareness and adoption. They plan to initiate a Phase
2a clinical trial in the first half of 2019 to evaluate the use of PiXL as a
solution for vision improvement for patients with presbyopia. They also
plan to leverage their platform to broaden their development programs into
additional vision correction uses, such as the treatment of refractive error
for low myopia and post-cataract procedures.
They
have successfully established broad private payor coverage and are continuing
to work on pursuing favorable payment policies for use of their KXL system to
treat keratoconus, with 63 private payors covering a total of up to 170 million
covered lives in the United States, or approximately 95% of their estimated
total U.S. addressable market for keratoconus. Corneal cross-linking for the treatment of
keratoconus was granted a Category III Current Procedural Terminology code, and
in November 2018, they received a product-specific J code for their Photrexa
formulations. The J code became effective on January 1, 2019. They expect
these changes will help stabilize payment policies. Vision correction
procedures are generally not covered by insurance and are paid
for out-of-pocket by the patient. They would expect providers to
establish a price per procedure that is self-paid and competitive with current
self-paid vision correction procedures, such as LASIK.
IPO
Detail
This is the initial public offering of Avedro,
Inc. and no public market currently exists for its common stock. Avedro, Inc.
is offering 5,000,000 shares of common stock as described in the prospectus.
The company expects the initial public offering price of its common stock to be
between $14.00 and $16.00 per share. The company has applied to list its common
stock on the NASDAQ Global Market under the symbol “AVDR.”
|
Common stock
offered by the company |
5,000,000
shares |
|
Common stock to
be outstanding immediately after this offering |
17,060,631
shares |
Use of
Proceeds
They
estimate that the net proceeds to them from this offering will be approximately
$66.0 million. The
principal purposes of this offering are to obtain additional capital to support
their operations, to create a public market for their common stock and to
facilitate their future access to the public equity markets. They intend to use
the net proceeds of this offering, together with their existing cash resources,
as follows:
|
|
• |
|
approximately
$47.7 million to fund the ongoing U.S. commercialization activities of
the KXL system and its associated Photrexa formulations, including to hire
additional sales and marketing personnel and to support costs associated with
increased sales and marketing activities; |
|
|
• |
|
approximately
$5.8 million to fund the ongoing development, regulatory and
international commercialization activities of their latest-generation KXL
system and its associated drug formulations, including the completion of their
ongoing Phase 3 clinical trial of their latest-generation KXL system in
combination with their investigational Boost Goggles and new riboflavin
formulations for use in Epi-On procedures; |
|
|
• |
|
approximately
$7.5 million to fund the ongoing development, regulatory and international
commercialization activities of the Mosaic system and its associated drug
formulations, including the initiation and completion of their Phase 2a
clinical trial of their Mosaic system and its associated drug formulations
for the treatment of presbyopia; and |
|
|
• |
|
the
remainder for working capital, capital expenditures and other general
corporate purposes. |
They may use a portion of their net
proceeds to acquire and invest in complementary products, technologies or
businesses; however, they currently have no agreements or commitments to
complete any such transaction. Pending these uses, they intend to invest their
net proceeds from this offering primarily in investment-grade, interest-bearing
instruments.
Competition
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Company |
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Stock Symbol |
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Exchange. |
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iVeena
Delivery Systems Inc. |
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Private |
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Peschke
Trade GmbH |
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Private |
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. EMAGine
SA |
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Private |
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TECLens,
LLC |
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Private |
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LIGHTMED
Corporation |
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Private |
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Allergan
plc |
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AGN |
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NYSE |
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Presbyopia
Therapies LLC |
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Private |
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Market
Opportunity
Their target
markets include corneal ectatic disorders, such as progressive keratoconus and
corneal ectasia following refractive surgery, and vision improvement
applications for presbyopia, low myopia and post-cataract refraction error
procedures. They believe the broad utility of their platform has the
potential to enable them to target a population that they estimate to be
approximately 64 million people in the United States, which represents an
estimated total addressable market opportunity of $26 billion. Further, they
believe that there is a substantial additional market opportunity in the rest
of the world.
Their initial
commercial focus within the United States is the keratoconus market, which,
according to a 2018 Market Scope study, they believe represents a total addressable
market of approximately 600,000 people and an opportunity of approximately $3
billion. Keratoconus typically manifests
at an early age and is the leading cause of full thickness corneal transplants
in the United States, a procedure that costs an average of $20,000 per
transplant and may require one or more repeat procedures in the same eye later
in life. Non-surgical solutions, such as eyeglasses or contact
lenses, do not treat the underlying cause of keratoconus or slow disease progression,
but temporarily attempt to address its symptoms, such as poor vision. Corneal
cross-linking with their KXL system and its associated Photrexa formulations is
the only treatment approved by the FDA to slow or arrest disease progression of
keratoconus.
They estimate the
vision correction market for their products in the United States to be
approximately 63 million people, or an estimated total addressable market
opportunity of $23 billion. Their initial clinical focus in vision correction
is the treatment of patients with presbyopia, which they estimate affects more
than 50 million people in the United States, representing an estimated
total addressable market opportunity of approximately $15 billion. Vision correction procedures traditionally include
refractive surgery or implants, the most common of which is LASIK. While LASIK
is the most common vision correction procedure, they believe that it has not
achieved greater market penetration due to patients’ fears of an ablative laser
procedure and the associated side effects. In addition to presbyopia, they
are exploring the use of their Mosaic system as a treatment option for other
large markets in the United States, including correcting refractive error for
low myopia, which they estimate affects 13.5 million people, representing
a total addressable market opportunity of approximately $8 billion, and
post-cataract procedures, which they estimate affects 600,000 eyes annually,
representing a total annual addressable market opportunity of approximately
$180 million.
|
ar Ended |
|
|
Nine Months Ended |
|
||||||||||||
|
|
|
2016 |
|
|
2017 |
|
|
2017 |
|
|
2018 |
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||||
|
|
|
(in thousands, except share and per share data) |
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Statement of Operations Data: |
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|
|
|||||||||||||
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Revenue |
|
$ |
14,910 |
|
|
$ |
20,154 |
|
|
$ |
15,645 |
|
|
$ |
19,467 |
|
|
Cost of goods sold |
|
|
7,144 |
|
|
|
9,850 |
|
|
|
7,157 |
|
|
|
8,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
7,766 |
|
|
|
10,304 |
|
|
|
8,488 |
|
|
|
11,244 |
|
|
Operating expenses: |
|
|
|
|
||||||||||||
|
Selling, general and administrative |
|
|
12,640 |
|
|
|
18,991 |
|
|
|
14,009 |
|
|
|
18,995 |
|
|
Research and development |
|
|
10,047 |
|
|
|
10,286 |
|
|
|
7,525 |
|
|
|
8,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
22,687 |
|
|
|
29,277 |
|
|
|
21,534 |
|
|
|
27,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(14,921 |
) |
|
|
(18,973 |
) |
|
|
(13,046 |
) |
|
|
(16,577 |
) |
|
Other (expense) income: |
|
|
|
|
||||||||||||
|
Interest income |
|
|
13 |
|
|
|
26 |
|
|
|
19 |
|
|
|
144 |
|
|
Interest expense |
|
|
(1,365 |
) |
|
|
(2,144 |
) |
|
|
(1,525 |
) |
|
|
(1,975 |
) |
|
Other (expense) income, net |
|
|
(104 |
) |
|
|
(186 |
) |
|
|
(48 |
) |
|
|
(302 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income, net |
|
|
(1,456 |
) |
|
|
(2,304 |
) |
|
|
(1,554 |
) |
|
|
(2,133 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net loss |
|
$ |
(16,377 |
) |
|
$ |
(21,277 |
) |
|
$ |
(14,600 |
) |
|
$ |
(18,710 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted |
|
$ |
(14.50 |
) |
|
$ |
(16.12 |
) |
|
$ |
(11.15 |
) |
|
$ |
(13.42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares used to compute net
loss per share, basic and diluted |
|
|
1,129,199 |
|
|
|
1,319,542 |
|
|
|
1,309,741 |
|
|
|
1,393,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net loss per share, basic and diluted |
|
|
$ |
(2.29) |
|
|
|
$ |
(1.66) |
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|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Pro forma weighted average common shares
outstanding, basic and diluted |
|
|
|
9,423,285 |
|
|
|
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|
|
|
As of December 31, |
|
|
As of |
|
||||||
|
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
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|
|
|
(in thousands) |
|
|||||||||
|
Balance Sheet Data: |
|
|
|
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|
Cash and cash equivalents |
|
$ |
12,658 |
|
|
$ |
8,850 |
|
|
$ |
16,932 |
|
|
Working capital(1) |
|
|
10,378 |
|
|
|
12,507 |
|
|
|
19,843 |
|
|
Total assets |
|
|
20,439 |
|
|
|
21,696 |
|
|
|
31,162 |
|
|
Convertible preferred stock warrant liability |
|
|
260 |
|
|
|
430 |
|
|
|
636 |
|
|
Total debt |
|
|
9,624 |
|
|
|
19,319 |
|
|
|
19,769 |
|
|
Total liabilities |
|
|
17,895 |
|
|
|
27,575 |
|
|
|
30,144 |
|
|
Convertible preferred stock |
|
|
31,852 |
|
|
|
43,641 |
|
|
|
68,423 |
|
|
Total stockholders’ deficit |
|
|
(29,308 |
) |
|
|
(49,520 |
) |
|
|
(67,405 |
) |
Target
Markets
Drive
customer adoption by pursuing consistent and favorable payment policies. They plan to continue their active discussions
with private payors to establish positive national and regional coverage
policies and facilitate claims processing. As they continue to establish
favorable coverage and payment policies, they believe they can substantially
expand patient access by reducing these hurdles to adoption.
Deepen
existing and cultivate new ophthalmologist customer relationships. They plan to significantly grow their commercial
sales and marketing organization as they achieve additional success in
establishing consistent and favorable private payor coverage and payment
policies for their treatment of corneal ectatic disorders in the United States.
If they obtain FDA approval for additional indications, they plan to leverage their
call points in order to cross-sell these additional uses of their products. They
believe investing in a scalable, efficient direct sales force will help them
broaden adoption of their products and drive revenue growth.
|
Increase
awareness among the broader eye care community, namely optometrists, in the
United States. In
addition to making ophthalmologists aware of the benefits of corneal
cross-linking and their products through participating in eye care industry
conferences, they are focusing their outreach on increasing awareness to
referring optometrists of corneal cross-linking as a therapeutic treatment
for corneal ectatic disorders. They also plan to continue building patient
awareness through their direct-to-consumer marketing initiatives,
which include paid search, radio, social media and online videos. Secure
additional FDA approvals and expand indications of their platform. They believe their market-leading
platform can improve upon current applications and, contingent upon receiving
FDA approval, be leveraged broadly across novel applications. They intend
to continue to invest in research and development and clinical trials to
improve patient experience and maximize the value of their platform to unlock
additional addressable markets. Expand
global reach of their platform. Outside
the United States, they plan to expand upon their substantial relationships
and to invest in growing their sales and marketing organization in markets they
deem attractive. They believe that there is a significant market
opportunity for corneal cross-linking in the European Union, the Middle East,
China, South Korea, Japan and other countries, and they have sold their
products into more than 80 countries. |
Company's
Unique Strengths
|
|
Company's
Unique Risks
They have
incurred significant operating losses since their inception and anticipate that
they will continue to incur significant operating losses for the foreseeable
future and may never be profitable. They have incurred net losses since their
inception. For the years ended December 31, 2016 and 2017, and for the
nine months ended September 30, 2018, they had net losses of
$16.4 million, $21.3 million and $18.7 million, respectively. As
of September 30, 2018, they had an accumulated deficit of
$175.7 million
Their
revenue from sales of the KXL system and its associated Photrexa formulations
is dependent upon the pricing and reimbursement guidelines adopted in the
United States.
They have a
limited history marketing and selling the KXL system and its associated
Photrexa formulations in the United States.
They rely
on contract manufacturing organizations, or CMOs, to manufacture and supply
certain components of their technology platform and to supply their
formulations of riboflavin, some of which are single-source suppliers.
If they or
their suppliers fail to comply with the FDA’s Quality System Regulation, or
QSR, cGMPs, ISO Quality Management Systems, or equivalent standards,
manufacturing of their products could be negatively impacted and sales of their
products could suffer.
They rely,
and in the future expect to rely, on a network of third-party distributors to
market and distribute their products internationally, and if they are unable to maintain and expand this
network, they may be unable to generate anticipated sales.
They
operate in a very competitive industry and they may fail to compete
successfully against their existing or potential competitors, many of whom have
greater resources than they have. Their industry is highly competitive and subject
to rapid and significant change
Their
future capital needs are uncertain and they may need to raise additional funds
in the future, and these funds may not be available on acceptable terms or at
all.
Their
intellectual property rights may not provide adequate protection, which may
permit third parties to compete against them more effectively.
They may
not be able to adequately protect their intellectual property rights throughout
the world.
Competitors
may market unapproved versions of their products in the United States, and
regulatory authorities may not act immediately to block the sale of such
unapproved products, which may harm their sales and impact public perception of
their products. Although the KXL system in combination
with its associated Photrexa formulations is the only approved corneal
cross-linking treatment in the United States for the treatment of progressive
keratoconus and corneal ectasia following refractive surgery, competitors may
unlawfully market unapproved drug-device combinations for performing corneal
cross-linking. For example, in the U.S. corneal
ectatic disorders market, they are aware that some providers who are not
currently their customers are promoting corneal cross-linking for the treatment
of keratoconus and they believe these providers are primarily using products
from CXLUSA or PeschkeTrade GmBH. While they believe the compounding and
marketing of compounded versions of Photrexa or Photrexa Viscous for use in
corneal cross-linking is illegal, they are aware that some pharmacies and
physicians in the United States have been, and may still be, compounding
riboflavin drugs for such use. It is uncertain if the FDA or other government
agencies will be able to effectively prevent such compounding and marketing
activities, and such continued activities may negatively impact the sales of
Photrexa and Photrexa Viscous.
They rely
on third parties to conduct and support their clinical trials, and those third
parties may not perform satisfactorily, including failing to meet deadlines for
the completion of such trials.
After this
offering, their executive officers, directors and principal stockholders will
maintain the ability to control or significantly influence all matters
submitted to stockholders for approval. Prior to this offering, their executive officers, directors and
stockholders who owned more than 5% of their outstanding common stock, and
their respective affiliates, in the aggregate, beneficially owned shares
representing approximately 84.0% of their common stock, and upon consummation
of this offering, that same group, in the aggregate, will beneficially own
approximately 60.3% of their common stock. As a result, if these stockholders
were to choose to act together, they would be able to control or significantly
influence all matters submitted to their stockholders for approval.
Bottom Line
They
generated revenue of $20.2 million, with a gross margin of 51.1% and a net
loss of $21.3 million, for the year ended December 31, 2017, compared
to revenue of $14.9 million, with a gross margin of 52.1% and a net loss
of $16.4 million, for the year ended December 31, 2016. They
generated revenue of $19.5 million, with a gross margin of 57.8% and a net
loss of $18.7 million, for the nine months ended September 30, 2018,
compared to revenue of $15.6 million, with a gross margin of 54.3% and a
net loss of $14.6 million, for the nine months ended September 30,
2017.
Their Avedro
Corneal Remodeling Platform technology uses corneal cross-linking to strengthen
the cornea and modify its shape. Their KXL system in combination with their
Photrexa drug formulations, which they launched in the United States in
September 2016, is the first and only minimally invasive product offering
approved by the U.S. Food and Drug Administration, or the FDA, indicated for
the treatment of progressive keratoconus and corneal ectasia following
refractive surgery. The FDA granted them orphan drug designations and they have
orphan drug exclusivity until 2023 that covers their Photrexa formulations used
with their KXL system for their approved indications. They have obtained a
Conformité Européene, or CE, mark for their Mosaic system, which allows it to
be marketed throughout the European Union. They are the only company to have
conducted randomized, sham-controlled clinical trials to receive marketing
approval of a corneal cross-linking solution. They are currently conducting a
pivotal Phase 3 clinical trial pursuant to a Special Protocol Assessment,
or SPA, for a new indication for their latest- generation KXL system and its
associated investigational drug formulations and their Boost Goggles in a
shorter and non-invasive procedure for the treatment of progressive keratoconus
that leaves the corneal epithelium in place, which they refer to as Epi-On.
Their CE mark for the KXL system, which they received in 2011, covers a broader
indication and technical range of use than currently approved in the United
States. Their Mosaic system, which they believe offers the world’s most
advanced and versatile cross-linking technology, is available outside of the
United States for performing vision correction procedures in addition to
treating keratoconus. They plan to initiate a Phase 2a clinical trial in the
first half of 2019 to evaluate the use of PiXL as a solution for vision
improvement for patients with presbyopia.
They believe
the broad utility of their platform has the potential to enable them to target
a population that they estimate to be approximately 64 million people in the
United States, which represents an estimated total addressable market
opportunity of $26 billion. Their initial commercial focus within the United
States is the keratoconus market, which, according to a 2018 Market Scope
study, they believe represents a total addressable market of approximately
600,000 people and an opportunity of approximately $3 billion. They estimate
the vision correction market for their products in the United States to be
approximately 63 million people, or an estimated total addressable market
opportunity of $23 billion. Their initial clinical focus in vision correction
is the treatment of patients with presbyopia, which they estimate affects more
than 50 million people in the United States, representing an estimated
total addressable market opportunity of approximately $15 billion. In
addition to presbyopia, they are exploring the use of their Mosaic system as a
treatment option for other large markets in the United States, including
correcting refractive error for low myopia, which they estimate affects
13.5 million people, representing a total addressable market opportunity
of approximately $8 billion, and post-cataract procedures, which they
estimate affects 600,000 eyes annually, representing a total annual addressable
market opportunity of approximately $180 million.
As they
continue to establish favorable coverage and payment policies, they believe
they can substantially expand patient access by reducing these hurdles to
adoption. They believe investing in a scalable, efficient direct sales force
will help them broaden adoption of their products and drive revenue growth. In
addition to making ophthalmologists aware of the benefits of corneal
cross-linking and their products through participating in eye care industry
conferences, they are focusing their outreach on increasing awareness to
referring optometrists of corneal cross-linking as a therapeutic treatment for
corneal ectatic disorders. They also plan to continue building patient
awareness through their direct-to-consumer marketing initiatives.
They believe their market-leading platform can improve upon current
applications and, contingent upon receiving FDA approval, be leveraged broadly
across novel applications. They believe that there is a significant market
opportunity for corneal cross-linking in the European Union, the Middle East,
China, South Korea, Japan and other countries, and they have sold their
products into more than 80 countries.
In the United
States, there are currently no other minimally invasive therapeutic treatments
for the corneal ectatic disorders their products are used to treat and
no non-invasive solutions for vision correction available except for
eyeglasses and contact lenses. Their platform is easy to use and requires a
minimal learning curve as physicians are already familiar with the procedures
to be performed using their devices. Their KXL system in combination with their Photrexa formulations is the first and only corneal
cross-linking product offering approved by the FDA for the treatment of
progressive keratoconus and corneal ectasia following refractive surgery. If
approved, they believe their
latest-generation KXL system, its associated drug formulations and their Boost Goggles will be the first corneal
cross-linking product offering approved in the United States for an Epi-On
procedure, and may result in the grant of a three-year period of market
exclusivity. They have successfully established
broad private payor coverage and are continuing to work on pursuing favorable
payment policies for use of their KXL system to treat keratoconus, with 63
private payors covering a total of up to 170 million covered lives in the
United States, or approximately 95% of their estimated total U.S. addressable
market for keratoconus. They believe that the broad adoption and established market
leadership position of their platform
outside the United States for corneal ectatic disorders will help facilitate
its commercial adoption in the United States. They have established strong research and development capabilities in
drug discovery, biomedical optics, machine vision and computational modeling,
which they believe will allow them to continue to innovate and maintain their
competitive position.
They have
incurred significant operating losses since their inception and anticipate that
they will continue to incur significant operating losses for the foreseeable
future and may never be profitable. As of September 30, 2018, they had an
accumulated deficit of $175.7 million. Their revenue from sales of the KXL
system and its associated Photrexa formulations is dependent upon the pricing
and reimbursement guidelines adopted in the United States. They have a limited
history marketing and selling the KXL system and its associated Photrexa
formulations in the United States. They rely on contract manufacturing
organizations, or CMOs, to manufacture and supply certain components of their
technology platform and to supply their formulations of riboflavin, some of
which are single-source suppliers. If they or their suppliers fail to comply
with the FDA’s Quality System Regulation, or QSR, cGMPs, ISO Quality Management
Systems, or equivalent standards, manufacturing of their products could be
negatively impacted and sales of their products could suffer. They rely, and in
the future expect to rely, on a network of third-party distributors to market
and distribute their products internationally. Their industry is highly
competitive and subject to rapid and significant change. Their future capital
needs are uncertain and they may need to raise additional funds in the future,
and these funds may not be available on acceptable terms or at all. Their
intellectual property rights may not provide adequate protection, which may
permit third parties to compete against them more effectively. They may not be
able to adequately protect their intellectual property rights throughout the
world. Although the KXL system in combination with its associated Photrexa
formulations is the only approved corneal cross-linking treatment in the United
States for the treatment of progressive keratoconus and corneal ectasia
following refractive surgery, competitors may unlawfully market unapproved
drug-device combinations for performing corneal cross-linking. While they
believe the compounding and marketing of compounded versions of Photrexa or
Photrexa Viscous for use in corneal cross-linking is illegal, they are aware
that some pharmacies and physicians in the United States have been, and may
still be, compounding riboflavin drugs for such use. It is uncertain if the FDA
or other government agencies will be able to effectively prevent such
compounding and marketing activities, and such continued activities may
negatively impact the sales of Photrexa and Photrexa Viscous. They rely on
third parties to conduct and support their clinical trials, and those third
parties may not perform satisfactorily, including failing to meet deadlines for
the completion of such trials. Upon consummation of this offering, their
executive officers, directors and stockholders who owned more than 5% of their
outstanding common stock, and their respective affiliates, in the aggregate
will beneficially own approximately 60.3% of their common stock. As a result,
if these stockholders were to choose to act together, they would be able to
control or significantly influence all matters submitted to their stockholders
for approval. Rating = 3