Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing at the end of this Annual Report on Form 10-K. This discussion includes forward-looking statements that involve risks, uncertainties and assumptions such as our plans, objectives, expectations and intentions. You should read the “Forward-Looking Statements” and “Risk Factors” sections of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
OVERVIEW
We are a pharmaceutical company committed to revolutionizing cardiorenal healthcare through patient-centric innovations while developing and commercializing products that have the potential to optimize the delivery of infused therapies, advance patient care and reduce healthcare costs. Our strategy is to develop therapies for subcutaneous administration that have previously been limited to intravenous, or IV, delivery. By moving delivery away from the high-cost healthcare settings typically required for IV administration, we believe our strategy has the potential to reduce overall healthcare costs and advance the quality and convenience of care. Our approved product, FUROSCIX, consists of our novel formulation of furosemide delivered via West Pharmaceutical Services, Inc.'s, or West’s, on-body infusor, which delivers an 80 mg/10 mL dose over 5 hours. On October 10, 2022, we announced that the U.S. Food and Drug Administration, or FDA, approved FUROSCIX for the treatment of congestion due to fluid overload in adults with New York Heart Association, or NYHA, Class II/III chronic heart failure. Subsequently, we announced the approval of our supplemental drug application expanding the FUROSCIX indication in heart failure on August 9, 2024 to include NYHA Class IV heart failure patients. FUROSCIX is the first and only FDA-approved subcutaneous loop diuretic that delivers IV equivalent diuresis at home. IV equivalence was established in a clinical study in which FUROSCIX demonstrated 99.6% bioavailability (90% CI: 94.8%-104.8%) and 8-hour urine output of 2.7 L which was similar to subjects receiving intravenous furosemide. The commercial launch of FUROSCIX for congestion in patients with chronic heart failure commenced in the first quarter of 2023.
In early May 2024 we submitted a supplemental New Drug Application (sNDA), seeking to expand the indication of FUROSCIX to include the treatment of edema due to fluid overload in adult patients with chronic kidney disease (CKD).The FDA had previously confirmed that no additional clinical studies would be needed to expand the indication to CKD, provided that we can demonstrate an adequate pharmacokinetic/pharmacodynamic (PK/PD) bridge to the listed drug, furosemide injection, 10mg/mL. The application was accepted for filing by the FDA in July 2024 and approved on March 6, 2025. We anticipate formally launching the product in April 2025.
On October 7, 2024, we were notified that the FDA awarded 3-year exclusivity to FUROSCIX on the basis of clinical investigations conducted by the Company that were essential to approval. As a result, the FDA may not approve a subsequent product for subcutaneous administration of furosemide for 3 years from the date of approval of FUROSCIX, or October 7, 2025.
We are developing an 80mg/1mL autoinjector intended to provide an additional option to the on-body infusor for treatment of fluid overload in eligible adult patients who do not require hospitalization. We believe that the development of an autoinjector, if approved, has the potential to significantly reduce manufacturing costs compared to the current on-body infusor and confer certain environmental advantages. We submitted an investigational new drug application (IND) in February 2024, initiated a pharmacokinetic/pharmacodynamic PK/PD study in April of 2024, and completed enrollment in May 2024 with positive data announced in August 2024. We plan to submit a sNDA for the autoinjector in 2025.
We estimate that there is a $12.5 billion total addressable market opportunity for FUROSCIX in the United States in patients with chronic heart failure and CKD. We believe FUROSCIX will allow eligible patients with chronic heart failure and chronic kidney disease with worsening symptoms due to fluid overload despite oral diuretics to receive IV-strength diuresis outside the high-cost hospital setting. At a price of approximately $947 per dose, we estimate the average cost of treatment with FUROSCIX for each episode to be approximately $5,685, which can be significantly lower than the cost of a single hospitalization for worsening heart failure. Prevention of heart failure hospital admissions and reduced readmission rates would result in reducing days patients spend in the hospital each year. By decreasing the number of heart failure admissions and readmissions to hospitals and shortening the hospital length of stay by completing diuresis post-discharge at home, we believe we can drive
significant cost savings to payers and hospitals and improve patients’ quality of life through outpatient management of their fluid overload.
In June 2024, another U.S. patent was granted, further strengthening our coverage of concentrated formulations of furosemide. We have progressed our development on multiple formulations described in the patent properties, have identified potential product candidates, and commenced a clinical study with our lead formulation.
We have funded our operations from inception through December 31, 2024 primarily through the sale of shares of our common stock and the incurrence of debt and, prior to that, through the private placement of our preferred stock.
For the years ended December 31, 2023 and 2024, our net losses were $54.8 million and $85.1 million, respectively. We have not been profitable since inception, and as of December 31, 2024, our accumulated deficit was $366.5 million. We expect to continue to incur net losses for the foreseeable future as we support the commercialization efforts of FUROSCIX in the United States, including expanding our sales and marketing organization, continuing research and development efforts, engaging in scale-up manufacturing and seeking regulatory approval for new product candidates and enhancements. Our financial results may fluctuate from quarter to quarter and will depend on, among other factors, the net sales of FUROSCIX, the scope and progress of our research and development efforts and timing of certain expenses.
COMPONENTS OF OUR RESULTS OF OPERATIONS
Product Revenues
Product revenues, net, consist of net sales of FUROSCIX. We initiated shipments of FUROSCIX to customers in the United States, which include specialty pharmacies, in February 2023. We recognize revenue for product received by our customers net of allowances for customer discounts, service fees, estimated returns and rebates.
Cost of Product Revenues
Cost of product revenues include costs related to the manufacturing of FUROSCIX, including third party manufacturing costs, packaging and freight, in addition to royalty expenses. We began capitalizing inventory upon FDA approval of FUROSCIX. All costs related to inventory for FUROSCIX that was produced prior to FDA approval were expensed as incurred and therefore not included in cost of revenues.
Research and Development Expenses
Research and development ("R&D") expenses consist of the cost of engineering, clinical trials, regulatory and medical affairs and quality assurance associated with developing our proprietary technology and product candidates. R&D expenses consist primarily of:
employee-related expenses, including salaries, benefits, travel expense and stock-based compensation expense;
cost of outside consultants who assist with technology development, regulatory affairs, clinical trials and medical affairs, and quality assurance;
cost of clinical trial activities performed by third parties;
cost of pre-approval pharmaceutical batch manufacturing; and
cost of facilities and supplies used for internal research and development and clinical activities.
We expense R&D costs as incurred. Given the emphasis to date on our approved product FUROSCIX, our R&D expenses have not been allocated on a program-specific basis. In the future, we expect R&D expenses to increase in absolute dollars as we continue to develop new products and enhance existing products and technologies. We anticipate that our expenses will increase significantly as we:
continue to advance our pipeline programs beyond FUROSCIX;
continue our current research and development activity;
seek to identify additional research programs and additional product candidates;
initiate preclinical testing and clinical trials for any product candidates we identify and develop, maintain, expand and protect our intellectual property portfolio; and
hire additional research, clinical and scientific personnel.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses consist of employee-related expenses, including salaries, benefits, travel expense and stock-based compensation expense for personnel in executive, finance, commercial, field sales, human resources, facility operations and administrative functions. Other SG&A expenses include promotional activities, marketing, conferences and trade shows, professional services fees, including legal, audit and tax fees, insurance costs, general corporate expenses and allocated facilities-related expenses.
We anticipate that our SG&A expenses will increase as we continue to expand our corporate and commercial infrastructure to support the commercialization activities of FUROSCIX in the United States.
RESULTS OF OPERATIONS
Comparison of Years Ended December 31, 2023 and 2024
The following table summarizes our results of operations for the years ended December 31, 2023 and 2024 (in thousands):
YEAR ENDED
DECEMBER 31,
INCREASE
(DECREASE)
Product revenues, net
Operating expenses:
Cost of product revenues
Research and development
Selling, general and administrative
Total operating expenses
Loss from operations
Loss on extinguishment of debt
Change in fair value of term loan
Change in fair value of revenue purchase and sale liability
Other income
Interest income
Interest expense
Net loss
Product revenues. Product revenues were $36.3 million for the year ended December 31, 2024, compared to $13.6 million for the year ended December 31, 2023. The increase of $22.7 million was due to an increase in demand of FUROSCIX further into commercial launch.
Cost of product revenues. Cost of product revenues were $11.4 million for the year ended December 31, 2024, compared to $3.8 million for the year ended December 31, 2023. The increase of $7.6 million was due to an increase in demand of FUROSCIX further into commercial launch, and related manufacturing costs.
Research and development expenses. R&D expenses increased $0.3 million to $12.1 million during the year ended December 31, 2024, compared to $11.8 million during the year ended December 31, 2023. This increase was primarily attributable to a $0.8 million increase in clinical study costs, a $0.6 million increase in device development costs, and a $0.2 million increase in patent costs. The increase was partially offset by a $1.1 million decrease in pharmaceutical development costs, a $0.1 million decrease in quality consulting, and a $0.1 million decrease in shipping and storage.
Selling, general and administrative expenses. SG&A expenses increased $24.3 million to $77.6 million during the year ended December 31, 2024, compared to $53.4 million during the year ended December 31, 2023. This increase was primarily attributable to a $9.8 million increase in employee-related costs due to increased headcount, including compensation, benefits, travel and facilities allocations, a $7.8 million increase in commercial preparation costs, $4.4 million in costs associated with entering into the Credit Agreement and Revenue Purchase and Sale Agreement in the third quarter of 2024, a $1.8 million increase in patient support costs, a $0.5 million increase in professional service costs, and a $0.3 million increase in FDA user fees. The increase was offset by a $0.3 million decrease in insurance costs.
Loss on extinguishment of debt. Loss on extinguishment of debt was $13.0 million for the year ended December 31, 2024. The loss was related to the payoff of the Oaktree Agreement in August 2024.
Change in fair value of term loan. The change in fair value of the term loan, which is accounted for under the fair value option, was $3.2 million for the year ended December 31, 2024. The change in fair value was primarily due to changes in interest rates and volatility.
Change in fair value of revenue purchase and sale liability. The change in fair value of the revenue purchase and sale liability, which is accounted for under the fair value option, was $3.6 million for the year ended December 31, 2024. The change in fair value was primarily due to changes in market yields.
Other income. Other income was $3.6 million for the year ended December 31, 2024, compared to $3.6 million during the year ended December 31, 2023. Other income primarily represents fair value adjustments to the derivative liability.
Interest income. Interest income decreased $1.7 million to $3.4 million during the year ended December 31, 2024 compared to $5.1 million during the year ended December 31, 2023. This decrease was primarily attributable to higher interest rates on and larger investment balances in our financial instruments during the year ended December 31, 2023.
Interest expense. Interest expense decreased $0.6 million to $7.6 million during the year ended December 31, 2024 compared to $8.1 million during the year ended December 31, 2023. This decrease was due to the termination of the Oaktree Agreement and associated non-cash interest charges previously incurred due to the amortization of the debt discount associated with the instrument.
LIQUIDITY AND CAPITAL RESOURCES
Overview
We have funded our operations from inception through December 31, 2024 primarily through the sale of shares of our common stock, through the private placement of our preferred stock and the incurrence of debt. From inception through December 31, 2024, we received net cash proceeds of $92.7 million from our initial public offering; $56.7 million from sales of our preferred stock; $81.6 million from borrowings under our previous term loan with SLR Investment Corp. and Silicon Valley Bank, our previous term loan under the Credit Agreement and Guaranty (the “Oaktree Agreement”) with Oaktree Fund Administration, LLC as administrative agent, and the lenders party thereto (collectively “Oaktree”), and the Credit Agreement and Revenue Purchase and Sale Agreement with Perceptive Credit Holdings IV, LP; $13.5 million from sales of convertible notes; $50.2 million from our public offering of common stock in 2020; $46.6 million from our public offering of common stock in 2022; $53.5 million from our public offering of common stock in 2024; $14.4 million from the sale of common stock in our 2019 at-the-market offering; and $15.2 million from the sale of common stock in our 2021 at-the-market offering. As of December 31, 2024, we had cash and cash equivalents of $75.7 million. Our cash and cash equivalents are maintained at a number of financial institutions in amounts that may exceed federally insured limits.
On March 23, 2021, we entered into an Open Market Sales Agreement (the "2021 ATM Agreement") with Cowen and Company LLC ("Cowen") to sell shares of our common stock, from time to time, with aggregate gross sales proceeds of up to $50.0 million, through an at-the-market equity offering program under which Cowen will act as our sales agent (the "2021 ATM Program").
On March 13, 2024, we amended and restated the 2021 ATM Agreement where we entered into an Open Market Sales Agreement with Cowen with respect to an at-the-market offering program under which we could offer and
sell the 2024 ATM Shares, having an aggregate offering price of up to $50.0 million through Cowen as its sales agent (the "2024 ATM Program"). As of March 13, 2024, we had sold a total of 1,726,043 2021 ATM Shares under the 2021 ATM Program at a weighted average gross selling price of $9.01 per share for net proceeds of $15.2 million. The offering and sale of the 2024 ATM Shares will be made pursuant to our shelf registration statement on Form S-3, which was declared effective by the SEC on March 22, 2024. There were no shares issued under the 2024 ATM Program as of December 31, 2024. Please see Note 11. Stockholders’ Equity to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
On August 9, 2024, we entered into the Credit Agreement and Revenue Purchase and Sale Agreement. The Credit Agreement established a $75.0 million term loan facility, consisting of (i) $50.0 million funded immediately and (ii) $25.0 million that we may borrow in a single borrowing on or prior to March 31, 2026. Under the Revenue Purchase and Sale Agreement, in exchange for the Purchaser's payment to us of a purchase price of $50.0 million, in the aggregate, we have agreed to sell to the Purchaser its right to receive payment in full of a tiered single digit percentage of net sales of FUROSCIX. In connection with the Credit Agreement, we paid off all unpaid borrowings under the Oaktree Agreement on August 9, 2024, including the $1.0 million exit fee and a prepayment premium of $2.6 million.
On August 12, 2024, we entered into an underwriting agreement (the “Underwriting Agreement”) with Leerink Partners LLC and TD Securities (USA) LLC, as representatives of the several underwriters named in Schedule A thereto (collectively, the “Underwriters”),relating to an underwritten offering of 12,000,000 shares of our common stock and, in lieu of common stock to select investors, pre-funded warrants to purchase 500,000 shares of common stock. Under the terms of the Underwriting Agreement, we also granted the Underwriters an option exercisable for 30 days to purchase up to an additional 1,875,000 shares of common stock at a price of $4.00 per share, less underwriting discounts and commissions. On August 12, 2024, the Underwriters exercised this option in full. The closing of the offering (including the sale of the Shares subject to the Underwriters’ option to purchase additional shares) took place on August 13, 2024. The net proceeds from the offering were $53.5 million, after deducting underwriting discounts and commissions and offering expenses. We do not intend to list the pre-funded warrants on Nasdaq or any other nationally recognized securities exchange or trading system.
We expect to incur substantial additional expenditures in the near future to support our ongoing activities and our commercialization of FUROSCIX. We believe our existing cash and cash equivalents will be sufficient to fund our operations through at least the next 12 months from the date of this Annual Report on Form 10-K. We expect our costs and expenses to increase in the future as we continue U.S. commercialization of FUROSCIX, including the expansion of our direct sales force, and as we continue to make substantial expenditures on research and development, including to increase our manufacturing capacity and for conducting clinical trials of our product candidates. Additionally, we continue to incur additional costs as a result of operating as a public company. We plan to continue to fund our operations through cash and cash equivalents on hand. Additionally, we expect to have access to funds pursuant to our at-the-market offering program with Cowen, or we could otherwise seek additional funding through a combination of public or private equity offerings, or debt financings, if we believe additional resources are needed. Our future capital requirements will depend on many factors, including without limitation:
the costs and expenses of expanding our U.S. sales and marketing infrastructure;
the costs and expenses related to the manufacturing of FUROSCIX and our agreements with third-party manufacturers;
the degree of success we experience in commercializing FUROSCIX;
the revenue generated by sales of FUROSCIX and of other product candidates that may be approved;
the pricing and reimbursement of FUROSCIX and of other product candidates that may be approved;
the costs, timing and outcomes of clinical trials and regulatory reviews associated with our product candidates;
the emergence of competing or complementary technological developments;
the extent to which FUROSCIX is adopted by the healthcare community;
the number and types of future products we develop and commercialize;
the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; and
the extent and scope of our general and administrative expenses.
Additional financing may not be available on a timely basis on terms acceptable to us, or at all. We may raise funds in equity, royalty-based or debt financings or enter into additional credit facilities in order to access funds for our capital needs. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution in their percentage ownership of our Company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we raise additional funds through royalty-based financing arrangements, we will likely agree to relinquish rights to potentially valuable future revenue streams and may agree to covenants that restrict our operations or strategic flexibility. Any debt financing obtained by us in the future would cause us to incur additional debt service expenses and could include restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and pursue business opportunities. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, we may or the development of one or more of our products, clinical trials necessary to market our products, or establishment or expansion of sales and marketing capabilities or other activities necessary to commercialize our products. For example, the trading prices for our and other biopharmaceutical companies’ securities have been highly as a result of macroeconomic conditions and developments in our industry. As a result, we may face raising capital through sales of our securities and any such sales may be on terms. Additionally, our ability to raise capital may be further impacted by global macroeconomic conditions including, for example, as a result of international political and/or , including due to war or terrorism, supply chain issues, tariffs and trade wars, and fluctuating inflation and interest rates.
Perceptive Financing
On August 9, 2024 (the "Closing Date"), we entered into a Credit Agreement and Guaranty (the "Credit Agreement"), by and among us, the guarantors from time to time party thereto, the lenders from time to time party thereto (the "Lenders"), and Perceptive Credit Holdings IV, LP, in its capacity as administrative agent for the Lenders (in such capacity, the "Agent"). The Credit Agreement establishes a $75.0 million term loan facility, consisting of (i) $50.0 million (the “ Tranche A Loan”) funded on the Closing Date, (ii) $25.0 million (the “Tranche B Loan” and, together with the Tranche A Loan, collectively, the “Term Loan”) that we may borrow in a single borrowing on or prior to March 31, 2026; provided, in the case of the Tranche B Loan, that we and our subsidiaries have obtained certain regulatory approval and achieved certain net sales targets, each as described in the Credit Agreement. The Term Loan has a maturity date of August 9, 2029 (the “Maturity Date”).
Borrowings under the Term Loan bear interest at a rate per annum equal to the one-month term SOFR (subject to a 3.25% floor), plus an applicable margin of 6.75%, payable monthly in arrears. There will be no scheduled repayments of outstanding principal on the Term Loan prior to the Maturity Date. We may voluntarily prepay the outstanding Term Loan, subject to a yield protection premium equal to (i) 5.0% of the principal amount of the Term Loan prepaid, if prepaid on or prior to the first anniversary of the Closing Date, (ii) 3.0% of the principal amount of the Term Loan if prepaid after the first anniversary of the Closing Date through and including the second anniversary of the Closing Date, (iii) 1.0% of the principal amount of the Term Loan if prepaid after the second anniversary of the Closing Date through and including the third anniversary of the Closing Date, with no prepayment premium due after the third anniversary of the Closing date through the Maturity Date. On the Closing Date, we were required to issue to the Lenders of such Term Loan warrants to purchase 300,000 of shares of our common stock, in the aggregate (the “ Warrant”), at an exercise price of $4.5902. The Warrant is immediately exercisable, and the exercise period will expire 6 years from the date of issuance. Upon the completion of the sale of common stock on August 13, 2024, the exercise price of the Warrants was adjusted to $4.00 according to the terms of the agreement.
Our obligations under the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement) will be guaranteed by any domestic subsidiaries of ours that become Guarantors (as defined in the Credit Agreement), subject to certain exceptions. Our obligations under the Credit Agreement and the other Loan Documents are secured by first priority security interests in substantially all of our assets, subject to certain customary thresholds and exceptions. As of the Closing Date, there are no Guarantors.
The Credit Agreement contains customary representations, warranties and affirmative and negative covenants, including financial covenants requiring us to (i) maintain certain levels of cash and cash equivalents in accounts subject to a control agreement in favor of the Agent of at least $5.0 million at all times after the Closing Date and (ii) meet minimum quarterly net sales targets described in the Credit Agreement.
In addition, the Credit Agreement contains customary events of default that entitle the Agent to cause our indebtedness under the Credit Agreement to become immediately due and payable, and to exercise remedies against us and the collateral securing the Term Loan, including cash. Under the Credit Agreement, an event of default will occur if, among other things, we fail to make payments under the Credit Agreement (subject to specified periods), we or our subsidiaries breach any of the covenants under the Credit Agreement (subject to specified cure periods with respect to certain breaches), a material adverse change occurs, we, our subsidiaries or their respective assets become subject to certain legal proceedings, such as bankruptcy proceedings, we and/or our subsidiaries are unable to pay our debts as they become due or default on contracts with third parties which would permit the holder of indebtedness in excess of a certain threshold to accelerate the maturity of such indebtedness or that could cause a material change. Upon the occurrence and for the duration of an event of , an additional interest rate equal to 3.0% per annum may apply to all obligations owed under the Credit Agreement.
On the Closing Date, we entered into a revenue participation right purchase and sale agreement (the "Revenue Purchase and Sale Agreement") with Perceptive Credit Holdings IV, LP (the "Purchaser"). Under the terms of the Revenue Purchase and Sale Agreement, in exchange for the Purchaser’s payment to us of a purchase price of $50.0 million, in the aggregate subject to certain conditions at closing (the “Purchase Price”), we have agreed to sell to the Purchaser its right to receive payment in full of a tiered single digit percentage of net sales of FUROSCIX (the “Revenue Payment”) for each calendar quarter commencing on the effective date of the Revenue Purchase and Sale Agreement, subject to adjustments on June 30, 2028 and June 30, 2030 depending on the amount of Revenue Payments received by such dates. The Purchaser’s right to receive the Revenue Payment terminates and we no longer have the obligation to pay Purchaser Revenue Payments once the Purchaser receives 200.0% (subject to reductions on September 30, 2027 and September 30, 2029 depending on the amount of Revenue Payments received by such dates) of the Purchase Price. We may also buy-out the Purchaser’s rights to receive the Revenue Payments by paying Purchaser a tiered multiple on the Purchaser Price.
The Revenue Purchase and Sale Agreement contains various representations and warranties, including with respect to organization, authorization, and certain other matters, certain covenants with respect to payment, reporting, intellectual property, in-licenses, out-licenses, and certain other actions, indemnification obligations and other provisions customary for transactions of this nature.
In conjunction with the closing of the Perceptive Financing, we used a portion of the proceeds to prepay all outstanding loans under the Oaktree Agreement, including the exit fee, on the Closing Date.
Oaktree Loan and Security Agreement
On October 13, 2022 (“Oaktree Closing Date”), we entered into a Credit Agreement and Guaranty (the “Oaktree Agreement”) with Oaktree Fund Administration, LLC as administrative agent, and the lenders party thereto (collectively “Oaktree”) to borrow up to $100.0 million in three tranches with a maturity date of October 13, 2027.
The first tranche of $50.0 million was drawn immediately. In connection with entering into the Oaktree Agreement, we granted warrants to Oaktree to purchase up to an aggregate of 516,345 shares of the Company’s common stock at an exercise price of $5.40 per share. The warrants are immediately exercisable and the exercise period expires on October 13, 2029.
In connection with the Credit Agreement, we paid off all unpaid borrowings under the Oaktree Agreement on August 9, 2024, including the $1.0 million exit fee and a prepayment premium of $2.6 million.
Prepayments of the term loan, in whole or in part, were subject to a prepayment fee. We were also required to pay an exit fee upon any payment or prepayment equal to 2.0% of the aggregate principal amount of the loans funded under the Oaktree Agreement.
CASH FLOWS
The following table summarizes our sources and uses of cash for each of the periods presented:
YEAR ENDED
DECEMBER 31,
(in thousands)
Net cash (used in) provided by:
Operating activities
Investing activities
Financing activities
Net (decrease) increase in cash and cash equivalents
Net Cash Used in Operating Activities
During the year ended December 31, 2024, net cash used in operating activities was $70.5 million, consisting primarily of a net loss of $85.1 million and a $13.1 million increase in net operating assets. This was offset by non-cash charges of $23.2 million and $4.5 million in debt issuance costs. The increase in net operating assets is related to accounts receivable and inventory to support the ongoing commercial operations of FUROSCIX. The non-cash charges primarily consisted of depreciation, amortization related to our right-of-use leased assets, stock-based compensation expense, non-cash interest expense related to amortization of debt discount associated with the Oaktree Agreement, the fair value adjustments to the derivative liability, term loan and revenue purchase and sale liability, and the loss on the extinguishment of the Oaktree Agreement and accretion of premium on investments.
During the year ended December 31, 2023, net cash used in operating activities was $59.2 million, consisting primarily of a net loss of $54.8 million and a $6.3 million increase in net operating assets. This was offset by non-cash charges of $1.9 million. The increase in net operating assets is related to accounts receivable and inventory to support the launch of FUROSCIX. The non-cash charges primarily consisted of depreciation, amortization related to our right-of-use leased assets, stock-based compensation expense, non-cash interest expense related to amortization of debt discount associated with the Oaktree Agreement, the fair value adjustment to the derivative liability and accretion of premium on investments.
Net Cash Provided by Investing Activities
During the year ended December 31, 2024, net cash provided by investing activities was $29.3 million, consisting primarily of maturities of short-term investments, net of purchases.
During the year ended December 31, 2023, net cash provided by investing activities was $20.0 million, consisting primarily of maturities of short-term investments, net of purchases.
Net Cash Provided by Financing Activities
During the year ended December 31, 2024, net cash provided by financing activities was $70.1 million, consisting of proceeds from the Perceptive Financing, proceeds from the sale of common stock, purchases pursuant to our 2017 Employee Stock Purchase Plan and stock option exercises, offset by the payoff of the Oaktree Agreement, and related fees, and amounts paid to settle restricted stock unit tax withholding obligations.
During the year ended December 31, 2023, net cash provided by financing activities was $14.9 million, consisting of proceeds from the 2021 ATM Agreement, purchases pursuant to our 2017 Employee Stock Purchase Plan and stock option exercises.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are 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 and any such differences may be material.
While our significant accounting policies are more fully described in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and results of operations and require our most difficult, subjective and complex judgments.
Revenue Recognition
We recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customer (“Topic 606”), we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied. We have identified one performance obligation, the delivery of FUROSCIX to our customers. We have not incurred any incremental costs associated with obtaining contracts with customers. Our revenues consist solely of the sale of FUROSCIX to customers in the United States.
Product Net Sales: FUROSCIX was approved by the FDA on October 7, 2022. We launched sales of FUROSCIX in the first quarter of 2023 and our customers consist of specialty pharmacies (“SPs”) and specialty distributors ("SDs"). We recognize revenue from product sales at a point in time, typically upon receipt of product at the SPs and the SDs, the date at which the rights, title, interest and risk of loss are transferred. Revenues from product sales are recorded at the net sales price, which includes estimates of variable consideration that result from (a) prompt pay discounts, (b) rebates (c) co-pay assistance, and (d) product returns. Reserves are established for the estimates of variable consideration based on the amounts earned or to be claimed on the related sales. The reserves for variable consideration are reflected as either as a reduction to the related account receivable or as an accrued liability, depending on how the consideration is settled. The amount of variable consideration that is included in the transaction price may be constrained and is included in net product revenues only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results vary from its estimates, we adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. There have not been material changes in these estimates or assumptions pertaining to constraints on revenue recognition over the reporting periods presented. In the future, if there are material changes in the underlying estimates and assumptions pertaining to constraints on revenue recognition, the financial statements could be materially impacted.
Sales Discounts : Sales discounts are agreed-upon discounts, from negotiated contracts, taken directly off our sales invoices. Sales discounts are recorded as an offset to revenue based on contractual terms at the time revenue from the sale is recognized.
Rebates : Allowance for rebates include mandated discounts under the Medicaid Drug Rebate Program and the Medicare Part D prescription drug benefit, TRICARE program and contractual rebates with commercial payers. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based
upon contractual agreements or statutory requirements. The allowance for rebates is based on contracted or statutory discount rates and expected utilization by benefit plan participants. Our estimates for expected utilization of rebates are based on utilization data received from the SPs since product launch. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for prior quarters’ unpaid rebates. If actual future rebates vary from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment.
Co-Payment Assistance: We offer co-payment assistance to commercially insured patients meeting certain eligibility requirement. Co-payment assistance is accrued at the time of product sale to SPs based on estimated patient participation and average co-pay benefit to be paid per a claim. Our estimated amounts are compared to actual program participation and co-pay amounts paid using data provided by third-party administrators. If actual amounts differ from the original estimates the assumptions being applied are updated and adjustment for prior period accruals will be adjusted in the current period.
Product Returns: Consistent with industry practice, we offer SPs and SDs limited product return rights for damages, shipment errors, and expiring product, provided that the return is within a specified period around the product expiration date as set forth in the applicable individual distribution agreement. We do not allow product returns for product that has been dispensed to a patient. As we receive inventory reports from the SPs and have the ability to control the amount of product that is sold to the SPs, we are able to make a reasonable estimate of future potential product returns based on this on-hand channel inventory data and sell-through data obtained from the SPs. Currently, sales to SDs are limited and there is no access to on-hand inventory or sell through data. As these arrangements mature, we will be able to utilize any data our SDs provide as part of this analysis. In arriving at our estimate, we also consider historical product returns, the underlying product demand, and industry data specific to the specialty pharmaceutical distribution industry.
Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued R&D expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued R&D expenses include the costs incurred for services performed by our vendors in connection with R&D activities for which we have not yet been invoiced.
We base our expenses related to R&D activities on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct R&D on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the R&D expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly. Advance payments for goods and services that will be used in future R&D activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.
Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.
Financial Liabilities
Our Term Loan and our revenue purchase and sale liability are accounted for under the fair value option in the accompanying consolidated balance sheets, as permitted under Accounting Standards Codification Topic 825, Financial Instruments. The fair values of our Term Loan and our revenue purchase and sale liability are based on
significant inputs which are not observable in the market and which causes them to be classified as a Level 3 measurement within the fair value hierarchy. These valuations use assumptions and estimates we believe would be made by a market participant in making the same valuation. We assess these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained.
The Term Loan was recorded using a binomial lattice model to account for the dynamic nature of interest rate fluctuations and the strategic exercise of the certain optional prepayment features. The Term Loan is re-measured at each financial reporting period with any changes in fair value being recognized as a component of other income (expense) in the accompanying consolidated statements of operations.
The fair value of the revenue purchase and sale liability was measured using the Monte Carlo simulation method (“MCS”), utilizing future cash flow projections and assumptions of the timing and probability of certain contingent events, such as the occurrence of a change of control and the exercise of call and put options.
The fair values of the term loan and the revenue purchase and sale liability may change significantly as additional data is obtained, impacting our assumptions regarding probabilities of outcomes used to estimate the fair value of the liabilities. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts, and such changes could materially impact the our results of operations in future periods.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk.
We are exposed to market risks related to changes in foreign currency exchange rates and interest rates.
We contract with vendors in foreign countries. As such, we have exposure to adverse changes in exchange rates of foreign currencies, principally the Swiss franc and the Euro, associated with our foreign transactions. We believe this exposure to be immaterial. We currently do not hedge against this exposure to fluctuations in exchange rates.
Our exposure to market risk also relates to interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. We have elected the fair value option for certain liabilities. The fair value of the liabilities related to the Credit Agreement and the Revenue Purchase and Sale Agreement will increase as market interest rates decrease. In addition, the fair value of the liabilities may fluctuate based upon changes in the Company's credit rating. Changes in the interest rate environment and the credit rating of the Company could have an effect on our future earnings.
We do not believe that inflation has had a material effect on our business. However, if our costs, in particular costs related to manufacture and supply, were to become subject to significant inflationary pressures, it may adversely impact our business, operating results and financial condition.
Item 8. Consolidated Financial Statement s and Supplementary Data.
Index to Consolidated Financial Statements
PAGE
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2023 and 2024
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2023 and 2024
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023 and 2024
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2024
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of scPharmaceuticals Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of scPharmaceuticals Inc. and its subsidiary (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition
As described in Note 2 to the financial statements, revenue from product sales are recorded at the net sales price, which requires estimates for variable consideration, including rebates for the Medicaid Drug Rebate Program (“Medicaid”) and the Medicare Part D prescription drug benefit (“Medicare”). Provisions for these allowances are recorded in the period in which the related revenue is recorded and are presented as an accrued liability in the Company’s consolidated balance sheet.
We identified the estimates for variable consideration in revenue relating to Medicaid and Medicare rebates as a critical audit matter due to their significance and the judgmental nature of the assumptions used by management in preparing the estimates. In particular, management is required to make estimates that include consideration of its history of paying rebates, historical and anticipated dispensing of product to eligible benefit plan patients and period end inventory held at its customers. The Company has a limited history upon which to base such estimates and changes in the estimated dispensing mix can have a material effect on the amount of estimates recorded. Auditing management’s assumptions was complex and required a high degree of auditor judgment and subjectivity when performing audit procedures and evaluating the audit evidence obtained.
Our audit procedures related to the Company’s variable consideration adjustments to revenue for rebates included the following, among others:
We tested the completeness and accuracy of the information used by management in calculating Medicaid and Medicare rebates by testing a sample of products sold to the underlying revenue transaction details
We confirmed the dispensing history and the December 31, 2024 inventory held by the Company’s customers directly with customers on a sample basis
We traced rebate percentages used to calculate the Medicaid and Medicare rebate allowances to related statutory or contractual rates
We evaluated the reasonableness of the Medicaid and Medicare rebate allowances by reviewing actual history of rebates paid through December 31, 2024, the historical dispensing mix and the Medicaid and Medicare rebates billed to the Company subsequent to the balance sheet date to determine consistency with management’s estimates
Valuation of Financial Liabilities
As described in Notes 9 and 10 to the financial statements, on August 9, 2024, the Company entered into a Credit Agreement (“Term Loan”) and into a Revenue Participation Right Purchase and Sale Agreement (“Revenue Purchase and Sale Liability”). T he Company elected the fair value option to account for both the Term Loan and the Revenue Purchase and Sale Liability . The Company estimates the fair value of the Term Loan using a binomial lattice model and estimates the fair value of the Revenue Purchase and Sale Liability using a Monte Carlo simulation method.
We identified the fair value estimates related to the Term Loan and the Revenue Purchase and Sale Liability as a critical audit matter because of the complexity of the valuation models, including the judgements made by management in estimating the fair value of the instruments. The valuation models used in determining the fair value of the financial liabilities include inputs subject to management’s judgment, including estimates of volatility, credit spreads, probability of a change of control, probability of prepayment, and net sales projections. This required a high degree of auditor judgment and subjectivity when performing audit procedures, including the involvement of valuation professionals with specialized skills and knowledge.
Our audit procedures related to the Company’s evaluation and valuation of the fair value of the Term Loan facility and the Revenue Purchase and Sale Liability included the following, among others:
Inspected the terms of all relevant legal documents supporting the transaction and ensured agreement to the source data used by management in determining the fair value of the instruments
Assessed the Company’s technical accounting documentation regarding their election of the fair value option
Evaluated the reasonableness of significant assumptions used to calculate the fair value of the Term Loan and the Revenue Purchase and Sale Liability including the estimate of the probability of a change of control, probability of prepayment and net sales projections
With the assistance of our fair value specialists, we evaluated the appropriateness of the methodology used in estimating the fair value of the Term Loan facility and the Revenue Purchase and Sale Liability , including testing the reasonableness of the estimates for volatility, discount rates and credit spreads and tested the mathematical accuracy of the resulting valuations
/s/ RSM US LLP
We have served as the Company’s auditor since 2015.
Boston, Massachusetts
March 19, 2025
SCPHARMACEUTICALS INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
DECEMBER 31,
DECEMBER 31,
Assets
Current assets
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventory, net
Prepaid expenses
Deposits and other current assets
Total current assets
Property and equipment, net
Right-of-use lease assets - operating, net
Deposits and other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
Accrued expenses
Lease obligation - operating, short-term
Other current liabilities
Total current liabilities
Term loan, long-term
Revenue purchase and sale liability
Derivative liability
Lease obligation - operating, long-term
Other liabilities
Total liabilities
Commitments and contingencies (Note 13)
Stockholders’ Equity
Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized
and no shares issued and outstanding
Common stock; $ 0.0001 par value; 150,000,000 shares
authorized at December 31, 2023; 35,968,510 and
50,095,689 shares issued and outstanding at December 31,
2023 and December 31, 2024, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
SCPHARMACEUTICALS INC.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
YEARS ENDED DECEMBER 31,
Product revenues, net
Operating expenses:
Cost of product revenues
Research and development
Selling, general and administrative
Total operating expenses
Loss from operations
Loss on extinguishment of debt
Change in fair value of term loan
Change in fair value of revenue purchase and sale liability
Other income
Interest income
Interest expense
Net loss
Net loss per share, basic and diluted
Weighted—average common shares outstanding, basic and
diluted
Other comprehensive loss:
Unrealized loss on short-term investments
Comprehensive loss
The accompanying notes are an integral part of these consolidated financial statements.
SCPHARMACEUTICALS INC.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
COMMON STOCK
ADDITIONAL
OTHER
TOTAL
SHARES
AMOUNT
PAID-IN
CAPITAL
ACCUMULATED
DEFICIT
COMPREHENSIVE INCOME (LOSS)
STOCKHOLDERS’
EQUITY
At December 31, 2022
Net loss
Issuance of common stock under at-the-market
offering, net of issuance costs (Note 11)
Issuance of common stock upon exercise
of stock options
Issuance of common stock purchased through
employee stock purchase plan
Stock-based compensation
Unrealized loss on short term investments
At December 31, 2023
Net loss
Issuance of warrants (Note 10)
Issuance of common stock and pre-funded warrants in
common stock offering, net of issuance costs (Note 11)
Issuance of common stock upon exercise
of stock options
Vesting of restricted stock
Issuance of common stock through
employee stock purchase plan
Stock-based compensation
Unrealized gain on short term investments
At December 31, 2024
The accompanying notes are an integral part of these consolidated financial statements.
SCPHARMACEUTICALS INC.
Consolidated Statements of Cash Flows
(in thousands)
FOR THE YEAR ENDED DECEMBER 31,
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation expense
Loss on disposal of property and equipment
Reduction in carrying value of operating right-of-use lease assets
Accretion on short-term investments
Allowance for doubtful accounts
Allowance for excess, damaged and obsolete inventory
Stock-based compensation
Non-cash interest expense
Fair value adjustment to term loan
Fair value adjustment to revenue purchase and sale liability
Fair value adjustment to derivative liability
Debt issuance costs
Loss on extinguishment of debt
Changes in operating assets and liabilities
Accounts receivable
Inventory
Prepaid expenses and other assets
Accounts payable, accrued expenses and other liabilities
Net cash flows used in operating activities
Cash flows from investing activities
Purchases of property and equipment
Maturities of short-term investments
Purchases of short-term investments
Net cash flows provided by investing activities
Cash flows from financing activities
Proceeds from common stock offering, net of underwriter discounts
and offering costs
Proceeds from term loan, net
Proceeds from revenue participation agreement, net
Proceeds from employee stock purchase plan
Proceeds from the exercise of vested stock options
Proceeds from at-the-market offering, net
Principal payments on term loan
Prepayment and legal fees
Payment of term loan final fee
Payments on revenue participation agreement
Settlement of restricted stock units for tax withholding obligations
Net cash flows provided by financing activities
Net (decrease) increase in cash
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental cash flow information
Interest paid
Taxes paid
Supplemental disclosure of non-cash activities
Fair value of warrants issued
Operating right-of-use asset received in exchange for lease obligations
Transfer of issuance costs from other noncurrent assets to equity
The accompanying notes are an integral part of these consolidated financial statements.
SCPHARMACEUTICALS INC.
Notes to Consolidated Financ ial Statements
For the Years Ended December 31, 2023 and 2024
1. Description of Business and Basis of Presentation
Description of Business
scPharmaceuticals LLC was formed as a Limited Liability Company under the laws of the State of Delaware on February 19, 2013. On March 24, 2014, scPharmaceuticals LLC was converted to a Delaware Corporation and changed its name to scPharmaceuticals Inc. (“the Company”). The Company is a pharmaceutical company focused on developing and commercializing products that have the potential to optimize the delivery of infused therapies, advance patient care and reduce healthcare costs. The Company’s strategy is designed to enable the subcutaneous administration of therapies that have previously been limited to intravenous (“IV”) delivery. The Company’s headquarters and primary place of business is Burlington, Massachusetts.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and have been prepared on a basis which assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements reflect the operations of the Company and its wholly-owned subsidiary, scPharmaceuticals Securities Corporation. All significant intercompany balances and transactions have been eliminated in consolidation.
Liquidity
At December 31, 2024 , the Company had cash and cash equivalents of $ 75.7 million and working capital of $ 91.0 million. During the year ended December 31, 2024 , the Company incurred a net loss totaling $ 85.1 million and used cash in operating activities totaling $ 70.5 million. The Company expects to continue to incur losses and use cash in operating activities in 2025.
On October 13, 2022, the Company entered into a Credit Agreement and Guaranty (the "Oaktree Agreement") with, among others, the lenders from time to time party thereto and Oaktree Fund Administration, LLC, in its capacity as administrative agent for the lenders (Note 10). On August 9, 2024 (the "Closing Date"), the Company entered into a Credit Agreement and Guaranty (the "Credit Agreement") with the guarantors from time to time party thereto, the lenders from time to time party thereto (the "Lenders"), and Perceptive Credit Holdings IV, LP, in its capacity as administrative agent for the Lenders (in such capacity, the "Agent") (Note 10). On the Closing Date, the Company also entered into a Revenue Participation Right Purchase and Sale Agreement (the "Revenue Purchase and Sale Agreement") with Perceptive Credit Holdings IV, LP (the "Purchaser") (Note 10). The Company used the proceeds of the Credit Agreement and the Revenue Purchase and Sale Agreement to, on the Closing Date, prepay all outstanding obligations under the Oaktree Agreement, including the payment of fees and expenses associated with the Oaktree Agreement. In addition, on August 13, 2024, the Company completed an underwritten public offering of shares of its common stock (and, in lieu of such shares of common stock to selected investors, pre-funded warrants to purchase shares of its common stock) with net proceeds of $ 53.5 million (Note 11).
The Company believes that, based on its current development plans and activities, its resources will be sufficient to satisfy its liquidity requirements for more than one year from the issuance date of these consolidated financial statements.
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant items subject to such estimates and assumptions include the determination of fair value of
financial instruments, accounting policies for revenue recognition, accruals related to development costs and clinical activities, and the establishment of the tax valuation allowance. Actual results could differ from those estimates.
Foreign Currency Transactions
The functional currency of the Company is the U.S. dollar. Accordingly, gains and losses resulting from translating transactions denominated in currencies and balances of assets and liabilities outstanding at the balance sheet date, other than U.S. dollars, are included in net loss in the Statements of Operations and Comprehensive Loss.
Cash and Cash Equivalents
Cash and cash equivalents consist of bank deposits and money market accounts with financial institutions. Cash equivalents are carried at cost which approximates fair value due to their short-term nature and which the Company believes do not have a material exposure to credit risk. The Company considers all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. The Company places its cash and cash equivalents with institutions with high credit quality. However, at certain times such cash and cash equivalents may be in excess of Federal Deposit Insurance Corporation and Securities Investor Protection Corporation insurance limits. The Company has not experienced any losses with respect to these accounts.
Accounts Receivable
Accounts receivable are recorded net of any estimated expected credit losses. The Company's measurement of expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Company's credit loss allowance for uncollectible trade receivables was $ 0 and $ 57,000 at December 31, 2023 and 2024 , respectively.
Concentration of Credit Risk
Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents. The Company maintains its cash and cash equivalent balances with high-quality financial institutions and, consequently, the Company believes that such funds are subject to minimal credit risk. The Company has adopted an investment policy that limits the amounts the Company may invest in any one type of investment and requires all investments held by the Company to hold a minimum rating, thereby reducing credit risk exposure.
Customer and Supplier Concentration
The Company has a limited number of specialty pharmacy customers and distributors. As of December 31, 2023 and December 31, 2024, three customers represent 99 % and two customers represent 96 % of accounts receivable, respectively. For the year ended December 31, 2023 and December 31, 2024, two customers represent 93 % and two customers represent 88 % of revenue, respectively.
The Company has a limited number of suppliers and contract manufacturers utilized in the production of its product. As of December 31, 2023 and December 31, 2024, one supplier represented 47 % and three suppliers represented 71 % of accounts payable, respectively. For the year ended December 31, 2023 and December 31, 2024, two suppliers represented 38 % and two suppliers represented 46 % of purchases, respectively.
The Company depends on suppliers for raw materials, API, and other components that are subject to stringent FDA requirements. Some of these materials may only be available from one or a limited number of sources. Establishing additional or replacement suppliers may take a substantial period of time, as suppliers must be approved by the FDA. If the Company is unable to secure, on a timely basis, sufficient quantities of the materials it depends on to manufacture its products, it could have a materially adverse effect on the Company's business, financial condition and results of operations.
Investments
The Company invests excess cash balances in available-for-sale debt securities. The Company determines the appropriate classification of these securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. The Company reports available-for-sale investments at fair value at each balance sheet date and includes any unrealized gains and losses in accumulated other comprehensive
income (loss), a component of stockholders’ equity. Realized gains and losses are determined using the specific identification method and are included in other income (expense). If any adjustment to fair value reflects a decline in the value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is “other than temporary,” including the intention to sell and, if so, marks the investment to market through a charge to the Company’s consolidated statements of operations and comprehensive loss.
Inventory
Inventory is stated at the lower of cost and net realizable value and consists of raw materials, work-in-process and finished goods. The Company began capitalizing inventory costs following U.S. Food and Drug Administration ("FDA") approval of FUROSCIX on October 7, 2022. Inventory is valued on a first in, first out ("FIFO") basis. The Company periodically reviews inventory for expiry and obsolescence and writes it down accordingly, if necessary. Prior to FDA approval of FUROSCIX, the Company expensed all inventory-related costs, including that used for clinical development, to research and development ("R&D") costs in the period incurred.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use (“ROU”) lease assets, current portion of lease obligations, and long term lease obligations on the Company’s balance sheets.
ROU lease assets represent the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligation to make lease payments arising from the lease. Operating ROU lease assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The ROU lease asset excludes lease incentives. The Company’s lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Debt Issuance Costs
Debt issuance costs are amortized to interest expense using the effective interest rate method over the term of the debt. Debt issuance costs paid to the lender and third parties are reflected as a discount to the debt in the consolidated balance sheet as of December 31, 2023 .
Fair Value Option
As permitted under Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") Topic 825, Financial Instruments (“ASC 825”), the Company elected the fair value option to account for the Credit Agreement and the Revenue Purchase and Sale Agreement (collectively, the "Perceptive Financing"). In accordance with ASC 825, the Company records these instruments at fair value with changes in fair value recorded in the Condensed Consolidated Statement of Operations and Comprehensive Loss. As a result of applying the fair value option, direct costs and fees related to the Perceptive Financing were expensed as incurred and were not deferred.
The Company elected to account for the Perceptive Financing using the fair value option, which allows for valuing the Credit Agreement and the Revenue Purchase and Sale Agreement in their entirety rather than bifurcation of the embedded derivatives.
Revenue Recognition
The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC Topic 606, Revenue from Contracts with Customer (“Topic 606”), the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the
goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied. The Company has identified one performance obligation, the delivery of FUROSCIX to its customers. The Company has not incurred any incremental costs associated with obtaining contracts with customers. The Company’s revenues consist solely of the sale of FUROSCIX to customers in the United States.
Product Net Sales
FUROSCIX was approved by the FDA on October 7, 2022. The Company launched sales of FUROSCIX in the first quarter of 2023 and its customers consist of specialty pharmacies (“SPs”) and specialty distributors ("SDs"). The Company recognizes revenue from product sales at a point in time, typically upon receipt of product at the SPs and SDs, the date at which the rights, title, interest and risk of loss are transferred. Revenues from product sales are recorded at the net sales price, which includes estimates of variable consideration that result from (a) prompt pay discounts, (b) rebates (c) co-pay assistance, and (d) product returns. Reserves are established for the estimates of variable consideration based on the amounts earned or to be claimed on the related sales. The reserves for variable consideration are reflected as either as a reduction to the related account receivable or as an accrued liability, depending on how the consideration is settled. The amount of variable consideration that is included in the transaction price may be constrained and is included in net product revenues only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company's estimates. If actual results vary from its estimates, the Company adjusts these estimates, which would affect net product revenue and earnings in the period such variances become known.
Sales Discounts : Sales discounts are agreed-upon discounts, from negotiated contracts, taken directly off the Company’s sales invoices. Sales discounts are recorded as an offset to revenue based on contractual terms at the time revenue from the sale is recognized.
Rebates : Allowance for rebates include mandated discounts under the Medicaid Drug Rebate Program and the Medicare Part D prescription drug benefit, TRICARE program and contractual rebates with commercial payers. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or statutory requirements. The allowance for rebates is based on contracted or statutory discount rates and expected utilization by benefit plan participants. The Company’s estimates for expected utilization of rebates are based on utilization data received from the SPs since product launch. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for prior quarters’ unpaid rebates. If actual future rebates vary from estimates, the Company may need to adjust prior period accruals, which would affect revenue in the period of adjustment.
Co-Payment Assistance: The Company offers co-payment assistance to commercially insured patients meeting certain eligibility requirements. Co-payment assistance is accrued at the time of product sale to SPs based on estimated patient participation and average co-pay benefit to be paid per a claim. The Company’s estimated amounts are compared to actual program participation and co-pay amounts paid using data provided by third-party administrators. If actual amounts differ from the original estimates the assumptions being applied are updated and adjustment for prior period accruals will be adjusted in the current period.
Product Returns: Consistent with industry practice, the Company offers SPs and SDs limited product return rights for damages, shipment errors, and expiring product, provided that the return is within a specified period around the product expiration date as set forth in the applicable individual distribution agreement. The Company does not allow product returns for product that has been dispensed to a patient. As the Company receives inventory reports from the SPs and has the ability to control the amount of product that is sold to the SPs, it is able to make a reasonable estimate of future potential product returns based on this on-hand channel inventory data and sell-through data obtained from the SPs. Currently, sales to SDs are limited and there is no access to on-hand channel inventory or sell through data. As these arrangements mature, the Company will utilize any data that they can provide as part of this analysis. In arriving at its estimate, the Company also considers historical product returns, the underlying product demand, and industry data specific to the specialty pharmaceutical distribution industry.
Research and Development Costs
Research and development costs are expensed as incurred. Nonrefundable advance payments, if any, for goods or services used in research and development are initially recorded as an asset and then recognized as an expense as the related goods are delivered or services are performed. Research and development expenses include contract services, consulting, salaries, materials and supplies and overhead.
Selling, General, and Administrative Costs
Selling, general, and administrative costs consist primarily of employee-related expenses , promotional activities, marketing, conferences and trade shows, professional services fees, including legal, audit and tax fees, insurance costs, general corporate expenses and allocated facilities-related expenses . Advertising costs are expensed as incurred in accordance with ASC 720-35, “Other Expense – Advertising Costs”, other than trade show expenses which are deferred until occurrence of the future event. Advertising costs for the years ended December 31, 2023 and 2024 were $ 79,000 and $ 1.1 million, respectively.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740 Income Taxes (“ASC 740”) . Deferred tax assets and liabilities are recorded to reflect the impact of temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured under enacted tax laws. A valuation allowance is required to offset any net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax asset will not be realized.
The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positions. The tax benefits recorded are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is “more likely than not” to be realized following resolution of any uncertainty related to the tax benefit, assuming that the matter in question will be raised by the tax authorities. Potential interest and penalties associated with such uncertain tax positions are recorded as a component of income tax expense. At December 31, 2023 and 2024 , the Company had no such accruals.
Stock-Based Compensation
Stock-based compensation expense for stock options is recognized based on the grant-date fair value using the Black-Scholes valuation model. Restricted stock units are valued at the fair market value per share of the Company’s common stock on the date of grant. The Company recognizes compensation expense only for those stock-based awards expected to vest after considering expected forfeitures. Cumulative compensation expense is at least equal to the compensation expense for vested awards. Stock-based compensation is recognized on a straight-line basis over the service period of each award.
Segments
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The Company’s chief executive officer is the CODM, and he uses consolidated financial information in determining how to allocate resources and assess performance. The Company has determined that it operates in one segment.
Recently Issued Accounting Standards
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2023-09, Income Taxes ("ASU 2023-09"), requiring entities to provide additional information in the income tax rate reconciliation and additional disclosures about income taxes paid. The new accounting guidance requires entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if the items meet a quantitative threshold. This guidance is effective for annual periods beginning after December 15, 2024, and should be applied prospectively, but entities have the option to apply it retrospectively for each period presented. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impact of the adoption of ASU 2023-09 and does not expect adoption to have a material effect on the Company’s consolidated financial statements or disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The amendments in the ASU provide new segment disclosure requirements for entities with a single reportable segment among other disclosure requirements. In addition, the amendments enhance interim disclosure requirements. The Company adopted this standard on a retrospective basis for the fiscal 2024 annual period, and for interim periods beginning December 29, 2024. The impact is limited to financial statement disclosures. See Note 15. Segments.
In November 2024, the FASB issued ASU 2024-03, Income Statement (Subtopic 220-40): Reporting Comprehensive Income-Expense Disaggregation Disclosures, which requires disaggregated disclosure of income statement expenses. ASU 2024-03 does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. This guidance is effective for annual periods beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of the adoption of ASU 2024-03 on the Company’s consolidated financial statements and disclosures.
3. Net Loss per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period without consideration of dilutive common stock equivalents. Diluted net loss per share is the same as basic net loss per common share, since the effects of potentially dilutive securities are anti-dilutive. Basic and diluted weighted average shares of common stock outstanding include the weighted average effect of outstanding pre-funded warrants for the purchase of shares of common stock for which the remaining unfunded exercise price is $ 0.001 per share.
Dilutive common stock equivalents are comprised of unexercised stock options outstanding under the Company’s equity plan, unexercised warrants and unvested restricted stock.
The following table sets forth the computation of basic and diluted net loss per share of common stock (in thousands, except shares and per share data):
For the year ended
December 31,
December 31,
Net loss
Weighted—average common shares
outstanding, basic and diluted
Net loss per share, basic and diluted
The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive (in common stock equivalent shares):
For the year ended
December 31,
December 31,
Stock options to purchase common stock
Warrants to purchase common stock
Unvested restricted stock
4. Investments
Cash in excess of the Company’s immediate requirements is invested in accordance with the Company’s investment policy that primarily seeks to maintain adequate liquidity and preserve capital.
A summary of the Company’s available-for-sale classified investments as of December 31, 2023 and 2024 consisted of the following (in thousands):
At December 31, 2023
Investments - Current:
Cost Basis
Accumulated Unrealized Gains
Accumulated Unrealized Losses
Fair Value
United States Treasury securities
Commercial paper
Corporate bonds
United States Government Agency securities
Total
The Company did not have any investments as of December 31, 2024.
5. Inventory
The Company's inventory balance consists of the following (in thousands):
As of December 31,
Raw materials
Work-in-process
Finished goods
Inventory is stated at the lower of cost and net realizable value and consists of raw materials, work-in-process and
finished goods. The Company began capitalizing inventory costs following FDA approval of FUROSCIX in October 2022 and has not recorded any significant inventory write-downs since that time. At December 31, 2023 and December 31, 2024, the Company had an allowance for excess, damaged, and obsolete inventory in the amount of $ 0 and $ 100,000 , respectively. The Company currently uses a limited number of third-party contract manufacturing organizations ("CMOs") to produce its inventory.
6. Property and Equipment
Purchased property and equipment consist of the following as of December 31, 2023 and 2024 (in thousands):
ESTIMATED
USEFUL LIFE
Office equipment
5 years
Office furniture
7 years
Computer equipment
3 years
Leasehold improvements
Life of lease
Less: Accumulated depreciation
Property and equipment, net
Depreciation expense for the years ended December 31, 2023 and 2024 was $ 24,000 and $ 20,000 , respectively, and is included in operating expenses.
7. Accrued Expenses
Accrued expenses at December 31, 2023 and 2024 consist of (in thousands):
Employee compensation and related costs
Sales allowances and related costs
Revenue purchase and sale agreement
Contract research and development
Consulting and professional service fees
Manufacturing costs
Royalty
Inventory in transit
Other
Total accrued expenses
8. Income Taxes
The Company accounts for income taxes in accordance with ASC 740, which requires an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for the years in which taxes are expected to be paid or recovered. The tax benefit arising from the Company’s net loss has been offset by an increase in the valuation allowance.
Accordingly, the Company had no net income tax provision or benefit during the years ended December 31, 2023 and 2024 . Components of the net deferred tax assets at December 31, 2023 and 2024 are as follows (in thousands):
Deferred tax assets:
Federal net operating loss carryforwards
State net operating loss carryforwards
Research and development tax credits
Accrued liabilities
Stock-based compensation
Depreciation and amortization
Capitalized research and development costs
Lease liabilities
Other
Inventory and bad debt reserve
Charitable contributions
Revenue purchase and sale liability
Total deferred tax assets
Deferred tax liabilities:
Right-of-use lease assets
Other
Total deferred tax liabilities
Valuation allowance
Net deferred tax assets
At December 31, 2024 , the Company had available federal net operating loss carryforwards of $ 17.5 million, which expire at various dates through 2037 , and $ 180.3 million, which may be carried forward indefinitely. At December 31, 2024 , the Company had available state net operating loss carryforwards of $ 185.5 million, which expire at various dates through 2044 , and $ 3.5 million, which may be carried forward indefinitely. In assessing the realizability of net deferred tax assets, management considers whether it is more likely than not that the net deferred tax assets will be realized. The ultimate realization of net deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing future deductible amounts become deductible. Management has established a full valuation allowance against the net deferred tax assets at December 31, 2023 and 2024 since it is more likely than not that these future tax benefits will not be realized. During 2024 , the valuation allowance increased by $ 20.9 million.
A reconciliation of the beginning and ending amount of the valuation allowance is as follows (in thousands):
Beginning valuation allowance
Current year - increases
Ending valuation allowance
At December 31, 2024, the Company had federal and state research and development credit carryforwards of $ 4.5 million and $ 1.1 million, respectively. The net credit carryforwards may be used to offset future income taxes and expire at various dates through 2044 . Under the provisions of the Internal Revenue Code ("IRC"), the net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50 %, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. The Company had performed an IRC 382 study during 2017 which resulted in identifying an ownership change had occurred on the initial public offering date of 11/21/2017. For these reasons, in the event the Company experiences a change of control, they may not be able to utilize a material portion of the net operating losses or research and development credit carryforwards even if they attain profitability.
The Tax Cuts and Jobs Act ("TCJA") requires taxpayers to capitalize and amortize research and experimental ("R&D") expenditures under section 174 for tax years beginning after December 31, 2021. These rules became effective for the Company during the year ended December 31, 2022. As a result, for tax purposes, the Company has capitalized R&D costs of $ 11.6 million and $ 10.7 million for the years ended December 31, 2023 and 2024, respectively. The Company will amortize these costs for tax purposes over 5 years if the R&D was performed in the U.S. and over 15 years if the R&D was performed outside the U.S.
A reconciliation of income tax (expense) benefit at the statutory federal income tax rate and income taxes as reflected in the consolidated financial statements at December 31, 2023 and 2024 are as follows:
Federal income tax at statutory rate
State income tax, net of federal benefit
Research and development credits
Book compensation related to stock options
Change in income tax rate
Other
Increase in valuation allowance
Permanent differences
Effective tax rate
The Company files tax returns in the United States, Massachusetts and other states. The tax years 2020 through 2024 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily the United States federal and Massachusetts. Carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they have or will be used in a future period. The Company is currently not under examination by the Internal Revenue Service or any other jurisdictions for any tax years. The Company recognizes both accrued interest and penalties related to
unrecognized benefits in income tax expense. The Company has not recorded any interest or penalties on any unrecognized tax benefits since its inception.
A reconciliation of the beginning and ending amount of uncertain tax benefits is as follows (in thousands):
Beginning uncertain tax benefits
Prior year - increases
Current year - increases
Ending uncertain tax benefits
9. Fair Value of Financial Instruments
The FASB ASC Topic, Fair Value Measurements and Disclosures ( “ASC 820” ), provides a fair value hierarchy, which classifies fair value measurements based on the inputs used in measuring fair value. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:
Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and observable.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The carrying values of the Company’s cash, prepaid expenses and deposits approximate their fair values due to their short-term nature.
The following tables summarize the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands):
As of December 31, 2023
TOTAL
Quoted Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Cash equivalents
Total cash equivalents
United States Treasury securities
Commercial paper
Corporate bonds
United States Government Agency securities
Investments
Total
Liabilities:
Derivative liability
Total
As of December 31, 2024
TOTAL
Quoted Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Cash equivalents
Total
Liabilities:
Term loan
Revenue purchase and sale liability
Total
The Company measures the term loan and the revenue purchase and sale liability from the Perceptive Financing at fair value based on significant inputs not observable in the market, which causes them to be classified as Level 3 measurements within the fair value hierarchy. These valuations use assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. Changes in the fair value of the Perceptive Financing related to updated assumptions and estimates are recognized within the Consolidated Statements of Operations and Comprehensive Loss.
The fair value of the term loan was measured as of December 31, 2024, using a binomial lattice model to account for the dynamic nature of interest rate fluctuations and the strategic exercise of the certain optional prepayment features.
The fair value of the revenue purchase and sale liability was measured as of December 31, 2024, using the Monte Carlo simulation method (“MCS”), utilizing future cash flow projections and assumptions of the timing and probability of certain contingent events, such as the occurrence of a change of control and the exercise of call and put options. A discount rate of 21.0 % was used.
The fair values of the term loan and the revenue purchase and sale liability may change significantly as additional data is obtained, impacting the Company’s assumptions regarding probabilities of outcomes used to estimate the fair value of the liabilities. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts, and such changes could materially impact the Company’s results of operations in future periods.
Changes in the fair value of the Company’s Level 3 liabilities for the year ended December 31, 2024 are as follows:
Derivative Liability
Term Loan
Revenue purchase and sale liability
At December 31, 2023
Initial fair value
Change in fair value
Repayments
At December 31, 2024
10. Financial Liabilities
Perceptive Financing
The following table presents the fair value of the Company's debt balance as of December 31, 2024 (in thousands):
DECEMBER 31,
Par value of the term loan
Initial fair value adjustment
Fair value of the term loan at issuance
Change in fair value of the term loan
Total fair value of the term loan
On the Closing Date, the Company entered into the Credit Agreement. The Credit Agreement establishes a $ 75.0 million term loan facility, consisting of (i) $ 50.0 million funded on the Closing Date ("Tranche A Loan") and (ii) subject to satisfaction of certain conditions, $ 25.0 million (together with the Tranche A Loan, collectively, the "Term Loan") that the Company may borrow in a single borrowing on or prior to March 31, 2026.
Borrowings under the Term Loan bear interest at a rate per annum equal to the one-month term SOFR (subject to a 3.25 % floor), plus an applicable margin of 6.75 %, payable monthly in arrears. There will be no scheduled repayments of outstanding principal on the Term Loan prior to August 9, 2029 (the “Maturity Date”). The Company may voluntarily prepay the outstanding Term Loan, subject to a yield protection premium equal to (i) 5.0 % of the principal amount of the Term Loan prepaid, if prepaid on or prior to the first anniversary of the Closing Date, (ii) 3.0 % of the principal amount of the Term Loan if prepaid after the first anniversary of the Closing Date through and including the second anniversary of the Closing Date, (iii) 1.0 % of the principal amount of the Term Loan if prepaid after the second anniversary of the Closing Date through and including the third anniversary of the Closing Date, with no prepayment premium due after the third anniversary of the Closing date through the Maturity Date.
On the Closing Date, the Company was required to issue to the Lenders of such Term Loan warrants to purchase 300,000 of shares of the Company’s common stock, in the aggregate (the “ Warrant”), at an exercise price of $ 4.5902 . Upon the completion of the sale of common stock on August 13, 2024 (Note 11), the exercise price of the warrants was adjusted to $ 4.00 according to the terms of the agreement. Upon inception, the Company
evaluated the warrants and determined that they met all the requirements for equity classification under ASC Topic 815 Derivatives and Hedging ("ASC 815"). This transaction was accounted for as a detachable warrant at its fair value, using the residual method, and is recorded as an increase to additional paid-in-capital on the consolidated statement of stockholder’s equity in the amount of $ 1.6 million. The Company used the Black-Scholes option pricing model to determine the fair value of the warrants. Assumptions included the fair market value per share of common stock on the valuation date of $ 4.33 , the exercise price per warrant equal to $ 4.00 , the expected volatility of 87.5 %, the risk-free interest rate of 3.83 %, the contractual term of 6 years and the absence of a dividend. The Warrant is immediately exercisable, and the exercise period will expire 6 years from the date of issuance.
In addition to the Warrant, the Company will be required to issue to the Lenders warrants to purchase 200,000 of shares of the Company's common stock (the "Tranche B Warrant") upon the draw down of the second tranche of the Term Loan on or prior to March 31, 2026. These warrants were accounted for using the residual method and were recorded on a relative fair value basis, resulting in an increase to additional paid-in capital on the consolidated statement of stockholder's equity in the amount of $ 0.2 million. The Company used the Black-Scholes option pricing model to determine the fair value of the warrants. Assumptions included the fair market value per share of common stock on the valuation date of $ 4.33 , the exercise price per warrant equal to $ 4.00 , the expected volatility of 82.5 %, the risk-free interest rate of 3.87 %, the contractual term of 7.64 years and the absence of a dividend. The Tranche B Warrant will expire 6 years from the date of issuance.
The Company's obligations under the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement) will be guaranteed by any domestic subsidiaries of ours that become Guarantors (as defined in the Credit Agreement), subject to certain exceptions. The Borrowers’ and the Guarantors’ (collectively, the “Loan Parties”) respective obligations under the Credit Agreement and the other Loan Documents are secured by first priority security interests in substantially all assets of the Loan Parties, subject to certain customary thresholds and exceptions.
The Credit Agreement contains customary representations, warranties and affirmative and negative covenants, including financial covenants requiring the Company to (i) maintain certain levels of cash and cash equivalents in accounts subject to a control agreement in favor of the Agent of at least $ 5.0 million at all times after the Closing Date and (ii) meet minimum quarterly net sales targets described in the Credit Agreement.
In addition, the Credit Agreement contains customary events of default that entitle the Agent to cause the Company's indebtedness under the Credit Agreement to become immediately due and payable, and to exercise remedies against the Loan Parties and the collateral securing the Term Loan, including cash. Under the Credit Agreement, an event of default will occur if, among other things, the Company fails to make payments under the Credit Agreement (subject to specified periods), the Company or its subsidiaries breach any of the covenants under the Credit Agreement (subject to specified cure periods with respect to certain breaches), a material adverse change occurs, the Company, its subsidiaries or its respective assets become subject to certain legal proceedings, such as bankruptcy proceedings, the Company and/or its subsidiaries are unable to pay its debts as they become due or default on contracts with third parties which would permit the holder of indebtedness in excess of a certain threshold to accelerate the maturity of such indebtedness or that could cause a material change. Upon the occurrence and for the duration of an event of , an additional interest rate equal to 3.0 % per annum may apply to all obligations owed under the Credit Agreement.
On the Closing Date, the Company also entered into the Revenue Purchase and Sale Agreement with the Purchaser. Under the Revenue Purchase and Sale Agreement, in exchange for the Purchaser's payment to the Company of a purchase price of up to $ 50.0 million, in the aggregate, the Company has agreed to sell to the Purchaser its right to receive payment in full of a tiered single digit percentage of net sales of FUROSCIX. The initial sale of the Revenue Payment under the Revenue Purchase and Sale Agreement in the amount of $ 25.0 million took place on the Closing Date. The Purchaser’s right to receive the Revenue Payment terminates and the Company no longer has the obligation to pay Purchaser Revenue Payments once the Purchaser receives 200.0 % (subject to reductions on September 30, 2027 and September 30, 2029 depending on the amount of Revenue Payments received by such dates) of the Purchase Price. The Company may also buy-out the Purchaser’s rights to receive the Revenue Payments by paying Purchaser a tiered multiple on the Purchaser Price.
The Revenue Purchase and Sale Agreement contains various representations and warranties, including with respect to organization, authorization, and certain other matters, certain covenants with respect to payment,
reporting, intellectual property, in-licenses, out-licenses, and certain other actions, indemnification obligations and other provisions customary for transactions of this nature.
Certain conversion and redemption features of the Perceptive Financing would typically be considered derivatives that would require bifurcation. In lieu of bifurcating various features in the agreements, the Company has elected the fair value option for the Perceptive Financing and will record the changes in the fair value within the accompanying condensed consolidated statements of operations at the end of each reporting period. The initial fair value of the Term Loan and the Revenue Purchase and Sale Agreement were $ 48.1 million and $ 25.0 million, respectively. As of December 31, 2024 , the fair value of the Term Loan and the Revenue Purchase and Sale Agreement were $ 51.4 million and $ 27.8 million, respectively. Refer to Note 9 , “Fair Value of Financial Instruments” for additional details regarding the fair value measurement. The Revenue Payment payable in connection with the Revenue Purchase and Sale Agreement was $ 971,000 and was recorded within accrued expenses on the consolidated balance sheet at December 31, 2024.
In conjunction with the closing of the Perceptive Financing, the Company used a portion of the proceeds to prepay all outstanding loans under the Oaktree Agreement (as defined below), including the exit fee, on the Closing Date.
As of December 31, 2024, future principal payments due under the Perceptive Agreement are as follows (in thousands):
Year ended:
December 31, 2025
December 31, 2026
December 31, 2027
December 31, 2028
December 31, 2029
Thereafter
Total minimum principal payments
Oaktree Agreement
The following table presents the carrying value of the Company's Oaktree term loan as of December 31, 2023 (in thousands):
DECEMBER 31,
Face value
Discount
Total
Less: short-term debt
Long-term debt
On October 13, 2022 (“Oaktree Closing Date”), the Company entered into a Credit Agreement and Guaranty (the “Oaktree Agreement”) with Oaktree Fund Administration, LLC as administrative agent, and the lenders party thereto (collectively “Oaktree”) to borrow up to $ 100.0 million in three tranches with a maturity date of October 13, 2027 .
The first tranche of $ 50.0 million was drawn immediately. In connection with entering into the Oaktree Agreement, the Company granted warrants to Oaktree to purchase up to an aggregate of 516,345 shares of the Company’s common stock at an exercise price of $ 5.40 per share. Upon inception, the Company evaluated the warrants and determined that they met all the requirements for equity classification under ASC Topic 815 Derivatives and Hedging ("ASC 815"). This transaction was accounted for as a detachable warrant at its fair value, using the relative fair value method, which is based on a number of unobservable inputs and is recorded as an increase to additional paid-in-capital on the consolidated statement of stockholder’s equity. The relative fair value of the warrants, $ 2.0 million, was reflected as a discount to the term loan and was amortized using the effective interest method. The Company used the Black-Scholes option pricing model to determine the fair value of the warrants.
Assumptions included the fair market value per share of common stock on the valuation date of $ 5.50 , the exercise price per warrant equal to $ 5.40 , the expected volatility of 77 %, the risk-free interest rate of 4.11 %, the contractual term of 7 years and the absence of a dividend. The warrants are immediately exercisable and the exercise period expires on October 13, 2029.
The Company identified a number of embedded derivatives that required bifurcation from the term loan and that were separately accounted for in the consolidated financial statements as one compound derivative liability. Certain of these embedded features include contingent interest rate reset upon event of default, contingent put options, including change in control and going concern provisions, and additional costs as a result of changes in law. These embedded features met the criteria requiring these to be bifurcated because they were not clearly and closely related to the host instrument in accordance with ASC 815-15. The fair value of the embedded derivative liabilities associated with the term loan was estimated using a hybrid between the discounted cash flow and Monte Carlo simulation methods. This involved significant Level 3 inputs and assumptions including an estimated probability and timing of a change in control. The initial recognition of the embedded derivative liability upon issuance of the Term Loan was $ 8.9 million.
Prepayments of the term loan, in whole or in part, were subject to a prepayment fee. The Company was also required to pay an exit fee upon any payment or prepayment equal to 2.0 % of the aggregate principal amount of the loans funded under the Oaktree Agreement.
In connection with the Credit Agreement, the Company paid off all unpaid borrowings under the Oaktree Agreement on August 9, 2024, including the $ 1.0 million exit fee and a prepayment premium of $ 2.6 million. For the years ended December 31, 2023 and 2024, the Company recorded $ 2.0 million and $ 1.5 million related to the amortization of the debt discount associated with the Oaktree Agreement, respectively. For the years ended December 31, 2023 and 2024, the Company recorded $ 149,000 and $ 107,000 related to the amortization of the exit fee associated with the Oaktree Agreement, respectively.
11. Stockholders’ Equity
Common Stock
At December 31, 2023 and 2024 , the Company had 150,000,000 shares of common stock authorized with a par value of $ 0.0001 . There were 35,968,510 and 50,095,689 shares issued and outstanding at December 31, 2023 and 2024, respectively. Voting, dividend and liquidation rights of the holders of the common stock are subject to the Company’s articles of incorporation, corporate bylaws and underlying shareholder agreements.
Reserved Shares
The Company has reserved 5,530,823 and 736,229 shares of common stock for the exercise of outstanding options to purchase common stock and for the vesting of RSUs respectively.
2021 At-the-Market Issuance Sales Agreement
On March 23, 2021, the Company entered into an Open Market Sale Agreement (the “2021 ATM Agreement”) with Cowen and Company, LLC (“Cowen”) with respect to an at-the-market offering program under which the Company could offer and sell shares of its common stock (the “2021 ATM Shares”), having an aggregate offering price of up to $ 50.0 million through Cowen as its sales agent. The Company agreed to pay Cowen a commission up to 3.0 % of the gross sales proceeds of such 2021 ATM Shares. On March 13, 2024, the Company amended and restated the 2021 ATM Agreement and entered into a new $ 50.0 million Open Market Sales Agreement with Cowen (the "2024 ATM Agreement"). As of March 13, 2024, the Company had sold a total of 1,726,043 2021 ATM Shares under the 2021 ATM Program at a weighted average gross selling price of $ 9.01 per share for net proceeds of $ 15.2 million.
2024 At-the-Market Issuance Sales Agreement
Pursuant to the 2024 ATM Agreement, the Company could offer and sell shares of its common stock (the “2024 ATM Shares”), having an aggregate offering price of up to $ 50.0 million through Cowen as its sales agent (the
"2024 ATM Program"). The offering and sale of the 2024 ATM Shares will be made pursuant to the Company's shelf registration statement on Form S-3, which was declared effective by the SEC on March 22, 2024 (the "2024 Registration Statement"). There were no shares issued under the 2024 ATM Program as of December 31, 2024.
Sale of Common Stock
On August 13 2024, the Company completed an underwritten public offering of 13,875,000 shares of its common stock, $ 0.0001 par value per share (the "2024 Offering Shares"), and, in lieu of shares of common stock to certain select investors, pre-funded warrants to purchase up to an aggregate of 500,000 shares of common stock at an exercise price equal to $ 0.001 per share, pursuant to the 2024 Registration Statement.
The 2024 Offering Shares were sold at an offering price of $ 4.00 per share. The pre-funded warrants were sold at an offering price of $ 3.999 per underlying share, which was equal to the price per share of common stock being sold in the public offering, minus $ 0.001 , which is the exercise price per share of the pre-funded warrants. The pre-funded warrants were accounted for as equity instruments. Net proceeds of the offering were $ 53.5 million, after deducting underwriting discounts, commissions and offering expenses.
Preferred Stock
At December 31, 2023 and 2024 , the Company had 10,000,000 shares of preferred stock authorized with a par value of $ 0.0001 and no shares of preferred stock were issued or outstanding.
12. Stock-Based Compensation
Stock Options
In October 2017, the board of directors approved the 2017 Stock Option and Incentive Plan (the “2017 Stock Plan”) which became effective in November 2017 , upon the closing of the Company’s IPO. The 2017 Stock Plan will expire in October 2027 . Under the 2017 Stock Plan, the Company may grant incentive stock options, non-statutory stock options, restricted stock awards, RSUs and other stock-based awards. The Company’s 2014 Stock Incentive Plan (the “2014 Stock Plan”) terminated in November 2017 effective upon the completion of the Company’s IPO. No additional options will be granted under the 2014 Stock Plan. At December 31, 2024 , there were 555,427 options outstanding under the 2014 Stock Plan.
At December 31, 2024 , there were 8,769,977 shares of the Company’s common stock authorized for issuance under the 2017 Stock Plan, including 366,823 options that have been forfeited from the 2014 Stock Plan.
At December 31, 2024 , there were 3,079,779 options available for issuance under the 2017 Stock Plan and 4,887,744 options outstanding and 736,229 RSUs outstanding.
On February 1, 2023, the Board of Directors of the Company adopted the 2023 Employment Inducement Award Plan (the "Inducement Plan") and, subject to the adjustment provisions of the Inducement Plan, reserved 500,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Plan. At December 31, 2024, there were 412,348 options available for issuance under the Inducement Plan, and 87,652 options outstanding.
Awards granted under the 2017 Stock Plan and the Inducement Plan have a term of ten years . Vesting of awards under the 2017 Stock Plan and the Inducement Plan is determined by the compensation committee of the board of directors but is generally over one to four-year terms.
The fair value of options at date of grant was estimated using the Black-Scholes option-pricing model with the following assumptions:
Risk-free interest rate
Expected dividend yield
Expected life
5.5 — 7.0 years
5.5 — 6.7 years
Expected volatility
Weighted-average grant date
fair value
The expected life of the awards is estimated based on the simplified method, which calculates the expected life based upon the midpoint of the term of the award and the vesting period. The Company uses the simplified method because it does not have sufficient option exercise data to provide a reasonable basis upon which to estimate the expected term. The Company has no history of paying dividends nor does management expect to pay dividends over the contractual terms of these options. The risk-free interest rates are based on the United States Treasury yield curve in effect at the time of grant, with maturities approximating the expected life of the stock options.
The following table summarizes information about stock option activity during 2023 and 2024 (in thousands, except share and per share data):
NUMBER OF
SHARES
WEIGHTED-
AVERAGE
EXERCISE
PRICE
WEIGHTED-
AVERAGE
REMAINING
CONTRACTUAL
TERM
AGGREGATE
INTRINSIC
VALUE
Outstanding, December 31, 2022
Granted
Exercised
Forfeited
Outstanding, December 31, 2023
Granted
Exercised
Forfeited
Outstanding, December 31, 2024
Vested and exercisable, December 31, 2024
Vested and expected to vest, December 31, 2024
The following table summarizes information about RSU activity during 2023 and 2024:
RSUs
AVERAGE GRANT DATE FAIR VALUE (IN DOLLARS PER SHARE)
RSUs outstanding, December 31, 2022
Granted
Vested
Forfeited
RSUs outstanding, December 31, 2023
Granted
Vested
Forfeited
RSUs outstanding, December 31, 2024
The number of RSUs vested includes shares of common stock withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements.
During 2023 and 2024 , the Company received $ 354,000 and $ 87,000 , respectively, upon exercise of stock options. The intrinsic value of the options exercised in 2023 and 2024 was $ 244,000 and $ 65,000 , respectively. 24,343 options were exercised on December 29, 2023 and the shares settled on January 2, 2024. Cash received on January 2, 2024 related to this exercise totaled $ 141,000 . This share issuance was recognized on the Company's Condensed Consolidated Statements of Stockholders' Equity for the quarter ending March 31, 2024.
Unrecognized compensation expense related to unvested options as of December 31, 2024 was $ 4.7 million and will be recognized over the remaining vesting periods of the underlying awards. The weighted-average period over which such compensation is expected to be recognized is 2.3 years. Unrecognized compensation expense related to unvested RSUs as of December 31, 2024 was $ 2.3 million and will be recognized over the remaining vesting periods of the underlying awards. The weighted-average period over which such compensation is expected to be recognized is 2.7 years.
During the three months ended June 30, 2023, as part of a severance arrangement, the Company extended the exercise period to six months for 111,532 vested options, with a weighted exercise price of $ 6.25 , and recorded incremental stock-based compensation of $ 87,000 .
Employee Stock Purchase Plan
In October 2017, the board of directors approved the 2017 Employee Stock Purchase Plan (“the ESPP”) which became effective in November 2017, upon the closing of the Company’s IPO. As part of the ESPP, eligible employees may acquire an ownership interest in the Company by purchasing common stock, at a discount, through payroll deductions. Eligible employees who elected to participate were able to participate in the ESPP beginning September 1, 2021.
During 2023 and 2024 , 90,125 and 140,948 shares of common stock were issued under the ESPP, respectively. As of December 31, 2024, there were 1,321,618 shares of common stock available for issuance under the ESPP.
The Company recorded stock-based compensation expense in the following expense categories of its accompanying consolidated statements of operations and comprehensive loss for employees, directors and non-employees during the years ended December 31, 2023 and 2024 as follows (in thousands):
Research and development
Selling, general and administrative
Total
13. Commitments and Contingencies
Operating Leases
The Company entered into noncancelable operating leases for office facilities located in Lexington, Massachusetts and Burlington, Massachusetts through December 31, 2022 and November 30, 2023 , respectively. These leases were terminated as of December 31, 2023.
In September 2023, the Company entered into a sublease agreement, pursuant to which the Company agreed to sublease office space for its new headquarters in Burlington, Massachusetts, under a non-cancelable operating lease, which expires on August 31, 2029 .
Rent expense under the operating leases totaled $ 0.6 million and $ 0.4 million for the years ended December 31, 2023 and 2024, respectively.
Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements. The leases generally also include real estate taxes and common area maintenance charges in the annual rental payments.
Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does no t record a related lease asset or liability for such leases.
The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of December 31, 2024 (in thousands):
Year ended:
December 31, 2025
December 31, 2026
December 31, 2027
December 31, 2028
December 31, 2029
Thereafter
Total minimum lease payments
Less imputed interest
Total
Lease cost:
Operating lease cost
Short-term lease cost
Sublease income
Total lease cost
Other information
Cash paid for amounts included in the
measurement of liabilities
Operating cash flows from operating leases
Weighted-average remaining lease term -
operating leases
5.6 years
4.5 years
Weighted-average discount rate -
operating leases
Research and Development Agreements
As part of the Company’s research and development efforts, the Company enters into research and development agreements with unrelated companies. These agreements contain varying terms and provisions which include fees and milestones to be paid by the Company. Some of these agreements also contain provisions which require the Company to make payments for exclusivity in the development of products in the area of loop diuretics.
Contingencies
The Company follows subtopic 450-20 of the FASB ASC to report accounting for contingencies.
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
14. 401(k) Savings Plan
In July 2014, the Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code covering all of its employees. Employees may make contributions by withholding a percentage of their salary. The plan includes an employer match equal to 100 % on the first 3 % of deferred compensation and an additional 50 % on the next 2 % of deferred compensation. During the years ended December 31, 2023 and 2024 , the Company has recognized compensation expense of $ 712,000 and $ 934,000 , respectively, for the employer match contribution.
15. Segment
The Company operates in a single segment. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. The chief operating decision maker assesses performance for the segment and decides how to allocate resources based on the net income (loss) that also is reported on the consolidated statement of operations as consolidated net income (loss). Net income (loss) is used to monitor budget versus actual results. monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing management’s compensation. The Company’s chief operating decision maker is the chief executive officer .
Segment net loss for the years ended December 31, 2023 and 2024 is as follows (in thousands):
YEARS ENDED DECEMBER 31,
Product revenues, net
Less:
Cost of product revenues
Research and development expenses
Selling, general and administrative expenses
Other segment items (1)
Loss on extinguishment of debt
Change in fair value of term loan
Change in fair value of revenue purchase and sale liability
Other income
Interest income
Interest expense
Segment net loss
(1) Other segment items include stock-based compensation expense, facility-related costs and depreciation.
16. Subsequent Events
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The Company evaluated subsequent events through the issuance date of the financial statements and concluded that no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements.
