TELA BIO, INC.
You should read the following discussion and analysis of our financial condition
and results of operations and the consolidated financial statements and the
related notes included elsewhere in this Annual Report. In addition to
historical financial information, the following discussion contains
forward-looking statements based upon our current plans, expectations and
beliefs that involve risks, uncertainties and assumptions. Our actual results
may differ materially from those described in or implied by these
forward-looking statements as a result of many factors, including those set
forth under the section titled "Risk Factors" and in other parts of this Annual
Report.
Overview
We are a commercial-stage medical technology company focused on providing
innovative soft-tissue reconstruction solutions that optimize clinical outcomes
by prioritizing the preservation and restoration of the patient's own anatomy.
Our growing product portfolio is purposefully designed to leverage the patient's
natural healing response while minimizing long-term exposure to permanent
synthetic materials. We are committed to delivering our advanced technologies
with a strong economic value proposition to assist surgeons and institutions in
providing next-generation soft-tissue repair solutions to more patients
worldwide.
Our first portfolio of products, the OviTex Reinforced Tissue Matrix ("OviTex"),
addresses unmet needs in hernia repair and abdominal wall reconstruction by
combining the benefits of biologic matrices and polymer materials while
minimizing their shortcomings, at a cost-effective price. Our OviTex products
have received 510(k) clearance from the U.S. Food and Drug Administration
("FDA"), which clearance was obtained and is currently held by Aroa Biosurgery
Ltd. ("Aroa"), our exclusive manufacturer and supplier. Interim results of our
single arm, multicenter post-market clinical study, which we refer to as our
BRAVO study, were recently published in the Journal of Clinical Medicine . The
interim analysis of patients reaching 12-month follow-up suggests that OviTex is
safe and clinically effective for treatment of ventral hernias. The recurrence
rate was 2.7% at 12 months. Twenty-four month follow-up has been completed for
all possible patients in our BRAVO study, and the recurrence rate remains below
5%. Final analysis is underway and full results will be presented in a future
peer-reviewed publication. Our second portfolio of products, the OviTex PRS
Reinforced Tissue Matrix ("OviTex PRS"), addresses unmet needs in plastic and
reconstructive surgery. In April 2019 , our OviTex PRS products received 510(k)
clearance from the FDA, which clearance was obtained by Aroa and is currently
held by us.
We began commercialization of our OviTex products in the U.S. in July 2016 . Our
OviTex portfolio consists of multiple products for hernia repair and abdominal
wall reconstruction, inguinal hernia repair and hiatal hernia repair. In
addition, to address the significant increase in the number of robotic-assisted
hernia repairs over the last several years, we have designed an OviTex product
line for use in laparoscopic and robotic-assisted surgery ("OviTex LPR"), which
we began commercializing in November 2018 . We subsequently expanded the OviTex
LPR product line in December 2019 .
OviTex PRS is indicated for use in implantation to reinforce soft-tissue where
weakness exists in patients requiring soft-tissue repair or reinforcement in
plastic and reconstructive surgery. We commenced a limited launch in May 2019
and have gathered clinical feedback from our initial surgeon users. Based on
this feedback, we expanded our commercial launch in June 2020 and expect to
continue to expand our surgeon network. We have also engaged in discussions with
the FDA regarding an Investigational Device Exemption protocol to study the
safety and effectiveness of our OviTex PRS product for an indication in breast
reconstruction surgery. The FDA has stated that a premarket approval, rather
than a 510(k) clearance, will be required for such an indication.
We market our products through a single direct sales force, predominantly in the
U.S. , augmented by distributors in certain European countries. We have invested
in our direct sales and marketing infrastructure to expand our presence and to
promote awareness and adoption of our products. As of December 31, 2021 , we had
46 sales territories in the United States . As part of our commercial strategy,
we plan to continue to invest in our commercial organization by hiring
additional account managers, clinical development specialists and administrative
support staff to support and service new accounts for soft-tissue reconstruction
procedures. Additionally, we believe we can enhance the productivity of our
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sales force by improving customer segmentation and targeting, leveraging digital channels to engage customers and utilizing engagement analytics to support development.
We announced, inNovember 2021 , that we entered into a distribution agreement withNext Science Technologies Pty Limited ("Next Science"), a medical technology company, granting us the exclusive rights to sell and market Next Science's proprietary antimicrobial surgical wash with XBIO® technology across theU.S. plastic reconstructive market. We will commence private label marketing of the solution for plastic surgery in 2022. Next Science's XBIO Technology delivers an advanced option for surgical infection control by addressing the biofilms that make bacteria more resistant to traditional antimicrobial agents, disinfectants and host immune defenses. We believe the infection control solution will expand our service offerings and diversify our supplier base as we continue to create a soft-tissue restoration portfolio. We are currently devoting research and development resources to develop additional versions of our OviTex hernia product lines, including self-adhering technology to further enhance product compatibility in robotic procedures, as well as additional versions of our OviTex PRS product lines. We are also working to develop new product features and designs for both our existing OviTex and OviTex PRS products. Additionally, we are exploring new packaging technology to increase the shelf life of our OviTex and OviTex PRS products. We intend to continue to make investments in research and development efforts to develop improvements and enhancements. We are also assessing strategic partnerships with medical device companies whereby we may enter into distribution, product development and/or licensing agreements for products complimentary to, or related to, existing and future products in our distribution channel, which could result in the payment of low single digit royalties or other product acquisition costs. Our products are manufactured by Aroa at their FDA registered and ISO 13485 facility inAuckland, New Zealand . We maintain our Aroa License for the exclusive supply of ovine rumen and manufacture of our reinforced tissue matrices under which we purchase product from Aroa at a fixed cost equal to 27% of our net sales of licensed products. This revenue sharing arrangement allows us to competitively price our products and pass along cost-savings to our customers. The vast majority of our revenue to date has been generated by the sale of our OviTex products. Our revenue for the years endedDecember 31, 2021 and 2020 was$29.5 million and$18.2 million , respectively, an increase of$11.3 million , or 62%. Net loss increased from$28.8 million for the year endedDecember 31, 2020 to$33.3 million for the year endedDecember 31, 2021 , an increase of$4.5 million , or 16%. We have not been profitable since inception and as ofDecember 31, 2021 , we had an accumulated deficit of$229.9 million . We expect to incur losses for the foreseeable future.
Business Update Regarding COVID-19
Our business, results of operations and commercial operations has been impacted by the ongoing COVID-19 pandemic and the development of variants of COVID-19. We continue to closely monitor developments related to the ongoing COVID-19 pandemic and our decisions will continue to be driven by the health and well-being of our employees, our customers, and their patients while maintaining operations to support our customers and their patients in the near-term. These developments include:
Surgery Deferrals: To date, among other impacts on our business related to the
pandemic, physicians and their patients are required by state mandates, or are
choosing, to defer elective surgery procedures in which our products otherwise
might be used. We believe our revenue was slightly impacted during the first
quarter of 2021, mostly in
corresponding lower surgical procedural volumes, though these were not at the
levels seen in early 2020. This impact on surgical procedures subsided
throughout the remaining months of the first quarter and the second quarter of
? 2021. However, we believe our revenue in
also impacted due to the surge of new COVID-19 cases relating to new variants.
The extent of future elective surgery deferrals and the timing and extent of
the economic impact of the pandemic on us, and the pace at which the economy
recovers therefrom, cannot be determined at this time, particularly in light of
recent surges and the continued emergence of new variants. Further, the
reallocation of hospital resources to treat COVID-19 may continue to cause a
financial strain on healthcare systems and reduce procedural volume. We
continue to work closely with our hospital and physician
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customers and suppliers to navigate through this unforeseen event whilemaintaining flexible operations to respond to the ongoing COVID-19 pandemic.
Operations: Our sales, marketing and research and development efforts have
continued since the outbreak of the pandemic. As access to hospitals continues
to evolve throughout this pandemic and vary from hospital to hospital and state
to state, our sales team has continued to adapt to changing conditions within
their regions. Most of our sales professionals have used a virtual selling
program, which includes virtual sales calls with physicians, peer-to-peer
discussions with key opinion leaders, physician webinars and sales professional
? training to supplement our in-person sales and marketing programs. We expect to
continue to adapt our sales and marketing plans as we continue to gain better
visibility into the effects of the ongoing COVID-19 pandemic on our business.
As Aroa is located and headquartered in
mitigation efforts have to date been effective, our manufacturing and supply
chain has largely been uninterrupted. However, it could be disrupted in the
future because of the pandemic due to staffing shortages, production slowdowns,
stoppages, travel and shipping restrictions or disruptions in delivery systems.
Product Development: We continue to evaluate the timing and scope of planned
? next generation product development and commercialization initiatives in light
of the ongoing COVID-19 pandemic and we plan to continue to prioritize and
invest in our critical R&D and clinical programs.
2021 Results: During
demand for our products as COVID-19 cases and related hospitalizations
increased. We saw improvement in our business during the second half of the
first quarter and during the second quarter, however, we believe our revenue in
?
cases relating to new variants. The timing, extent and continuation of any
increase in procedures, any corresponding increase in sales of our products,
and whether there could be a future decrease in the current level of procedures
being performed, remain uncertain and are subject to a variety of factors,
including:
A material increase in COVID-19 cases in one or more locations, including as a
o result of the development of new variants of COVID-19 may result in an increase
in COVID-19 hospitalizations and a corresponding decrease in elective procedures in such impacted locations.
The perceived safety of COVID-19 vaccines and boosters, the speed of COVID-19
o vaccine distribution and administration, the timing and extent to which the
vaccination process will affect the progression of the virus, and the efficacy
of such vaccines against the new variants of the virus.
o Government vaccine mandates could affect our ability to retain or hire
employees.
Government restrictions on elective procedures may change over time and may
o vary in different geographic locations due to localized increases or decreases
of COVID-19 cases.
Patients electing to defer or avoid treatment for elective procedures due to
o concerns about being exposed to COVID-19, loss of employer-sponsored health
insurance related to unemployment in
Hospitals may reserve increased space, personal protective equipment and staff
for potential COVID-19 patients, especially if the number of COVID-19 cases in
o a particular region spikes or a new variant of COVID-19 emerges in such region,
limiting the space and resources allocated to inpatient and outpatient elective
procedures.
Hospitals may experience staffing shortages due to normal turnover and due to
o COVID-19, which could reduce the number of elective procedures that can be
performed at hospitals with staffing shortages.
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Hospitals may continue to preserve cash and may not immediately replenish their
o inventories of our products, which would impact our future sales and revenue
and make it difficult to accurately predict our inventory requirements.
We continue to closely monitor local, regional and global COVID-19 surges as well as new variants of the virus for any potential impact on procedures during the first quarter of 2022 and beyond.
Outlook. There remains uncertainty and lack of visibility regarding our
near-term revenue growth prospects and product development plans due to the
rapidly evolving environment and continued uncertainties resulting from the
ongoing COVID-19 pandemic. While certain regions are experiencing a reduction
? in COVID-19 cases and a relaxing of governmental restrictions, at this time,
the full extent of the impact of the ongoing COVID-19 pandemic on our business,
financial condition and results of operations is uncertain and cannot be
predicted with reasonable accuracy and will depend on future developments that
are also uncertain, such as the potential development of new variants of
COVID-19, and the future geographic scope of COVID-19.
Components of Our Results of Operations
Revenue
Substantially all our revenue consists of direct sales of our products to hospital accounts in theU.S. Depending on the terms of our agreements with our customers, we recognize revenue related to product sales either when control transfers, which generally occurs when the product is shipped to the customer, or when the product is utilized in a surgical procedure in the case of consignment agreements. Fees charged to customers for shipping are recognized as revenue. Recent revenue growth has been driven by increasing revenue from product sales due to our expanding customer base, although it is unclear at this point what long-term effect the ongoing COVID-19 pandemic will have on our ability to continue to generate revenue and expand our customer base.
Cost of Revenue
Cost of revenue primarily consists of the costs of licensed products, charges related to excess and obsolete inventory adjustments, current and potential royalties and costs related to shipping. We purchase product from Aroa at a fixed cost equal to 27% of our net sales of licensed products. The initial term of our Aroa License terminates on the later of (i)August 3, 2022 , or (ii) the expiration of the last patent covering bovine and ovine products, with an option to extend for an additional ten-year period. We expect our cost of revenue to increase in absolute dollars as, and to the extent, our sales volume grows although it is unclear at this point what long-term effect, if any, the ongoing COVID-19 pandemic will have on our product demand which could lead to additional charges to excess and obsolete inventory.
Amortization of Intangible Assets
Amortization of intangible assets relates to the amortization of capitalized milestone amounts paid or probable to be paid to Aroa related to license fees or commercialization rights after future economic benefit has been established for a product. These capitalized milestone amounts relate to regulatory clearances, the receipt of certain supply quantities of product, and amounts based upon aggregate net sales thresholds within a specified territory, and are amortized over the remaining useful life of the intellectual property.
Gross Profit and Gross Margin
Our gross profit is calculated by subtracting our cost of revenue and
amortization of intangible assets from our revenue. We calculate our gross
margin percentage as our gross profit divided by our revenue. Our gross margin
has been, and we expect it will continue to be, affected by a variety of
factors, including sales volume, current and potential royalties and excess and
inventory obsolescence costs. Our gross profit may increase to the extent our
revenue grows.
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Sales and Marketing Expenses
Sales and marketing expenses consist of market research and commercial activities related to the sale of OviTex and OviTex PRS and salaries and related benefits, sales commissions and stock-based compensation for employees focused on these efforts. Other significant sales and marketing expenses include costs incurred with post-market clinical studies, conferences and trade shows, promotional and marketing activities, as well as travel and training expenses. Over time we expect our sales and marketing expenses to increase in absolute dollars as we continue to expand our commercial organization to both drive and support our planned growth in revenue. It is unclear at this point, however, what long-term effect, if any, the ongoing COVID-19 pandemic will have on these expansion plans. We expect our sales and marketing expenses to continue to decrease as a percentage of revenue primarily as, and to the extent, our revenue grows.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation for personnel in executive, finance, information technology and administrative functions. General and administrative expenses also include professional service fees for legal, accounting, consulting, investor and public relations, insurance costs and direct and allocated facility-related costs.
We expect that our general and administrative expenses will increase in absolute dollars as we execute our growth initiatives and expand our business and headcount to support these initiatives. It is unclear at this point, however, what long-term effect, if any, the ongoing COVID-19 pandemic will have on these expansion plans. We expect our general and administrative expenses to continue to decrease as a percentage of revenue primarily as, and to the extent, our revenue grows.
Research and Development Expenses
Research and development expenses consist primarily of product research, engineering, product development, regulatory compliance and clinical development. These expenses include salaries and related benefits, stock-based compensation, consulting services, costs associated with our preclinical studies, costs incurred with our manufacturing partner under development agreements related to technology transfer, laboratory materials and supplies and an allocation of related facilities costs. We expense research and development costs as they are incurred. We expect research and development expenses in absolute dollars to increase in the future as we develop new products and enhance existing products although it is unclear at this point what long-term effect, if any, the ongoing COVID-19 pandemic will have on these development plans. We expect research and development expenses as a percentage of revenue to vary over time depending on the level and timing of new product development initiatives.
Interest Expense
Interest expense consists of cash interest under our credit facilities and non-cash interest attributable to the amortization of final payment fees and deferred financing costs related to our indebtedness.
Change in Fair Value of Preferred Stock Warrant Liability
Prior to our IPO, our outstanding warrants to purchase shares of our preferred
stock were classified as liabilities, recorded at fair value and were subject to
remeasurement at each balance sheet date until they were exercised, expired or
were otherwise settled. The change in fair value of our preferred stock warrant
liability reflected a non-cash charge primarily driven by changes in the fair
value of our underlying Series B preferred stock. All outstanding warrants to
purchase shares of our preferred stock were converted into warrants to purchase
shares of our common stock upon our IPO.
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Other (Expense) Income
Other (expense) income consists primarily of miscellaneous tax expenses and foreign currency exchange gains and losses offset by income earned on our cash and cash equivalents.
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Results of Operations
Comparison of the Year Ended
Year Ended December 31, Change
2021 2020 Dollar Percentage
(in thousands, except percentages)
Revenue $ 29,463 $ 18,213 $ 11,250 62 %
Cost of revenue (excluding amortization of
intangible assets) 10,346 6,675 3,671 55
Amortization of intangible assets 304 304 - - Gross profit 18,813 11,234 7,579 67 Gross margin 64 % 62 % Operating expenses: Sales and marketing 29,062 22,111 6,951 31 General and administrative 12,459 10,143 2,316 23 Research and development 6,743 4,255 2,488 58 Total operating expenses 48,264 36,509 11,755 32 Loss from operations (29,451) (25,275) (4,176) 17 Other (expense) income: Interest expense (3,597) (3,564) (33) 1 Other (expense) income (228) 45 (273) (607) Total other expense (3,825) (3,519) (306) 9 Net loss$ (33,276) $ (28,794) $ (4,482) 16 % Revenue Revenue increased by$11.3 million , or 62%, to$29.5 million for the year endedDecember 31, 2021 from$18.2 million for the year endedDecember 31, 2020 . The increase in revenue was primarily driven by an increase in unit sales of our products due to the expansion of our commercial organization with increased penetration within existing customer accounts and stronger international sales. During the year endedDecember 31, 2021 , we sold 7,516 units of OviTex compared to 4,794 units of OviTex during the year endedDecember 31, 2020 , a 57% increase in unit sales volume. Additionally, we sold 1,260 units of OviTex PRS compared to 663 units during the year endedDecember 31, 2020 , a 90% increase in unit sales volume. Cost of Revenue
Cost of revenue (excluding amortization of intangible assets) increased by$3.7 million to$10.3 million for the year endedDecember 31, 2021 from$6.7 million for the year endedDecember 31, 2020 . The increase in cost of revenue was primarily the result of an increase in products purchased to support our higher unit sales and an increase in our provision for excess and obsolete inventory.
Amortization of Intangible Assets
Amortization of intangible assets was
Gross Margin
Gross margin increased to 64% for the year endedDecember 31, 2021 from 62% for the year endedDecember 31, 2020 . The increase was primarily due to a lower expense recognized for excess and obsolete inventory adjustments as a percentage of revenue due to longer shelf life and inventory management during the year endedDecember 31, 2021 as compared to the prior year. 85 Table of Contents Sales and Marketing Sales and marketing expenses increased by$7.0 million , or 31%, to$29.1 million for the year endedDecember 31, 2021 from$22.1 million for the year endedDecember 31, 2020 . The increase was primarily due to higher salaries, benefits and commission costs as a result of an expansion of our commercialization activities, including an increase in headcount and increased travel and consulting expenses. The prior year period also included cost containment actions taken in response to the COVID-19 pandemic including salary reductions and reduced traveling which were not repeated in 2021.
General and Administrative
General and administrative expenses increased by$2.3 million , or 23%, to$12.5 million for the year endedDecember 31, 2021 from$10.1 million for the year endedDecember 31, 2020 . The increase was primarily due to higher salaries and benefits, increased professional, consulting and legal fees, higher stock-based compensation expense, increased insurance expense, higher recruiting fees and additional facilities expenses. The prior year period also included cost containment actions taken in response to the COVID-19 pandemic including salary reductions which were not repeated in 2021.
Research and Development
Research and development expenses increased by$2.5 million , or 58%, to$6.7 million for the year endedDecember 31, 2021 from$4.3 million for the year endedDecember 31, 2020 . The increase in research and development expense primarily relates to a non-cash stock-based compensation expense of$0.7 million related to amendments to certain equity award agreements following the death of our co-founder and former Chief Medical Officer, higher salaries and benefits, increased testing and development expenses and increased consulting expenses. The prior year period also included cost containment actions taken in response to the COVID-19 pandemic including salary reductions which were not repeated in 2021. Interest Expense
Interest expense was
Other (Expense) Income
Other (expense) income decreased by
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Comparison of the Year Ended
Year Ended December 31, Change
2020 2019 Dollar Percentage
(in thousands, except percentages)
Revenue $ 18,213 $ 15,446 $ 2,767 18 %
Cost of revenue (excluding amortization of
intangible assets) 6,675 5,870 805 14
Amortization of intangible assets 304 304 - -
Gross profit 11,234 9,272 1,962 21
Gross margin 62 % 60 %
Operating expenses:
Sales and marketing 22,111 18,060 4,051 22
General and administrative 10,143 6,223 3,920 63
Research and development 4,255 4,151 104 3
Total operating expenses 36,509 28,434 8,075 28
Loss from operations (25,275) (19,162) (6,113) 32
Other (expense) income:
Interest expense (3,564) (3,609) 45 (1)
Change in fair value of preferred stock
warrant liability - (5) 5 (100)
Other income 45 351 (306) (87)
Total other expense (3,519) (3,263) (256) 8
Net loss $ (28,794) $ (22,425) $ (6,369) 28 %
Revenue
Revenue increased by $2.8 million , or 18%, to $18.2 million for the year ended
December 31, 2020 from $15.4 million for the year ended December 31, 2019 . The
increase in revenue was primarily driven by an increase in unit sales of our
products due to the expansion of our commercial organization with increased
penetration within existing customer accounts. During the year ended
December 31, 2020 , we sold 4,794 units of OviTex compared to 3,779 units of
OviTex during the year ended December 31, 2019 , a 27% increase in unit sales
volume. Additionally, we sold 663 units of OviTex PRS compared to 240 units
during the year ended December 31, 2019 , a 176% increase in unit sales volume.
Cost of Revenue
Cost of revenue (excluding amortization of intangible assets) increased by
Amortization of Intangible Assets
Amortization of intangible assets was
Gross Margin
Gross margin increased to 62% for the year endedDecember 31, 2020 from 60% for the year endedDecember 31, 2019 . The increase was primarily due to a lower expense recognized for excess and obsolete inventory adjustments as a percentage of revenue due to longer shelf life and inventory management during the year endedDecember 31, 2020 as compared to the prior year.
Sales and Marketing
Sales and marketing expenses increased by
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and commission costs of
General and Administrative
General and administrative expenses increased by$3.9 million , or 63%, to$10.1 million for the year endedDecember 31, 2020 from$6.2 million for the year endedDecember 31, 2019 . The increase was primarily due to increased insurance costs of$1.7 million , increased professional, legal and consulting fees of$0.9 million , higher stock-based compensation expense of$0.8 million and higher salaries and benefits costs of$0.3 million which was partially offset by the cost containment actions taken in response to the ongoing COVID-19 pandemic.
Research and Development
Research and development expenses increased by
Interest Expense
Interest expense was
Change in Fair Value of Preferred Stock Warrant Liability
We recognized a loss on the change in the fair value of our preferred stock warrant liability of$5,000 during the year endedDecember 31, 2019 . All outstanding warrants to purchase shares of our preferred stock were converted into warrants to purchase shares of our common stock and the liability was reclassed to additional paid-in capital in the accompanying consolidated balance sheet. Other Income Other income decreased by$0.3 million , or 87%, to$45,000 for the year endedDecember 31, 2020 from$0.4 million for the year endedDecember 31, 2019 due to a decrease in interest income as a result of the decrease in short-term investments.
Liquidity and Capital Resources
Overview
As of
We have incurred operating losses since our inception, and we anticipate that our operating losses will continue in the near term as we seek to invest in our sales and marketing initiatives to support our growth in existing and new markets and in additional research and development activities. As ofDecember 31, 2021 , we had$30.0 million of borrowings outstanding under our credit facility (the "OrbiMed Credit Facility"). This credit facility matures inNovember 2023 and requires that we maintain a minimum cash balance of$2.0 million . Based on our current business plan, we believe that our existing cash resources will be sufficient to meet our capital requirements and fund our operations for at least the next 12 months from the issuance of this Annual Report. If these sources are insufficient to satisfy our liquidity requirements, we may seek to sell additional common or preferred equity or debt securities, or enter into a new credit facility. InDecember 2020 , we entered into an Equity Distribution Agreement (the "Equity Agreement") withPiper Sandler & Co (the "Agent") in connection with the establishment of an 88
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at-the-market offering program under which we may sell up to an aggregate of$50.0 million of shares of our common stock, from time to time through the Agent, as sales agent. No sales were made under the Equity Agreement during the years endedDecember 31, 2021 or 2020. If we raise additional funds by issuing equity or equity-linked securities, our stockholders would experience dilution and any new equity securities could have rights, preferences and privileges superior to those of holders of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. We cannot be assured that additional equity, equity-linked or debt financing will be available on terms favorable to us or our stockholders, or at all, including because of market volatility following the COVID-19 pandemic. If we are unable to obtain adequate financing, we may be required to delay the development, commercialization and marketing of our products.
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Year Ended December 31,
(in thousands) 2021 2020 2019Cash used in operating activities$ (30,432) $ (24,456) $ (25,523) Cash (used in) provided by investing activities (627) 9,122
(11,981)
Cash provided by financing activities 585 44,409
65,532
Effect of exchange rate on cash 11 17
(4)
Net (decrease) increase in cash and cash equivalents$ (30,463) $ 29,092 $ 28,024 Operating Activities During the year endedDecember 31, 2021 , we used$30.4 million of cash in operating activities, resulting from our net loss of$33.3 million and the change in operating assets and liabilities of$3.5 million offset by non-cash charges of$6.3 million . Our non-cash charges were comprised of stock-based compensation expense of$3.7 million , our excess and obsolete inventory charge of$1.4 million , interest expense of$0.7 million and depreciation and amortization expense of$0.5 million . The change in our operating assets and liabilities was primarily related to an increase in our inventory and prepaid expenses and other assets partially offset by increases in accrued expenses and other current and long-term liabilities. During the year endedDecember 31, 2020 , we used$24.5 million of cash in operating activities, resulting from our net loss of$28.8 million and the change in operating assets and liabilities of$0.2 million offset by non-cash charges of$4.5 million . Our non-cash charges were comprised of stock-based compensation expense of$2.1 million , our excess and obsolete inventory charge of$1.3 million , interest expense of$0.6 million and depreciation and amortization expense of$0.5 million . During the year endedDecember 31, 2019 , we used$25.5 million of cash in operating activities, resulting from our net loss of$22.4 million and the change in operating assets and liabilities of$6.3 million , offset by non-cash charges of$3.2 million . Our non-cash charges were primarily comprised of our excess and obsolete inventory charge of$1.6 million , stock-based compensation expense of$0.5 million , interest expense of$0.5 million and depreciation and amortization expense of$0.6 million . The change in our operating assets was primarily related to increases in accounts receivable, inventory and prepaid expenses and other assets. Investing Activities
During the year ended
During the year endedDecember 31, 2020 , cash provided by investing activities was$9.1 million consisting primarily of the proceeds from the sale and maturity of short-term investments. 89 Table of Contents
During the year endedDecember 31, 2019 , cash used in investing activities was$12.0 million consisting primarily from the purchase of short-term investments of$9.3 million and payments made for our intangible assets of$2.5 million .
Financing Activities
During the year ended
During the year ended
During the year endedDecember 31, 2019 , cash provided by financing activities was$65.5 million , consisting primarily from the net proceeds received from our IPO and the net proceeds from the issuance of our Series B preferred stock.
Indebtedness
InNovember 2018 , we entered into the OrbiMed Credit Facility, which consists of up to$35.0 million in term loans (the "OrbiMed Term Loans"). The OrbiMed Term Loans consist of two tranches, a$30.0 million Tranche 1 ("Tranche 1") and a$5.0 million Tranche 2 ("Tranche 2"). Upon closing, we borrowed$30.0 million of Tranche 1. We elected not to borrow Tranche 2 prior to its expiration onDecember 31, 2019 . Pursuant to the OrbiMed Credit Facility, we provided a first priority security interest in all existing and future acquired assets, excluding intellectual property and certain other assets, owned by us. The OrbiMed Credit Facility contains a negative pledge on intellectual property owned by us. The OrbiMed Credit Facility also contains customary indemnification obligations and customary events of default, including, among other things, (i) non-payment, (ii) breach of warranty, (iii) non-performance of covenants and obligations, (iv) default on other indebtedness, (v) judgments, (iv) change of control, (vii) bankruptcy and insolvency, (viii) impairment of security, (ix) key permit events, (x) key person events, (xi) regulatory matters, (xii) and key contracts. In addition, we must maintain a minimum cash balance of$2.0 million . In the event of default under the OrbiMed Credit Facility, we may become obligated to immediately pay all outstanding principal and interest and all other due and unpaid obligations at the current rate in effect plus 3%. The OrbiMed Term Loans mature onNovember 16, 2023 and bear interest at a rate equal to 7.75% plus the greater of one-month LIBOR or 2.0%. We are required to make 60 monthly interest payments beginning onNovember 30, 2018 with the entire principal payment due at maturity. The OrbiMed Term Loans have a prepayment penalty equal to 10.0% of the prepaid principal amount prior to the second anniversary of the OrbiMed Term Loans, 5.0% of the prepaid principal amount after the second anniversary but prior to the third anniversary and 2.5% of the prepaid principal amount after the third anniversary. We are also required to pay an exit fee at the time of maturity or prepayment event equal to 10% of all principal borrowings and an administration fee equal to$10,000 on the last day of each quarter until all obligations have been paid in full.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as ofDecember 31, 2021 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods: Payments due by Period Less than More than (in thousands) Total 1 year 1 to 3 years 3 to 5 years 5 years
Principal payments on long-term debt$ 30,000 $ -$ 30,000 $ - $ - Interest and end of term charge on long-term debt(1) 8,489 2,925 5,564 - - Operating lease commitments(2) 2,388 349
724 758 557
Purchase commitments 12,606 1,381 3,140 2,310 5,775
Total(3) $ 53,483 $ 4,655 $ 39,428 $ 3,068 $ 6,332
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(1) Interest payable reflects the rate in effect as of
interest rate on borrowings under the OrbiMed Credit Facility is variable and
resets monthly. End of term fee reflects final payment fee due at maturity.
(2) Reflects payments due for our lease of office and laboratory space in
2028.
(3) This table does not include (a) any milestone payments that are not deemed
probable under license agreements as the timing and likelihood of such
payments are not known with certainty and (b) contracts that are entered into
in the ordinary course of business that are not material in the aggregate in
any period presented above. Excluded amounts primarily consist of a
milestone payment due to Aroa when certain sales milestones are met.
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