IVERIC bio, Inc. - Quarter Report: 2021 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


(Mark One)
☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


Or
☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number: 001-36080

IVERIC bio, Inc.

(Exact name of registrant as specified in its charter)



Delaware		20-8185347
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Five Penn Plaza	Suite 2372	10001
New York,	NY	(Zip Code)
(Address of principal executive offices)

(212) 845-8200

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	ISEE	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of November 5, 2021 there were 114,641,279 shares of Common Stock, $0.001 par value per share, outstanding.

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PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	5
	Condensed Unaudited Consolidated Balance Sheets	5
	Condensed Unaudited Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Unaudited Consolidated Statements of Stockholders' Equity	7
	Condensed Unaudited Consolidated Statements of Cash Flows	8
	Notes to Condensed Unaudited Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	96
Item 5.	Other Information	97
Item 6.	Exhibits	97
	Signatures	99

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “goals,” “estimate,” “expect,” “intend”, “may,” “might,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

•the potential benefits of our business plan and strategy, including our goal to deliver treatment options for all stages of age-related macular degeneration (AMD);

•our expectations regarding the impact of results from GATHER1, our completed Phase 3 clinical trial evaluating Zimura for the treatment of Geographic Atrophy (GA) secondary to AMD, on our business and regulatory strategy, including our plans to pursue development of Zimura in intermediate AMD;

•the timing, costs, conduct and outcome of GATHER2, our ongoing Phase 3 clinical trial evaluating Zimura for the treatment of GA secondary to AMD, including expectations regarding receipt of topline data from the trial and regarding patient retention, and expectations regarding the potential for Zimura to receive regulatory approval for the treatment of GA secondary to AMD based on the clinical trial results we have received to date and the future results from the GATHER2 clinical trial and any other trials we or a potential collaborator may conduct;

•our plans and expectations for initiating a clinical trial evaluating Zimura for the treatment of intermediate AMD, and for evaluating, obtaining rights to and developing sustained release delivery technologies for Zimura;

•our plans and strategy for the potential commercialization of Zimura, including hiring of medical affairs and commercialization personnel, building a commercialization infrastructure, including sales, marketing and distribution capabilities, and our expectations regarding the market dynamics for treatments for GA and other commercial matters;

•our ability to establish and maintain arrangements and capabilities for the manufacture of Zimura and our other product candidates, including scale up and validation of the manufacturing process for Zimura drug substance and securing the supply of Zimura drug product and the polyethylene glycol (PEG) starting material for our expected needs;

•the timing, costs, conduct and outcome of STAR, our ongoing Phase 2b screening trial evaluating Zimura for the treatment of autosomal recessive Stargardt disease, including expectations regarding the recruitment of additional patients for this trial;

•the actual and expected effects of the COVID-19 pandemic and related response measures on our business and operations, including the timing, costs, conduct and outcome of our research and development programs, our supply chain, the work of our third-party vendors and collaborators, the work and well-being of our employees, and our financial position;

•our estimates regarding expenses, future revenues, capital requirements and needs for, and ability to obtain, additional financing;

•our plans and ability to consummate business development transactions, including potential collaboration opportunities for further development and potential commercialization of Zimura and potential collaboration or out-licensing opportunities for further development of IC-100 and IC-200; and in-licenses or other opportunities to acquire rights to additional product candidates or technologies to treat retinal diseases, including sustained release delivery technologies for Zimura;

•the timing, costs, conduct and outcome of our ongoing and planned clinical trials, including statements regarding the timing of the initiation and completion of, and the receipt of results from, such clinical trials, the costs to conduct such clinical trials, and the impact of the results of such clinical trials on our business strategy;

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•the timing, costs, conduct and outcome of our ongoing and planned research and preclinical development activities, including statements regarding the timing of the initiation and completion of, and the receipt of results from, such activities, the costs to conduct such activities, and the impact of the results of such activities on our business strategy;

•the timing of and our ability to submit investigational new drug applications for, and to obtain marketing approval of our product candidates, and the ability of our product candidates to meet existing or future regulatory standards;

•the potential advantages of our product candidates and other technologies that we are pursuing, including our hypotheses regarding complement factor C5 inhibition and HtrA1 inhibition as potentially relevant mechanisms of action to treat GA and other stages of AMD, and of gene therapy, including the use of minigenes;

•our estimates regarding the number of patients affected by the diseases our product candidates and development programs are intended to treat;

•our estimates regarding the potential market opportunity for our product candidates;

•the rate and degree of potential market acceptance and clinical utility of our product candidates, if approved;

•the potential receipt of revenues from future sales of our product candidates, if approved;

•our personnel and human capital resources;

•our intellectual property position;

•the impact of existing and new governmental laws and regulations; and

•our competitive position.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and our stockholders should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, licenses, dispositions, joint ventures or investments we may make.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q and our other periodic reports, completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.

Summary of Principal Risk Factors

The following is a summary of the principal factors that make an investment in our company speculative or risky. This summary does not address all of the risks and uncertainties that we face. Additional risk and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. Additional discussion of the risks summarized in this summary, and other risks that we face, can be found in Part II, Item 1A. Risk Factors section of this Quarterly Report on

Form 10-Q, and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and

our other filings with the Securities Exchange Commission, before making an investment decision regarding our common

stock. The forward-looking statements discussed above are qualified by these risk factors. If any of the following risks occur,

our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.

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1.We are a development-stage company without any approved products. The value of your investment is highly dependent on the success of Zimura and our other research and development programs, which carry numerous risks. We are working to transition to being a company capable of commercializing a pharmaceutical product, if approved, and may not be successful in this transition.

2.We have had a history of operating at significant losses and expect to continue to do so until we can successfully commercialize one or more of our product candidates, if ever. We may never achieve profitability.

3.We may need additional financing in order to finish developing and start commercializing one or more of our product candidates, if approved. Securing financing may be challenging and/or dilutive to our shareholders, and if we are unable to secure financing when needed, we may need to curtail our development programs or planned commercialization activities.

4.The COVID-19 pandemic has adversely affected our business, for example, by impacting the initiation and conduct of our clinical trials, the work of our academic collaborators and contract manufacturing organizations, and aspects of our supply chain. Because of the ongoing and fluid nature of the pandemic, it will continue to affect our business.

5.We may not be successful in obtaining rights to and developing a sustained release delivery technology for Zimura.

6.Drug development is inherently risky with numerous scientific, technical, regulatory and other challenges. A promising drug candidate can fail at any time and for any number of reasons.

7.We are pursuing the development of our product candidates using novel mechanisms of action targeting indications for which there are no approved products. These include, for example, complement inhibition and inhibition of High temperature requirement A serine peptidase 1 protein for GA, and complement inhibition for intermediate AMD and autosomal recessive Stargardt disease. These approaches carry numerous scientific, regulatory and other risks.

8.Regulatory authorities, including the U.S. Food and Drug Administration, or FDA, and the European Medicines Agency, or EMA, may disagree with the design of or our analyses or conclusions from our clinical trials of Zimura in GA or our planned development pathway for Zimura in intermediate AMD. Since receipt of the 12-month results from GATHER1, we have not had any formal interactions with the EMA regarding our planned regulatory pathway for Zimura in GA and the EMA and other regulatory authorities may disagree with the requirements of the FDA. The results of the GATHER2 trial may not replicate the results of the GATHER1 trial. We may need to conduct additional clinical trials or nonclinical studies for Zimura in order to obtain marketing approval.

9.We may discover safety issues with our product candidates due to known and currently unknown factors, which could hamper their further development.

10.Manufacturing our product candidates is technically complex, expensive and time consuming. We may face issues with scaling up and validating the manufacturing process for Zimura. We may not be able to secure adequate supply of Zimura drug product and the PEG starting material for our future needs, including potential commercial launch. Issues with manufacturing can derail the further development or commercialization of our product candidates.

11.We face substantial competition from large pharmaceutical companies, smaller biotech companies and others.

12.To commercialize any of our product candidates, if approved, we will need to set up a sales and marketing infrastructure. We have only recently hired commercialization personnel and will need to continue building our commercial infrastructure. The success of our commercialization efforts will depend in part on the degree of acceptance of our product candidates by patients, the medical community and payors.

13.We do not have any internal manufacturing facilities and rely heavily on our third-party contract manufacturers. They may have different business priorities than we do and may fail to meet our expectations or follow regulatory requirements, including current good manufacturing practices requirements. We may need to engage alternative manufacturers or suppliers sooner than we currently expect.

14.We rely heavily on our third-party contract research organizations as well as our clinical trial sites and academic collaborators. They may have different priorities than we do and may fail to follow regulatory requirements, including good laboratory practice, good clinical practice and other data integrity requirements.

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15.We may pursue a collaboration for the further development and potential commercialization of Zimura in one or more territories outside the United States, and plan to pursue a collaboration or out-license for the further development and potential commercialization of IC-100 and IC-200. For any of these, we may not be able to enter into a collaboration or out-license on favorable terms, or at all. Even if we are able to do so, the collaboration or out-license may not be successful.

16.We rely on patents to protect our proprietary position. We may not obtain the patent rights that we seek and/or we may not be able to exclude our competitors from relevant markets. We may be subject to litigation involving our patents or those of third parties.

17.We are highly dependent on our information security systems and those of third parties we work with. A cybersecurity incident may cause interruptions to the progress of our development programs and operations, financial or regulatory penalties and/or harm to our reputation.

18.We rely on a limited number of employees to conduct our operations, including supervising our outside vendors. The skills needed to advance our research and development programs and plan for commercialization of our product candidates are highly specialized. We plan to hire additional qualified personnel, including commercialization and medical affairs personnel, to support the growth of our business. Hiring these personnel and retaining existing employees may be challenging.

19.We need to satisfy numerous regulatory requirements in order to secure marketing approval and reimbursement approval, if applicable, for any of our product candidates. These requirements differ across jurisdictions. Failure to satisfy and maintain those requirements can preclude us from commercializing our products.

20.We and any commercialization partners are subject to numerous healthcare laws and regulations governing our relationships with patients, healthcare professionals and third-party payors. Failure to comply with these requirements may adversely affect our business, including as we prepare for potential commercialization of Zimura.

21.The reimbursement and payment regime for pharmaceutical products in the United States remains in flux, including as a result of the implementation of and litigation involving the Affordable Care Act. There are ongoing, and often bipartisan, efforts to reduce the prices of pharmaceutical products.

USE OF TRADEMARKS

The trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. We have omitted the ® and ™ designations, as applicable, for the trademarks named in this Quarterly Report on Form 10-Q after their first reference in this Quarterly Report on Form 10-Q.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

IVERIC bio, Inc.

Condensed Unaudited Consolidated Balance Sheets

(in thousands, except share and per share data)


	September 30, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	179,879	$	66,373
Available for sale securities	62,091		143,674
Prepaid expenses and other current assets	4,070		4,791
Income tax receivable	—		1,765
Total current assets	246,040		216,603
Property and equipment, net	2		26
Right-of-use asset, net	1,748		120

Other assets	—		5
Total assets	$	247,790	$	216,754
Liabilities and Stockholders' Equity
Current liabilities
Accrued research and development expenses	$	11,368	$	12,284
Accounts payable and accrued expenses	8,130		12,792
Lease liability	945		54
Total current liabilities	20,443		25,130
Lease liability, non-current	861		61
Total liabilities	21,304		25,191
Stockholders' equity
Preferred stock—$0.001 par value, 5,000,000 shares authorized, no shares issued or outstanding	—		—
Common stock—$0.001 par value, 200,000,000 shares authorized, 104,237,878 and 90,120,797 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	104		90
Additional paid-in capital	872,955		756,543
Accumulated deficit	(646,562)		(565,073)
Accumulated other comprehensive income	(11)		3
Total stockholders' equity	226,486		191,563
Total liabilities and stockholders' equity	$	247,790	$	216,754

The accompanying unaudited notes are an integral part of these financial statements.

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IVERIC bio, Inc.

Condensed Unaudited Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating expenses:
Research and development	$	17,935	$	18,841	$	59,972	$	45,311
General and administrative	6,648		6,643		21,688		17,930
Total operating expenses	24,583		25,484		81,660		63,241
Loss from operations	(24,583)		(25,484)		(81,660)		(63,241)
Interest income	42		33		184		437

Other expense, net	(10)		1		(13)		(6)
Loss before income tax benefit	(24,551)		(25,450)		(81,489)		(62,810)
Income tax benefit	—		—		—		3,695
Net loss	$	(24,551)	$	(25,450)	$	(81,489)	$	(59,115)
Comprehensive loss	$	(24,565)	$	(25,449)	$	(81,503)	$	(59,114)
Net loss per common share:
Basic and diluted	$	(0.23)	$	(0.27)	$	(0.84)	$	(0.87)
Weighted average common shares outstanding:
Basic and diluted	105,217		92,675		97,370		67,931

The accompanying unaudited notes are an integral part of these financial statements.

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IVERIC bio, Inc.

Condensed Unaudited Consolidated Statements of Stockholders' Equity

(in thousands)


	Preferred Stock			Common Stock				Additional paid-in capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total
	Shares	Amount		Shares		Amount
Balance at December 31, 2020	—	$	—	90,121		$	90	$	756,543	$	(565,073)	$	3	$	191,563
Issuance of common stock under employee stock compensation plans	—	—		49		—		129		—		—		129
Share-based compensation	—	—		—		—		2,292		—		—		2,292
Net loss	—	—		—		—		—		(26,795)		—		(26,795)
Unrealized loss on available for sale securities, net of tax	—	—		—		—		—		—		(1)		(1)
Balance at March 31, 2021	—	$	—	90,170		$	90	$	758,964	$	(591,868)	$	2	$	167,188
Issuance of common stock under employee stock compensation plans	—	—		217		—		448		—		—		448
Share-based compensation	—	—		—		—		2,079		—		—		2,079
Net loss	—	—		—		—		—		(30,143)		—		(30,143)
Unrealized loss on available for sale securities, net of tax	—	—		—		—		—		—		1		1
Balance at June 30, 2021	—	—		90,387		90		761,491		(622,011)		3		139,573
Issuance of common stock and pre-funded warrants through underwritten offering, net of issuances costs	—	—		13,398		14		107,743		—		—		107,757
Issuance of common stock under employee stock compensation plans	—	—		453		—		1,095		—		—		1,095
Share-based compensation	—	—		—		—		2,626		—		—		2,626
Net loss	—	—		—		—		—		(24,551)		—		(24,551)
Unrealized loss on available for sale securities, net of tax	—	$	—	—		$	—	$	—	$	—	$	(14)	(14)
Balance at September 30, 2021	—	$	—	$	104,238	$	104	$	872,955	$	(646,562)	$	(11)	$	226,486






	Preferred Stock			Common Stock				Additional paid-in capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total
	Shares	Amount		Shares		Amount
Balance at December 31, 2019	—	$	—	49,627		$	50	$	597,679	$	(480,526)	$	—	$	117,203
Issuance of common stock under employee stock compensation plans	—	—		105		—		179		—		—		179
Share-based compensation	—	—		—		—		2,324		—		—		2,324
Net loss	—	—		—		—		—		(15,076)		—		(15,076)
Balance at March 31, 2020	—	$	—	49,732		$	50	$	600,182	$	(495,602)	$	—	$	104,630
Issuance of common stock and pre-funded warrants through underwritten offering, net of issuance costs	—	—		28,503		28		116,855		—		—		116,883
Issuance of common stock in connection with private offering, net of issuance costs.	—	—		8,649		9		33,228		—		—		33,237
Issuance of common stock under the exercise of pre-funded warrants	—	—		2,500		2		(2)		—		—		—
Issuance of common stock under employee stock compensation plans	—	—		105		—		7		—		—		7
Share-based compensation	—	—		—		—		1,873		—		—		1,873
Net loss	—	—		—		—		—		(18,589)		—		(18,589)
Balance at Balance at June 30, 2020	—	$	—	89,489		$	89	$	752,143	$	(514,191)	$	—	$	238,041
Issuance of common stock under employee stock compensation plans	—	$	—	65		$	1	$	146	$	—	$	—	147
Share-based compensation	—	$	—	—		$	—	$	1,847	$	—	$	—	1,847
Net loss	—	$	—	—		$	—	$	—	$	(25,450)	$	—	(25,450)
Unrealized gain on available for sale securities, net of tax	—	$	—	—		$	—	$	—	$	—	$	1	1
Balance at September 30, 2020	—	—		89,554		90		754,136		(539,641)		1		214,586

The accompanying unaudited notes are an integral part of these financial statements.

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IVERIC bio, Inc.

Condensed Unaudited Consolidated Statements of Cash Flows

(in thousands)


	Nine Months Ended September 30,
	2021		2020
Operating Activities
Net loss	(81,489)		$	(59,115)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and other expense	24		108
Amortization of premium and discounts on investment securities	918		115


Share-based compensation	6,997		6,044
Changes in operating assets and liabilities:
Income tax receivable	1,765		—
Prepaid expense and other assets	726		542
Accrued interest receivable	449		(112)
Accrued research and development expenses	(916)		6,007
Accounts payable and accrued expenses	(4,662)		1,383
Change in working capital	63		—
Net cash used in operating activities	(76,125)		(45,028)
Investing Activities
Purchase of marketable securities	(56,245)		(108,305)

Maturities of marketable securities	136,447		—
Net cash provided by (used in) investing activities	80,202		(108,305)
Financing Activities

Proceeds from employee stock plan purchases	1,672		333
Proceeds from follow-on public offering, net	107,757		116,883
Proceeds from private-placement, net	—		33,237

Net cash provided by financing activities	109,429		150,453
Net increase (decrease) in cash and cash equivalents	113,506		(2,880)
Cash and cash equivalents
Beginning of period	66,373		125,699
End of period	$	179,879	$	122,819
Supplemental disclosure of cash paid


Income tax refunds received	$	1,765	$	3,327

The accompanying unaudited notes are an integral part of these financial statements.

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IVERIC bio, Inc.

Notes to Condensed Unaudited Consolidated Financial Statements

(in thousands, except per share data)

1. Business

Description of Business and Organization

IVERIC bio, Inc. (“the Company” or “IVERIC”) is a science-driven biopharmaceutical company focused on the discovery and development of novel treatments for retinal diseases with significant unmet medical needs. The Company is committed to having a positive impact on patients’ lives by delivering high-quality, safe and effective treatments designed to address debilitating retina diseases including all stages of age-related macular degeneration (“AMD”).

The Company’s lead asset is its clinical stage product candidate Zimura® (avacincaptad pegol), a complement C5

inhibitor. It is currently targeting the following diseases with Zimura:

•Geographic Atrophy (“GA”), which is the advanced stage of AMD, and is characterized by marked thinning or atrophy of retinal tissue, leading to irreversible loss of vision;

•intermediate AMD, which is an earlier stage of AMD that precedes GA; and

•autosomal recessive Stargardt disease (“STGD1”), which is an orphan inherited condition characterized by progressive damage to the central portion of the retina (the “macula”) and other retinal tissue, leading to loss of vision.

In July 2021, the Company completed patient enrollment for GATHER2, its Phase 3 clinical trial evaluating the safety and efficacy of Zimura for the treatment of GA secondary to AMD. The Company has also received a written agreement from the U.S. Food and Drug Administration (“FDA”) under a Special Protocol Assessment for the overall design of GATHER2. The Company expects topline data from the GATHER2 trial to become available during the second half of 2022, approximately one year after the enrollment of the last patient plus the time needed for database lock and analysis. The Company also plans to initiate a Phase 3 clinical trial evaluating Zimura for patients with intermediate AMD during 2022. The Company expects data from this trial, if positive, together with other supportive data, may be sufficient to file a supplemental new drug application with the FDA and a supplemental marketing authorization application with the European Medicines Agency.

In addition to Zimura, the Company is developing its preclinical product candidate IC-500, a High temperature requirement A serine peptidase 1 protein (“HtrA1”) inhibitor, for GA secondary to AMD and potentially other age-related retinal diseases. Based on current timelines, the Company expects to submit an investigational new drug application to the FDA for IC-500 during the second half of 2022.

The Company’s portfolio also includes two preclinical stage gene therapy product candidates (IC-100 and IC-200)

and several ongoing gene therapy research programs, each of which uses adeno-associated virus (“AAV”) for gene delivery. These AAV mediated gene therapy programs are targeting the following orphan inherited retinal diseases (“IRDs”):

•rhodopsin-mediated autosomal dominant retinitis pigmentosa (“RHO-adRP”), which is characterized by progressive and severe bilateral loss of vision leading to blindness;

•IRDs associated with mutations in the BEST1 gene, including Best vitelliform macular dystrophy (“Best disease”);

•Leber Congenital Amaurosis type 10 (“LCA10”), which is characterized by severe bilateral loss of vision at or soon after birth;

•STGD1; and

•IRDs associated with mutations in the USH2A gene, which include Usher syndrome type 2A, and USH2A-associated non-syndromic autosomal recessive retinitis pigmentosa.

As the Company focuses its efforts on and prioritizes the development of Zimura, it has been considering its development options for IC-100 and IC-200, which the Company has been developing for RHO-adRP and BEST1-related IRDs, respectively. It currently plans to seek a collaborator or licensee for the future development and potential commercialization of these product candidates.

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2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the notes to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on March 4, 2021.

Basis of Presentation and Consolidation

In the opinion of management, the Company’s condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair statement of the Company’s financial statements for interim periods in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The information included in this quarterly report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes included in the Annual Report.

The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from the Company’s audited financial statements but does not include all disclosures required by U.S. GAAP. The results of operations for the nine months ended September 30, 2021 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.

Segment and Geographic Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating and reportable segment.

Use of Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities reported in the Company's Consolidated Balance Sheets and the amount of expenses reported for each of the periods presented are affected by estimates and assumptions, which are used for, but not limited to, accounting for research and development costs, accounting for share-based compensation and accounting for income taxes. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of 90 days or less when purchased to be cash equivalents. The carrying amounts reported in the Balance Sheets for cash and cash equivalents are valued at cost, which approximates their fair value.

Available for Sale Securities

The Company considers securities with original maturities of greater than 90 days to be available for sale securities. Available for sale securities with original maturities of greater than one year are recorded as non-current assets. Available for sale securities are recorded at fair value and unrealized gains and losses are recorded within other comprehensive income.

On a quarterly basis, the Company reviews the status of each security in an unrealized loss position, to evaluate the existence of potential credit losses. The Company first considers whether it intends to sell, or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company considers a number of factors to determine if the decline in fair value has resulted from credit losses or other factors, including but not limited to: (1) the extent of the decline; (2) changes to the rating of the security by a rating agency; (3) any adverse conditions specific to the security; and (4) other market conditions that may affect the fair value of the security. If this assessment indicates that a credit loss exists and the present value of cash flows expected to be collected is less than the amortized cost basis, an allowance for credit losses is required for the credit loss. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

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Financial Instruments

Cash equivalents and available for sale securities are reflected in the accompanying financial statements at fair value. The carrying amount of accounts payable and accrued expenses, including accrued research and development expenses, approximates fair value due to the short-term nature of those instruments.

Accounting Standards Codification, or ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value standard also establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company reviews investments on a periodic basis for other than temporary impairments. This review is subjective as it requires management to evaluate whether an event or change in circumstances has occurred in the period that may have a significant adverse effect on the fair value of the investment. The Company uses the market approach to measure fair value for its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The Company classifies its corporate debt securities within the fair value hierarchy as Level 2 assets, as it primarily utilizes quoted market prices or rates for similar instruments to value these securities.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:

•Level 1—inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market. The Company's Level 1 assets consist of investments in money market funds and U.S. Treasury securities.

•Level 2—inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability. The Company's Level 2 assets consist of investments in investment-grade corporate debt securities.

•Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability. The Company does not hold any assets that are measured using Level 3 inputs.

Concentration of Credit Risk

The Company's financial instruments that are exposed to concentration of credit risk consist primarily of cash, cash equivalents and available for sale securities. The Company maintains its cash in bank accounts, the balances of which generally exceed federally insured limits. The Company maintains its cash equivalents and available for sale securities in investments in money market funds, in U.S. Treasury securities, asset-backed securities and investment-grade corporate debt securities with original maturities of 90 days or less.

The Company believes it is not exposed to significant credit risk on its cash, cash equivalents and available for sale securities.

Concentration of Suppliers

The Company historically relied upon a single third-party manufacturer to provide the drug substance for Zimura on a purchase order basis. The Company also historically relied upon a single third-party manufacturer to provide fill/finish services for clinical supplies of Zimura. The Company has engaged one additional third-party manufacturer to provide drug substance for Zimura and one additional third-party manufacturer to provide fill/finish services for clinical supplies of Zimura. In addition, the Company currently relies upon a single third-party supplier to supply on a purchase order basis the polyethylene glycol starting material used to manufacture Zimura. Furthermore, the Company and its contract manufacturers currently rely upon sole-source suppliers of certain raw materials and other specialized components of production used in the manufacture and fill/finish of Zimura. The Company currently relies exclusively upon a single third-party contract manufacturer for IC-100 and IC-200 and also relies on sole-source suppliers for certain starting materials used in the manufacture of such product candidates. The Company currently relies upon a single third-party contract manufacturer to conduct process development, scale-up and GMP manufacture of the drug substance for IC-500 for preclinical toxicology studies and early-stage clinical trials and a single third-party contract manufacturer to conduct fill/finish services for IC-500. If the Company’s third-party manufacturers or fill/finish service providers should become unavailable to the Company for any reason, including as a result of capacity constraints, different business objectives, financial difficulties, insolvency or the COVID-19 pandemic, the Company believes that there are a limited number of potential replacement manufacturers, and the Company likely would incur added costs and delays in identifying or qualifying such replacements.

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Foreign Currency Translation

The Company considers the U.S. dollar to be its functional currency. Expenses denominated in foreign currencies are translated at the exchange rate on the date the expense is incurred. The effect of exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars is included in the Consolidated Statements of Operations and Comprehensive Loss. Foreign exchange transaction gains and losses are included in the results of operations and are not material in the Company's financial statements.

Leases

The Company determines if an arrangement contains a lease at inception. For arrangements where the Company is the lessee, it recognizes a right-of-use (“ROU”) asset and operating lease liability on the Company's Consolidated Balance Sheet. ROU lease assets represent the Company's right to use the underlying asset for the lease term and the lease obligation represents the Company's commitment to make the lease payments arising from the lease. Right-of-use lease assets and obligations are recognized at the commencement date based on the present value of remaining lease payments over the lease term. As the Company’s leases do not provide an implicit discount rate, the Company has used an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. ROU lease asset includes any lease payments made prior to commencement and excludes any lease incentives. The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. Variable lease costs such as common area costs and property taxes are expensed as incurred. For all office lease agreements the Company combines lease and nonlease components. Leases with an initial term of 12 months or less are not recorded on the Company's Consolidated Balance Sheet.

Property and Equipment

Property and equipment, which consists mainly of clinical and laboratory equipment, computers, software, other office equipment, and leasehold improvements, are carried at cost less accumulated depreciation. Depreciation is computed over the estimated useful lives of the respective assets, generally three to ten years, using the straight-line method. Amortization of leasehold improvements is recorded over the shorter of the lease term or estimated useful life of the related asset.

Research and Development

The Company's research and development expenses primarily consist of costs associated with the manufacturing, development and preclinical and clinical testing of the Company’s product candidates and costs associated with its gene therapy research programs. The Company's research and development expenses consist of:

•external research and development expenses incurred under arrangements with third parties, such as academic research collaborators, contract research organizations (“CROs”) and contract development and manufacturing organizations (“CDMOs”) and other vendors for the production and analysis of drug substance and drug product; and

•employee-related expenses for employees dedicated to research and development activities, including salaries, benefits and share-based compensation expense.

Research and development expenses also include costs of acquired product licenses, in-process research and development, and related technology rights where there is no alternative future use, costs of prototypes used in research and development, consultant fees and amounts paid to collaborators.

All research and development expenses are charged to operations as incurred in accordance with ASC 730, Research and Development. The Company accounts for non-refundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received, rather than when the payment is made.

Income Taxes

The Company utilizes the liability method of accounting for deferred income taxes, as set forth in ASC 740, Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation allowance is established against deferred tax assets when, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company's policy is to record interest and penalties on uncertain tax positions as income tax expense.

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Share-Based Compensation

The Company follows the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, non-employees and non-employee directors, including employee stock options, restricted stock units (“RSUs”) and options granted to employees to purchase shares under the 2016 Employee Stock Purchase Plan (the “ESPP”). Share-based compensation expense is based on the grant date fair value estimated in accordance with the provisions of ASC 718 and is generally recognized as an expense over the requisite service period, net of estimated forfeitures. For grants containing performance-based vesting provisions, expense is recognized over the estimated achievement period only when the performance-based milestone is deemed probable of achievement. If performance-based milestones are later determined not to be probable of achievement, then all previously recorded stock-based compensation expense associated with such options will be reversed during the period in which the Company makes this determination.

The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from its estimates. The Company uses historical data to estimate pre-vesting forfeitures and record share-based compensation expense only for those awards that are expected to vest. To the extent that actual forfeitures differ from the Company's estimates, the difference is recorded as a cumulative adjustment in the period the estimates were revised.

Stock Options

The Company estimates the fair value of stock options granted to employees, non-employee directors and consultants on the date of grant using the Black-Scholes option-pricing model. The Company's computation of stock-price volatility is based on daily historical volatility during the time period that corresponds to the expected option term. The Company's computation of expected term is determined using the expected term of stock option grants to employees based on an analysis of actual option exercises. The Company utilizes a dividend yield of zero based on the fact that the Company has never paid cash dividends to stockholders and has no current intentions to pay cash dividends. The risk-free interest rate is based on the zero-coupon U.S. Treasury yield at the date of grant for a term equivalent to the expected term of the option.

The weighted-average assumptions used to estimate grant date fair value of stock options using the Black-Scholes option pricing model were as follows for the nine month periods ended September 30, 2021 and 2020:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Expected common stock price volatility	113%	117%	113%	117%
Risk-free interest rate	0.68%-0.84%	0.22%-0.26%	0.31%-0.96%	0.22%-1.34%
Expected term of options (years)	5.2	4.8	5.2	4.6
Expected dividend yield	—	—	—	—

RSUs

The Company estimates the fair value of RSUs granted to employees using the closing market price of the Company's common stock on the date of grant.

ESPP

In April 2016, the Company's board of directors adopted the ESPP pursuant to which the Company may sell up to an aggregate of 1,000,000 shares of its common stock. The ESPP was approved by the Company’s stockholders in June 2016. The ESPP is considered compensatory and the fair value of the discount and look back provision are estimated using the Black-Scholes option-pricing model and recognized over the six month withholding period prior to purchase.

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements through the date the financial statements were issued and filed with the SEC and believes that there are none that will have a material impact on the Company’s financial statements.

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3. Common Stock

In July 2021, the Company completed an underwritten public offering in which the Company sold 13,397,500 shares of its common stock, which included the exercise in full of the underwriters’ option to purchase an additional 1,747,500 shares of the Company’s common stock, at a price to the public of $8.60 per share and at a price to the underwriters of $8.084 per share.

The net proceeds from the July 2021 public offering, after deducting underwriting discounts and commissions and other expenses payable by the Company totaling approximately $7.4 million, was approximately $107.8 million.

In June 2020, the Company completed an underwritten public offering in which the Company sold 28,503,220 shares of its common stock, which included the exercise in full of the underwriters’ option to purchase additional shares of the Company’s common stock, at a price to the public of $4.100 per share and at a price to the underwriters of $3.854 per share. The Company also sold to certain investors in lieu of common stock, pre-funded warrants to purchase 1,914,280 shares of its common stock at a price to the public of $4.099 per share underlying each pre-funded warrant, and at a price to the underwriters of $3.853 per share underlying each pre-funded warrant.

Concurrently with the June 2020 public offering, the Company completed a private placement in which the Company sold 8,649,453 shares of its common stock to affiliates of Vivo Capital, LLC and Samsara BioCapital, LP, at a sale price equal to the price to the public in the underwritten public offering.

The net proceeds from the June 2020 public offering and private placement, after deducting underwriting discounts, underwriting and placement agent commissions and other expenses totaling approximately $10.1 million, was approximately $150.1 million.

The Company evaluated the pre-funded warrants for liability or equity classification in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity, and ASC 815-40, Derivatives and Hedging. Based on the provisions governing the pre-funded warrants in the applicable agreement, the Company determined that the pre-funded warrants meet the criteria required to be classified as an equity award subject to the guidance in ASC 815-10 and 815-40 and should effectively be treated as outstanding common shares in both basic and diluted earnings per share calculations.

4. Net Loss Per Common Share

Basic and diluted net loss per common share is determined by dividing net loss by the weighted average common shares and pre-funded warrants outstanding during the period. Basic and diluted shares outstanding includes the weighted average effect of the Company's outstanding pre-funded warrants as the exercise of such pre-funded warrants requires nominal consideration to be given for the delivery of the corresponding shares of common stock. As of September 30, 2021 and September 30, 2020, the Company had 3,164,280 pre-funded warrants outstanding, which if exercised, would increase the number of shares of common stock issued and outstanding. For the periods when there is a net loss, shares underlying stock options and RSUs have been excluded from the calculation of diluted net loss per common share because the effect of including such shares would be anti-dilutive. Therefore, the weighted average common shares used to calculate both basic and diluted net loss per common share would be the same.

The following table sets forth the computation of basic and diluted net loss per common share for the periods indicated:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Basic and diluted net loss per common share calculation:
Net loss	$	(24,551)	$	(25,450)	$	(81,489)	$	(59,115)
Weighted average common shares outstanding - basic and dilutive	105,217		92,675		97,370		67,931
Net loss per share of common stock - basic and diluted	$	(0.23)	$	(0.27)	$	(0.84)	$	(0.87)

The following potentially dilutive securities have been excluded from the computations of diluted weighted average common shares outstanding for the periods presented, as the effect of including such shares would be anti-dilutive:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Stock options outstanding	9,089	7,426	9,089	7,426
Restricted stock units	1,903	1,727	1,903	1,727
Total	10,992	9,153	10,992	9,153

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5. Cash, Cash Equivalents and Available for Sale Securities

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at the date of purchase to be cash equivalents. As of September 30, 2021 and December 31, 2020, the Company had cash and cash equivalents of approximately $179.9 million and $66.4 million, respectively. Cash and cash equivalents included cash of $97.0 million at September 30, 2021 and $8.4 million at December 31, 2020. Cash and cash equivalents at September 30, 2021 and December 31, 2020 included $82.9 million and $58.0 million, respectively, of investments in money market funds.

The Company considers securities with original maturities of greater than 90 days at the date of purchase to be available for sale securities. As of September 30, 2021 and December 31, 2020, the Company held available for sale securities of $62.1 million and $143.7 million, respectively, all of which have maturities of less than one year.

The Company evaluates securities with unrealized losses, if any, to determine whether the decline in fair value has resulted from credit loss or other factors. The Company has determined that there were no credit losses in fair value of its investments as of September 30, 2021. Factors considered in determining whether a loss resulted from a credit loss or other factors included the length of time and extent to which the investment’s fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, the extent of the loss related to credit of the issuer, the expected cash flows from the security, the Company’s intent to sell the security, and whether or not the Company will be required to sell the security before the recovery of its amortized cost.

The Company classifies these securities as available for sale. However, the Company has not sold and does not currently intend to sell its investments and the Company believes it is more likely than not that the Company will recover the carrying value of these investments.

The Company believes that its existing cash, cash equivalents and available for sale securities as of September 30, 2021 will be sufficient to fund its currently planned capital expenditure requirements and operating expenses for at least the next 12 months from the filing of this Quarterly Report on Form 10-Q. See Note 10 to the Financial Statements for information about the Company’s follow-on public offering completed in October 2021.

Available for sale securities, including carrying value and estimated fair values, are summarized as follows:


	As of September 30, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	$	8,999	$	—	$	—	$	8,999
Corporate debt securities	43,614		—		(8)		43,606
Asset-backed securities	9,489		—		(3)		9,486
Total	$	62,102	$	—	$	(11)	$	62,091


	As of December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	$	54,225	$	8	$	—	$	54,233
Corporate debt securities	79,282		4		(10)		79,276
Asset-backed securities	10,164		1		—		10,165
Total	$	143,671	$	13	$	(10)	$	143,674

The Company’s available for sale securities are reported at fair value on the Company’s balance sheet. Unrealized gains (losses) are reported within other comprehensive income in the statements of comprehensive loss. The cost of securities sold and any realized gains/losses from the sale of available for sale securities are based on the specific identification method. The

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changes in accumulated other comprehensive income associated with the unrealized gain on available for sale securities during the three and nine months ended September 30, 2021 and 2020, respectively, were as follows:


	Three months ended September 30,				Nine Months Ended September 30, 2021
	2021		2020		2021		2020
Beginning balance	$	3	$	—	$	3	$	—
Current period changes in fair value before reclassifications, net of tax	(14)		1		(14)		1
Amounts reclassified from accumulated other comprehensive income, net of tax	—		—		—		—
Total other comprehensive income (loss)	$	(14)	$	1	(14)		1
Ending balance	$	(11)	$	1	$	(11)	$	1

6. Share-Based Compensation

Pursuant to the evergreen provisions of the Company's 2013 stock incentive plan (the “2013 Plan”), annual increases have resulted in the addition of an aggregate of approximately 13,081,000 additional shares to the 2013 Plan, including for 2021, an increase of approximately 2,542,000 shares. As of September 30, 2021, the Company had approximately 3,031,000 shares available for grant under the 2013 Plan.

In October 2019, the Company's board of directors adopted its 2019 Inducement Stock Incentive Plan (the “2019 Inducement Plan”) to reserve initially 1,000,000 shares of its common stock to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company as a material inducement to such individuals’ entry into employment with the Company within Rule 5635(c)(4) of the Nasdaq Listing Rules. The terms and conditions of the 2019 Inducement Plan are substantially similar to those of the 2013 Plan. In March 2020, the Company's board of directors amended the 2019 Inducement Plan to reserve an additional 1,000,000 shares of its common stock for issuance under the plan, and in February 2021 and September 2021, the Company's board of directors further amended the 2019 Inducement Plan to reserve an additional 600,000 shares, and an additional 1,000,000 shares, respectively, of its common stock for issuance under the plan. As of September 30, 2021, the Company had approximately 1,314,000 shares available for grant under the 2019 Inducement Plan.

Share-based compensation expense, net of estimated forfeitures, includes expenses related to stock options and RSUs granted to employees, non-employee directors and consultants, as well as options granted to employees to purchase shares under the ESPP. Stock-based compensation by award type was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Stock options	$	1,485	$	1,089	$	3,997	$	3,556
Restricted stock units	1,101		723		2,896		2,411
Employee stock purchase plan	40		35		104		77
Total	$	2,626	$	1,847	$	6,997	$	6,044

The Company allocated stock-based compensation expense in the Company’s Consolidated Statements of Operations and Comprehensive Loss as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	1,476	$	882	$	4,138	$	2,986
General and administrative	1,150		965		2,859		3,058
Total	$	2,626	$	1,847	$	6,997	$	6,044

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Stock Options

A summary of the stock option activity, weighted average exercise prices, options outstanding, exercisable and expected to vest as of September 30, 2021 is as follows (in thousands except weighted average exercise price):


	Number of Shares Underlying Options	Weighted Average Exercise Price
Outstanding, December 31, 2020	8,928	$	9.22
Granted	969	$	7.84
Exercised	(487)	$	2.89
Forfeited	(321)	$	4.49


Outstanding, September 30, 2021	9,089	$	9.85
Vested and exercisable, September 30, 2021	5,154	$	12.71
Vested and expected to vest, September 30, 2021	8,768	$	9.99

As of September 30, 2021, there were approximately $15.3 million of unrecognized compensation costs, net of estimated forfeitures, related to stock option awards grants, which are expected to be recognized over a remaining weighted average period of 3.0 years.

RSUs

The following table presents a summary of the Company's outstanding RSU awards granted as of September 30, 2021 (in thousands except weighted average grant-date fair value):


	Restricted Stock Units	Weighted Average Grant-Date Fair Value
Outstanding, December 31, 2020	1,958	$	6.95
Awarded	329	$	7.44
Vested	(181)	$	4.32
Forfeited	(203)	$	21.60
Outstanding, September 30, 2021	1,903	$	5.76
Outstanding, Expected to vest	1,750	$	5.76

As of September 30, 2021, there were approximately $7.5 million of unrecognized compensation costs, net of estimated forfeitures, related to RSUs grants, which are expected to be recognized over a remaining weighted average period of 2.7 years.

ESPP

As of September 30, 2021, there were 753,410 shares available for future purchases under the ESPP. There were 27,529 and 32,821 shares issued under the ESPP during the three months ended September 30, 2021 and 2020, respectively. There were 51,951 and 76,402 shares of common stock issued under the ESPP during the nine months ended September 30, 2021 and 2020, respectively. Cash proceeds from ESPP purchases were $146 thousand and $147 thousand during the nine months ended September 30, 2021 and 2020, respectively.

7. Income Taxes

For the three and nine months ended September 30, 2021 and the three months ended September 2020, the Company recorded no income tax benefit. For the nine months ended September 30, 2020, the Company recorded a $3.7 million income tax benefit primarily to reflect a settlement of a local tax audit.

In response to the COVID-19 pandemic, the U.S. Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) on March 27, 2020. The CARES Act provides numerous tax provisions and other stimulus measures, including the immediate refund of minimum tax credits. In April 2021, the Company received the remaining balance, approximately $1.8 million, of its minimum tax credits refund.

The Company will continue to evaluate its ability to realize its deferred tax assets on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax

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legislation, rulings by relevant tax authorities, the progress of ongoing tax audits and the regulatory approval of products currently under development. Any additional changes to the valuation allowance recorded on deferred tax assets in the future would impact the Company’s income taxes.

8. Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value standard also establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company's assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021:


	Fair Value Measurement Using
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Investments in money market funds*	$	82,872	$	—	$	—
Investments in U.S. Treasury securities	$	8,999	$	—	$	—
Investments in corporate debt securities	$	—	$	43,606	$	—
Investments in asset-backed securities	$	—	$	9,486	$	—

*Investments in money market funds are reflected in cash and cash equivalents in the accompanying Consolidated Balance Sheets.


	Fair Value Measurement Using
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Investments in money market funds*	$	58,042	$	—	$	—

Investments in U.S. Treasury securities	54,233		—		—
Investments in corporate debt securities	$	—	$	79,275	$	—
Investments in asset-backed securities	—		10,166		—

*Investments in money market funds are reflected in cash and cash equivalents in the accompanying Consolidated Balance Sheets.

No transfer of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the three and nine months ended September 30, 2021.

9. Commitments and Contingencies

Zimura - Archemix Corp.

The Company is party to an agreement with Archemix Corp. (“Archemix”) under which the Company in-licensed rights in certain patents, patent applications and other intellectual property related to Zimura and pursuant to which the Company may be required to pay sublicense fees and make milestone payments (the “C5 License Agreement”). Under the C5 License Agreement, for each anti-C5 aptamer product that the Company may develop under the agreement, including Zimura, the Company is obligated to make additional payments to Archemix of up to an aggregate of $50.5 million if the Company achieves specified development, clinical and regulatory milestones, with $24.5 million of such payments relating to a first indication, $23.5 million of such payments relating to second and third indications and $2.5 million of such payments relating to sustained delivery applications. Under the C5 License Agreement, the Company is also obligated to make additional

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payments to Archemix of up to an aggregate of $22.5 million if the Company achieves specified commercial milestones based on net product sales of all anti-C5 products licensed under the agreement. The Company is also obligated to pay Archemix a double-digit percentage of specified non-royalty payments the Company may receive from any sublicensee of its rights under the C5 License Agreement. The Company is not obligated to pay Archemix a running royalty based on net product sales in connection with the C5 License Agreement.

IC-100 - University of Florida and the University of Pennsylvania

Under its exclusive license agreement with the University of Florida Research Foundation, Incorporated (“UFRF”) and the University of Pennsylvania (“Penn”) for rights to IC-100, the Company is obligated to make payments to UFRF, for the benefit of Penn and UFRF (together, the “Licensors”), of up to an aggregate of $23.5 million if the Company achieves specified clinical, marketing approval and reimbursement approval milestones with respect to a licensed product and up to an aggregate of an additional $70.0 million if the Company achieves specified commercial sales milestones with respect to a licensed product. The Company is also obligated to pay UFRF, for the benefit of the Licensors, a low single-digit percentage of net sales of licensed products. The Company is also obligated to pay UFRF, for the benefit of the Licensors, a double-digit percentage of specified non-royalty payments the Company may receive from any third-party sublicensee of the licensed patent rights. Further, if the Company receives a rare pediatric disease priority review voucher from the FDA in connection with obtaining marketing approval for a licensed product and the Company subsequently uses such priority review voucher in connection with a different product candidate, the Company will be obligated to pay UFRF, for the benefit of the Licensors, aggregate payments in the low double-digit millions of dollars based on certain approval and commercial sales milestones with respect to such other product candidate. In addition, if the Company sells such a priority review voucher to a third party, the Company will be obligated to pay UFRF, for the benefit of the Licensors, a low double-digit percentage of any consideration received from such third party in connection with such sale.

IC-200 - University of Pennsylvania and the University of Florida

Under its exclusive license agreement with Penn and UFRF for rights to IC-200, the Company is obligated to make payments to Penn, for the benefit of the Licensors, of up to an aggregate of $15.7 million if the Company achieves specified clinical, marketing approval and reimbursement approval milestones with respect to one licensed product and up to an aggregate of an additional $3.1 million if the Company achieves these same milestones with respect to a different licensed product. In addition, the Company is obligated to make payments to Penn, for the benefit of the Licensors, of up to an aggregate of $48.0 million if the Company achieves specified commercial sales milestones with respect to one licensed product and up to an aggregate of an additional $9.6 million if the Company achieves these same milestones with respect to a different licensed product. The Company is also obligated to pay Penn, for the benefit of the Licensors, a low single-digit percentage of net sales of licensed products. The Company is also obligated to pay Penn, for the benefit of the Licensors, a high single-digit to a mid-teen percentage of specified non-royalty payments the Company may receive from any third-party sublicensee of the licensed patent rights, with the applicable percentage based upon the stage of development of the sublicensed product at the time the Company enters into the sublicense. Further, if the Company receives a rare pediatric disease priority review voucher from the FDA in connection with obtaining marketing approval for a licensed product and the Company subsequently uses such priority review voucher in connection with a different product candidate outside the scope of the agreement, the Company will be obligated to pay Penn, for the benefit of the Licensors, aggregate payments in the low double-digit millions of dollars based on certain approval and commercial sales milestones with respect to such other product candidate. In addition, if the Company sells such a priority review voucher to a third party, the Company will be obligated to pay Penn, for the benefit of the Licensors, a high single-digit percentage of any consideration received from such third party in connection with such sale.

miniCEP290 Program - University of Massachusetts

Under its exclusive license agreement with the University of Massachusetts (“UMass”) for its miniCEP290 program, which targets LCA10, which is associated with mutations in the CEP290 gene, the Company is obligated to pay UMass up to an aggregate of $14.75 million in cash and issue up to 75,000 shares of common stock of the Company if the Company achieves specified clinical and regulatory milestones with respect to a licensed product. In addition, the Company is obligated to pay UMass up to an aggregate of $48.0 million if the Company achieves specified commercial sales milestones with respect to a licensed product. The Company is also obligated to pay UMass royalties at a low single-digit percentage of net sales of licensed products. If the Company or any of its affiliates sublicenses any of the licensed patent rights or know-how to a third party, the Company will be obligated to pay UMass a high single-digit to a mid-tens percentage of the consideration received in exchange for such sublicense, with the applicable percentage based upon the stage of development of the licensed products at the time the Company or the applicable affiliate enters into the sublicense. If the Company receives a priority review voucher from the FDA in connection with obtaining marketing approval for a licensed product, and the Company subsequently uses such priority review voucher in connection with a different product candidate outside the scope of the agreement, the Company will be obligated to pay UMass a low-tens percentage of the fair market value of the priority review voucher at the time of

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approval of such product candidate and a low-twenties percentage of the fair market value of the priority review voucher at the time of achievement of a specified commercial sales milestone for such product candidate. In addition, if the Company sells such a priority review voucher to a third party, the Company will be obligated to pay UMass a low-thirties percentage of any consideration received from such third party in connection with such sale.

IC-500 - Former Equityholders of Inception 4

Under the agreement and plan of merger between the Company and Inception 4, Inc. (“Inception 4”), pursuant to which the Company acquired IC-500 and its other HtrA1 inhibitors (the “Inception 4 Merger Agreement”), the Company is obligated to make payments to the former equityholders of Inception 4 of up to an aggregate of $105 million, subject to the terms and conditions of the Inception 4 Merger Agreement, if the Company achieves certain specified clinical and regulatory milestones with respect to IC-500 or any other product candidate from its HtrA1 inhibitor program, with $45 million of such potential payments relating to GA and $60 million of such potential payments relating to wet AMD. Under the Inception 4 Merger Agreement, the Company does not owe any commercial milestones or royalties based on net sales. The future milestone payments will be payable in the form of shares of the Company's common stock, calculated based on the price of its common stock over a five-trading day period preceding the achievement of the relevant milestone, unless and until the issuance of such shares would, together with all other shares issued in connection with the acquisition, exceed an overall maximum limit of approximately 7.2 million shares, which is equal to 19.9% of the number of issued and outstanding shares of the Company's common stock as of the close of business on the business day prior to the closing date of the Inception 4 acquisition, and will be payable in cash thereafter. The Inception 4 Merger Agreement also includes customary indemnification obligations to the former equityholders of Inception 4, including for breaches of the representations and warranties, covenants and agreements of the Company and its subsidiaries (other than Inception 4) in the Inception 4 Merger Agreement.

Employment Contracts

The Company also has letter agreements with certain employees that require the funding of a specific level of payments if certain events, such as a termination of employment in connection with a change in control or termination of employment by the employee for good reason or by the Company without cause, occur.

Contract Service Providers

In addition, in the course of normal business operations, the Company has agreements with contract service providers to assist in the performance of the Company’s research and development and manufacturing activities. Expenditures to CROs and CDMOs represent significant costs in preclinical and clinical development. Subject to required notice periods and the Company’s obligations under binding purchase orders and any cancellation fees that the Company may be obligated to pay, the Company can elect to discontinue the work under these agreements at any time.

Legal Proceedings

On January 11, 2017, a putative class action lawsuit was filed against the Company and certain of its current and former executive officers in the United States District Court for the Southern District of New York, captioned Frank Micholle v. IVERIC bio, Inc., et al., No. 1:17-cv-00210. On March 9, 2017, a related putative class action lawsuit was filed against the Company and the same group of its current and former executive officers in the United States District Court for the Southern District of New York, captioned Wasson v. IVERIC bio, Inc., et al., No. 1:17-cv-01758. These cases were consolidated on March 13, 2018. On June 4, 2018, the lead plaintiff filed a consolidated amended complaint (the “CAC”). The CAC purports to be brought on behalf of shareholders who purchased the Company’s common stock between March 2, 2015 and December 12, 2016. The CAC generally alleges that the Company and certain of its officers violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements concerning the results of the Company’s Phase 2b trial and the prospects of the Company’s Phase 3 trials for Fovista in combination with anti-VEGF agents for the treatment of wet AMD. The CAC seeks unspecified damages, attorneys’ fees, and other costs. The Company and individual defendants filed a motion to dismiss the CAC on July 27, 2018. On September 18, 2019, the court issued an order dismissing some, but not all, of the allegations in the CAC. On November 18, 2019, the Company and the individual defendants filed an answer to the complaint. On June 12, 2020, the lead plaintiff filed a motion for class certification. On August 11, 2020, the defendants filed a notice of non-opposition to lead plaintiff's motion for class certification. On April 23, 2021, the court issued an order staying the action until July 1, 2021, 10 days after a mediation scheduled for June 21, 2021. On July 1, 2021, following the June 21, 2021 mediation, the parties notified the court that they had reached an agreement in principle to settle the class action. On September 8, 2021, the parties executed a settlement agreement, which has been submitted to the court for approval. The Company does not expect this settlement, if finalized as currently contemplated, to have a material impact on its financial condition.

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On August 31, 2018, a shareholder derivative action was filed against current and former members of the Company's Board of Directors and certain current and former officers of the Company in the United States District Court for the Southern District of New York, captioned Luis Pacheco v. David R. Guyer, et al., Case No. 1:18-cv-07999. The complaint, which is based substantially on the facts alleged in the CAC, alleges that the defendants breached their fiduciary duties to the Company and wasted the Company's corporate assets by failing to oversee the Company's business, and also alleges that the defendants were unjustly enriched as a result of the alleged conduct, including through receipt of bonuses, stock options and similar compensation from the Company, and through sales of the Company's stock between March 2, 2015 and December 12, 2016. The complaint purports to seek unspecified damages on the Company's behalf, attorneys’ fees, and other costs, as well as an order directing the Company to reform and improve its corporate governance and internal procedures to comply with applicable laws, including submitting certain proposed amendments to the Company's corporate charter, bylaws and corporate governance policies for vote by the Company's stockholders. On December 14, 2018, the Company filed a motion to dismiss the complaint. On September 19, 2019, the court denied its motion to dismiss this complaint. This matter was subsequently referred to a special litigation committee (“SLC”) of the Company's board of directors. On February 18, 2020, the Company filed an answer to the complaint. The Company and the plaintiff agreed to stay this litigation while the SLC conducts its investigation. On May 4, 2020, the court approved the stipulation and stayed the litigation through November 1, 2020. By agreement of the parties, the court has since extended the stay through June 26, 2021. The Company also entered into tolling agreements with the defendant directors to December 2021. The SLC and the plaintiffs in this derivative matter and the one described below recently agreed in principle on a settlement and are conducting settlement agreement discussions.

On October 16, 2018, the Company’s board of directors received a shareholder demand to investigate and commence legal proceedings against certain members of the Company’s board of directors. The demand alleges facts that are substantially similar to the facts alleged in the CAC and the Pacheco complaint and asserts claims that are substantially similar to the claims asserted in the Pacheco complaint. On January 30, 2019, the Company’s board of directors received a second shareholder demand from a different shareholder to investigate and commence legal proceedings against certain current and former members of the Company’s board of directors based on allegations that are substantially similar to the allegations contained in the first demand letter. These shareholder demands were referred to a demand review committee of the Company's board of directors. On May 6, 2021, the shareholders who served the October 16, 2018 demand filed a shareholder derivative action against current and former members of the Company’s Board of Directors and certain current and former officers of the Company in the New York Supreme Court, captioned Brian Ferber et al., derivatively on behalf of Ophthotech Corporation v. Axel Bolte et al., Index No. 154462/2021. The complaint asserts the same claims as those asserted in the Pacheco complaint and is based on factual allegations that are materially similar to the allegations in the Pacheco complaint. On June 22, 2021, the parties filed a stipulation staying the Ferber action until 60 days after the SLC concludes its investigation. The Company has entered into tolling agreements with the directors named in the demands to December 2021. The SLC and the plaintiffs in this derivative matter and the one described above recently agreed in principle on a settlement and are conducting settlement agreement discussions.

The Company denies any and all allegations of wrongdoing and intends to vigorously defend against these lawsuits. The Company is unable, however, to predict the outcome of these matters, including that of the settlement agreement discussions, at this time. Moreover, any conclusion of these matters in a manner adverse to the Company and for which it incurs substantial costs or damages not covered by the Company's directors’ and officers’ liability insurance would have a material adverse effect on its financial condition and business. In addition, the litigation could adversely impact the Company's reputation and divert management’s attention and resources from other priorities, including the execution of its business plan and strategies that are important to the Company's ability to grow its business, any of which could have a material adverse effect on the Company's business.

10. Subsequent Events

In October 2021, the Company completed an underwritten public offering in which the Company sold 10,350,000 shares of its common stock, which included the exercise in full of the underwriters’ option to purchase 1,350,000 shares of the Company’s common stock, at a price to the public of $16.75 per share and at a price to the underwriters of $15.745 per share.

The net proceeds from the October 2021 public offering, after deducting underwriting discounts and commissions and other expenses payable by the Company totaling approximately $10.8 million, was approximately $162.6 million.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related notes and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2020 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 4, 2021. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties and should be read together with the “Risk Factors” section of this Quarterly Report on Form 10-Q 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 science-driven biopharmaceutical company focused on the discovery and development of novel treatments for retinal diseases with significant unmet medical needs. We are committed to having a positive impact on patients’ lives by delivering high-quality, safe and effective treatments designed to address debilitating retina diseases including all stages of age-related macular degeneration, or AMD.

Our lead asset is our clinical stage product candidate Zimura® (avacincaptad pegol), a complement C5 inhibitor. We are currently targeting the following diseases with Zimura:

•Geographic Atrophy, or GA, which is the advanced stage of AMD, and is characterized by marked thinning or atrophy of retinal tissue, leading to irreversible loss of vision;

•intermediate AMD, which is an earlier stage of AMD that precedes GA; and

•autosomal recessive Stargardt disease, or STGD1, which is an orphan inherited condition characterized by progressive damage to the central portion of the retina, or the macula, and other retinal tissue, leading to loss of vision.

In July 2021, we completed patient enrollment for GATHER2, our Phase 3 clinical trial evaluating the safety and efficacy of Zimura for the treatment of GA secondary to AMD. We have also received a written agreement from the U.S. Food and Drug Administration, or the FDA, under a Special Protocol Assessment, for SPA, for the overall design of GATHER2. We expect topline data from the GATHER2 trial to become available during the second half of 2022, approximately one year after the enrollment of the last patient plus the time needed for database lock and analysis. We also plan to initiate a Phase 3 clinical trial evaluating Zimura for patients with intermediate AMD during 2022. We expect data from this trial, if positive, together with other supportive data, may be sufficient to file a supplemental new drug application, or NDA, with the FDA and a supplemental marketing authorization application, or MAA, with the European Medicines Agency, or the EMA.

In addition to Zimura, we are developing our preclinical product candidate IC-500, a High temperature requirement A serine peptidase 1 protein, or HtrA1, inhibitor, for GA secondary to AMD and potentially other age-related retinal diseases. Based on current timelines, we expect to submit an investigational new drug application, or IND, to the FDA for IC-500 during the second half of 2022.

Our portfolio also includes two preclinical stage gene therapy product candidates (IC-100 and IC-200) and several ongoing gene therapy research programs, each of which uses adeno-associated virus, or AAV, for gene delivery. These AAV mediated gene therapy programs are targeting the following orphan inherited retinal diseases, or IRDs:

•rhodopsin-mediated autosomal dominant retinitis pigmentosa, or RHO-adRP, which is characterized by progressive and severe bilateral loss of vision leading to blindness;

•IRDs associated with mutations in the BEST1 gene, including Best vitelliform macular dystrophy, or Best disease;

•Leber Congenital Amaurosis type 10, or LCA10, which is characterized by severe bilateral loss of vision at or soon after birth;

•STGD1; and

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•IRDs associated with mutations in the USH2A gene, which include Usher syndrome type 2A, or Usher 2A, and USH2A-associated non-syndromic autosomal recessive retinitis pigmentosa.

As we focus our efforts on and prioritize the development of Zimura, we have been considering our development options for IC-100 and IC-200, which we have been developing for RHO-adRP and BEST1- related IRDs, respectively. We currently plan to seek a collaborator or licensee for the future development and potential commercialization of these product candidates. We do not now expect to initiate a Phase 1/2 clinical trial for IC-200 in 2021. We expect that this re-prioritization of our development programs will allow us to devote an additional $10 million to $15 million to our Zimura development and pre-commercialization efforts between now and the end of 2023.

Research and Development Pipeline

We have summarized the current status of our ongoing research and development programs in the table below.

*We have an option to exclusively in-license intellectual property resulting from these research programs.

Therapeutic Development Programs

Zimura

Zimura, our complement C5 inhibitor, is a chemically-synthesized, pegylated RNA aptamer. Aptamers are short molecules made up of a single stranded nucleic acid sequence or amino acid sequence that binds molecular targets with high selectivity and specificity. The following are brief descriptions of our ongoing and planned clinical trials for Zimura, and our manufacturing activities for Zimura.

GATHER2 (GA secondary to AMD - Ongoing)

Trial Design

GATHER2, also known as ISEE2008, is an international, randomized, double-masked, sham controlled, multi-center Phase 3 clinical trial evaluating the safety and efficacy of Zimura for the treatment of GA secondary to AMD. In this trial, patients are randomized to receive either monthly administration of Zimura 2 mg or sham during the first 12 months of the trial, at which time we plan to analyze the primary efficacy endpoint of the mean rate of growth (slope) estimated based on GA area, as measured by fundus autofluorescence, FAF, based on readings at three time points: baseline, month 6 and month 12. At month 12, patients in the Zimura 2 mg arm are re-randomized to receive either monthly or every other month administration of Zimura 2 mg. The final evaluation for all patients will take place at month 24.

Trial Progress

In July 2021, we completed patient enrollment in GATHER2 with a total of 448 patients enrolled. We expect 12-month top-line data from this trial to become available during the second half of 2022, approximately one year after the enrollment of the last patient plus the time needed for database lock and analysis. If the 12-month results are positive, we plan to file applications with the FDA and the EMA for marketing approval of Zimura for GA secondary to AMD.

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We are focusing on patient retention and continue to closely monitor the COVID-19 pandemic and its potential effect on the trial. We are targeting patient retention for the trial, as measured by the injection fidelity rate through month 12, of greater than 90%. The 12-month injection fidelity rate for our previously completed GATHER1 trial was 87%. The injection fidelity rate is calculated by dividing the total number of actual injections for all patients by the total number of expected injections based on the total number of patients enrolled in the trial.

Special Protocol Assessment

In July 2021, we received a written agreement from the FDA under a SPA for the overall design of GATHER2. The SPA is a procedure by which the FDA provides a clinical trial sponsor with an official evaluation and written guidance on the design of a proposed protocol intended to form the basis for an NDA. In connection with our SPA, the FDA recommended, and we accepted, modifying the primary efficacy endpoint for the GATHER2 trial from the mean rate of change in GA area over 12 months measured by FAF at three timepoints: baseline, month 6 and month 12, to the mean rate of growth (slope) estimated based on GA area measured by FAF in at least three timepoints: baseline, month 6 and month 12.

Planned Development of Zimura for Intermediate AMD

Previous Post-Hoc Analyses

As previously disclosed, we conducted post-hoc analyses on the GATHER1 data, in which we evaluated the progression of incomplete Retinal Pigment Epithelial and Outer Retinal Atrophy, or iRORA, to complete Retinal Pigment Epithelial and Outer Retinal Atrophy, or cRORA, and the progression of drusen to iRORA or cRORA, in patients treated with Zimura 2 mg as compared to patients in the corresponding sham group. Drusen, iRORA and cRORA represent progressive stages of AMD.

The post-hoc analysis data show a 19.6% absolute reduction in the rate of progression from drusen to iRORA or cRORA, for the Zimura 2 mg group as compared to sham at 18 months, representing a relative risk reduction of 72%. The data also show a 21.8% absolute reduction in the rate of progression from iRORA to cRORA for the Zimura 2 mg group as compared to sham at 18 months, representing a relative risk of reduction of 52%. The following graphs illustrate these results:

Proportion of patients that progress from drusen to iRORA or cRORA (Zimura 2 mg compared to sham)

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Proportion of patients that progress from iRORA to cRORA (Zimura 2 mg compared to sham).

Planned Phase 3 Clinical Trial in Intermediate AMD

We have been encouraged by the post-hoc analyses data and have been planning development of Zimura for earlier stages of AMD. We recently announced aspects of the design of our planned Phase 3 clinical trial evaluating Zimura for patients with intermediate AMD, or the intermediate AMD trial, which we expect to initiate in 2022. Intermediate AMD is an earlier stage of AMD that precedes GA.

We expect the intermediate AMD trial will be an international, randomized, double-masked, sham-controlled, multi-center trial with approximately 200 patients per treatment group. We continue to consider which dosing regimens to evaluate in the trial. We expect to treat and follow all patients for 24 months. We are currently evaluating a specific definition of intermediate AMD for purposes of patient inclusion, as well as a primary endpoint for this trial, in each case, based on imaging criteria and other relevant anatomic features. We expect data from this trial, if positive, together with other supportive data, may be sufficient to file a supplemental NDA with the FDA and supplemental MAA with the EMA. Our plans for the intermediate AMD trial and regulatory strategy in this indication are subject to regulatory feedback, which we plan to obtain before initiating the trial in 2022.

We estimate that, by 2039, there will be approximately six million individuals with drusen in the United States and eight million individuals with drusen in the EU5 countries (France, Germany, Italy, Spain and United Kingdom). Intermediate AMD is a subset of drusen.

STAR (STGD1 - Ongoing)

STAR, also known as OPH2005, is an international, randomized, double-masked, sham controlled, multi-center clinical trial evaluating the safety and efficacy of Zimura for the treatment of STGD1. STAR, similar to GATHER1, was designed to be a Phase 2b screening trial, with the potential to demonstrate statistically significant results depending on the magnitude of the potential benefit observed. If the results are positive and statistically significant, we believe this trial could potentially serve as a clinical trial that can support an application for marketing approval. We initially enrolled 95 patients in the STAR trial. All of these initially enrolled patients had completed their scheduled visits as of September 2020.

In July 2020, we reopened enrollment in this trial in the United States. We plan to enroll approximately 25 additional patients, with the goal of enrolling a total of approximately 120 patients. As we continue to enroll new patients, we continue to monitor the COVID-19 pandemic closely and may need to slow down or stop patient enrollment in certain geographies depending on the local situation. Newly enrolled patients are randomized on a 1:1 basis to be treated with either Zimura 4 mg or sham for 18 months. We have been and plan to remain masked to the treatment group of all patients in the trial. In addition, we have not reviewed and do not plan to review or analyze efficacy data for any patients in the trial, until the 18-month data has been collected and analyzed for all patients enrolled in the trial. We expect results from this trial to be available after the 12-month top-line data from the GATHER2 trial.

Zimura Manufacturing

In early 2017, we completed the small scale manufacture of multiple batches of Zimura drug substance that we are using to support clinical drug supply for the GATHER2 trial and the expanded STAR trial. We are working with our historical contract manufacturer for Zimura drug substance, Agilent Technologies, Inc., or Agilent, to scale up and potentially validate the manufacturing process for Zimura drug substance. In parallel, we are working with a new contract manufacturer with the goal

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of assessing whether this manufacturer can produce Zimura drug substance at an adequate scale for potential commercial use. We have experienced issues with technology transfer of the existing manufacturing process to this manufacturer, which has resulted in delays to our timelines with this manufacturer. Subject to successful completion of scale up and validation activities, we currently plan to use both Agilent and the new manufacturer for the future supply of Zimura drug substance. Validation requires that we demonstrate that the drug substance produced through the scaled up process can be produced consistently, delivering quality product within a range of acceptable specifications. We are continuing analytical method development and qualification with our contract manufacturers and laboratories.

We order the polyethylene glycol, or PEG, starting material used to make Zimura drug substance from a sole source third-party manufacturer outside the United States. We currently procure the supply on a purchase order basis and are in discussions regarding a long-term supply agreement with this manufacturer for the PEG starting material. We believe this supplier will have the capacity to supply us with the PEG at the scale that we expect we will need for commercial manufacturing.

IC-500: HtrA1 Inhibitor

We are pursuing the preclinical development of IC-500 for the treatment of GA secondary to AMD and potentially other age-related retinal diseases. We have selected IC-500 as the lead compound from our HtrA1 inhibitor program, which includes a number of small molecule compounds that show high affinity and specificity for HtrA1 when tested in vitro.

In early 2021, we completed a review of our IC-500 development program, which we had previously designed to support monthly dosing in our planned first-in-human clinical trial. We believe that we may be able to establish, at an earlier stage of development, a dosing regimen for IC-500 with less frequent dosing than we had previously planned. As a result, we have revised our development plans and timelines for IC-500 with the goal of including both monthly dosing and a less frequent dosing regimen in our first-in-human clinical trial. We have initiated a number of preclinical tolerability and pharmacokinetic and target engagement studies for IC-500 and are planning additional preclinical studies. We are continuing formulation optimization and other manufacturing activities for IC-500. Based on current timelines and subject to successful preclinical development and cGMP manufacturing, we expect to submit an IND to the FDA for IC-500 during the second half of 2022.

Gene Therapy Research and Development Programs

IC-100: Product Candidate for RHO-adRP

We have been conducting the preclinical development of IC-100, our novel AAV gene therapy product candidate for the treatment of RHO-adRP. We worked with a gene therapy contract development and manufacturing organization, or CDMO, for preclinical and early-stage clinical supply of IC-100. This CDMO produced, and we released, a cGMP batch of IC-100. In addition, we and the University of Pennsylvania, or Penn, conducted a number of preclinical studies of IC-100 and a natural history study of RHO-adRP patients, including a preclinical toxicology and efficacy study of IC-100 in the naturally occurring canine model of RHO-adRP. We have been considering our development options for this product candidate. We currently plan to seek a collaborator or licensee for the future development and potential commercialization of IC-100.

IC-200: Product Candidate for BEST1-Related IRDs

We have been conducting the preclinical development of IC-200, our novel AAV gene therapy product candidate for the treatment of BEST1-related IRDs. We worked with a gene therapy CDMO for preclinical and early-stage clinical supply of IC-200. This CDMO produced, and we released, a cGMP batch of IC-200. In addition, we and Penn conducted a number of preclinical studies of IC-200 and natural history studies of patients with BEST1-related IRDs, including a preclinical toxicology and efficacy study of IC-200 in the naturally occurring canine model of Best disease. We have been considering our development options for this product candidate and do not now expect to initiate a Phase 1/2 clinical trial for IC-200 in 2021. We currently plan to seek a collaborator or licensee for the future development and potential commercialization of IC-200.

Minigene Programs

AAV vectors are generally limited as a delivery vehicle by the size of their genetic cargo, which is restricted to approximately 4,700 base pairs of genetic code. The use of minigenes seeks to deliver a smaller but still functional form of a

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larger gene packaged into a standard-size AAV delivery vector. The goal of minigene therapy is to deliver a gene expressing a protein that, although smaller than the naturally occurring protein, is nonetheless functional for purposes of treating the associated disease.

Starting in 2018, we funded several sponsored research programs at the University of Massachusetts Medical School, or UMMS, seeking to use a minigene approach to develop new gene therapies for several orphan IRDs. These programs (miniCEP290, miniABCA4 and miniUSH2A) are described below. In July 2021, we hired four individuals who were previously at UMMS and working on these sponsored research programs, including the principal investigator for these programs. We are transitioning the preclinical research activities for these programs from UMMS to us and establishing laboratory space for these employees to continue working on these programs and other preclinical research and development activities for us.

The following is a summary of these minigene programs and their status:

•miniCEP290 (LCA10): This program, which we refer to as the miniCEP290 program, is targeting LCA10, which is associated with mutations in the CEP290 gene. In July 2019, we entered into a license agreement with the University of Massachusetts, or UMass, for exclusive development and commercialization rights to this program. The sponsored research yielded a number of minigene constructs that show encouraging results when tested in a mouse model. UMMS conducted additional experiments to optimize constructs, which were delayed during 2020 because of restrictions placed by UMMS on animal research activities as a result of the COVID-19 pandemic. We have identified a lead construct from this program and are considering preclinical development options for this program.

•miniABCA4 (STGD1): This program, which we refer to as the miniABCA4 program, is targeting STGD1, which is associated with mutations in the ABCA4 gene. UMMS granted us an option to obtain an exclusive license to certain patent applications for this program. UMMS generated and evaluated several ABCA4 minigene constructs in both in vitro and in vivo experiments, which yielded what we believe to be encouraging results. We are evaluating the preclinical data generated from the miniABCA4 program to date and are considering next steps for this program.

•miniUSH2A (USH2A-related IRDs): This program, which we refer to as the miniUSH2A program, is targeting IRDs associated with mutations in the USH2A gene, including Usher 2A and USH2A-associated non-syndromic autosomal recessive retinitis pigmentosa. UMMS granted us an option to obtain an exclusive license to certain patent applications for this program. Some of the activities in this program were delayed during 2020 as a result of the closure of UMMS animal research laboratories due to the COVID-19 pandemic. UMMS generated and evaluated several USH2A minigene constructs in in vitro experiments and we are planning to evaluate the constructs in animals. The animal experiments have been delayed as a result of transitioning the work from UMMS to us. We expect to receive preliminary results from this program during the first half of 2022.

Impact of COVID-19

Beginning in March 2020, the COVID-19 pandemic and measures taken to contain it have affected our business and operations in a number of ways. These include, but are not limited to, the following:

•Clinical Trial Operations. In March 2020, we decided to delay the initiation of patient enrollment in our GATHER2 trial. As we initiated patient enrollment in June 2020, we and our clinical trial sites implemented new health and safety practices to mitigate the effects of the COVID-19 pandemic and to support patients and site staff. In addition, we added more than 30 new sites to the GATHER2 trial to help with patient recruitment. Although we have since completed patient enrollment in GATHER2, we may face difficulties in retaining patients or maintaining scheduled visits to the extent patients are affected by the virus or lockdown measures or are fearful of visiting or traveling to our clinical trial sites because of the pandemic. We are aware that a number of patients initially enrolled in the STAR trial missed consecutive visits during the early months of the pandemic, and that a number of patients in our Latin America sites for GATHER2 missed visits because of the COVID-19 pandemic. We do not yet know whether the number of missed visits will increase or decrease in the GATHER2 or STAR trials, or what the impact of missed visits may be on patient retention in those trials or the trial results, especially because we are masked to the treatment of patients during the conduct of the trials. We have been and continue to monitor the situation closely. For a more detailed discussion of the impact of the COVID-19 pandemic on our clinical trial operations, please see the Risk Factor titled, “The COVID-19 pandemic has affected and may continue to affect the initiation and conduct of our clinical trials, including the retention of patients for our GATHER2 clinical trial and patient recruitment and retention for our STAR clinical trial. It may have long-lasting effects on the conduct of clinical trials, which can make our ongoing and any future trials more difficult, costly or time consuming”.

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•Third-Party Collaborators and Vendors. Many of our third-party contract manufacturers, academic research collaborators and contract research organizations limited their operations and staff during the COVID-19 pandemic, which resulted in delays to some of our manufacturing and research and development activities and limited our ability to be on site to oversee these activities. For example, the closure of animal research laboratories at UMMS for several months during 2020 caused delays to the progress of, and to our timelines for receipt of data from, our gene therapy research programs. Recently, several of our vendors have been facing backlogs due to work and demands from other clients, including those who are developing vaccines or medicines for the COVID-19 pandemic, which has limited their availability to perform work for us. For example, this situation has limited the number of contract research organizations and their availability for conducting a number of planned preclinical studies for IC-500, which caused us to modify our plans for these studies, including by performing internally some of the activities originally planned to be conducted by outside vendors. At this time, we do not know whether there will be further impact on the work of our third-party vendors and collaborators due to the COVID-19 pandemic.

•Supply Chain and Materials. Shortages, delays and governmental restrictions arising from the COVID-19 pandemic have disrupted and may continue to disrupt the ability of our contract manufacturers to procure items, such as raw materials, that are essential for the manufacture of our product candidates. For example, during 2020, our contract manufacturer for IC-500 experienced a shortage in obtaining one of the raw materials that was sourced from China, which was caused by the shutdown of local suppliers and the slowdown in trade due to the COVID-19 pandemic. This shortage delayed our process development activities for the drug substance for IC-500 by a number of months. In addition, since 2020, there have been shortages of various animals used in research studies, such as several types of non-human primates, which are typically sourced from China, due to the COVID-19 pandemic and disruptions to the global supply chain. Although our development programs have not yet been affected by these shortages, we are continuing to monitor the situation. Furthermore, we recently learned that the new manufacturer we are working with for supply of Zimura drug substance has experienced issues with procuring an important raw material common to many manufacturing processes, which occurred due to recent supply chain interruptions and caused a slight delay to our manufacturing timelines with this contract manufacturer.

•Remote Working. We instituted company-wide remote working starting in March 2020. We are planning for a gradual return to working in our offices and expect to continue to work mostly remote for the near future. We have been relying on remote means of working and communication both internally and externally. We are continuing to monitor and support the health and well-being of our employees and their productivity as remote working continues.

We do not believe that the COVID-19 pandemic, and our actions in response and the costs of those actions, have had a material impact on our financial position, results of operations, or cash flows for the three months or nine months ended September 30, 2021. The progression of the COVID-19 pandemic remains fluid and its impact on our business and operations remains uncertain. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and new variants of the virus, the actions taken to contain it or lessen its impact, including the availability, effectiveness and administration of vaccines, and the economic impact on local, regional, national and international markets. For example, the FDA has approved the use of three booster shots for certain individuals because of decreases in efficacy. If the delays and other disruptions due to the pandemic become prolonged or more extensive, then we may experience further delays or disruptions to our research and development programs and our financial position, results of operations or cash flows for future periods may be materially affected.

For further information on actual and potential impacts to us as a result of the COVID-19 pandemic, see the other sections of this Management's Discussion and Analysis of Results of Operations and Financial Position and the Risk Factors contained in this Quarterly Report on Form 10-Q.

Business Development and Financing Activities

As we continue the development of our product candidates and programs, prepare for potential commercialization of Zimura and evaluate our overall strategic priorities, we will continue to pursue selective business development and financing opportunities that advance us toward our strategic goals. We plan to continue to evaluate, on a selective and targeted basis, opportunities to potentially obtain rights to additional product candidates and technologies for retinal diseases, with a focus on sustained release delivery technologies for Zimura. In addition, we continue to explore potential collaboration and out-licensing opportunities for the future development and potential commercialization of our product candidates, including potential collaboration opportunities for the future development and potential commercialization of Zimura in one or more territories outside the United States and collaboration and out-license opportunities for the future development and potential commercialization of IC-100 and IC-200.

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For information about our follow-on public offerings that we completed in July 2021 and October 2021, please see the Liquidity and Capital Resources section of Management' s Discussion and Analysis of Financial Condition and Results of Operations. We expect to continue to pursue capital raising transactions when they are available on terms favorable to us and if the opportunity advances our strategic goals.

Financial Matters

As of September 30, 2021, we had cash, cash equivalents and available for sale securities of $242 million. In October 2021, we raised approximately $162.6 million in net proceeds in an underwritten public offering of common stock. We now estimate that our year-end 2021 cash, cash equivalents and available for sale securities will range between $375 million and $385 million. We also estimate that our cash, cash equivalents and available for sale securities will be sufficient to fund our planned capital expenditure requirements and operating expenses through at least mid-2024. These estimates are based on our current business plan, which includes the continuation of our ongoing clinical development programs for Zimura in GA and STGD1 and the initiation of an intermediate AMD clinical trial, preparation and potential filing of an NDA and a MAA for Zimura in GA secondary to AMD, continuing preparations for a potential commercial launch of Zimura in GA secondary to AMD, investing in sustained release delivery technologies for Zimura, and the advancement of our IC-500 development program. Excluded from these estimates are any potential approval or sales milestones payable to Archemix or any potential expenses for actual commercial launch of Zimura, such as sales force expenses, any additional expenditures related to potentially studying Zimura in indications outside of GA, STGD1 and intermediate AMD, or resulting from the potential in-licensing or acquisition of additional product candidates or technologies, or any associated development we may pursue. We have based these estimates on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

Financial Operations Overview

Revenue

As we have no products approved for sale, we do not expect to receive any revenue related to our product candidates until we obtain regulatory approval for and commercialize such products, or until we potentially enter into agreements with third parties for the development and commercialization of our product candidates. If our development efforts for any of our product candidates result in regulatory approval or if we enter into collaboration agreements with third parties, we may generate revenue from product sales or from such third parties.

Our ability to become and remain profitable depends on our ability to generate revenues in excess of our expenses. Our ability to generate revenues from product sales is dependent on our obtaining marketing approval for and commercializing our product candidates or any product candidates we may in-license or acquire. We may be unsuccessful in our efforts to develop and commercialize product candidates or in our efforts to in-license or acquire additional product candidates. Even if we succeed in developing and commercializing one or more of our product candidates, we may never achieve sufficient sales revenue to achieve or maintain profitability.

Research and Development Expenses

Our research and development expenses primarily consist of costs associated with the manufacturing, development, and preclinical and clinical testing of our product candidates and costs associated with our gene therapy research programs. Our research and development expenses consist of:

•external research and development expenses incurred under arrangements with third parties, such as academic research collaborators, contract research organizations, or CROs, CDMOs and other vendors for the production and analysis of drug substance and drug product; and

•employee-related expenses for employees dedicated to research and development activities, including salaries, benefits and share-based compensation expense.

All research and development expenses are charged to operations as incurred in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 730, Research and Development, or ASC 730. We account for non-refundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received, rather than when the payment is made. We do not currently utilize a formal time allocation system to capture expenses on a project-by-project basis because we record expenses by functional department. Accordingly, we do not allocate expenses to individual projects or

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product candidates, although we do allocate some portion of our research and development expenses by project area or product candidate, as shown below.

The following table summarizes our research and development expenses for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(in thousands)				(in thousands)
Zimura	$	11,509	$	10,640	$	37,533	$	19,616
IC-500: HtrA1	348		280		1,320		1,098
IC-100: RHO-adRP	(272)		2,920		933		7,328
IC-200: BEST1	724		1,361		2,685		4,877
Other gene therapy	15		56		11		920
Prior product candidate Fovista	2		(792)		(7)		(754)
Personnel-related	4,277		3,330		13,247		8,783
Share-based compensation	1,476		882		4,138		2,986
Other	(144)		164		112		457
	$	17,935	$	18,841	$	59,972	$	45,311

As we continue our ongoing clinical trials, plan for and initiate clinical development of Zimura in intermediate AMD and continue our ongoing and planned manufacturing activities for Zimura, we expect our research and development expenses for Zimura to increase. We expect our research and development expenses for IC-500 to increase as we continue preclinical development. We expect our research and development expenses for IC-100 and IC-200 to decrease for the foreseeable near future. We expect our research and development expenses for our miniCEP290 program and other gene therapy research programs to remain largely unchanged as we continue those programs. Our research and development expenses may increase if we in-license or acquire any new product candidates or technologies or if we commence any new development programs.

We expect the development of our product candidates will continue for at least the next several years. At this time, we cannot reasonably estimate that the total remaining costs necessary to complete development, to complete process development and manufacturing scale-up and validation activities, and to potentially seek marketing approval for Zimura for indications outside of GA or for any of our other product candidates.

The successful development of our product candidates is subject to numerous risks and uncertainties associated with developing drugs, including the uncertainty of:

•the scope, rate of progress and costs of our research and development activities, including manufacturing activities;

•the potential benefits of our product candidates over other therapies;

•preclinical development results and clinical trial results;

•the terms and timing of regulatory approvals;

•our ability to market, commercialize and achieve market acceptance for any of our product candidates; and

•our ability to successfully file, prosecute, defend and enforce patent claims and other intellectual property rights, together with associated expenses.

A change in the outcome of any of these variables with respect to the development of our product candidates could mean a significant change in the costs and timing associated with the development of that product candidate. For example, we are conducting the GATHER2 trial, which is a Phase 3 clinical trial evaluating Zimura for GA, with the expectation that data collected from this trial, if positive, together with other available data, will be sufficient to seek marketing approval for this indication in the United States and the European Union. We may subsequently decide to, or be required by regulatory authorities to, enroll additional patients in the GATHER2 trial, conduct additional clinical trials for Zimura in GA or conduct additional nonclinical studies of Zimura in order to seek or maintain regulatory approval or qualify for reimbursement approval. As a result of any of the above, we could be required to expend significant additional financial resources and time on the completion of development of Zimura in GA.

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See the “Liquidity and Capital Resources” section of this Quarterly Report on Form 10-Q for more information regarding our current and future financial resources and our expectations regarding our research and development expenses and funding requirements.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for personnel, including share-based compensation expense, in our executive, legal, finance, business development, commercial operations, human resources, investor relations and information technology functions. Other general and administrative expenses include facility costs and professional fees for legal, including patent-related, services and expenses, consulting and accounting services, and travel expenses.

We expect to incur additional general and administrative expenses as we begin preparing for the potential commercialization of Zimura.

Interest Income

We currently have invested our cash, cash equivalents and available for sale securities in money market funds, U.S Treasury securities, asset-backed securities and investment-grade corporate debt securities, which generate a nominal amount of interest income.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued research and development expenses, share-based compensation and income taxes described in greater detail below. We base our estimates on our limited historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in more detail in the notes to our financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. Of those policies, we believe that the following accounting policies are the most critical to aid our stockholders in fully understanding and evaluating our financial condition and results of operations.

Accrued Research and Development Expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing quotations and contracts, identifying 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 in our financial statements 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 research and development expenses are related to expenses related to our academic research collaborators, CROs, CDMOs and other vendors in connection with research and development and manufacturing activities.

We base our expenses related to academic research collaborators, CROs and CDMOs on our estimates of the services received and efforts expended pursuant to quotations and contracts with such vendors that conduct research and development and manufacturing activities 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 applicable research and development or manufacturing 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 expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period. There have been no material changes in estimates for the periods presented in this Quarterly Report on Form 10-Q.

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Results of Operations

Comparison of Three Month Periods Ended September 30, 2021 and 2020


	Three months ended September 30,
	2021		2020		Increase (Decrease)
	(in thousands)
Statements of Operations Data:
Operating expenses:
Research and development	$	17,935	$	18,841	$	(906)
General and administrative	6,648		6,643		5
Total operating expenses	24,583		25,484		(901)
Loss from operations	(24,583)		(25,484)		(901)
Interest income	42		33		9
Other expense, net	(10)		1		(11)
Loss before income tax benefit	(24,551)		(25,450)		(899)
Income tax benefit	—		—		—
Net loss	$	(24,551)	$	(25,450)	$	(899)

Research and Development Expenses

Our research and development expenses were $17.9 million for the three months ended September 30, 2021, a decrease of $0.9 million compared to $18.8 million for the three months ended September 30, 2020. The decrease in research and development expenses for the three months ended September 30, 2021 was primarily due to a $3.2 million decrease in costs associated with IC-100 and a $0.6 million decrease in costs associated with IC-200. The decreased costs for IC-100 and IC-200 primarily reflect decreased manufacturing and preclinical development activities. The decreased cost for IC-100 and IC-200 were partially offset by a $1.5 million increase in personnel costs, including share-based compensation associated with additional research and development staffing and a $0.9 million increase in costs associated with Zimura. The increased costs for Zimura were primarily due to the ongoing progress and the commencement of patient recruitment activities for our GATHER2 trial and increased manufacturing activities.

General and Administrative Expenses

Our general and administrative expenses were $6.6 million for the three months ended September 30, 2021, unchanged from the three months ended September 30, 2020. For the three months ended September 30, 2021, the increases in personnel costs, including share-based compensation and external costs, including consulting costs associated with pre-commercialization activities and other administrative costs necessary to support our operations was offset by a decrease in legal costs associated with litigation.

Interest Income

Interest income for the three months ended September 30, 2021 was $42 thousand compared to interest income of $33 thousand for the three months ended September 30, 2020.

Income Tax Benefit

For the three months ended September 30, 2021, the Company recorded no income tax benefit. For the three months ended September 30, 2020, the Company recorded no income tax benefit.

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Comparison of Nine Month Periods Ended September 30, 2021 and 2020


	Nine months ended September 30,
	2021	2020	Increase (Decrease)
	(in thousands)
Statements of Operations Data:
Operating expenses:
Research and development	59,972	45,311	$	14,661
General and administrative	21,688	17,930	3,758
Total operating expenses	81,660	63,241	18,419
Loss from operations	(81,660)	(63,241)	18,419
Interest income	184	437	(253)
Other expense, net	(13)	(6)	7
Loss before income tax benefit	(81,489)	(62,810)	18,679
Income tax benefit	—	3,695	(3,695)
Net loss	(81,489)	(59,115)	$	22,374

Research and Development Expenses

Our research and development expenses were $60.0 million for the nine months ended September 30, 2021, an increase of $14.7 million compared to $45.3 million for the nine months ended September 30, 2020. The increase in research and development expenses for the nine months ended September 30, 2021 was primarily due to a $17.9 million increase in costs associated with Zimura, and a $5.6 million increase in personnel costs, including share-based compensation associated with additional research and development staffing. These increases were partially offset by a $6.4 million decrease in costs associated with IC-100 and a $2.2 million decrease in costs associated with IC-200. The increased costs for Zimura were primarily due to the continued patient recruitment activities for our GATHER2 trial and increased manufacturing activities. The decreased costs for IC-100 and IC-200 primarily reflect decreased manufacturing and preclinical development activities.

General and Administrative Expenses

Our general and administrative expenses were $21.7 million for the nine months ended September 30, 2021, an increase of $3.8 million, compared to $17.9 million for the nine months ended September 30, 2020. The increase in general and administrative expenses for the nine months ended September 30, 2021 was primarily due to an increase in external costs, including legal and consulting costs associated with litigation, pre-commercialization activities and other administrative costs necessary to support our operations.

Interest Income

Interest income for the nine months ended September 30, 2021 was $0.2 million compared to interest income of $0.4 million for the nine months ended September 30, 2020. The decrease in interest income was primarily due to the decrease in interest rate yields.

Income Tax Benefit

For the nine months ended September 30, 2021, we recorded no income tax benefit. For the nine months ended September 30, 2020, we recorded an income tax benefit of $3.7 million primarily to reflect a settlement of a local tax audit.

Liquidity and Capital Resources

Sources of Liquidity

Since inception, we have financed our operations primarily through private placements of our common stock and preferred stock, venture debt borrowings, funds received under the Novo Holdings A/S Agreement, our initial public offering, which we closed in September 2013, funds we received under a prior agreement with Novartis Pharma AG related to the licensing and commercialization of Fovista, funds we received in connection with our acquisition of Inception 4, Inc., or Inception 4, in October 2018 and our follow-on public offerings, which we closed in February 2014, December 2019, June 2020, July 2021 and October 2021, including the sale of pre-funded warrants in December 2019 and June 2020. We do not have any committed external source of funds.

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We currently have an effective universal shelf registration statement on Form S-3, or the March 2021 Shelf Registration, on file with the SEC registering for sale from time to time up to $300.0 million of common stock, preferred stock, debt securities, depositary shares, subscription rights, warrants and/or units in one or more registered offerings, of which $100.0 million may be offered, issued and sold under an “at-the-market” Sales Agreement, or the ATM Agreement, with Cowen and Company, LLC. We also have an automatically effective shelf registration statement on Form S-3, or the October 2021 Shelf Registration, pursuant to which we may offer and sell an indeterminate amount of shares of common stock, preferred stock, debt securities, depositary shares, subscription rights, warrants and/or units in one or more registered offerings.

In July 2021, we closed an underwritten public offering in which we sold 13,397,500 shares of our common stock under the March 2021 Shelf Registration, which included the exercise in full of the underwriters’ option to purchase an additional 1,747,500 shares of our common stock, at a price to the public of $8.60 per share and at a price to the underwriters of $8.084 per share. The net proceeds from the public offering, after deducting underwriting discounts and commissions and other offering expenses payable by us totaling approximately $7.4 million, was approximately $107.8 million.

In October 2021, we closed an underwritten public offering in which we sold 10,350,000 shares of our common stock, under the October 2021 Shelf Registration, which included the exercise in full of the underwriters’ option to purchase an additional 1,350,000 shares of our common stock, at a price to the public of $16.750 per share and at a price to the underwriters of $15.745 per share. The net proceeds from the public offering, after deducting underwriting discounts and commissions and other offering expenses payable by us totaling approximately $10.8 million, was approximately $162.6 million.

We have not yet issued and sold any shares of our common stock under the ATM Agreement.

Cash Flows

As of September 30, 2021, we had cash, cash equivalents and available for sale securities totaling $242.0 million and no debt. We currently have invested our cash, cash equivalents and available for sale securities in money market funds, U.S. Treasury securities, certain asset-backed securities and certain investment-grade corporate debt securities.

The following table shows a summary of our cash flows for the nine months ended September 30, 2021 and 2020:


	Nine months ended September 30,
	2021		2020
	(in thousands)
Net cash (used in) provided by:
Operating Activities	$	(76,125)	$	(45,028)
Investing Activities	80,202		(108,305)
Financing Activities	109,429		150,453
Net change in cash and cash equivalents	$	113,506	$	(2,880)

Cash Flows from Operating Activities

Net cash used in operating activities in the nine months ended September 30, 2021 and September 30, 2020 related primarily to net cash used to fund our Zimura clinical trials and manufacturing activities, our preclinical development of IC-500, IC-100 and IC-200, our gene therapy research programs and to support our general and administrative operations.

See “—Funding Requirements” below for a description of how we expect to use our cash for operating activities in future periods.

Cash Flows from Investing Activities

Net cash provided by investing activities for the nine months ended September 30, 2021 was $80.2 million, which related to the maturities and purchases of marketable securities. Net cash used in investing activities for the nine months ended September 30, 2020 was $108.3 million, which related to the purchase of marketable securities.

Cash Flows from Financing Activities

Net cash provided by financing activities was $109.4 million for the nine months ended September 30, 2021 and $150.5 million for the nine months ended September 30, 2020. Net cash provided by financing activities for the nine months ended September 30, 2021 consisted primarily of proceeds of $107.8 million from our follow-on public offering in July 2021 Net cash provided by financing activities for the nine months ended September 30, 2020, consisted primarily of net proceeds of $150.1 million from our June 2020 follow-on public offering and private placement of our common stock.

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Funding Requirements

Zimura is in clinical development, IC-500 is in preclinical development, and we are advancing multiple gene therapy research programs. We expect our research and development expenses to increase as we pursue these programs as currently planned. We could incur additional research and development expenses if we modify or further expand the scope of our clinical trials, our preclinical development programs or our gene therapy research programs, or if we in-license or acquire, and undertake development of, additional product candidates and technologies, including sustained release delivery technologies for Zimura and any promising product candidates that emerge from our gene therapy research programs. We could also incur additional research and development expenses if, for example, we are required by the FDA, the EMA or regulatory authorities in other jurisdictions, or if we otherwise decide, to perform clinical trials and/or nonclinical or other studies in addition to those we currently expect to conduct. If we experience delays or disruptions to our research and development programs, including delays in patient enrollment or issues with patient retention or patients missing scheduled visits and treatments, if we experience issues with our preclinical development programs, such as unfavorable toxicology or other preclinical data, if we experience issues with the manufacture and supply of product candidates for our development programs, including issues with process development or manufacturing scale-up activities, whether such delays or disruptions are due to the COVID-19 pandemic or other reasons, we could incur additional and unexpected expenses as a result of such delays or disruptions and our business and financial results may be materially impacted. Furthermore, if we successfully develop and expect to obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing. We expect to start incurring these expenses as we prepare for the potential commercialization of Zimura. We are party to agreements with Archemix with respect to Zimura, the former equityholders of Inception 4 with respect to IC-500, the University of Florida Research Foundation, Incorporated, or UFRF, and Penn, with respect to IC-100 and IC-200, and UMass with respect to any potential product candidates from our miniCEP290 program, in each case, that impose significant milestone payment obligations on us if we or a potential collaborator achieves specified clinical, regulatory and commercial milestones with respect to these product candidates, as well as certain royalties on net sales with respect to IC-100, IC-200 and any product candidates we choose to develop from our miniCEP290 program. It is likely that any future in-licensing or acquisition agreements that we enter into with respect to additional product candidates or technologies would include similar obligations.

We expect that we will continue to incur significant expenses as we:

•continue the development of Zimura in GA and STGD1 and initiate development of Zimura in intermediate AMD and potentially other indications;

•expand our outsourced manufacturing capabilities for Zimura and IC-500 and begin to establish commercial operations and sales, marketing and distribution capabilities for Zimura;

•prepare an NDA and an MAA for Zimura and seek marketing approval for any product candidates that successfully complete clinical trials;

•in-license or acquire the rights to, and pursue the development of, other product candidates or technologies for retinal diseases, such as sustained release delivery technologies for Zimura;

•continue the development of IC-500 and pursue our gene therapy research programs;

•maintain, expand and protect our intellectual property portfolio;

•hire additional clinical, commercial, medical affairs, regulatory, pharmacovigilance, manufacturing, quality control, quality assurance and scientific personnel; and

•expand our general and administrative functions to support our future growth.

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potentially studying Zimura in indications outside of GA, STGD1 and intermediate AMD, or resulting from the potential in-licensing or acquisition of additional product candidates or technologies, or any associated development we may pursue. We have based these estimates on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

We expect the development of our product candidates will continue for at least the next several years. Although we believe we have sufficient financial resources for the activities necessary to complete development of, including manufacturing scale-up and validation activities, and potentially seek marketing approval of Zimura in GA, we expect we will require additional funding in order to launch and commercialize Zimura in GA, if approved. We also expect we will require substantial, additional funding in order to complete the activities necessary to develop and commercialize Zimura for other indications or any of our other product candidates. At this time, we cannot reasonably estimate the total remaining costs necessary to complete development, to complete process development and manufacturing scale-up and validation activities and to potentially seek marketing approval for Zimura for any other indication or for any of our other product candidates.

Our future capital requirements will depend on many factors, including:

•the scope, progress, costs and results of our current and future Zimura clinical programs and any further development we may undertake to enable us to file an NDA and an MAA for Zimura in one or more indications;

•the scope, progress, costs and results of process development, manufacturing scale-up and validation activities, analytical method development and qualification, and stability studies associated with Zimura and our other product candidates;

•the timing, scope and costs of establishing a commercial infrastructure for potential commercialization of Zimura and for any other product candidates for which we receive, or expect to receive, marketing approval;

•the costs, timing and outcome of regulatory filings and reviews of our product candidates, including the potential submission and regulatory review of an NDA and an MAA for Zimura in GA;

•our ability to establish collaborations on favorable terms, if at all, if we choose to do so, including a potential collaboration for the further development and potential commercialization of Zimura in one or more territories outside the United States and a collaboration or out-license for the further development and potential commercialization of IC-100 and IC-200;

•the extent to which we in-license or acquire rights to, and undertake research or development of, additional product candidates or technologies, including sustained release delivery technologies for Zimura;

•the scope, progress, costs and results of our efforts to develop IC-500, including activities to establish manufacturing capabilities and other preclinical development activities to enable us to file an IND for this product candidate;

•the scope, progress, costs and results from our gene therapy research programs, including costs related to the in-license and future development of any promising product candidates and technologies that emerge from these programs;

•the timing and extent of delays or disruptions to our research and development programs as a result of the COVID-19 pandemic;

•the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending intellectual property-related claims; and

•subject to receipt of marketing approval, net revenue received from commercial sales of any of our product candidates, after milestone payments and royalty payments that we would be obligated to make.

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to conduct. For example, we are conducting the GATHER2 trial with the expectation that data collected from such trial, if it is positive, together with other available data, will be sufficient to support an application for marketing approval in the United States and the European Union and we may subsequently decide to, or be required by regulatory authorities to, enroll additional patients in the GATHER2 trial, or conduct additional clinical trials or nonclinical studies of Zimura in order to seek or maintain marketing approval or qualify for reimbursement approval. In addition, the COVID-19 pandemic may result in disruptions to the progress of the GATHER2 or STAR trials, including slowing patient enrollment in STAR or causing enrolled patients in either trial to miss their scheduled visits or drop out in greater numbers than we expect, or disruptions to our other research and development programs, which could cause us to continue to expend our cash resources while not progressing our research and development programs as expeditiously as we would have had the pandemic not occurred or persisted. As a result of any of the above, we may need or may seek to obtain additional funding for our continuing operations sooner or in greater amounts than expected.

We do not have any committed external source of funds. Our ability to raise adequate additional financing when needed, and on terms acceptable to us, will depend on many factors. These factors include investors' perceptions of the potential success of our ongoing business, including the development of our product candidates and other programs, and the potential future growth of our business. Additionally, these factors include general market conditions that also affect other companies. For example, the COVID-19 pandemic and governmental responses to the pandemic have caused volatility and uncertainty in the financial markets as well as additional volatility in the price of our stock, which may result in prospective investors being less likely to invest new capital. These factors may make raising capital difficult, and may result in us accepting terms that are unfavorable to us, especially if we are in need of financing at the particular time. We may not be able to successfully raise additional capital in the future. The size of our company and our status as a company listed on The Nasdaq Global Select Market, or Nasdaq, may also limit our ability to raise financing. For example, our ability to raise adequate financing through a public offering may be limited by market conditions and SEC rules based on our current market capitalization. Nasdaq listing rules also generally limit the number of shares we may issue in a private placement to a number less than 20% of the number of shares of our common stock outstanding immediately prior to the transaction, unless we issue such shares at a premium, which investors may be unwilling to accept, or unless we obtain shareholder approval, which can be expensive and time-consuming and can add risk to our ability to complete the financing transaction. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate the development of one or more of our product candidates, our gene therapy research programs, or our future commercialization efforts.

Until such time, if ever, when we can generate substantial product revenues, we may need or may seek to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our existing stockholders' ownership interests would be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect our existing stockholders' rights as common stockholders. The dilutive effect of future equity issuances may be substantial, depending on the price of our common stock at the time of such capital raise, with a lower stock price translating to greater dilution for existing stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends or entering into certain investments or transactions. In addition, we have issued, and may in the future issue additional, equity securities as consideration for business development transactions, which may also dilute our existing stockholders' ownership interests.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, products or product candidates or grant licenses on terms that may not be favorable to us. If we choose to pursue a collaboration for any of our product candidates, we may be required to relinquish certain valuable rights depending on the terms of such a transaction. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

Our need for additional financing may continue even if we are able to successfully develop one or more of our product candidates. Our future commercial revenues, if any, will be derived from sales of such product candidates, which may not be available for at least several years following completion of successful product development, if at all. In addition, if approved, our product candidates may not achieve commercial success. Even if those products are successful and we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Under most, if not all, of the foregoing circumstances, we may need to obtain substantial additional financing to achieve our business objectives.

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Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of September 30, 2021:


	Payments Due by Period
	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
	(in thousands)
Sponsored Research (1)	$	720	$	720	$	—	$	—	$	—
Purchase Obligations (2)	8,145		8,145		—		—		—
Operating Leases (3)	1,864		989		875		—		—
Total (4)	$	10,729	$	9,854	$	875	$	—	$	—

(1)This item includes our non-cancelable contractual obligations under our sponsored research agreements.

(2)This item includes our non-cancelable contractual commitments under certain of our manufacturing and supply agreements.

(3)This item includes our contractual obligations to make payments in connection with leases for office space.

(4)This table does not include:

•any milestone payments which may become payable to third parties under license or acquisition agreements as the timing and likelihood of such payments are not known with certainty;

•any royalty payments to third parties as the amounts, timing and likelihood of such payments are not known;

•anticipated expenditures under supply agreements for periods for which we are not yet bound under binding purchase orders; or

•contracts that are entered into in the ordinary course of business that are not material in the aggregate in any period presented above.

In addition to the amounts set forth in the table above, we may be required, under the agreements under which we acquired rights to Zimura, IC-100, IC-200, IC-500 and our miniCEP290 program, to make milestone payments and/or pay royalties. These payments are described in “Note 9—Commitments and Contingencies” in our unaudited consolidated financial statements appearing elsewhere in this Quarterly Report.

We also have letter agreements with certain employees that require the funding of a specific level of payments if certain events, such as a termination of employment in connection with a change in control or termination of employment by the employee for good reason or by us without cause, occur. For a description of these obligations, see our definitive proxy statement on Schedule 14A for our 2021 annual meeting of stockholders, as filed with the SEC on April 7, 2021.

In addition, in the course of normal business operations, we have agreements with contract service providers to assist in the performance of our research and development and manufacturing activities. Expenditures to CROs and CDMOs represent significant costs in preclinical and clinical development. Subject to required notice periods and our obligations under binding purchase orders and any cancellation fees that we may be obligated to pay, we can elect to discontinue the work under these agreements at any time. We may also enter into additional collaborative research and development, contract research, manufacturing, and supplier agreements in the future, which may require upfront payments and long-term commitments of cash.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under Securities and Exchange Commission rules.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk related to changes in interest rates. We had cash, cash equivalents and available for sale securities of $242.0 million as of September 30, 2021, consisting of cash and investments in money market funds, U. S. Treasury securities, corporate debt securities and asset-backed securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because a significant portion of

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our investments are in short-term securities. Due to the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.

We contract with CDMOs, CROs and certain other vendors to perform services outside of the United States. We may be subject to fluctuations in foreign currency rates in connection with certain of these agreements. Transactions denominated in currencies other than the U.S. dollar are recorded based on exchange rates at the time such transactions arise. As of September 30, 2021, substantially all of our total liabilities were denominated in the U.S. dollar.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of September 30, 2021, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) occurred during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings

Descriptions of legal proceedings are set forth in “Note 9-Commitments and Contingencies” in the notes to the financial statements filed with this Quarterly Report on Form 10-Q.

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Item 1A. Risk Factors

The following risk factors and other information included in this Quarterly Report on Form 10-Q should be carefully considered. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. Please see page 1 of this Quarterly Report on Form 10-Q for a discussion of some of the forward-looking statements that are qualified by these risk factors. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.

Risks Related to Our Business Plan, Financial Position and Need for Additional Capital

We are a development-stage company without any commercial products. The value of our company, therefore, is highly dependent on the success of Zimura and our other research and development efforts and the amount of our available cash. Our research and development programs, which are focused on novel therapies and technologies, carry significant scientific and other risks. If any of these programs are not successful, the value of your investment may decline.

We are a development-stage company without any approved products. Our growth prospects and the future value of our company are highly dependent on the progress of our research and development programs, including our ongoing and any future clinical trials for Zimura, our preclinical development program for IC-500, and our gene therapy research programs. In particular, we are highly dependent on the success of Zimura, and any delays or issues with its further development, its potential marketing approval, or its potential commercialization will likely cause the value of your investment to decline significantly. Drug development is a highly uncertain undertaking and carries significant scientific and other risks.

We may encounter unforeseen difficulties, complications, delays, expenses and other known and unknown factors. We may never be successful in developing or commercializing any of our product candidates or other programs. There is a high rate of failure in pharmaceutical research and development. Even if we have promising preclinical or clinical candidates, their development could fail at any time. Our failure could be due to unexpected scientific, safety or efficacy issues with our product candidates and other programs, invalid hypotheses regarding the molecular targets and mechanisms of action we choose to pursue or unexpected delays in our research and development programs resulting from applying the wrong criteria or experimental systems and procedures to our programs or lack of experience or other factors, including disruptions resulting from the COVID-19 pandemic, with the possible result that none of our product candidates or other programs result in the development of marketable products. We have not yet demonstrated our ability to successfully complete the development of a pharmaceutical product, including completion of large-scale, pivotal clinical trials with safety and efficacy data sufficient to obtain marketing approval or activities necessary to apply for and obtain marketing approval, including the qualification of a commercial manufacturer through a pre-approval inspection with regulatory authorities. If successful in developing and obtaining marketing approval of one of our product candidates, we would need to transition from a company having a product development focus to a company capable of commercializing pharmaceutical products. At this time, we are beginning to hire commercialization personnel and build a commercial infrastructure for the potential commercialization of Zimura, if approved. We may not be successful in such a transition, as our company has never conducted the sales, marketing, manufacturing and distribution activities necessary for successful product commercialization.

Because the value of our company is largely based on the prospects for our research and development programs and their potential to result in therapies capable of achieving marketing approval and generating future revenues, any failure, delay or setback for these programs will likely have a negative impact on the value of your investment. In addition, even if we are successful in advancing the research and development of IC-500, which is currently in preclinical development, the value of our common stock may not rise in a meaningful way. As we continue to invest in our research and development programs to generate data to support further development or applications to obtain marketing approval for commercialization, the amount of our available cash will continue to decline until we raise additional finances.

We have a history of significant operating losses. We expect to continue to incur losses until such time, if ever, that we successfully commercialize our product candidates and may never achieve or maintain profitability.

Since inception, we have experienced significant cash outflows in funding our operations. To date, we have not generated any revenues from commercial product sales and have financed our operations primarily through private placements of our common stock and preferred stock, venture debt borrowings, funds received under our prior Fovista royalty purchase and sale agreement with Novo Holdings A/S, our initial public offering, which we closed in September 2013, funds we received under our prior Fovista licensing and commercialization agreement with Novartis Pharma AG, funds we received in connection with our acquisition of Inception 4 in October 2018, and our follow-on public offerings, which we closed in February 2014, December 2019, June 2020, July 2021 and October 2021. As of September 30, 2021, we had an accumulated deficit of $646.6 million. Our net loss was $81.5 million for the nine months ended September 30, 2021 and we expect to continue to incur significant operating losses for the foreseeable future.