View:
aeri-20220930
false2022Q3000133755312/31http://fasb.org/us-gaap/2022#ProductMemberhttp://fasb.org/us-gaap/2022#ProductMemberhttp://fasb.org/us-gaap/2022#ProductMemberhttp://fasb.org/us-gaap/2022#ProductMemberhttp://fasb.org/us-gaap/2022#AccountingStandardsUpdate202006Memberimmaterialimmaterial0.0400400013375532022-01-012022-09-3000013375532022-10-28xbrli:shares00013375532022-09-30iso4217:USD00013375532021-12-31iso4217:USDxbrli:shares00013375532021-07-012021-09-3000013375532021-01-012021-09-3000013375532022-07-012022-09-300001337553us-gaap:CommonStockMember2020-12-310001337553us-gaap:AdditionalPaidInCapitalMember2020-12-310001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001337553us-gaap:RetainedEarningsMember2020-12-3100013375532020-12-310001337553us-gaap:CommonStockMember2021-01-012021-03-310001337553us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-3100013375532021-01-012021-03-310001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001337553us-gaap:RetainedEarningsMember2021-01-012021-03-310001337553us-gaap:CommonStockMember2021-03-310001337553us-gaap:AdditionalPaidInCapitalMember2021-03-310001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001337553us-gaap:RetainedEarningsMember2021-03-3100013375532021-03-310001337553us-gaap:CommonStockMember2021-04-012021-06-300001337553us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-3000013375532021-04-012021-06-300001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001337553us-gaap:RetainedEarningsMember2021-04-012021-06-300001337553us-gaap:CommonStockMember2021-06-300001337553us-gaap:AdditionalPaidInCapitalMember2021-06-300001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001337553us-gaap:RetainedEarningsMember2021-06-3000013375532021-06-300001337553us-gaap:CommonStockMember2021-07-012021-09-300001337553us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300001337553us-gaap:RetainedEarningsMember2021-07-012021-09-300001337553us-gaap:CommonStockMember2021-09-300001337553us-gaap:AdditionalPaidInCapitalMember2021-09-300001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300001337553us-gaap:RetainedEarningsMember2021-09-3000013375532021-09-300001337553us-gaap:CommonStockMember2021-12-310001337553us-gaap:AdditionalPaidInCapitalMember2021-12-310001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001337553us-gaap:RetainedEarningsMember2021-12-3100013375532021-01-012021-12-310001337553srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AdditionalPaidInCapitalMember2021-12-310001337553srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2021-12-310001337553srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2021-12-310001337553us-gaap:CommonStockMember2022-01-012022-03-310001337553us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-3100013375532022-01-012022-03-310001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001337553us-gaap:RetainedEarningsMember2022-01-012022-03-310001337553us-gaap:CommonStockMember2022-03-310001337553us-gaap:AdditionalPaidInCapitalMember2022-03-310001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001337553us-gaap:RetainedEarningsMember2022-03-3100013375532022-03-310001337553us-gaap:CommonStockMember2022-04-012022-06-300001337553us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-3000013375532022-04-012022-06-300001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001337553us-gaap:RetainedEarningsMember2022-04-012022-06-300001337553us-gaap:CommonStockMember2022-06-300001337553us-gaap:AdditionalPaidInCapitalMember2022-06-300001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001337553us-gaap:RetainedEarningsMember2022-06-3000013375532022-06-300001337553us-gaap:CommonStockMember2022-07-012022-09-300001337553us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-300001337553us-gaap:RetainedEarningsMember2022-07-012022-09-300001337553us-gaap:CommonStockMember2022-09-300001337553us-gaap:AdditionalPaidInCapitalMember2022-09-300001337553us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300001337553us-gaap:RetainedEarningsMember2022-09-30aeri:Segmentaeri:product0001337553us-gaap:ConvertibleDebtMemberaeri:ConvertibleSeniorNotesDue2024Member2019-09-30xbrli:pure0001337553aeri:SecondSantenAgreementMemberaeri:LicenseRevenueUpfrontPaymentMember2020-10-310001337553aeri:SecondSantenAgreementMemberaeri:LicenseRevenueUpfrontPaymentMember2021-12-310001337553aeri:LicenseRevenueAdditionalUpfrontPaymetMemberaeri:SecondSantenAgreementMember2021-12-310001337553aeri:SecondSantenAgreementMemberaeri:LicenseRevenueUpfrontPaymentMember2022-01-310001337553aeri:LyonMergerSubIncMembersrt:ScenarioForecastMember2022-12-310001337553aeri:LyonMergerSubIncMembersrt:ScenarioForecastMember2022-10-012022-12-310001337553aeri:LyonMergerSubIncMember2022-09-300001337553srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate202006Member2021-12-310001337553us-gaap:ConvertibleDebtSecuritiesMember2022-07-012022-09-300001337553us-gaap:ConvertibleDebtSecuritiesMember2021-07-012021-09-300001337553us-gaap:ConvertibleDebtSecuritiesMember2022-01-012022-09-300001337553us-gaap:ConvertibleDebtSecuritiesMember2021-01-012021-09-300001337553us-gaap:EmployeeStockOptionMember2022-07-012022-09-300001337553us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001337553us-gaap:EmployeeStockOptionMember2022-01-012022-09-300001337553us-gaap:EmployeeStockOptionMember2021-01-012021-09-300001337553us-gaap:RestrictedStockMember2022-07-012022-09-300001337553us-gaap:RestrictedStockMember2021-07-012021-09-300001337553us-gaap:RestrictedStockMember2022-01-012022-09-300001337553us-gaap:RestrictedStockMember2021-01-012021-09-300001337553us-gaap:RestrictedStockUnitsRSUMember2022-07-012022-09-300001337553us-gaap:RestrictedStockUnitsRSUMember2021-07-012021-09-300001337553us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300001337553us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-300001337553us-gaap:CustomerConcentrationRiskMemberaeri:RhopressaAndRocklatanMemberus-gaap:SalesRevenueNetMember2022-01-012022-09-300001337553us-gaap:CustomerConcentrationRiskMemberaeri:RhopressaAndRocklatanMemberus-gaap:SalesRevenueNetMemberaeri:DistributorOneMember2022-01-012022-09-300001337553us-gaap:CustomerConcentrationRiskMemberaeri:RhopressaAndRocklatanMemberus-gaap:SalesRevenueNetMemberaeri:DistributorTwoMember2022-01-012022-09-300001337553us-gaap:CustomerConcentrationRiskMemberaeri:RhopressaAndRocklatanMemberus-gaap:SalesRevenueNetMemberaeri:DistributorThreeMember2022-01-012022-09-300001337553us-gaap:CustomerConcentrationRiskMemberaeri:RhopressaAndRocklatanMemberus-gaap:SalesRevenueNetMember2021-01-012021-09-300001337553us-gaap:CustomerConcentrationRiskMemberaeri:RhopressaAndRocklatanMemberus-gaap:SalesRevenueNetMemberaeri:DistributorOneMember2021-01-012021-09-300001337553us-gaap:CustomerConcentrationRiskMemberaeri:RhopressaAndRocklatanMemberus-gaap:SalesRevenueNetMemberaeri:DistributorTwoMember2021-01-012021-09-300001337553us-gaap:CustomerConcentrationRiskMemberaeri:RhopressaAndRocklatanMemberus-gaap:SalesRevenueNetMemberaeri:DistributorThreeMember2021-01-012021-09-300001337553aeri:SecondSantenAgreementMemberaeri:SantenMember2022-01-310001337553aeri:SecondSantenAgreementMemberaeri:SantenMember2021-12-310001337553aeri:ExpandedTerritoriesExcludingChinaAndIndiaMemberaeri:SecondSantenAgreementMemberaeri:SantenMember2021-12-012021-12-310001337553aeri:ChinaAndIndiaMemberaeri:SecondSantenAgreementMemberaeri:SantenMember2021-12-012021-12-310001337553aeri:SecondSantenAgreementMemberaeri:SantenMember2021-12-012021-12-310001337553srt:EuropeMemberaeri:SantenMember2021-12-012021-12-310001337553aeri:FirstSantenAgreementMemberaeri:SantenMemberaeri:LicenseRevenueUpfrontPaymentMember2022-09-300001337553aeri:FirstSantenAgreementMemberaeri:SantenMemberaeri:LicenseRevenueUpfrontPaymentMember2021-12-310001337553aeri:LicenseRevenueDevelopmentalMilestonesMemberaeri:FirstSantenAgreementMemberaeri:SantenMember2022-09-300001337553aeri:LicenseRevenueDevelopmentalMilestonesMemberaeri:FirstSantenAgreementMemberaeri:SantenMember2021-12-310001337553aeri:LicenseRevenueCounterpartysPortionOfCostsMemberaeri:FirstSantenAgreementMemberaeri:SantenMember2022-09-300001337553aeri:LicenseRevenueCounterpartysPortionOfCostsMemberaeri:FirstSantenAgreementMemberaeri:SantenMember2021-12-310001337553aeri:SecondSantenAgreementMemberaeri:SantenMemberaeri:LicenseRevenueUpfrontPaymentMember2022-09-300001337553aeri:SecondSantenAgreementMemberaeri:SantenMemberaeri:LicenseRevenueUpfrontPaymentMember2021-12-310001337553aeri:SantenMember2022-09-300001337553aeri:SantenMember2021-12-310001337553us-gaap:CashAndCashEquivalentsMember2022-09-300001337553us-gaap:CertificatesOfDepositMember2022-09-300001337553us-gaap:CommercialPaperMember2022-09-300001337553aeri:CorporateBondsDuewithin1YearMember2022-09-300001337553us-gaap:USGovernmentAgenciesShorttermDebtSecuritiesMember2022-09-300001337553us-gaap:CashAndCashEquivalentsMember2021-12-310001337553us-gaap:CertificatesOfDepositMember2021-12-310001337553us-gaap:CommercialPaperMember2021-12-310001337553aeri:CorporateBondsDuewithin1YearMember2021-12-310001337553us-gaap:FairValueInputsLevel1Memberus-gaap:CashAndCashEquivalentsMember2022-09-300001337553us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel2Member2022-09-300001337553us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel3Member2022-09-300001337553us-gaap:FairValueInputsLevel1Member2022-09-300001337553us-gaap:FairValueInputsLevel2Member2022-09-300001337553us-gaap:FairValueInputsLevel3Member2022-09-300001337553us-gaap:FairValueInputsLevel1Memberus-gaap:CertificatesOfDepositMember2022-09-300001337553us-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMember2022-09-300001337553us-gaap:FairValueInputsLevel3Memberus-gaap:CertificatesOfDepositMember2022-09-300001337553us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel1Member2022-09-300001337553us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2022-09-300001337553us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Member2022-09-300001337553us-gaap:FairValueInputsLevel1Memberus-gaap:CorporateBondSecuritiesMember2022-09-300001337553us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateBondSecuritiesMember2022-09-300001337553us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateBondSecuritiesMember2022-09-300001337553us-gaap:CorporateBondSecuritiesMember2022-09-300001337553us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2022-09-300001337553us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-09-300001337553us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2022-09-300001337553us-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-09-300001337553us-gaap:FairValueInputsLevel1Memberus-gaap:CashAndCashEquivalentsMember2021-12-310001337553us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel2Member2021-12-310001337553us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel3Member2021-12-310001337553us-gaap:FairValueInputsLevel1Member2021-12-310001337553us-gaap:FairValueInputsLevel2Member2021-12-310001337553us-gaap:FairValueInputsLevel3Member2021-12-310001337553us-gaap:FairValueInputsLevel1Memberus-gaap:CertificatesOfDepositMember2021-12-310001337553us-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMember2021-12-310001337553us-gaap:FairValueInputsLevel3Memberus-gaap:CertificatesOfDepositMember2021-12-310001337553us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel1Member2021-12-310001337553us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2021-12-310001337553us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Member2021-12-310001337553us-gaap:FairValueInputsLevel1Memberus-gaap:CorporateBondSecuritiesMember2021-12-310001337553us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateBondSecuritiesMember2021-12-310001337553us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateBondSecuritiesMember2021-12-310001337553us-gaap:CorporateBondSecuritiesMember2021-12-310001337553aeri:ManufacturingEquipmentMember2022-09-300001337553aeri:ManufacturingEquipmentMember2021-12-310001337553aeri:LaboratoryEquipmentMember2022-09-300001337553aeri:LaboratoryEquipmentMember2021-12-310001337553us-gaap:FurnitureAndFixturesMember2022-09-300001337553us-gaap:FurnitureAndFixturesMember2021-12-310001337553aeri:SoftwareComputerAndOtherEquipmentMember2022-09-300001337553aeri:SoftwareComputerAndOtherEquipmentMember2021-12-310001337553us-gaap:LeaseholdImprovementsMember2022-09-300001337553us-gaap:LeaseholdImprovementsMember2021-12-310001337553us-gaap:ConstructionInProgressMember2022-09-300001337553us-gaap:ConstructionInProgressMember2021-12-310001337553stpr:NC2021-07-012021-09-30utr:sqft0001337553stpr:CA2021-07-012021-09-300001337553stpr:NJ2022-01-012022-09-300001337553country:IE2022-01-012022-09-300001337553srt:MinimumMember2022-09-300001337553srt:MaximumMember2022-09-300001337553us-gaap:ConvertibleDebtMember2019-09-300001337553us-gaap:ConvertibleDebtMemberaeri:ConvertibleSeniorNotesDue2024Member2019-09-040001337553us-gaap:ConvertibleDebtMemberaeri:ConvertibleSeniorNotesDue2024Member2019-09-042019-09-040001337553us-gaap:CommonStockMember2019-09-040001337553us-gaap:ConvertibleDebtMemberaeri:ConvertibleSeniorNotesDue2024Member2022-01-012022-09-300001337553us-gaap:ConvertibleDebtMemberaeri:ConvertibleSeniorNotesDue2024Member2022-09-30utr:D0001337553us-gaap:ConvertibleDebtMemberus-gaap:FairValueInputsLevel3Memberaeri:ConvertibleSeniorNotesDue2024Member2022-09-300001337553us-gaap:ConvertibleDebtMemberaeri:ConvertibleSeniorNotesDue2024Member2019-12-310001337553us-gaap:ConvertibleDebtMemberaeri:ConvertibleSeniorNotesDue2024Member2019-10-012019-12-310001337553us-gaap:ConvertibleDebtMemberus-gaap:FairValueInputsLevel3Memberaeri:ConvertibleSeniorNotesDue2024Member2021-09-300001337553us-gaap:ConvertibleDebtMemberaeri:ConvertibleSeniorNotesDue2024Member2021-12-310001337553us-gaap:ConvertibleDebtMemberaeri:ConvertibleSeniorNotesDue2024Member2022-07-012022-09-300001337553us-gaap:ConvertibleDebtMemberaeri:ConvertibleSeniorNotesDue2024Member2021-07-012021-09-300001337553us-gaap:ConvertibleDebtMemberaeri:ConvertibleSeniorNotesDue2024Member2021-01-012021-09-300001337553us-gaap:CallOptionMember2019-09-04iso4217:USDaeri:unit00013375532019-09-042019-09-040001337553us-gaap:CostOfSalesMember2022-07-012022-09-300001337553us-gaap:CostOfSalesMember2021-07-012021-09-300001337553us-gaap:CostOfSalesMember2022-01-012022-09-300001337553us-gaap:CostOfSalesMember2021-01-012021-09-300001337553us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-07-012022-09-300001337553us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-07-012021-09-300001337553us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-09-300001337553us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-012021-09-300001337553us-gaap:ResearchAndDevelopmentExpenseMember2022-07-012022-09-300001337553us-gaap:ResearchAndDevelopmentExpenseMember2021-07-012021-09-300001337553us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-09-300001337553us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-09-30aeri:plan0001337553aeri:TwoThousandandFiveAeriePharmaceuticalStockPlanMember2022-01-012022-09-300001337553aeri:TwoThousandAndThirteenOmniBusIncentivePlanMember2018-01-012018-12-310001337553aeri:TwoThousandAndThirteenOmniBusIncentivePlanMember2018-12-310001337553aeri:InducementAwardPlanMember2016-12-310001337553aeri:InducementAwardPlanMember2017-01-012017-12-310001337553aeri:InducementAwardPlanMember2019-01-012019-12-310001337553srt:ChiefExecutiveOfficerMemberaeri:InducementAwardPlanMember2021-12-012021-12-310001337553aeri:InducementAwardPlanMember2022-03-110001337553aeri:AmendedAndRestatedInducementAwardPlanMember2022-03-112022-03-110001337553us-gaap:EmployeeStockOptionMember2022-09-300001337553us-gaap:RestrictedStockMember2021-12-310001337553us-gaap:RestrictedStockMember2022-01-012022-09-300001337553us-gaap:RestrictedStockMember2022-09-300001337553aeri:UnvestedPerformanceStockAwardsMember2022-09-300001337553us-gaap:RestrictedStockMembersrt:MinimumMember2022-01-012022-09-300001337553us-gaap:RestrictedStockMembersrt:MaximumMember2022-01-012022-09-300001337553aeri:RestrictedStockWithNonMarketPerformanceConditionsMember2017-01-012017-12-310001337553aeri:RestrictedStockWithNonMarketPerformanceConditionsMember2022-01-012022-09-300001337553us-gaap:RestrictedStockUnitsRSUMember2021-12-310001337553us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300001337553us-gaap:RestrictedStockUnitsRSUMember2022-09-300001337553us-gaap:StockAppreciationRightsSARSMember2021-12-310001337553us-gaap:StockAppreciationRightsSARSMember2022-01-012022-09-300001337553us-gaap:StockAppreciationRightsSARSMember2022-09-300001337553aeri:AvizorexMember2019-11-012019-11-300001337553aeri:AvizorexMember2022-03-310001337553aeri:EnvisiaMember2017-10-012017-10-310001337553us-gaap:CollaborativeArrangementMember2018-08-012018-08-010001337553us-gaap:CollaborativeArrangementMember2018-01-012018-12-3100013375532022-09-222022-09-22aeri:purportedStockholder
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
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: 001-36152
 
Aerie Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware 20-3109565
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification Number)
4301 Emperor Boulevard, Suite 400
Durham, North Carolina 27703
(919) 237-5300
(Address of principal executive offices, zip code and telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareAERINasdaq Global 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 October 28, 2022, there were 49,417,407 shares of the registrant’s common stock, par value $0.001 per share, outstanding.


Table of Contents
TABLE OF CONTENTS
 
  Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



Table of Contents
Unless otherwise indicated or the context requires, the terms “Aerie,” “Company,” “we,” “us,” and “our” refer to Aerie Pharmaceuticals, Inc. and its subsidiaries. References to “products” mean products approved by the U.S. Food and Drug Administration (“FDA”) or other regulatory authorities; references to “product candidates” mean products that are in development but not yet approved by the FDA or other regulatory authorities; and references to “future product candidates” mean products that have not yet been developed.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may, in some cases, use terms such as “predicts,” “believes,” “potential,” “proposed,” “continue,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “would,” “could,” “might,” “will,” “should,” “exploring,” “pursuing,” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements.
Forward-looking statements appear in a number of places throughout this report and include statements regarding our intentions, beliefs, projections, outlook, analyses, or current expectations concerning, among other things:
the anticipated timing of the proposed Merger (as defined below) with Alcon Research, LLC and the expected benefits of the proposed transaction, as further described in Note 1 to our condensed consolidated financial statements included in this report;
the broad impact of the coronavirus (“COVID-19”) pandemic on our business;
the sales of Rocklatan® (netarsudil and latanoprost ophthalmic solution) 0.02%/0.005% (“Rocklatan®”) or of Rhopressa® (netarsudil ophthalmic solution) 0.02% (“Rhopressa®”), in the United States, and the potential future sales in the United States of any product candidates or future product candidates, if approved;
the potential future sales in jurisdictions outside of the United States of Rocklatan®, named Roclanda® (netarsudil and latanoprost ophthalmic solution) 0.02%/0.005% (“Roclanda®”) in Europe, or Rhopressa®, named Rhokiinsa® (netarsudil ophthalmic solution) 0.02% (“Rhokiinsa®”) in Europe, or their equivalents, and those of any product candidates or future product candidates;
our commercialization, marketing, manufacturing and supply management capabilities, and strategies in and outside of the United States;
third-party payer coverage and reimbursement for our products, product candidates, and any future product candidates, if approved;
the glaucoma patient market size and the rate and degree of market adoption of our products, product candidates, and any future product candidates, if approved, by eye-care professionals and patients;
the timing, cost or other aspects of the commercial launch of our products, product candidates, and any future product candidates, if approved;
the success, timing, and cost of our ongoing and anticipated preclinical studies and clinical trials for our product candidates and any future product candidates, including statements regarding the timing of initiation and completion of the studies and trials;
our expectations regarding the effectiveness of our products, product candidates, and any future product candidates and our expectations regarding the results of any clinical trials and preclinical studies;
the timing of and our ability to request, obtain, and maintain FDA or other regulatory authority approval of, or other action with respect to our products, product candidates, and any future product candidates in the United States, Europe, Japan, and elsewhere, including the expected timing of, and regulatory and/or other review of, filings for such products, product candidates, and any future product candidates;
our expectations related to the use of proceeds from our financing activities;
ii

Table of Contents
our estimates regarding anticipated operating expenses and capital requirements and our needs for additional financing;
our plans to pursue development of additional product candidates and technologies in ophthalmology, including development of our products or product candidates for additional indications, and our preclinical retinal programs and other therapeutic opportunities;
the potential advantages of our products, product candidates, and any future product candidates;
our ability to protect our proprietary technology and enforce our intellectual property rights; and
our expectations regarding existing and future collaborations, licensing, acquisitions, and strategic operations, including our ability to in-license or acquire additional ophthalmic products, product candidates or technologies.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics, industry changes and other factors beyond our control, and depend on regulatory approvals and economic and other environmental circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. We discuss many of these risks in greater detail under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022 and Part II, Item 1A of this Quarterly Report on Form 10-Q, and other documents we have filed or furnished with the SEC.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and liquidity, and events in the industry in which we operate, are consistent with the forward-looking statements contained in this report, they may not be predictive of results or developments in future periods.
In particular, FDA and European Medicines Agency (“EMA”) approval of Rocklatan® and Rhopressa®, and Medicines and Healthcare products Regulatory Agency (“MHRA”) authorization of Roclanda® does not guarantee regulatory approval of Rocklatan®, Rhopressa®, or Roclanda® in other jurisdictions, and there can be no assurance that we will receive regulatory approval for Rocklatan®, Rhopressa®, or Roclanda® in such other jurisdictions. In addition, FDA approval of Rocklatan® and Rhopressa® does not guarantee FDA approval of our product candidates or any future product candidates and there can be no assurance that we will receive FDA approval for our product candidates or any future product candidates. Furthermore, the acceptance of the Investigational New Drug Applications by the FDA for our product candidates does not guarantee FDA approval of such product candidates and the outcomes of later clinical trials for our product candidates may not be sufficient to submit a New Drug Application (“NDA”) with the FDA or to receive FDA approval. In addition, the clinical trials discussed in this report are preliminary and the outcome of such clinical trials may not be predictive of the outcome of later clinical trials. Any future clinical trial results may not demonstrate safety and efficacy sufficient to obtain regulatory approval related to the clinical trials findings discussed in this report, and we may suspend or discontinue research programs at any time for any reason.
Any forward-looking statements that we make in this report speak only as of the date of this report. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether the result of new information, future events or otherwise, after the date of this report.
iii

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AERIE PHARMACEUTICALS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share data)
SEPTEMBER 30, 2022DECEMBER 31, 2021
Assets
Current assets
Cash and cash equivalents$54,093 $37,187 
Short-term investments118,371 102,614 
Accounts receivable, net73,881 68,828 
Inventory46,762 40,410 
Licensing receivable 90,000 
Prepaid expenses and other current assets9,706 16,611 
Total current assets302,813 355,650 
Property, plant, and equipment, net50,296 51,472 
Operating lease right-of-use assets20,760 22,669 
Other assets1,721 1,600 
Total assets$375,590 $431,391 
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable$9,062 $8,285 
Accrued expenses and other current liabilities119,398 112,341 
Operating lease liabilities4,873 4,365 
Total current liabilities133,333 124,991 
Convertible notes, net312,588 234,527 
Deferred revenue, non-current70,881 64,315 
Operating lease liabilities, non-current19,525 21,751 
Other non-current liabilities3,245 3,140 
Total liabilities539,572 448,724 
Commitments and contingencies (Note 12)
Stockholders’ deficit
Preferred stock, $0.001 par value; 15,000,000 shares authorized as of September 30, 2022 and December 31, 2021; none issued and outstanding
  
Common stock, $0.001 par value; 150,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 49,390,503 and 48,444,473 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
49 48 
Additional paid-in capital1,024,809 1,136,656 
Accumulated other comprehensive loss(803)(126)
Accumulated deficit(1,188,037)(1,153,911)
Total stockholders’ deficit(163,982)(17,333)
Total liabilities and stockholders’ deficit$375,590 $431,391 
The accompanying notes are an integral part of these condensed consolidated financial statements.
1

Table of Contents

AERIE PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per share data)
 
 THREE MONTHS ENDED SEPTEMBER 30,NINE MONTHS ENDED SEPTEMBER 30,
 2022202120222021
Product revenues, net$36,129 $29,313 $99,275 $79,468 
Total revenues, net36,129 29,313 99,275 79,468 
Costs and expenses:
Cost of goods sold6,929 7,899 17,450 20,776 
Selling, general, and administrative33,878 34,656 93,551 101,796 
Research and development21,994 19,132 66,726 54,990 
Total costs and expenses62,801 61,687 177,727 177,562 
Loss from operations(26,672)(32,374)(78,452)(98,094)
Other expense, net(59)(7,259)(2,800)(22,142)
Loss before income taxes(26,731)(39,633)(81,252)(120,236)
Income tax expense95 58 836 107 
Net loss$(26,826)$(39,691)$(82,088)$(120,343)
Net loss per common share—basic and diluted$(0.56)$(0.86)$(1.72)$(2.60)
Weighted average number of common shares
 outstanding—basic and diluted
47,819,936 46,342,905 47,635,854 46,217,404 
Net loss$(26,826)$(39,691)$(82,088)$(120,343)
Unrealized (loss) gain on available-for-sale investments, net(10)2 (677)(7)
Comprehensive loss$(26,836)$(39,689)$(82,765)$(120,350)
The accompanying notes are an integral part of these condensed consolidated financial statements.
2

Table of Contents

AERIE PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
(Unaudited)
(in thousands, except share data)
 
 COMMON STOCKADDITIONAL
PAID-IN
CAPITAL
ACCUMULATED OTHER
COMPREHENSIVE LOSS
ACCUMULATED
DEFICIT
TOTAL
 SHARESAMOUNT
Balances at December 31, 2020
46,821,644 $47 $1,103,074 $(52)$(1,079,101)$23,968 
Issuance of common stock upon exercise of stock options62,016 — 26 — — 26 
Issuance of common stock for restricted stock awards, net10,162 — (1,127)— — (1,127)
Stock-based compensation— — 8,741 — — 8,741 
Other comprehensive loss— — — (12)— (12)
Net loss— — — — (41,964)(41,964)
Balances at March 31, 202146,893,822 $47 $1,110,714 $(64)$(1,121,065)$(10,368)
Issuance of common stock upon exercise of stock purchase rights89,555 — 998 — — 998 
Issuance of common stock upon exercise of stock options18,426 — 91 — — 91 
Issuance of common stock for restricted stock awards, net(7,400)— (13)— — (13)
Stock-based compensation— — 8,363 — — 8,363 
Other comprehensive income — — — 3 — 3 
Net loss— — — — (38,688)(38,688)
Balances at June 30, 202146,994,403 $47 $1,120,153 $(61)$(1,159,753)$(39,614)
Issuance of common stock upon exercise of stock options 8,897 — 112 — — 112 
Issuance of common stock for restricted stock awards, net176,433 — (502)— — (502)
Stock-based compensation— — 6,817 — — 6,817 
Other comprehensive income— — — 2 — 2 
Net loss— — — — (39,691)(39,691)
Balances at September 30, 202147,179,733 $47 $1,126,580 $(59)$(1,199,444)$(72,876)
3

Table of Contents
 COMMON STOCKADDITIONAL
PAID-IN
CAPITAL
ACCUMULATED OTHER
COMPREHENSIVE LOSS
ACCUMULATED
DEFICIT
TOTAL
 SHARESAMOUNT
Balances at December 31, 2021
48,444,473 $48 $1,136,656 $(126)$(1,153,911)$(17,333)
Cumulative effect adjustment from adoption of ASU 2020-06— — (124,666)— 47,962 (76,704)
Issuance of common stock for restricted stock awards, net191,227 — (358)— — (358)
Stock-based compensation— — 4,878 — — 4,878 
Other comprehensive loss— — — (304)— (304)
Net loss— — — — (35,891)(35,891)
Balances at March 31, 202248,635,700 $48 $1,016,510 $(430)$(1,141,840)$(125,712)
Issuance of common stock upon exercise of stock purchase rights30,043 — 191 — — 191 
Issuance of common stock for restricted stock awards, net20,505 — (25)— — (25)
Stock-based compensation— — 4,146 — — 4,146 
Other comprehensive loss— — — (363)— (363)
Net loss— — — — (19,371)(19,371)
Balances at June 30, 202248,686,248 $48 $1,020,822 $(793)$(1,161,211)$(141,134)
Issuance of common stock upon exercise of stock options197,701 — 679 — — 679 
Issuance of common stock for restricted stock awards, net506,554 1 (492)— — (491)
Stock-based compensation— — 3,800 — — 3,800 
Other comprehensive loss— — — (10)— (10)
Net loss— — — — (26,826)(26,826)
Balances at September 30, 202249,390,503 $49 $1,024,809 $(803)$(1,188,037)$(163,982)
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Table of Contents
AERIE PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands) 
 NINE MONTHS ENDED 
SEPTEMBER 30,
 20222021
Cash flows from operating activities
Net loss$(82,088)$(120,343)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation4,802 4,774 
Amortization and accretion5,582 22,943 
Stock-based compensation12,232 23,358 
Other non-cash(505)1,221 
Changes in operating assets and liabilities
Accounts receivable, net(5,053)(8,544)
Inventory(5,548)(2,486)
Prepaid, current, and other assets6,938 (5,381)
Licensing receivable90,000  
Accounts payable, accrued expenses, and other current liabilities7,692 14,738 
Operating lease liabilities(3,341)(2,165)
Deferred revenue6,566 2,841 
Net cash provided by (used in) operating activities
37,277 (69,044)
Cash flows from investing activities
Purchase of available-for-sale investments(145,726)(112,432)
Proceeds from sales and maturities of investments129,137 94,708 
Purchase of property, plant, and equipment(3,779)(2,540)
Net cash used in investing activities
(20,368)(20,264)
Cash flows from financing activities
Payments related to issuance of stock for stock-based compensation arrangements, net(3)(415)
Net cash used in financing activities
(3)(415)
Net change in cash and cash equivalents16,906 (89,723)
Cash and cash equivalents, at beginning of period37,187 151,570 
Cash and cash equivalents, at end of period$54,093 $61,847 
Non-cash investing and financing activities
Purchase of property, plant, and equipment in accounts payable and accrued expenses and other current liabilities$947 $200 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Table of Contents
AERIE PHARMACEUTICALS, INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. The Company
Aerie Pharmaceuticals, Inc. (“Aerie”), with its wholly-owned subsidiaries, Aerie Distribution, Inc., Aerie Pharmaceuticals Limited, Aerie Pharmaceuticals Ireland Limited, and Avizorex Pharma S.L. (“Aerie Distribution,” “Aerie Limited,” “Aerie Ireland Limited,” and “Avizorex,” respectively, together with Aerie, the “Company”), is a pharmaceutical company focused on the discovery, development, and commercialization of first-in-class ophthalmic therapies for the treatment of patients with eye diseases and conditions including open-angle glaucoma, dry eye, diabetic macular edema (“DME”), and wet age-related macular degeneration (“AMD”). The Company has its principal executive offices in Durham, North Carolina, and operates as one business segment.
U.S. Commercialization of the Glaucoma Franchise
The Company has developed and commercialized two U.S. Food and Drug Administration (“FDA”) approved products, Rocklatan® (netarsudil/latanoprost ophthalmic solution) 0.02%/0.005% (“Rocklatan®”) and Rhopressa® (netarsudil ophthalmic solution) 0.02% (“Rhopressa®”), which are sold in the United States and comprise its glaucoma franchise. Rocklatan® is a once-daily fixed-dose combination of Rhopressa® and latanoprost, a commonly prescribed drug for the treatment of patients with open-angle glaucoma or ocular hypertension. Rhopressa® is a once-daily eye drop designed to reduce elevated intraocular pressure (“IOP”) in patients with open-angle glaucoma or ocular hypertension. The Company is commercializing Rocklatan®, which was launched in the United States in May 2019, and Rhopressa®, which was launched in the United States in April 2018.
In March 2022, the Company commenced a Phase 4 program that was designed to further demonstrate that Rocklatan® is a highly effective single bottle, once-daily therapy.
Efforts Outside the United States
In addition to actively promoting Rocklatan® and Rhopressa® in the United States, the Company is also developing business opportunities outside of the United States and has made progress in its efforts to commercialize Rocklatan® and Rhopressa® in Europe, Japan, and other regions of the world.
The Company partnered and has collaboration agreements in place with Santen Pharmaceuticals Co., Ltd. (“Santen Pharmaceuticals”) and Santen SA (“Santen SA” and, together with Santen Pharmaceuticals, “Santen”) to develop and commercialize its products in Japan and South Korea, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, and Taiwan (collectively, “East Asia”), as well as Europe, China, India, the Middle East, Commonwealth of Independent States (“CIS”), Africa, parts of Latin America, and the Oceania countries. The initial Collaboration and License Agreement with Santen was executed in October 2020 (the “First Santen Agreement”) to advance the Company’s clinical development and ultimately commercialize Rocklatan® and Rhopressa® in Japan and East Asia. The second Collaboration and License Agreement with Santen (the “Second Santen Agreement” and, together with the First Santen Agreement, the “Santen Agreements”) was executed in December 2021 to develop and commercialize Rocklatan® and Rhopressa® in Europe, China, India, the Middle East, CIS, Africa, parts of Latin America, and the Oceania countries. See Note 3 for additional information. In Europe, Rocklatan® and Rhopressa® will be marketed under the names Roclanda® and Rhokiinsa®, respectively.
Roclanda® and Rhokiinsa® were granted a Centralised Marketing Authorisation (“Centralised MA”) by the European Commission (“EC”) in January 2021 and November 2019, respectively. In April 2021, Roclanda® received marketing authorisation from the Medicines and Healthcare Products Regulatory Agency (“MHRA”) in Great Britain.
In Japan, in October 2021, the Company reported positive topline results for its Phase 3 clinical trial of netarsudil ophthalmic solution 0.02% (“netarsudil 0.02%”), the first of three expected Phase 3 clinical trials in Japan. A second, confirmatory Phase 3 study, required for approval in Japan, is currently underway. Santen is taking the lead on next steps in preparation for registration in Japan under the terms of the First Santen Agreement. Clinical trials for Rocklatan® in Japan have not yet begun.
Glaucoma Product Manufacturing
The Company has a sterile fill manufacturing facility in Athlone, Ireland (“Athlone plant”), for the production of its FDA and EMA approved products and clinical supplies. In addition, the Athlone plant has also manufactured clinical supplies of Rhopressa® for the Phase 3 clinical trials in Japan as well as registration batches to support product approval in Japan.
6

Table of Contents
Product Candidates in Development
The Company is furthering the development of its product candidates focused on dry eye and retinal diseases as described below.
Dry Eye Program
The Company is developing AR-15512 ophthalmic solution for the treatment of patients with dry eye disease. The active ingredient in AR-15512 is a potent and selective agonist of the TRPM8 ion channel, a cold sensor and osmolarity sensor that regulates tear production and blink rate. In addition, activating the TRPM8 receptor may reduce ocular discomfort by promoting a cooling sensation.
In September 2021, the Company reported topline results of its Phase 2b clinical study, named COMET-1, for AR-15512. The Company completed a dose ranging study evaluating two concentrations of AR-15512 (0.0014% and 0.003%) in a 90-day trial with 369 subjects. The COMET-1 clinical study achieved statistical significance for multiple pre-specified and validated signs and symptoms. The greatest efficacy was demonstrated with the higher concentration 0.003% formulation, which the Company plans to advance to Phase 3 studies. The study did not achieve statistical significance at the pre-determined primary endpoints at Day 28. The Company gained alignment with the FDA in the first quarter of 2022 on the results of the Phase 2b clinical trial and confirmed the design of the Phase 3 registrational trials, which was based on the endpoints that achieved statistical significance in the COMET-1 study. The Company initiated the Phase 3 registrational trials in the second quarter of 2022, with the first Phase 3 registrational trial, named COMET-2, commencing in May 2022 with the enrollment of the first participant. The second Phase 3 registrational trial, named COMET-3, commenced in August 2022 with the enrollment of the first participant. Both COMET-2 and COMET-3 are multi-center, vehicle-controlled, double-masked, randomized clinical studies, designed to evaluate a single concentration of AR-15512 (0.003%) compared to the AR-15512 vehicle, administered twice-daily for 90 days. The last of the Phase 3 registrational trials, a 12-month study designed to evaluate the long-term safety of AR-15512, named COMET-4, commenced in November 2022 with the enrollment of the first participant.
Retina Program
The Company is currently developing two sustained-release implants focused on retinal diseases, AR-1105 and AR-14034 SR. For AR-1105, a dexamethasone steroid implant, the Company completed a Phase 2 clinical trial for patients with macular edema due to retinal vein occlusion (“RVO”) in July 2020 and reported topline results indicating sustained efficacy of up to six months.
The preclinical sustained-release implant AR-14034 SR is being designed to deliver the active ingredient, axitinib, a potent small molecule pan vascular endothelial growth factor (“VEGF”) receptor inhibitor. AR-14034 SR has the potential to provide a duration of effect of approximately one year with a once per-year injection. It may potentially be used to treat DME, wet AMD, and related diseases of the retina.
Liquidity
The Company’s activities prior to the commercial launch of Rhopressa® had primarily consisted of developing product candidates, raising capital, and performing research and development activities. The Company has incurred losses and experienced negative operating cash flows since inception. The Company had previously funded its operations primarily through the sale of equity securities and issuance of convertible notes prior to generating product revenues. In September 2019, the Company issued an aggregate principal amount of $316.25 million of 1.50% convertible senior notes due October 2024 (the “Convertible Notes”). See Note 10 for additional information. Further, the Company entered into the First Santen Agreement and Second Santen Agreement in October 2020 and December 2021, respectively, pursuant to which Santen made upfront payments of $50.0 million and $88.0 million, respectively. In December 2021, the Company also earned a $2.0 million supplemental upfront payment associated with the Second Santen Agreement. Total aggregate upfront payments of $90.0 million associated with the Second Santen Agreement (the “Second Santen Agreement Upfront Payment”) were received in January 2022. See Note 3 for additional information. As of September 30, 2022, the Company had $172.5 million in cash, cash equivalents, and investments. The Company believes that its cash, cash equivalents, and investments and projected cash flows from revenues will provide sufficient resources to support its operations, including interest payments for its Convertible Notes, through at least the next twelve months from the date of this filing, without giving effect to the proposed Merger (as defined below) and assuming the Company remains a standalone entity.
The Company expects to incur ongoing operating losses until such a time when Rocklatan® or Rhopressa® or any current or future product candidates, if approved, generate sufficient cash flows for the Company to achieve profitability. Accordingly, the Company may be required to obtain further funding through debt or equity offerings or other sources. In addition, the Company continues to evaluate collaboration and licensing opportunities related to its product candidates in development. Adequate
7

Table of Contents
additional funding may not be available to the Company on acceptable terms, or at all. If the Company is unable to raise capital or repurchase, repay, or otherwise refinance its Convertible Notes when needed or on acceptable terms, it may be forced to delay, reduce or eliminate its research and development programs or commercialization and manufacturing efforts.
Additionally, pursuant to the Merger Agreement (as defined below) the Company is subject to a variety of operational restrictions. Unless the Company obtains Alcon’s prior written consent, it may not, among other things and subject to certain exceptions and aggregate limitations, incur additional indebtedness, issue additional shares of common stock, repurchase common stock, pay dividends, acquire assets, or enter into material contracts. The Company does not believe these restrictions will prevent it from meeting ongoing costs of operations, working capital needs, or capital expenditure requirements.
Proposed Merger
On August 22, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Alcon Research, LLC, a Delaware limited liability company (“Alcon”) and indirect wholly owned subsidiary of Alcon Inc., and Lyon Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Alcon (“Merger Sub”). The Merger Agreement provides, among other things, and subject to the terms and conditions set forth therein, that Merger Sub will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Alcon (the “Merger”).
At the effective time of the Merger (the “Effective Time”), and by virtue of the Merger, each share of common stock, par value $0.001 per share, of the Company then outstanding (other than shares held (i) by the Company or held in the Company’s treasury or (ii) by Alcon, Merger Sub or any direct or indirect wholly owned Subsidiary (as defined in the Merger Agreement) of Alcon or the Company, which, in each case, will be cancelled and retired and will cease to exist) will be converted into the right to receive $15.25 per share in cash (the “Merger Consideration”), without interest and subject to any withholding of taxes. As a result of the Merger, the Company’s common stock will no longer be publicly traded, and will be delisted from The Nasdaq Global Market (“Nasdaq”).
The Company’s Board of Directors unanimously approved the Merger Agreement and transactions contemplated thereby, including the Merger, and directed that a proposal to adopt the Merger Agreement be submitted to a vote at a meeting of the Company’s stockholders.
The consummation of the Merger (the “Closing”) is subject to certain conditions, including, but not limited to, (i) the approval and adoption of the Merger Agreement and the Merger by the affirmative vote of the holders of a majority of the issued and outstanding shares of common stock of the Company as of the close of business on October 4, 2022 at the stockholder meeting on November 17, 2022, (ii) the absence of any temporary restraining order, preliminary or permanent injunction or final judgment, or law, regulation, or order promulgated, enacted, issued or deemed applicable to the Merger, by any governmental entity in any jurisdiction in which Alcon or the Company has material business operations that prohibits or otherwise makes illegal the consummation of the Merger, and (iii) the expiration or termination of any waiting period (or any extension thereof) applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the rules and regulations promulgated thereunder. The parties expect the transaction to close following the receipt of all required regulatory and antitrust approvals and the satisfaction or waiver of the other closing conditions. The waiting period applicable to the Merger under the HSR Act expired in October 2022.
Pursuant to the terms of the Merger Agreement, the Company would be required to pay a termination fee to Alcon equal to $27.0 million under certain specified conditions upon or following the termination of the Merger Agreement. Alcon will be required to make a payment to the Company equal to $65.0 million if the Merger Agreement is terminated under certain specified conditions.

For the nine months ended September 30, 2022, the Company incurred $10.4 million in Merger-related costs, including for professional services, which are included in general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive loss.
The Merger is expected to close during the fourth quarter of 2022.
2. Significant Accounting Policies
Basis of Presentation
The Company’s interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments necessary for a fair statement of the Company’s
8

Table of Contents
condensed consolidated financial position and results of operations for the interim periods presented. Certain information and disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022. The results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.
Principles of Consolidation
The interim condensed consolidated financial statements include the accounts of Aerie and its wholly-owned subsidiaries. All intercompany accounts, transactions and profits have been eliminated in consolidation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of income and expenses during the reporting periods. Significant items subject to such estimates and assumptions include revenue recognition, leases, acquisitions, stock-based compensation, and fair value measurements. On March 11, 2020, the World Health Organization declared the coronavirus (“COVID-19”) outbreak a pandemic. The COVID-19 pandemic continues to evolve, which the Company considered in its critical and significant accounting estimates as future developments continue to be uncertain, including as a result of new information that may emerge concerning COVID-19 and its variants and the actions taken to contain or treat it, as well as the economic impact on eye-care professionals, patients, third parties, and markets. Actual results could differ from the Company’s estimates.
Adoption of New Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity (“ASU 2020-06”). This ASU simplifies the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and the derivative scope exception for contracts in an entity’s own equity. Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument, such as the Convertible Notes, will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments and requires additional disclosures. The guidance became effective for the Company beginning on January 1, 2022, and was applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date. As such, financial results reported in prior periods were not adjusted. The impact of adopting ASU 2020-06 on January 1, 2022, was comprised of a $124.7 million decrease to additional paid-in capital, a $76.7 million increase to convertible notes, net to reduce debt discounts and a $48.0 million decrease to accumulated deficit. Upon adoption of ASU 2020-06, the Company’s interest expense, recognized as a component of other expense, net in its condensed consolidated statements of operations and comprehensive loss, will decrease which primarily relates to no longer recognizing non-cash interest expense from the discount amortization, partially offset by an increase in amortization of debt issuance costs. See Note 10 for additional information.
Recently Issued Accounting Standards
There have been no new accounting pronouncements issued since the filing of the Annual Report on Form 10-K for the year ended December 31, 2021 that are expected to materially impact the Company’s consolidated financial statements.
Net Loss per Common Share
Basic net loss per common share (“Basic EPS”) is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share (“Diluted EPS”) gives effect to all dilutive potential shares of common stock outstanding during this period. For Diluted EPS, net loss used in calculating Basic EPS may be adjusted for certain items related to the dilutive securities.
9

Table of Contents
For all periods presented, Aerie’s potential common stock equivalents have been excluded from the computation of Diluted EPS as their inclusion would have had an anti-dilutive effect.
The potential common stock equivalents that have been excluded from the computation of Diluted EPS consisted of the following:
 THREE MONTHS ENDED 
SEPTEMBER 30,
NINE MONTHS ENDED 
SEPTEMBER 30,
 2022202120222021
Convertible Notes (1)
12,662,650  12,662,650  
Outstanding stock options5,753,892 8,703,221 5,753,892 8,703,221 
Non-vested restricted stock awards 1,491,788 796,656 1,491,788 796,656 
Non-vested restricted stock units225,685 155,083 225,685 155,083 
Total20,134,015 9,654,960 20,134,015 9,654,960 
(1)     Upon adoption of ASU 2020-06 on January 1, 2022, the if-converted method is applied to the Convertible Notes in the calculation of earnings per share. Prior to the adoption of ASU 2020-06, the Company did not include the conversion value of the Convertible Notes in the diluted earnings per share computation.
3. Revenue Recognition
Product Revenues
Net product revenues for the three and nine months ended September 30, 2022 and 2021 were generated from sales of Rocklatan® and Rhopressa®, the Company’s glaucoma franchise products, which were commercially launched in the United States in May 2019 and April 2018, respectively. Aerie’s customers include a limited number of national and select regional wholesalers (the “distributors”). For the nine months ended September 30, 2022, three distributors accounted for 37%, 33%, and 29% of total revenues, respectively. For the nine months ended September 30, 2021, three distributors accounted for 36%, 32%, and 31% of total revenues, respectively. Product affordability for the patient drives consumer acceptance, and this is generally managed through coverage by third-party payers, such as government or private healthcare insurers and pharmacy benefit managers (“Third-party Payers”) and such product may be subject to rebates and discounts payable directly to those Third-party Payers.
Product revenues are recorded net of trade discounts, allowances, rebates, chargebacks, estimated returns, and other incentives in the condensed consolidated statements of operations and comprehensive loss, discussed below. These reserves are classified as either reductions of accounts receivable or as current liabilities in the condensed consolidated balance sheets. Amounts billed or invoiced are included in accounts receivable, net on the condensed consolidated balance sheets. The Company did not have any contract assets (unbilled receivables) as of September 30, 2022 or December 31, 2021, as customer invoicing generally occurs before or at the time of revenue recognition. The Company did not have any contract liabilities as of September 30, 2022 or December 31, 2021, as the Company did not receive payments in advance of fulfilling its performance obligations to its customers. The Company calculates its net product revenues based on the wholesale acquisition cost that the Company charges its distributors for Rocklatan® and Rhopressa® less provisions for (i) trade discounts and allowances, such as discounts for prompt payment and distributor fees, (ii) estimated rebates to Third-party Payers, estimated payments for Medicare Part D prescription drug program coverage gap (commonly called the “donut hole”), patient co-pay program coupon utilization, chargebacks and other discount programs, and (iii) reserves for expected product returns. Provisions for revenue reserves reduced product revenues by $75.5 million and $210.0 million in aggregate for the three and nine months ended September 30, 2022, respectively, a significant portion of which related to commercial and Medicare Part D rebates. Provisions for revenue reserves reduced product revenues by $65.8 million and $177.8 million in aggregate for the three and nine months ended September 30, 2021, respectively, a significant portion of which related to commercial and Medicare Part D rebates.
Trade Discounts and Allowances: The Company generally provides discounts on sales of Rocklatan® and Rhopressa® to its distributors for prompt payment and pays fees for distribution services and for certain data that distributors provide to the Company. The Company expects its distributors to earn these discounts and fees, and accordingly deducts the full amount of these discounts and fees from its gross product revenues at the time such revenues are recognized.
Rebates, Chargebacks and Other Discounts: The Company contracts with Third-party Payers for coverage and reimbursement of Rocklatan® and Rhopressa®. The Company estimates the rebates, donut hole and chargebacks it expects to be obligated to provide to Third-party Payers and deducts these estimated amounts from its gross product revenue at the time the revenue is
10

Table of Contents
recognized. The Company estimates the rebates, donut hole and chargebacks that it expects to be obligated to provide to Third-party Payers based upon (i) the Company's contracts and applicable negotiations with these Third-party Payers, (ii) estimates regarding the payer mix for Rocklatan® and Rhopressa® based on utilization of both third-party and the Company’s historical data, (iii) inventory held by distributors, and (iv) estimates of inventory held at the retail channel. Other discounts include the Company’s co-pay assistance coupon programs for commercially-insured patients meeting certain eligibility requirements. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to pay associated with product that has been recognized as revenue.
Product Returns: The Company estimates the amount of Rocklatan® and Rhopressa® that will be returned and deducts these estimated amounts from its gross revenue at the time the revenue is recognized. The Company currently estimates product returns based on historical information regarding returns of Rocklatan® and Rhopressa® as well as historical industry information regarding rates for comparable pharmaceutical products and product portfolios, the estimated remaining shelf life of Rocklatan® and Rhopressa® shipped to distributors, and contractual agreements with the Company's distributors intended to limit the amount of inventory they maintain. Reporting from the distributors includes distributor sales and inventory held by distributors, which provides the Company with visibility into the distribution channel to determine when the product would be eligible to be returned.
Santen Collaboration and License Agreements
Second Santen Agreement
In December 2021, Aerie Ireland Limited entered into the Second Santen Agreement with Santen which expands the scope of the First Santen Agreement, entered into in October 2020. Pursuant to the Second Santen Agreement, Aerie Ireland Limited granted to Santen the exclusive right to develop and commercialize Rocklatan® and Rhopressa® (the “Licensed Products”) in Europe, China, India, the Middle East, CIS, Africa, parts of Latin America, and the Oceania countries (such jurisdictions collectively, the “Expanded Territories”). The Company is the sole manufacturer of the Licensed Products for Santen and Santen may manufacture, in certain circumstances, upon mutual agreement of both parties. In addition, Aerie Ireland Limited granted Santen a first right of refusal to commercialize the Licensed Products in Canada.
Under the agreement, Santen made the Second Santen Agreement Upfront payment in January 2022 to Aerie Ireland Limited which was comprised of an $88.0 million upfront payment and a $2.0 million supplemental upfront payment that was earned based on the achievement of an event that occurred in December 2021. Upon the achievement of certain events, Aerie Ireland Limited will earn various development milestones of up to $15.5 million and sales milestones of up to $60.0 million. In addition, Santen will pay Aerie Ireland Limited a royalty in excess of 25% of the Licensed Products’ net sales in the Expanded Territories, excluding China and India (and in excess of 20% of the Licensed Products’ net sales in China and India), such consideration consisting of the cost of products supplied to Santen from Aerie Ireland Limited and a royalty for the Company’s intellectual property. While the royalty rate decreases when the Licensed Products are manufactured by or on behalf of Santen, there is a guaranteed minimum percentage.
The term of the Second Santen Agreement continues on a country-by-country and product-by-product basis until the expiration of the obligation to make payments under the Second Santen Agreement with respect to each Licensed Product in each country or region. The Second Santen Agreement may be terminated by either Aerie Ireland Limited or Santen upon the other party’s material breach, bankruptcy or insolvency. Aerie Ireland Limited may also terminate the agreement upon a patent challenge by Santen or on a country-by-country basis upon a breach by Santen of its obligation to develop, obtain marketing approval of and commercialize the Licensed Products in certain of the Expanded Territories. Santen may terminate the Second Santen Agreement in its discretion if Santen reasonably determines that the Licensed Products are not commercially viable in the Expanded Territory (effective upon 180 days’ prior written notice). In addition, in the event that patents are issued that may prevent the commercialization of the Licensed Products during the three-year period following marketing authorization of Rhopressa® in China, Santen would have the right to terminate the agreement with respect to China only and require Aerie Ireland Limited to repay $8.0 million of the Second Santen Agreement Upfront Payment. In the event of termination, the Licensed Products in the applicable Expanded Territories will revert to Aerie Ireland Limited.
11

Table of Contents
The Company recognized deferred revenue, non-current as of September 30, 2022 and December 31, 2021 as follows:
(in thousands)SEPTEMBER 30, 2022DECEMBER 31, 2021
First Santen Agreement:
Upfront payment (1)
$50,000 $50,000 
Developmental milestones (2)
6,000  
Santen’s portion of shared costs (3)
6,881 6,315 
Second Santen Agreement:
Upfront payment (4)
8,000 8,000 
Total$70,881 $64,315 
(1)While the Company determined that the license was a right to use the Company’s intellectual property and as of the effective date of the First Santen Agreement, the Company had provided all necessary information to Santen to benefit from the license and the license term had begun, revenue was not recognized upon satisfaction of the performance obligation due to the uncertainty around potential termination in the event that patents are issued that may prevent the commercialization of the Licensed Products.
The Company will recognize the $50.0 million upfront payment received under the First Santen Agreement, and any other current and potential future development milestones and sales milestones, when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
(2)In March 2022, Santen made a $6.0 million developmental milestone payment in connection with the First Santen Agreement.
(3)This item represents Santen’s portion of shared costs related to conducting the first Rhopressa® Phase 3 clinical trial in Japan, which commenced in the fourth quarter of 2020, as described above.
(4)As of September 30, 2022 and December 31, 2021, the Company recognized $8.0 million of the Second Santen Agreement Upfront Payment as deferred revenue, non-current in its consolidated balance sheet due to the uncertainty around potential termination in China in the event that patents are issued that may prevent the commercialization of the Licensed Products.
4. Investments
Cash, cash equivalents and investments as of September 30, 2022 included the following:
GROSSGROSS
AMORTIZEDUNREALIZEDUNREALIZEDFAIR
(in thousands)COSTGAINSLOSSESVALUE
Cash and cash equivalents:
Cash and cash equivalents$54,093 $ $ $54,093 
Total cash and cash equivalents$54,093 $ $ $54,093 
Investments:
Certificates of deposit (due within 1 year)$1,500 $ $(1)$1,499 
Commercial paper (due within 1 year)49,174  (251)48,923 
Corporate bonds (due within 1 year)21,240  (241)20,999 
U.S. Government and government agencies (due within 1 year)47,260  (310)46,950 
Total investments$119,174 $ $(803)$118,371 
Total cash, cash equivalents, and investments$173,267 $ $(803)$172,464 

12

Table of Contents
Cash, cash equivalents and investments as of December 31, 2021 included the following:
GROSSGROSS
AMORTIZEDUNREALIZEDUNREALIZEDFAIR
(in thousands)COSTGAINSLOSSESVALUE
Cash and cash equivalents:
Cash and cash equivalents$37,187 $ $ $37,187 
Total cash and cash equivalents$37,187 $ $ $37,187 
Investments:
Certificates of deposit (due within 1 year)$9,047 $ $(9)$9,038 
Commercial paper (due within 1 year)50,975  (55)50,920 
Corporate bonds (due within 1 year)42,718  (62)42,656 
Total investments$102,740 $ $(126)$102,614 
Total cash, cash equivalents, and investments$139,927 $ $(126)$139,801 
Interest income earned on the Company’s cash, cash equivalents, and investments was $0.5 million and $0.9 million during the three and nine months ended September 30, 2022, respectively, and was immaterial for each of the three and nine months ended September 30, 2021. Realized gains or losses were immaterial during the three and nine months ended September 30, 2022 and 2021.
As of September 30, 2022 and December 31, 2021, the Company did not hold any equity securities.
5. Fair Value Measurements
The following tables summarize the fair value of financial assets and liabilities that are measured at fair value and the classification by level of input within the fair value hierarchy:
FAIR VALUE MEASUREMENTS AS OF
SEPTEMBER 30, 2022
(in thousands)LEVEL 1LEVEL 2LEVEL 3TOTAL
Cash and cash equivalents:
Cash and cash equivalents$54,093 $ $ $54,093 
Total cash and cash equivalents:$54,093 $ $ $54,093 
Investments:
Certificates of deposit$ $1,499 $ $1,499 
Commercial paper 48,923  48,923 
Corporate bonds 20,999  20,999 
U.S. Government and government agencies 46,950  46,950 
Total investments$ $118,371 $ $118,371 
Total cash, cash equivalents, and investments:$54,093 $118,371 $ $172,464 
13

Table of Contents
FAIR VALUE MEASUREMENTS AS OF
DECEMBER 31, 2021
(in thousands)LEVEL 1LEVEL 2LEVEL 3TOTAL
Cash and cash equivalents:
Cash and cash equivalents$37,187 $ $ $37,187 
Total cash and cash equivalents:$37,187 $ $ $37,187 
Investments:
Certificates of deposit$ $9,038 $ $9,038 
Commercial paper 50,920  50,920 
Corporate bonds 42,656  42,656 
Total investments$ $102,614 $ $102,614 
Total cash, cash equivalents, and investments:$37,187 $102,614 $ $139,801 
The fair value of the Convertible Notes, which differs from their carrying value, is influenced by interest rates, stock price and stock price volatility and is determined by prices observed in market trading. The market for trading of the Convertible Notes is not considered to be an active market and therefore the estimate of fair value is based on Level 2 inputs. The estimated fair value of the Convertible Notes was $310.7 million and $270.4 million at September 30, 2022 and December 31, 2021, respectively.
There were no transfers between the different levels of the fair value hierarchy during the nine months ended September 30, 2022 and 2021.
6. Inventory
Inventory consists of the following:
(in thousands)SEPTEMBER 30, 2022DECEMBER 31, 2021
Raw materials$4,450 $5,368 
Work-in-process35,328 30,989 
Finished goods6,984 4,053 
Total inventory$46,762 $40,410 
For the three and nine months ended September 30, 2022, $4.1 million and $9.0 million, respectively, of production costs associated with underutilized capacity at the Company’s Athlone plant were recorded to costs of goods sold. For the three and nine months ended September 30, 2021, $5.4 million and $13.7 million, respectively, of production costs associated with underutilized capacity at the Company’s Athlone plant were recorded to costs of goods sold. The underutilization results from the Athlone plant having not yet reached full capacity as it commenced operations in early 2020.
14

Table of Contents
7. Property, Plant, and Equipment, Net
Property, plant, and equipment, net consists of the following:
(in thousands)SEPTEMBER 30, 2022DECEMBER 31, 2021
Manufacturing equipment$22,719 $22,464 
Laboratory equipment9,786 9,182 
Furniture and fixtures1,614 1,569 
Software, computer, and other equipment