As filed with the Securities and Exchange Commission on January 18, 2019.

Registration Statement No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

AVEDRO, INC.

(Exact name of registrant as specified in its charter)

201 Jones Road

Waltham, Massachusetts 02451

Tel: (781) 768-3400

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Reza Zadno, Ph.D.

President and Chief Executive Officer

Avedro, Inc.

201 Jones Road

Waltham, Massachusetts 02451

Tel: (781) 768-3400

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ☐

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.

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 in Section 7(a)(2)(B) of the Securities Act.  ☐

CALCULATION OF REGISTRATION FEE

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion

Preliminary Prospectus dated January 18, 2019

PROSPECTUS

Shares

Common Stock

This is Avedro, Inc.’s initial public offering. We are selling                    shares of our common stock.

We expect the public offering price to be between $                    and $                    per share. Currently, no public market exists for the shares. We have applied to list our common stock on the Nasdaq Global Market under the symbol “AVDR”.

We are an “emerging growth company” as defined under the U.S. federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for this and future filings.

Investing in the common stock involves risks that are described in the “Risk Factors” section beginning on page 15 of this prospectus.

The underwriters may also exercise their option to purchase up to an additional                     shares from us, at the public offering price, less the underwriting discount, for 30 days after the date of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The shares will be ready for delivery on or about                    , 2019.

The date of this prospectus is                    , 2019.

TABLE OF CONTENTS

We have not, and the underwriters have not, authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares of common stock offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside the United States: We have not, and the underwriters have not, done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. Before deciding to invest in our common stock, you should consider carefully the risks and uncertainties described below, together with general economic and business risks and all of the other information contained in this prospectus, including our financial statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If any of the following risks actually occur, our business, financial condition, results of operations and prospects could be harmed. In that event, the price of our common stock could decline and you could lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks described below. See “Special Note Regarding Forward-Looking Statements.”

Risks Related to Our Business and Industry

We have incurred significant operating losses since our inception and anticipate that we will continue to incur significant operating losses for the foreseeable future and may never be profitable.

We have incurred net losses since our inception. For the years ended December 31, 2016 and 2017, and for the nine months ended September 30, 2018, we had net losses of $16.4 million, $21.3 million and $18.7 million, respectively. As of September 30, 2018, we had an accumulated deficit of $175.7 million. To date, we have financed our operations primarily through sales of our preferred stock, debt financings and, more recently, sales of our proprietary Photrexa formulations and our KXL system. Historically, we have devoted substantially all of our resources to the research, development and engineering of our products and product candidates, seeking regulatory approval of our products and product candidates and the commercial launch of our KXL system and its associated Photrexa formulations in the United States.

Following this offering, we expect that our operating expenses will increase substantially as we expand our research and development activities, product portfolio commercial infrastructure and incur additional operational costs associated with being a public company. As a result of the foregoing, we expect to continue to incur significant operating losses in the future and may never achieve profitability. We will need to generate significant additional net sales to achieve and maintain profitability, and even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time. Our failure to achieve or sustain profitability could have an adverse effect on the value of our common stock.

We rely on the sale of our KXL system and its associated drug formulations to generate revenue, and we are therefore highly dependent on a limited number of products.

At present, we primarily rely on the sale of our KXL system and its associated drug formulations to generate revenue, and we expect to generate substantially all of our revenue in the foreseeable future from sales of these and any related products. We expect that sales of our KXL system and its associated drug formulations will continue to account for the substantial majority of our revenue going forward. Therefore, our ability to execute our growth strategy and become profitable will depend upon continued increased adoption of corneal cross-linking for the treatment of corneal ectatic disorders, especially in the United States, and specifically on the adoption of our KXL system and its associated drug formulations. If our products fail to achieve wide market acceptance for any reason, our business, financial conditions, results of operations and growth prospects would be materially and adversely affected.

Our revenue from sales of the KXL system and its associated Photrexa formulations is dependent upon the pricing and reimbursement guidelines adopted in the United States.

In the U.S. market, our ability to commercialize our KXL system and its associated Photrexa formulations successfully depends in significant part on the availability of insurance coverage and adequate

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reimbursement from private health insurers. Private payors decide which drugs can be reimbursed and establish reimbursement and co-pay levels and conditions for reimbursement. Private payors are increasingly challenging the prices charged for medical products and services and examining their cost effectiveness, in addition to their safety and efficacy.

If reimbursement for our products is unavailable, limited in scope or amount, or if pricing is set at unsatisfactory levels, our business will be materially harmed. Our financial success depends on our ability to price our products in a manner acceptable to relevant third party payors. Numerous factors that may be beyond our control may ultimately impact the pricing of our KXL system and its associated Photrexa formulations and determine whether healthcare providers are able to obtain reimbursement at adequate levels from third-party private payors. If there is no coverage or our products are not adequately reimbursed, we will experience reduced or stagnant sales, our business, financial conditions, results of operations and growth prospects would be materially and adversely affected, and we may not become profitable.

Healthcare providers and private payors use coding systems to identify diagnoses, procedures, services, products, pharmaceutical devices, equipment and other health-related items and services. Proper coding is an integral component to receiving appropriate reimbursement for our KXL system and its associated Photrexa formulations. The majority of third-party payors use nationally recognized code sets to report medical conditions, services and products. We were granted a Category III Current Procedural Terminology, or CPT, code for corneal cross-linking for the treatment of progressive keratoconus and received a product-specific J code from the Centers for Medicare and Medicaid Services, or CMS, for our Photrexa formulations in November 2018. The J code became effective on January 1, 2019. Nevertheless, we cannot predict at this time how much physicians will be reimbursed for cross-linking treatments using our KXL system and its associated Photrexa formulations, and whether those physicians will consider such reimbursement adequate to utilize our KXL system and its associated Photrexa formulations more frequently. We have not signed a Medicaid Drug Rebate Agreement for our Photrexa formulations, and therefore, payment for the Photrexa formulations is not available under Medicare, and may not be available under some or all state Medicaid plans.

Further, increasing consolidation among third-party payors has led to fewer and larger third-party payors with increased negotiating power. We expect to continue to experience increasing pressure from third-party payors to agree to discounts, rebates or other restrictive pricing terms. If we are unsuccessful at ensuring reimbursement for our products in a timely manner and at acceptable levels, or if third party payors limit the indications for which our products will be reimbursed or refuse to provide reimbursement, demand for our products may be negatively impacted, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Additionally, there is no uniform policy of coverage and reimbursement for our products or procedures using our products among third-party payors in the United States, and coverage and reimbursement for our products and procedures using our products can differ significantly from payor to payor. Further, these payors regularly review new and existing technologies for possible coverage and can, without notice, deny or reverse coverage for new or existing products and treatments. Third-party payors may not consider our products to be medically necessary or cost-effective for certain indications or for all uses, and as a result, may not provide coverage for the products.

Our business also could be adversely affected if healthcare providers, including ophthalmologists, hospitals and ambulatory surgery centers, are not adequately reimbursed for the KXL system and its associated Photrexa formulations on a basis satisfactory to these providers.

In addition, we may decide to participate in the U.S. Department of Veterans Affairs Federal Supply Schedule, or FSS, pricing program, which would subject us to complex laws and regulations regarding price reporting and contracting obligations. Participation in the FSS pricing program would permit us to sell our Photrexa formulations to the U.S. Department of Veterans Affairs, Department of Defense, Public Health Service and Coast Guard, but those sales would be capped by a statutory ceiling price.

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We have a limited history marketing and selling the KXL system and its associated Photrexa formulations in the United States.

We began marketing the KXL system in combination with its associated Photrexa formulations in the United States in September 2016, and we have a limited history marketing and selling the KXL system and its associated Photrexa formulations in the United States.

In order to generate increased sales, we will need to expand the size and geographic scope of our direct field support team. As a result, our future success will depend largely on our ability to continue to hire, train, retain and motivate skilled local sales managers, direct sales representatives with technical knowledge of the KXL system and its associated Photrexa formulations and field reimbursement specialists. Because of the competition for their services, we cannot assure you we will be able to hire and retain additional direct sales representatives or field reimbursement specialists on favorable or commercially reasonable terms, if at all. Failure to hire or retain qualified sales representatives and field reimbursement specialists would prevent us from expanding our business and generating sales. Additionally, new hires require training and take time before they achieve full productivity. If we fail to train new hires adequately, new hires may not become as productive as may be necessary to maintain or increase our sales.

The further expansion of our sales force will require significant additional investment and time. If we are unable to expand our sales and marketing capabilities, we may not be able to commercialize our products effectively in the United States, which would adversely affect our business, financial condition, results of operations and growth prospects. Additionally, if we overestimate the size and growth of our user base, or their expected utilization of our product post-training, we could overspend on sales and marketing programs and infrastructure or suffer material diminishing returns on these investments. Because the KXL system in combination with its associated Photrexa formulations is the first and only corneal cross-linking product offering approved by the Food and Drug Administration, or FDA, for progressive keratoconus and corneal ectasia following refractive surgery, there are no specific commercial models of other companies that we can utilize to project our resource and investment needs. If we fail to forecast our commercial infrastructure needs correctly, over- or under-investing in market reach, acceptance and penetration, it could materially and adversely impact our financial operating results as we may not see sufficient net sales growth to become profitable.

While certain of our products are commercially available, these products, as well as products that we may be able to commercialize in the future under applicable regulatory regimes, may fail to achieve the degree of market acceptance necessary for commercial success.

We have received FDA approval for our KXL system and its associated Photrexa formulations for the treatment of progressive keratoconus and corneal ectasia following refractive surgery, and the KXL system, Mosaic system and their associated drug formulations are CE marked in the European Union and are approved in certain other countries outside of the United States. Outside of the United States, our systems are not regulated as a combination drug/device, and as such the KXL system and its associated drug formulations, as well as the Mosaic system and its associated drug formulations, are separately CE marked. Although we have marketing authorizations for these products in these territories, these products, as well as products that we may be able to commercialize in the future under applicable regulatory regimes, may fail to achieve the degree of market acceptance by ophthalmologists and other eye care professionals necessary for commercial success. Additionally, market acceptance of our products and any product that we are able to commercialize in the future depends on a number of factors, including:

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Ophthalmologists and referring optometrists play a significant role in determining the course of treatment and, ultimately, the type of products that will be used to treat a patient. As a result, it will be important for us to market our products to them effectively. Acceptance of our products depends on educating ophthalmologists as to the distinctive characteristics, perceived clinical benefits, safety and cost-effectiveness of our products as compared to existing vision correction applications and procedures, such as eyeglasses, rigid contact lenses, surgically implanted intracorneal ring segments, laser vision correction, such as laser in situ keratomileusis, or LASIK, and corneal transplants. It also depends on increasing awareness to referring optometrists of corneal cross-linking as a therapeutic treatment for corneal ectatic disorders, and training ophthalmologists in the proper application of our products. If we are not successful in increasing awareness to referring optometrists, convincing ophthalmologists of the merits of our products or educating them on the use of our products, they may not use our products and we will be unable to fully commercialize our products or our business, financial conditions, results of operations and growth prospects would be materially and adversely affected. Ophthalmologists may be hesitant to change their medical treatment practices for the following reasons, among others:

Even if a product displays a favorable safety profile and efficacy in preclinical studies and clinical trials and is approved by the relevant regulatory authorities on that basis, market acceptance of the product will not be known until after it is launched. In addition, we believe recommendations and support of our products by influential ophthalmologists are important for market acceptance and adoption. If we do not receive support from such ophthalmologists or long-term data does not show the benefits of using our products, ophthalmologists may not use our products, and our business, financial conditions, results of operations and growth prospects would be materially and adversely affected. In such circumstances, we may not be able to grow our revenue or achieve profitability.

We rely on contract manufacturing organizations, or CMOs, to manufacture and supply certain components of our technology platform and to supply our formulations of riboflavin, some of which are single-source suppliers.

We currently manufacture the KXL and Mosaic systems at our manufacturing headquarters in Burlington, Massachusetts. We also rely upon third-party CMOs to manufacture our drug formulations and other

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third parties to supply off-the-shelf and custom components for our devices, such as molded plastic components, machine parts and circuit boards. In addition, we currently have an exclusive supply agreement with Medio-Haus-Medizinprodukte GmbH, or Medio-Haus, to manufacture our drug formulations that are available outside of the United States for use with our KXL and Mosaic systems. We have also entered into manufacturing, supply or quality agreements with single-source suppliers pursuant to which they supply to us the active pharmaceutical ingredient, or API, we use for our Photrexa formulations. We currently rely on Albany Molecular Research Inc., or AMRI, to manufacture and provide us with clinical supply of our API. The API is exclusively manufactured for us by AMRI and then the API is transferred to Ajinomoto Althea for production of our Photrexa formulations.

If we and any of our suppliers cannot agree in the future to the terms and conditions for provision of the products necessary for our clinical and commercial supply needs, or if any of our suppliers terminate their agreements in response to a breach by us or otherwise become unable to fulfill their supply obligations, our ability to market and sell products and to conduct clinical trials could be delayed until a qualified alternative supplier is identified, the manufacturing process is qualified and validated and we have agreed on the terms and conditions for such alternative supplier to supply product for us, which would delay the development and impair the commercialization of our products. New suppliers of any products would be required to qualify under applicable regulatory requirements. Obtaining the necessary FDA, EU or other regulatory approvals or other qualifications required for changes in manufacturing sites, methods or processes under applicable regulatory requirements could result in a significant interruption of supply and could require the new manufacturer to bear significant additional costs which may be passed on to us.

Our proprietary Photrexa formulations are regulated by the FDA as the drug component of a combination drug/device product. We are required to manufacture both our proprietary drug formulations, Photrexa and Photrexa Viscous, and their API in accordance with the FDA’s current good manufacturing practice regulations guidance and standards, or collectively, cGMPs, as well as in accordance with the drug product specifications approved by the FDA in the United States. The manufacture of pharmaceutical products in compliance with cGMP requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Our Photrexa and Photrexa Viscous API is not available in pharmaceutical quality as a catalog product. Manufacturers of our current or future products may be unable to comply with these cGMP requirements and with other FDA, state and foreign regulatory requirements. The FDA or similar foreign regulatory agencies may also implement new regulations, guidance or standards at any time, or change their interpretation and enforcement of existing standards for manufacture, packaging, or testing of products. A failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension, or delay in product approval, product seizure, or recall or withdrawal of product approval. If the safety of any product supplied is compromised due to our manufacturers’ failure to adhere to applicable laws, regulations, guidance or standards or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our products and we may be held liable for any injuries sustained as a result.

Manufacturers of pharmaceutical products often encounter difficulties in production, including difficulties with production costs and yields, quality control, including stability of the product and quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced cGMP requirements, other federal, state and foreign regulatory requirements. If our manufacturers were to encounter any of these difficulties or otherwise fail to comply with their obligations to us or under applicable regulations, guidance or standards, our ability to provide commercial product or study drugs in our clinical trials would be jeopardized. Any delay or interruption in the supply of clinical trial materials could delay the completion of our clinical trials, increase the costs associated with maintaining our clinical trial programs, and, depending upon the period of delay, require us to commence new trials at significant additional expense or terminate the trials completely.

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If we or our suppliers fail to comply with the FDA’s Quality System Regulation, or QSR, cGMPs, ISO Quality Management Systems, or equivalent standards, manufacturing of our products could be negatively impacted and sales of our products could suffer.

The methods used by, and the facilities of, our CMOs, and our manufacturing practices in the United States, to the extent we continue to manufacture our products in the future, must be in compliance with the FDA’s applicable QSR and cGMPs. We and our CMOs are also subject to similar state and foreign requirements and licenses in third countries, including the Medical Devices Directive, the ISO 13485 Quality Management Systems, or QMS, standard or equivalent standards applicable to medical devices. In addition, we and our CMOs must engage in regulatory reporting in the case of potential patient safety risks and are subject to market surveillance activities and periodic unannounced inspections and/or audits of our facilities, procedures, and records by governmental agencies, including the FDA, state authorities, comparable foreign agencies and notified bodies. If we or our CMOs fail to comply with the applicable cGMPs, the QSR, QMS or other applicable regulations and standards, our operations could be disrupted and our manufacturing interrupted, and we may be subject to enforcement actions if our corrective and preventive actions are not adequate to ensure compliance. Further, if our current CMOs fail to comply with the applicable cGMPs, the QSR, QMS or other applicable regulations and standards, we may be required to contract with alternate CMOs, which may result in substantial delays in our manufacturing processes and increases in our manufacturing costs, and which could materially and adversely affect our business, financial conditions, results of operations and growth prospects.

Failure to take adequate corrective action in response to inspectional observations or any notice of deficiencies from a regulatory inspection or audit could result in partial or total shut-down of our or our CMO’s manufacturing operations unless and until adequate corrections are implemented, voluntary or FDA-ordered recall, or equivalent third country authority recall, FDA or equivalent third country authority seizure of affected devices, court-ordered injunction or consent decree that could impose additional regulatory oversight and significant requirements and limitations on our manufacturing operations, significant fines, suspension or withdrawal of marketing clearances and approvals, suspension, variation or withdrawal of EC Certificates of Conformity, and criminal prosecutions, any of which would cause our business to suffer. Furthermore, our key component suppliers may not currently be or may not continue to be in compliance with applicable regulatory requirements, which may result in manufacturing delays for our products and cause our revenue to decline.

The FDA and other foreign regulatory authorities also may, at any time following approval of a product for sale, audit our manufacturing facilities or those of our CMOs. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time-consuming for us or a third party to implement and that may include the temporary or permanent suspension of a clinical study or commercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business. If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product, or revocation of a pre-existing approval. As a result, our business, financial conditions, results of operations and growth prospects could be materially and adversely affected. Additionally, if supply from one approved manufacturer is interrupted, there could be a significant disruption in commercial supply.

We rely, and in the future expect to rely, on a network of third-party distributors to market and distribute our products internationally, and if we are unable to maintain and expand this network, we may be unable to generate anticipated sales.

We rely on distributors for all of our sales outside the United States and do not have direct control over foreign sales activities. Our revenue outside the United States represented 42.6%, 46.2% and 32.9% of our revenues in the years ended December 31, 2016 and 2017 and the nine months ended September 30, 2018,

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respectively, and we intend to continue our efforts to increase our sales in the European Union, the Middle East, China, South Korea and Japan and other markets outside of the United States. The agreements with our existing distributors typically have a term of 24 months and require the distributor to sell a minimum quantity of products during the course of the contract. However, if our existing international distributors fail to sell our products or sell at lower levels than we anticipate, we could experience a decline in revenue or fail to meet our forecasts.

We may also face significant challenges and risks in managing a geographically dispersed distribution network. We have limited ability to control any third-party distributors. Our distributors may be unable to successfully market and sell our products and may not devote sufficient time and resources to support the marketing, sales, education and training efforts that we believe enable the products to develop, achieve or sustain market acceptance. Additionally, in some international jurisdictions, we rely on our distributors to manage the regulatory process, while complying with all applicable rules and regulations, and we are dependent on their ability to do so effectively. If a dispute arises with a distributor or if a distributor is terminated by us or goes out of business, it may take time to locate an alternative distributor, to seek appropriate regulatory approvals and to train new personnel to market our products, and our ability to sell those systems in the region formerly serviced by such terminated distributor could be harmed. Any of these factors could reduce our revenue from affected markets, increase our costs in those markets or damage our reputation. In addition, if an independent distributor were to depart and be retained by one of our competitors, we may be unable to prevent that distributor from helping competitors solicit business from our existing customers, which could further adversely affect our sales. As a result of our reliance on third-party distributors outside the United States, we may be subject to disruptions and increased costs due to factors beyond our control, including labor strikes, third-party error and other issues. If the services of any of these third-party distributors become unsatisfactory, we may experience delays in meeting our customers’ demands and we may be unable to find a suitable replacement on a timely basis or on commercially reasonable terms. Any failure to deliver products in a timely manner may damage our reputation and could cause us to lose potential customers.

Our long-term growth depends in part on our ability to develop and commercialize additional products.

It is important to our business that we continue to enhance our product offerings and commercialize new products. Developing products is expensive and time-consuming and could divert management’s attention away from our current commercial products. Even if we are successful in developing additional products, the success of any new product offering or enhancements to existing products will depend on several factors, including our ability to:

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If we are unsuccessful in developing and commercializing new products, our ability to increase our revenue may be impaired.

We operate in a very competitive industry and we may fail to compete successfully against our existing or potential competitors, many of whom have greater resources than we have.

Our industry is highly competitive and subject to rapid and significant change. For the treatment of progressive keratoconus, we currently compete with available disease management options, including eyeglasses, rigid contact lenses and corneal transplants, which is an invasive, end-stage definitive-care solution. We face potential competition from pharmaceutical, medical device and biotechnology companies, including academic institutions, government agencies and research institutions. For example, in the U.S. corneal ectatic disorders market, we are aware that some providers who are not currently our customers are promoting corneal cross-linking for the treatment of keratoconus and we believe these providers are primarily using products from CXLUSA or PeschkeTrade GmBH, a Swiss corporation. In addition, iVeena Delivery Systems is currently in preclinical development for a twice-daily eye drop for the treatment of keratoconus, and for which iVeena has received orphan drug designation. Outside the United States, our primary competitors in the corneal ectatic disorder market offer for sale devices and drug product for corneal cross-linking procedures, including PeschkeTrade, EMAGine, IROS, LIGHTMED Corporation, NVILaser, SERVImed, SOOFT italia S.p.A. and Appasamy Associates. Several of these companies offer lower-cost solutions for corneal cross-linking.

Our initial clinical focus in the vision correction market is on the treatment of patients with presbyopia. Our primary competitors in this market are mainly competitors that are developing corneal inlay surgical solutions for presbyopia, such as Presbia, LLC, which is in the process of obtaining FDA approval for a proprietary optical lens implant for treating presbyopia, Allotex Inc., which is developing shaped human corneal grafts for inlay, Gebauer Medizintechnik GmbH, which offers an inlay procedure outside of the United States using human donor tissue, and Novartis International AG, which is developing a drug to permanently soften the lens for presbyopia. For other vision correction applications, we currently compete with available options for disease management, including eyeglasses, contact lenses, surgically implanted intracorneal ring segments and laser vision correction, such as LASIK, as well as corneal transplants. Other competitors developing non-surgical treatment options for presbyopia include Allergan plc, Presbyopia Therapies, LLC, Clerio Vision, Inc. and TECLens, LLC. We expect that any such treatment options that are successfully developed could eventually be available both within and outside the United States. Consolidations and mergers and acquisitions in the pharmaceutical, medical device and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Our commercial opportunity could be reduced or eliminated if our competitors develop or market products or other novel therapies that are more effective, safer or less costly than our current or future products, or obtain regulatory approval for their products more rapidly than we may obtain approval for our products. Our success will also be based in part on our ability to identify, develop and manage a portfolio of products that are safer and more effective than competing therapies for corneal ectasia and refractive conditions.

These competitors may also enjoy several competitive advantages over us, including:

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For these and other reasons, we may not be able to compete successfully against our current or potential future competitors. As a result, we may fail to meet our strategic objectives and forecasted budget and our business, financial conditions, results of operations and growth prospects could be materially and adversely affected.

The FDA granted us orphan drug designations for the use of riboflavin and ultraviolet A, or UVA, irradiation for the treatment of keratoconus and corneal ectasia following refractive surgery. After FDA approval, Photrexa and Photrexa Viscous were also granted seven years of orphan exclusivity from the date of approval based on this orphan drug designation, during which period the FDA generally may not approve any other application to market the same drug for the same indication. However, the FDA is not blocked from approving applications for the same drug for a different indication, or a different drug for the same indication. The FDA may also approve an application for the same drug for the same indication upon a showing of the new product’s clinical superiority over our Photrexa and Photrexa Viscous products.

We may encounter difficulties in managing our growth, which could disrupt our operations.

As of September 30, 2018, we had 122 employees. Over the next several years, we expect to increase significantly the number of our employees and the scope of our operations, particularly in the areas of drug development, regulatory affairs, sales, marketing and reimbursement and other functional areas, including finance, accounting, quality and legal. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational quality and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to manage the expansion of our operations or recruit and train additional qualified personnel in an effective manner. The physical expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

There may be significant disruptions in our information technology systems, and confidential information, including non-public personal information that we maintain, could be improperly disclosed.

The efficient operation of our business depends on our information technology systems. We are required by EU data privacy rules to ensure that we have established appropriate systems and procedures to ensure that personal data that we hold is appropriately protected. We rely on our information technology systems to effectively manage sales and marketing data, accounting and financial functions, quality functions, inventory management, product development tasks, research, development and engineering data, and technical support functions. Our information technology systems are vulnerable to damage or interruption from earthquakes, fires, floods and other natural disasters, terrorist attacks, cyberattacks by computer viruses or hackers, power losses, and computer system or data network failures.

The U.S. federal and various state and foreign governments have adopted or proposed requirements regarding the collection, distribution, use, security and storage of personally identifiable information and other

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data relating to individuals, and federal and state consumer protection laws are being applied to enforce regulations related to the collection, use, and dissemination of data. Some of these federal, state and foreign government requirements include obligations of companies to notify individuals of security breaches involving particular personally identifiable information, which could result from breaches experienced by us or by our vendors, contractors, or organizations with which we have formed strategic relationships. In particular, under EU data privacy rules, we are required to enter into appropriate data processing agreements with our third-party service providers to ensure that personal data that we hold is appropriately protected. The failure of our, or our service providers’, information technology systems to perform as we anticipate or our failure to effectively implement new information technology systems, could disrupt our operations and could have an adverse effect on our business, financial conditions, results of operations and growth prospects. Our failure or the failure of our service providers to comply with applicable cybersecurity or privacy law may subject us to significant fines, penalties or liabilities for any noncompliance to certain privacy and security laws.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

We face an inherent risk of product liability exposure related to the testing of our products in human clinical trials and the sale of our current and any future products that we may develop. If we cannot successfully defend ourselves against claims that our current or future products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

Physicians may also misuse our products or use improper techniques if they are not adequately trained, potentially leading to injury and an increased risk of product liability. If our products are misused or used with improper technique, we may become subject to costly litigation by our customers or their patients. Product liability claims could divert management’s attention from our core business, be expensive to defend and result in sizable damage awards against us that may not be covered by insurance. Any of these events could materially and adversely harm our business, financial conditions, results of operations and growth prospects and cause our stock price to decline.

We currently have $10.0 million in product liability insurance coverage for our clinical trials and marketed products, which may not be adequate to cover all liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

Software and hardware defects may be discovered in our current or future products, which could harm our reputation and reduce our revenue.

Software and hardware incorporated into our current or future products may contain errors or defects, especially when first introduced. For example, our KXL and Mosaic systems incorporate our proprietary computer software. While we have made efforts to test this software and hardware extensively, we cannot assure you that this software and hardware, or software and hardware developed in the future, will not experience errors or performance problems. Because our current and future products may be designed to be used to perform

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complex medical procedures, we expect that our customers will have an increased sensitivity to such defects. If we experience software or hardware errors or performance problems in our approved products, we may also experience:

We operate primarily at facilities in three locations, and any disruption at any of these facilities could adversely affect our business and operating results.

Our principal offices are located in Waltham, Massachusetts, and our manufacturing operations are located in Burlington, Massachusetts. We distribute and perform limited manufacturing outside of the United States at our site in Dublin, Ireland. Substantially all of our operations are conducted at these locations, including our manufacturing processes, research, development and engineering activities, customer and technical support and management and administrative functions. In addition, substantially all of our inventory of component supplies and finished goods is held at these locations. Vandalism, terrorism or a natural or other disaster, such as an earthquake, fire or flood, at these or any of our other facilities could damage or destroy our manufacturing equipment or our inventory of component supplies or finished goods, cause substantial delays in our operations, result in the loss of key information and cause us to incur additional expenses.

We take precautions to safeguard these facilities, as well as all of our other facilities, including acquiring insurance, adopting health and safety protocols, and utilizing off-site storage of computer data. However, such measures may not prove to be adequate or our insurance may not cover our losses in any particular case. In addition, regardless of the level of insurance coverage, damage to our facilities may have a material and adverse effect on our business, financial conditions, results of operations and growth prospects.

The size of the market for products developed using our Avedro Corneal Remodeling Platform has not been established with precision, and may be smaller than we estimate.

Our estimate of the potential annual total addressable market for products developed using our Avedro Corneal Remodeling Platform, assuming we obtain approvals for the additional products and indications that are currently under development, is based on a number of internal and third-party estimates, including, without limitation, keratoconus peer-reviewed disease prevalence and incidence publications, the number of LASIK procedures performed in the United States as compared to the total number of low myopes, the number of presbyopia-correcting surgeries performed globally, and our internal estimates based on our commercialization experience in regions like the United Kingdom. While we believe these factors have historically provided and may continue to provide us with effective tools in estimating the potential total market for corneal cross-linking procedures and our Avedro Corneal Remodeling Platform, these estimates may not be correct and the conditions supporting our estimates may change at any time, thereby reducing the predictive accuracy of these underlying

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factors. As a result, our estimates of the total addressable market for our products may prove to be incorrect. If the actual number of patients who would benefit from our products and the total addressable market for our products is smaller than we have estimated, it may impair our sales growth and may have a material and adverse effect on our business, financial conditions, results of operations and growth prospects.

Our international operations expose us to risks associated with doing business outside of the United States.

The sale and shipment of our products and services across international borders, as well as the purchase of components from international sources, subject us to extensive foreign governmental trade regulations. Compliance with such regulations is costly. Any failure to comply with applicable legal and regulatory obligations, including obligations related to EU data privacy, could impact us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments and restrictions on certain business activities. Failure to comply with applicable legal and regulatory obligations could result in the disruption of our shipping and sales activities. In addition, if our third-party distributors fail to comply with these laws and regulations in their dealings, we could face potential liability or penalties for violations.

Our international business operations may expose us and our representatives, agents, distributors, and strategic collaborators to risks inherent in operating in foreign jurisdictions, including:

We cannot ensure that one or more of these factors will not harm our business. Any material decrease in our international revenues or inability to expand our international operations would adversely our business, financial conditions, results of operations and growth prospects.

If we fail to comply with U.S. export control and economic sanctions, our business, financial conditions, results of operations and growth prospects could be materially and adversely affected.

We are subject to U.S. export control and economic sanctions laws relating to the sale of our products, the violation of which could result in substantial penalties being imposed against us. We do not conduct business in Cuba, North Korea, Syria or Crimea, which are subject to U.S. comprehensive sanctions, or Sudan, which is

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subject to heightened U.S. export controls. We rely on general licenses issued by the U.S. Treasury Department’s Office of Foreign Assets Control to sell our products to Tavana Abzar Parto in Iran and receive payment. The use of the general licenses requires us to observe strict conditions with respect to products sold, end-user limitations and payment requirements. Although we believe we have maintained compliance with general license requirements and U.S. trade economic sanctions and export control regulations generally, there can be no assurance that the license will not be revoked or be renewed in the future, or that a compliance exception will not occur. More broadly, these laws and requirements are subject to change and if we fail to comply with current or future applicable export control or economic sanctions laws and requirements, the U.S. government could impose penalties, our sales could fail to grow or could decline, and our ability to grow our business could be adversely affected.

We depend on the knowledge and skills of our senior management and other key employees and if we are unable to retain and motivate them or recruit additional qualified personnel, our business may suffer.

We are highly dependent on members of our management team, including Reza Zadno, our Chief Executive Officer, the loss of whose services may adversely impact the achievement of our objectives. Our success will depend on our ability to retain our management team and other key employees, and to attract and retain qualified personnel in the future. Competition for senior management and key employees in our industry is intense and we cannot guarantee that we will be able to retain our current personnel or attract new, qualified personnel. The loss of the services of certain members of our senior management or key employees could prevent or delay the implementation and completion of our strategic objectives, or divert management’s attention to seeking qualified replacements. We do not maintain key man life insurance on any of our senior management or key employees. Each of our executive officers may terminate employment without notice and without cause or good reason.

We may enter into strategic collaborations, in-licensing arrangements or alliances with third parties that may not result in the development of commercially viable products or the generation of significant future revenues.

In the ordinary course of our business, we may enter into strategic collaborations, in-licensing arrangements or alliances to develop products and to pursue new markets. Proposing, negotiating and implementing strategic collaborations, in-licensing arrangements or alliances may be a lengthy and complex process. Other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or arrangements. We may not identify, secure or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms, or at all. We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement. In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant revenues and could be terminated prior to developing any products.

Additionally, we may not be in a position to exercise sole decision-making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. We have limited control over the amount and timing of resources that our current collaborators or any future collaborators devote to our collaborators’ or our future products. Disputes between us and our collaborators may result in litigation or arbitration which would increase our expenses and divert the attention of our management. Further, these transactions and arrangements would be contractual in nature and it is possible they could be terminated or dissolved under the terms of the applicable agreements.

We may seek to grow our business through strategic acquisitions and the failure to manage acquisitions, or the failure to integrate them with our existing business, could prevent us from realizing their anticipated benefits or otherwise have a material and adverse effect on our business, financial conditions, results of operations and growth prospects.

We have acquired products and technologies and, from time to time, we may consider opportunities to acquire other products, product candidates or technologies that may enhance our product platform or technology,

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expand the breadth of our markets or customer base or advance our business strategies. For example, in August 2014, we acquired the assets of IROC InnoCross, the first company to commercialize corneal cross-linking. We may not realize the anticipated benefits, or any benefits, from future acquisitions. In addition, if we finance acquisitions by issuing equity or convertible or other debt securities, our existing stockholders may be diluted or we could face constraints related to the repayment of indebtedness, which could adversely affect the market value of our common stock. Any debt financing that we secure in the future could involve restrictive covenants, which may make it more difficult for us to pursue business opportunities or otherwise operate our business in the ordinary course. Further, if we fail to evaluate and execute acquisitions or investments properly, our business and prospects may be seriously harmed and the value of your investment may decline. For us to realize the benefits of past and future acquisitions, we must successfully integrate the acquired businesses, products, or technologies with ours, which may take time. Some of the challenges to successful integration of acquisitions may include:

We have no current commitments with respect to any acquisition. We do not know if we will be able to identify acquisitions we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired products or technologies. Our potential inability to integrate any acquired products or technologies effectively may have a material and adverse effect on our business, financial conditions, results of operations and growth prospects.

Risks Related to Our Capital Requirements and Finances

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

Our report from our independent registered public accounting firm for the year ended December 31, 2017 includes an explanatory paragraph stating that our accumulated deficit and negative cash flows from operating activities raise substantial doubt about our ability to continue as a going concern. If we are unable to obtain sufficient funding, our business, financial conditions, results of operations and growth prospects could be materially and adversely affected, and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or a part of their investment. After this offering, future reports from our independent registered public accounting firm may also contain statements expressing substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding on commercially reasonable terms or at all.

Our future capital needs are uncertain and we may need to raise additional funds in the future, and these funds may not be available on acceptable terms or at all.

At September 30, 2018, we had $16.9 million in cash and cash equivalents. We believe that our available cash and cash equivalents and anticipated net proceeds from this offering will be sufficient to satisfy

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our liquidity requirements for at least the next twelve months. However, the continued investment in and growth of our business, including the expansion of our sales and marketing infrastructure, research, development and engineering activities and manufacturing capabilities, will significantly increase our expenses, and we could spend our available financial resources faster than we currently expect. Our future capital requirements will depend on many factors, including:

As a result of these and other factors, we do not know whether and the extent to which we may be required to raise additional capital. We may in the future seek additional capital from public or private offerings of our equity or debt securities, borrowings under credit lines or other sources. If we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences, and privileges senior to those of our existing stockholders. In addition, if we raise additional funds through collaborations, licensing, joint ventures, strategic alliances, partnership arrangements or other similar arrangements, it may be necessary to relinquish valuable rights to our potential future products or proprietary technologies, or grant licenses on terms that are not favorable to us.

If we are unable to raise additional capital, we may not be able to expand our sales and marketing infrastructure, enhance our current products or develop new products, take advantage of future opportunities or respond to competitive pressures, changes in supplier relationships or unanticipated changes in customer demand. Any of these events could adversely affect our ability to achieve our strategic objectives, which could have a material and adverse effect on our business, financial conditions, results of operations and growth prospects.

Our operating results may fluctuate significantly from quarter to quarter.

Although we have a limited operating history, there has been and there may continue to be meaningful variability in our operating results among quarters, as well as within each quarter. Our operating results, and the variability of these operating results, may be affected by numerous factors, including:

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As a result of our limited operating history, and due to the complexities of the industry in which we operate, it will be difficult for us to forecast demand for our current or future products with any degree of certainty, which means it will be difficult for us to forecast our sales. In addition, we will be significantly increasing our operating expenses as we expand our business. Accordingly, we may experience substantial variability in our operating results from quarter to quarter, including unanticipated or greater than expected quarterly losses. If our quarterly or annual operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Further, any quarterly or annual fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

The terms of our credit agreement require us to meet certain operating covenants and place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.

We have a credit agreement with OrbiMed Royalty Opportunities II, LP, or OrbiMed, that is secured by a lien covering all of our assets, including our intellectual property. As of September 30, 2018, the outstanding principal balance of the loan was $20.0 million. The credit agreement contains customary affirmative and negative covenants and events of default. Affirmative covenants include, among others, covenants requiring us to deliver certain financial reports and provide access to our books and records. Negative covenants include, among others, restrictions on change in control transactions, transferring any part of our business or property outside of the ordinary course of business, changing our business, incurring additional indebtedness, engaging in mergers or

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acquisitions, paying dividends or making other distributions, making investments, entering into certain transactions with affiliates and creating other liens on our assets and other financial covenants, in each case subject to customary exceptions. If we default under the terms of the credit agreement, including failure to satisfy our operating covenants, OrbiMed may accelerate all of our repayment obligations and take control of our pledged assets, including our intellectual property, potentially requiring us to renegotiate our agreement on terms less favorable to us or to immediately cease operations. Further, if we are liquidated, the lender’s right to repayment would be senior to the rights of the holders of our common stock. OrbiMed could declare a default upon the occurrence of any event that they interpret as a material adverse effect as defined under the credit agreement. Any declaration by OrbiMed of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.

Prolonged negative economic conditions could adversely affect us, our customers and suppliers, which could harm our financial condition.

We are subject to the risks arising from adverse changes in general economic and market conditions. The global economy continues to experience market volatility and the uncertainty about future economic conditions could negatively impact our existing and potential customers and patients’ ability or willingness to pay out-of-pocket costs for the treatment and adversely impact our expenses and ability to obtain financing for our operations, and cause delays or other problems with key suppliers.

Healthcare spending in the United States has been, and is expected to continue to be, negatively affected by the continuing economic uncertainty. For example, patients who have lost their jobs and patients reducing their overall spending may eliminate healthcare-related purchases. A decline in economic conditions could result in a decline in the number of procedures performed with our products and could have an adverse effect on our business, financial position, and results of operations.

We may be prohibited from fully using our net operating loss carryforwards and research and development carryforwards, which could affect our financial performance.

As of December 31, 2017, we had U.S. federal and state net operating loss, or NOL, carryforwards of approximately $125.3 million and $75.7 million, respectively. Our U.S. federal NOL carryforwards begin to expire in 2037, and the state NOL carryforwards begin to expire in 2037. In addition, we have federal and state research and development, or R&D, tax credits of $15.9 million and $2.2 million as of December 31, 2017, respectively, available to offset future federal and state income taxes, which begin to expire in 2037 and 2032, respectively. Our ability to use these NOL and R&D credit carryforwards is subject to restrictions, including those contained in the Internal Revenue Code, which provide for limitations on our utilization of our NOL carryforwards and R&D credit carryforwards following a cumulative ownership change greater than 50% during the prescribed testing period. We believe that we have experienced such ownership changes and may experience another such ownership change in connection with this offering. As a result, our NOL carryforwards and R&D credit carryforwards that relate to periods prior to any such ownership changes are limited in utilization. The annual limitation may result in the expiration of these carryforwards prior to utilization. In addition, in order to realize the future tax benefits of our NOL carryforwards and R&D credit carryforwards, we must generate taxable income, of which there is no assurance. Accordingly, we have provided a full valuation allowance for deferred tax assets as of December 31, 2017.

The recently passed comprehensive tax reform law could adversely affect our business and financial condition.

On December 22, 2017, new legislation was enacted that significantly revised the Internal Revenue Code. The recently enacted federal income tax law, among other things, contained significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of

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21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of NOL carrybacks (in each case applicable to NOLs arising after 2017), one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain and our business, financial conditions, results of operations and growth prospects could be materially and adversely affected. In addition, it is uncertain if and to what extent various states will conform to the newly enacted federal tax law. The impact of this tax reform on holders of our common stock is also uncertain and could be adverse. We urge our stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock.

Risks Related to Intellectual Property

Our intellectual property rights may not provide adequate protection, which may permit third parties to compete against us more effectively.

Our success depends in large part on our ability to maintain and protect our proprietary rights to the technologies and inventions used in or embodied by our products, and our ability to defend our intellectual property rights against third-party challenges and successfully enforce our intellectual property rights to prevent third-party infringement. To protect our proprietary technology, we rely on patent protection and a combination of trade secret and trademark laws, as well as nondisclosure, confidentiality, and other contractual restrictions in our consulting and employment agreements. These legal means afford only limited protection, however, and may not adequately protect our rights or permit us to gain or keep any competitive advantage.

In addition, the degree of future protection afforded by our intellectual property rights is uncertain because even granted intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to entry against our competitors or potential competitors or permit us to maintain our competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from our intellectual property. The following examples are illustrative:

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Should any of these events occur, they could have a material and adverse effect on our business, financial conditions, results of operations and growth prospects.

If we are unable to secure sufficient patent protection for our proprietary rights in our products and processes, and to adequately maintain and protect those rights, competitors will be able to compete against us more effectively, and our business will suffer.

The process of applying for patent protection itself is time consuming and expensive, and we cannot assure you that we will be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. We may also choose not to seek patent protection for certain innovations or products and may choose not to pursue patent protection in certain jurisdictions, and under the laws of certain jurisdictions, patents may be unavailable or limited in scope and, in any event, any patent protection we obtain may be limited. As a result, some of our products are not, and in the future may not be, protected by patents. We generally apply for patents in those countries where we intend to make, have made, use, offer for sale, or sell products and where we assess the risk of infringement to justify the cost of seeking patent protection. However, we do not seek protection in all countries where we sell products and we may not accurately predict all the countries where patent protection would ultimately be desirable. In addition, our patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for example, with respect to proper priority claims, inventorship, claim scope or patent term adjustments. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories in which we have patent protection that may not be sufficient to terminate infringing activities.

The patent positions of medical device and pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions for which important legal principles remain unresolved. The standards that the United States Patent and Trademark Office, or USPTO, and its foreign counterparts use to grant patents are not always applied predictably or uniformly. Changes in either the patent laws, implementing regulations or the interpretation of patent laws may diminish the value of our rights. The legal systems of certain countries do not protect intellectual property rights to the same extent as the laws of the United States, and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions.

Moreover, we cannot assure you that all of our pending patent applications will issue as patents or that, if issued, they will issue in a form that will be advantageous to us. Even if issued, existing or future patents may

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be challenged, including with respect to ownership, narrowed, invalidated, held unenforceable or circumvented, any of which could limit our ability to prevent competitors and other third parties from developing and marketing similar products or limit the length of terms of patent protection we may have for our products and technologies. The strength of the claims in any issued patent depends greatly on the quality of the examination conducted by the respective patent office. During a poor examination, the examiner may fail to identify and consider the most relevant prior art and may allow claims that are overly broad in scope and easily invalidated. In the United States and other jurisdictions, patent applicants and their attorneys have a duty to disclose any known prior art and/or facts that may be material to the examination of their patent applications. A failure to disclose known material information during examination of a patent application may invalidate the issued patent as well as other patents in the patent family. We can give no assurance that all of the potentially relevant art relating to our patents and patent applications has been found; overlooked prior art could be used by a third party to challenge the validity, enforceability and scope of our patents or prevent a patent from issuing from a pending patent application. As a result, we may not be able to obtain or maintain protection for certain inventions. Therefore, the validity, enforceability and scope of our patents in the United States, Europe and in other countries cannot be predicted with certainty and, as a result, any patents that we own or license may not provide sufficient protection against our competitors.

We own and license from others numerous issued patents and pending patent applications that relate to corneal cross-linking treatments. However, the rights granted to us under these patents, including prospective rights sought in the pending patent applications, may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Competitors may be able to design around the patents or develop products that provide outcomes comparable to ours without infringing on our intellectual property rights. In addition, the issuance of a patent does not give us the right to practice the patented invention. Third parties may have blocking patents that could prevent us from marketing our products or practicing our own patented technology.

We cannot guarantee that any of our or our licensors’ patent searches or analyses, including the identification of relevant patents or pending applications, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of our products in any jurisdiction. For example, U.S. patent applications filed before November 29, 2000 and certain U.S. patent applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States, Europe and elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date, or in some cases are not published at all. In addition, publications of discoveries in scientific literature lag behind actual discoveries. Therefore, we cannot be certain that we were the first to conceive or reduce to practice the inventions claimed in our issued patents or pending patent applications, as patent applications covering our products could have been filed by others without our knowledge. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our products or the use of our products. The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our products. We may incorrectly determine that our products are not covered by a third-party patent or may incorrectly predict whether a third party’s pending patent application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our products and services. Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our products and services.

If we fail to identify and correctly interpret relevant patents, we may be subject to infringement claims. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently

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prohibited from commercializing any of our products that are held to be infringing. We might, if possible, also be forced to redesign products or services so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

Once granted, patents may remain open to invalidity challenges including opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the allowed or granted claims thus attacked, or may lose the allowed or granted claims altogether.

In addition, we may in the future be subject to claims by our former employees or consultants asserting an ownership right in our patents or patent applications as a result of the work they performed on our behalf. If any of our patents are challenged, invalidated or legally circumvented by third parties, and if we do not own other enforceable patents protecting our products, competitors could market products and use processes that are substantially similar to, or superior to, ours, and our business will suffer.

The degree of patent protection we require may be unavailable or severely limited in some cases and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years from its filing date. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Without patent protection for our products and devices, we may be open to competition from generic versions of products and devices.

Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

Our success is heavily dependent on intellectual property, particularly patents. The process of obtaining and enforcing patents involves both technological and legal complexity, and therefore is costly, time-consuming and inherently uncertain. In addition, on September 16, 2011, the Leahy-Smith America Invents Act, or the AIA, was signed into law by the United States. The AIA includes a number of significant changes to U.S. patent law, including provisions that affect the way patent applications will be prosecuted, redefine prior art and may also affect patent litigation.

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An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned to a “first-to-file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. A third party that files a patent application in the USPTO after that date, but before us, could therefore be awarded a patent covering an invention of ours even if we had conceived the invention before it was conceived by the third party. This will require us to be cognizant, going forward, of the time from invention to filing of a patent application.

Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and that provide opportunities for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiary standard necessary to invalidate a patent claim in USPTO proceedings compared to the evidentiary standard in United States federal court, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action.

Depending on decisions by the U.S. Congress, the federal courts, the USPTO, or similar authorities in foreign jurisdictions, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. We cannot predict future changes in the interpretation of patent laws or changes to patent laws that might be enacted into law. Those changes may materially affect our patents or patent applications and our ability to obtain additional patent protection in the future.

The United States federal government retains certain rights in inventions produced with its financial assistance under the Bayh-Dole Act. The federal government retains a “nonexclusive, nontransferable, irrevocable, paid-up license” for its own benefit. The Bayh-Dole Act also provides federal agencies with “march-in rights.” March-in rights allow the government, in specified circumstances, to require the contractor or successors in title to the patent to grant a “nonexclusive, partially exclusive, or exclusive license” to a “responsible applicant or applicants.” If the patent owner refuses to do so, the government may grant the license itself.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In addition, periodic maintenance fees on issued patents and some pending patent applications must be paid to the USPTO and foreign patent agencies. While an unintentional lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit formal documents. If we fail to maintain the patents and patent applications covering our products or procedures, we may not be able to stop a competitor from marketing products that are the same as or similar to our products, which would have an adverse effect on our business.

We may not be able to adequately protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on our products in all countries throughout the world would be prohibitively expensive. The requirements for patentability may differ in certain countries, particularly

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developing countries, and the breadth of patent claims allowed can be inconsistent. In addition, the laws of some foreign countries may not protect our intellectual property rights to the same extent as laws in the United States. For example, novel formulations of existing drugs and manufacturing processes may not be patentable in certain jurisdictions, and the requirements for patentability may differ in certain countries, particularly developing countries. Also, some foreign countries, including European Union countries, India, Japan and China, have compulsory licensing laws under which a patent owner may be compelled under certain circumstances to grant licenses to third parties. Consequently, we may have limited remedies if patents are infringed or if we are compelled to grant a license to a third party, and we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions into or within the United States or other jurisdictions. This could limit our potential revenue opportunities. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but where enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not have any issued patents or where our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from competing with us in these jurisdictions.

We are pursuing a global patent strategy and are seeking protection in the United States and Europe, and in some cases Japan, China and South Korea. However, we do not have patent rights in certain foreign countries in which a market may exist in the future. Moreover, in foreign jurisdictions where we do have patent rights, proceedings to enforce such rights could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Further, in some countries, we may be subject to compulsory or statutory licensing laws that allow others to copy our products in exchange for less than reasonable royalties. Thus, we may not be able to stop a competitor from marketing and selling in foreign countries products that are the same as or similar to our products.

We may in the future become involved in lawsuits to protect, defend or enforce our intellectual property, which could be expensive, time consuming, and unsuccessful and have an adverse effect on the success of our business.

Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file one or more lawsuits and assert infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, or may refuse to enjoin the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. The standards that courts use to interpret patents are not always applied predictably or uniformly and can change, particularly as new technologies develop. As a result, we cannot predict with certainty how much protection, if any, will be given to our patents if we attempt to enforce them and they are challenged in court. Further, even if we prevail against an infringer in U.S. district court, there is always the risk that the infringer will file an appeal and the district court judgment will be overturned at the appeals court and/or that an adverse decision will be issued by the appeals court relating to the validity or enforceability of our patents. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted in a manner insufficient to achieve our business objectives.

We do not know whether our competitors or potential competitors have applied for, will apply for, or will obtain patents that will prevent, limit, or interfere with our ability to make, use, sell, import, or export our products. Competitors may misappropriate our intellectual property, infringe our patents or otherwise violate our intellectual property rights. To stop any such infringement or unauthorized use, litigation may be necessary. Our intellectual property has not been tested in litigation. A court may declare our patents invalid or unenforceable, may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover

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the technology in question, or may interpret the claims of our patents narrowly, thereby substantially narrowing the scope of patent protection they afford.

Third parties may challenge any existing or future patents we own or license through adversarial proceedings in the issuing offices or in court proceedings, including as a response to any assertion of our patents against them. In addition, third parties may allege an ownership right in our patents, as a result of their past employment or consultancy with us. We may be subject to a third-party pre-issuance submission of prior art to the USPTO, or reexamination by the USPTO if a third party asserts a substantial question of patentability against any claim of a U.S. patent we own or license. The adoption of the AIA established additional opportunities for third parties to invalidate U.S. patent claims, including inter partes review and post-grant review proceedings. Outside of the United States, patents we own or license may become subject to patent opposition or similar proceedings, which may result in loss of scope of some claims or the entire patent. In addition, such proceedings are very complex and expensive, and may divert our management’s attention from our core business. Many of our current and potential competitors have the ability to dedicate substantially greater resources to defend their intellectual property rights than we can. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Competing products may also be sold in other countries in which our patent coverage might not exist or be sufficiently strong. If any of our patents are challenged, invalidated, circumvented by third parties or otherwise limited or expire prior to the commercialization of our products, and if we do not own or have exclusive rights to other enforceable patents protecting our products or other technologies, competitors and other third parties could market products and use processes that are substantially similar to, or superior to, ours and our business would suffer.

Litigation related to infringement and other intellectual property claims, with or without merit, is unpredictable, can be expensive and time-consuming, and can divert management’s attention from our core business. If we lose this kind of litigation, a court could require us to pay substantial damages, treble damages, and attorneys’ fees, and could prohibit us from using technologies essential to our products, any of which would have an adverse effect on our business, results of operations, and financial condition. If relevant patents are upheld as valid and enforceable and we are found to infringe, we could be prevented from selling our products unless we can obtain licenses to use technology or ideas covered by such patents. We do not know whether any necessary licenses would be available to us on satisfactory terms, if at all. If we cannot obtain these licenses, we could be forced to design around those patents at additional cost or abandon the product altogether. Further, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of shares of our common stock. As a result, our ability to grow our business and compete in the market may be harmed.

Our commercial success depends significantly on our ability to operate without infringing upon the intellectual property rights of third parties.

The medical device and pharmaceutical industries are subject to rapid technological change and substantial litigation regarding patent and other intellectual property rights. Our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in patent portfolios and competing technologies, may have applied for or obtained or may in the future apply for or obtain, patents that will prevent, limit or otherwise interfere with our ability to make, use and sell our products and services. Numerous third-party patents exist in the fields relating to our products and services, and it is difficult for industry participants, including us, to identify all third-party patent rights relevant to their products, services and technologies. Moreover, because some patent applications are maintained as confidential for a certain period of time, we cannot be certain that third parties have not filed patent applications that cover our products, services and technologies.

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Patents could be issued to third parties that we may ultimately be found to infringe. As a result of any patent infringement claims, or in order to avoid any potential infringement claims, we may choose to seek, or be required to seek, a license from a third party, which may require payment of substantial royalties or fees, or require us to grant a cross-license under our intellectual property rights, as part of our patent litigation settlement. These licenses may not be available on reasonable terms or at all. Even if a license can be obtained on reasonable terms, the rights may be nonexclusive, which would give our competitors access to the same intellectual property rights. If we are unable to enter into a license on acceptable terms, we could be prevented from commercializing one or more products, or forced to modify such products, or to cease some aspect of our business operations, which could harm our business significantly. We might also be forced to redesign or modify our technology or products so that we no longer infringe the third-party intellectual property rights, which may result in significant cost or delay to us, or which redesign or modification could be impossible or technically infeasible. Even if we were ultimately to prevail, any of these events could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

From time to time, we may be party to, or threatened with, litigation or other proceedings with third parties, including non-practicing entities, who allege that our products, components of our products, services, and/or proprietary technologies infringe, misappropriate or otherwise violate their intellectual property rights. The types of situations in which we may become a party to such litigation or proceedings include:

These lawsuits and proceedings, regardless of merit, are time-consuming and expensive to initiate, maintain, defend or settle, and could divert the time and attention of managerial and technical personnel, which

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could materially adversely affect our business. Any such claim could also force us to do one or more of the following:

Some of our competitors may be able to sustain the costs of complex intellectual property litigation more effectively than we can because they have substantially greater resources. In addition, intellectual property litigation, regardless of its outcome, may cause negative publicity, adversely impact prospective customers, cause product shipment delays, or prohibit us from manufacturing, marketing or otherwise commercializing our products, services and technology. Any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise additional funds or otherwise have a material adverse effect on our business, financial conditions, results of operations and growth prospects.

In addition, we may indemnify our customers and distributors against claims relating to the infringement of intellectual property rights of third parties related to our products. Third parties may assert infringement claims against our customers or distributors. These claims may require us to initiate or defend protracted and costly litigation on behalf of our customers or distributors, regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf of our customers, suppliers or distributors, or may be required to obtain licenses for the products or services they use. If we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products or services.

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Further, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments, which could have a material adverse effect on the price of our common stock. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock. The occurrence of any of these events may have a material adverse effect on our business, results of operation, financial condition or cash flows.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed patents, trade secrets, or other intellectual property as an inventor or co-inventor. For example, we or our licensors may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our products. Litigation may be necessary to defend against these and other claims challenging inventorship or our or our licensors’ ownership of our owned or in-licensed patents, trade secrets or other intellectual property. If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our products. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial conditions, results of operations and growth prospects.

In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property. We are still in the process of obtaining certain assignments for some of our owned, acquired and licensed patents and patent applications.

If we or our licensors fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we and our licensors are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors.

We do and may employ individuals who were previously employed at universities or other pharmaceutical or medical device companies, including our licensors, competitors or potential competitors. We could in the future be subject to claims that we or our employees have inadvertently or otherwise used or disclosed alleged trade secrets or other proprietary information of former employers or competitors. Although we try to ensure that our employees and consultants do not use the intellectual property, proprietary information, know-how or trade secrets of others in their work for us, we may in the future be subject to claims that we caused an employee to breach the terms of his or her non-competition or non-solicitation agreement, or that we or these individuals have, inadvertently or otherwise, used or disclosed the alleged trade secrets or other proprietary information of a former employer or competitor. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and could be a distraction to management. If our defense to those claims fails, in addition to paying monetary damages, a court could prohibit us from using technologies or features that are essential to our products, if such technologies

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or features are found to incorporate or be derived from the trade secrets or other proprietary information of the former employers. An inability to incorporate technologies or features that are important or essential to our products would have an adverse effect on our business, and may prevent us from selling our products. In addition, we may lose valuable intellectual property rights or personnel. Moreover, any such litigation or the threat thereof may adversely affect our ability to hire employees or contract with independent sales representatives. A loss of key personnel or their work product could hamper or prevent our ability to commercialize our products, which could have an adverse effect on our business, financial conditions, results of operations and growth prospects.

Our intellectual property agreements with third parties may be subject to disagreements over contract interpretation, which could narrow the scope of our rights to the relevant intellectual property or technology.

Certain provisions in our intellectual property agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could affect the scope of our rights to the relevant intellectual property or technology, or affect financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial conditions, results of operations and growth prospects.

We may not be successful in obtaining necessary intellectual property rights to future products through acquisitions and in-licenses.

Although we intend to develop products and technology through our own internal research, we may also seek to acquire or in-license technologies to grow our product offerings and technology portfolio. However, we may be unable to acquire or in-license intellectual property rights relating to, or necessary for, any such products or technology from third parties on commercially reasonable terms or at all. In that event, we may be unable to develop or commercialize such products or technology. We may also be unable to identify products or technology that we believe are an appropriate strategic fit for our company and protect intellectual property relating to, or necessary for, such products and technology.

The in-licensing and acquisition of third-party intellectual property rights for products is a competitive area, and a number of more established companies are also pursuing strategies to in-license or acquire third-party intellectual property rights for products that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. Further, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. If we are unable to successfully obtain rights to additional technologies or products, our business, financial condition, results of operations and prospects for growth could suffer.

In addition, we expect that competition for the in-licensing or acquisition of third-party intellectual property rights for products and technologies that are attractive to us may increase in the future, which may mean fewer suitable opportunities for us as well as higher acquisition or licensing costs. We may be unable to in-license or acquire the third-party intellectual property rights for products or technology on terms that would allow us to make an appropriate return on our investment.

If our trademarks are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

We rely on our trademarks as one means to distinguish our products from the products of our competitors, and have registered or applied to register many of these trademarks. The USPTO or foreign trademark offices may deny our trademark applications or determine our trademarks to be infringing on other marks. In addition, even if published or registered, these trademarks may be ineffective in protecting our brand and goodwill and may be successfully opposed or challenged. Third parties may oppose our trademark applications, or otherwise challenge, infringe, circumvent, or declare generic our use of our trademarks. We may

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not be able to protect our rights to these trademarks and trade names, or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. If we are unable to establish name recognition based on our trademarks, we may not be able to compete effectively.

Actions by a trademark office or a third party, e.g., during oppositions, may require the scope of goods and services covered by one of our trademarks to be narrowed. In addition, third parties may use marks that are identical or confusingly similar to our own, which could result in confusion among our customers, thereby weakening the strength of our brand or allowing such third parties to capitalize on our goodwill. Third parties may also have similar or identical trademarks in foreign jurisdictions, and have filed or may in the future file for registration of such trademarks in the jurisdictions in which we operate. If such a third party succeeds in registering or developing common law rights in such trademarks, and if we are not successful in challenging such third-party rights, we may not be able to use these trademarks to market our products in those countries. In such an event, or if our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Our competitors may infringe our trademarks and we may not have adequate resources to enforce our trademark rights in the face of any such infringement. In any case, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position may be harmed.

In addition to patent and trademark protection, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect our trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our consultants and vendors, and our former or current employees. We also enter into invention or assignment agreements with our employees. Despite these efforts, any of these parties may breach the agreements and disclose our trade secrets and other unpatented or unregistered proprietary information. Monitoring unauthorized uses and disclosures of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be effective. In addition, we may not be able to obtain adequate remedies for any such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts within and outside the United States may be less willing or unwilling to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how. Competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If our intellectual property is not adequately protected so as to protect our market against competitors’ products and methods, our competitive position could be adversely affected, as could our business.

Risks Related to Government Regulation

Competitors may market unapproved versions of our products in the United States, and regulatory authorities may not act immediately to block the sale of such unapproved products, which may harm our sales and impact public perception of our products.

Although the KXL system in combination with its associated Photrexa formulations is the only approved corneal cross-linking treatment in the United States for the treatment of progressive keratoconus and corneal ectasia following refractive surgery, competitors may unlawfully market unapproved drug-device

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combinations for performing corneal cross-linking. For example, in the U.S. corneal ectatic disorders market, we are aware that some providers who are not currently our customers are promoting corneal cross-linking for the treatment of keratoconus and we believe these providers are primarily using products from CXLUSA or PeschkeTrade GmBH.

The Federal Food, Drug and Cosmetic Act generally requires FDA approval of new drugs before they may be introduced into interstate commerce, but provides an exemption for the compounding of certain drugs that are often required to meet patient needs that are otherwise unmet by FDA approved drug products. However, in general terms, the Federal Food, Drug and Cosmetic Act does not allow compounding of drugs that are essentially a copy of a commercially available drug product, such as Photrexa and Photrexa Viscous. While we believe the compounding and marketing of compounded versions of Photrexa or Photrexa Viscous for use in corneal cross-linking is illegal, we are aware that some pharmacies and physicians in the United States have been, and may still be, compounding riboflavin drugs for such use. It is uncertain if the FDA or other government agencies will be able to effectively prevent such compounding and marketing activities, and such continued activities may negatively impact the sales of Photrexa and Photrexa Viscous.

Clinical development, including the conduct of clinical trials necessary to support a new drug application, or NDA, or an application for an EC Certificate of Conformity, is a lengthy and expensive process with an uncertain outcome, and results of earlier preclinical studies and clinical trials may not be predictive of future trial results. Delays or failure can occur at any stage of clinical development and may adversely affect our business, operating results, and prospects.

Initiating and completing clinical trials necessary to support clearance or approval of our current products, as well as other possible future products, will be time consuming and expensive and the outcome uncertain.

Clinical testing is expensive and can take many years to complete and its outcome is inherently uncertain. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. Failure can occur at any time and for any number of reasons during the clinical trial process. The results of preclinical studies and early clinical trials and evaluations of our products may not be predictive of the results of later stage clinical trials. Similarly, the final results from a clinical trial may not be as favorable as interim results reported earlier in the same clinical trial. Products in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. A number of companies in the pharmaceutical and medical device industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials.

Our products are in various stages of development. Clinical trial failures may occur at any stage and may result from a multitude of factors both within and outside our control, including flaws in formulation or manufacturing, medical device design, adverse safety or efficacy profile and flaws in trial design, among others. If the trials result in negative or inconclusive results, we or our collaborators may decide, or regulators may require us, to discontinue trials of the products or conduct additional clinical trials or preclinical studies. In addition, data obtained from trials and studies are susceptible to varying interpretations, we cannot guarantee that the FDA or foreign regulatory authorities will interpret our data the same way that we do, which may delay, limit or prevent regulatory approval or clearance. FDA may also disagree with the design of our clinical trials. To the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our products. Other potential reasons for clinical trial failures include, but are not limited to, inability to enroll sufficient patients, inability to engage sufficient clinical sites, inability to obtain or maintain institutional review board, or IRB, approval of the trial, or cessation of a trial for futility or safety concerns by us, FDA, or an independent committee such as an independent data monitoring committee. As a result of any number of potential reasons, our current and future clinical trials may not be successful.

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Conducting successful clinical studies may require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Patient enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, including the size of the patient population, the nature of the trial protocol, the attractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of other treatments, the availability of appropriate clinical trial investigators, support staff, and proximity of patients to clinical sites and ability to comply with the eligibility and exclusion criteria for participation in the clinical trial and patient compliance. For example, although we began the enrollment process a Phase 1/2 clinical trial for Lasik Xtra in the United States in 2013, we decided to terminate the trial because our trial sites were unable to enroll a sufficient number of patients. Patients may also not participate in our clinical trials if they choose to participate in contemporaneous clinical trials of competitive products. In addition, patients participating in clinical trials may die before completion of the trial or suffer adverse medical events unrelated to investigational products.

Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required and we may not adequately develop such protocols to support clearance and approval or the results from such studies may not sufficiently demonstrate safety and efficacy. Further, the FDA may, among other things, require us to submit data on a greater number of patients than we originally anticipated and/or for a longer follow-up period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure of patients to continue to participate in a clinical trial may cause an increase in costs and delays in the approval and attempted commercialization of our products or result in the failure of the clinical trial. In addition, despite considerable time and expense invested in our clinical trials, the FDA or a notified body may not consider our data adequate to demonstrate safety and efficacy. Such increased costs and delays or failures could adversely affect our business, operating results and prospects. In addition, many of the factors that cause or lead to a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our products.

A special protocol assessment, or SPA, agreement from the FDA does not guarantee approval of any of our products or any other particular outcome from regulatory review.

We have obtained agreement from the FDA on the design and size of our Phase 3 trial of our latest-generation KXL system in combination with our investigational Boost Goggles and new riboflavin formulations for use in Epi-On procedures in the form of an SPA agreement. The FDA’s SPA process is designed to facilitate the FDA’s review and approval of drugs by allowing the FDA to evaluate the proposed design and size of certain clinical or animal trials, including clinical trials that are intended to form the primary basis for determining a drug product’s efficacy. Upon specific request by a clinical trial sponsor, the FDA will evaluate the protocol and respond to a sponsor’s questions regarding protocol design and scientific and regulatory requirements. The FDA aims to complete SPA reviews within 45 days of receipt of the request. The FDA ultimately assesses whether specific elements of the protocol design of the trial, such as entry criteria, dose selection, endpoints and/or planned analyses, are acceptable to support regulatory approval of the product with respect to the effectiveness of the indication studied. All agreements and disagreements between the FDA and the sponsor regarding an SPA must be clearly documented in an SPA letter or the minutes of a meeting between the sponsor and the FDA.

Even if the FDA agrees to the SPA, an SPA agreement does not guarantee approval of a product. Even if the FDA agrees to the design, execution, and analysis proposed in protocols reviewed under the SPA process, the FDA may revoke or alter its agreement in certain circumstances. In particular, an SPA agreement is not binding on the FDA if public health concerns emerge that were unrecognized at the time of the SPA agreement, other new scientific concerns regarding product safety or efficacy arise, the sponsor company fails to comply with the agreed upon trial protocols, or the relevant data, assumptions or information provided by the sponsor in a request for the SPA change or are found to be false or omit relevant facts. While we have obtained an SPA agreement for our Phase 3 trial, we have subsequently made minor amendments to the protocol and have not obtained an SPA amendment in connection with the amended protocol. Nevertheless, based on our informal communications with the FDA, we believe our SPA agreement remains intact.

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In addition, even after an SPA agreement is finalized, the SPA agreement may be modified, and such modification will be deemed binding on the FDA review division, except under the circumstances described above, if the FDA and the sponsor agree in writing to modify the protocol. Generally, such modification is intended to improve the study. The FDA retains significant latitude and discretion in interpreting the terms of the SPA agreement and the data and results from any study that is the subject of the SPA agreement.

Moreover, if the FDA revokes or alters its agreement under the SPA, or interprets the data collected from the clinical trial differently than we do, the FDA may not deem the data sufficient to support an application for regulatory approval.

Our products may cause adverse effects or have other properties that could delay or prevent their regulatory approval or clearance or limit the scope of any approved label or market acceptance, or result in significant negative consequences following marketing approval or clearance, if any.

Treatment with our products may produce unacceptable side effects or adverse reactions or events. Further, clinical trials and evaluations of our products may not uncover all possible adverse effects that patients may experience, and any side effects could be attributed to our unique treatment formulations or methods. Such adverse events or side effects could cause us, our IRBs, Ethics Committees, clinical trial sites, the FDA, the competent authorities of EU member states or other regulatory authorities or notified bodies to interrupt, delay or halt clinical trials and could result in a more restrictive label, indications for use, or intended purposes or the delay, denial or withdrawal of regulatory approval or clearance, suspension, variation, or withdrawal of EC Certificates of Conformity or delay in obtaining new EC Certificates of Conformity, any of which may harm our business, financial condition and prospects significantly.

Further, if any of our products cause or are believed to cause serious or unexpected side effects after receiving marketing approval or clearance, a number of potentially significant negative consequences could result, including:

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In light of widely publicized events concerning the safety risk of certain drug products, regulatory authorities, members of Congress, the Governmental Accounting Office, medical professionals and the general public have raised concerns about potential drug safety issues. These events have resulted in the recall and withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and establishment of risk management programs that may, for instance, restrict distribution of drug products or require safety surveillance and/or patient education. The increased attention to drug safety issues may result in a more cautious approach by the FDA to clinical trials and the drug approval process. Data from clinical trials may receive greater scrutiny with respect to safety, which may make the FDA or other regulatory authorities more likely to terminate or suspend clinical trials before completion, or require longer or additional clinical trials that may result in substantial additional expense and a delay or failure in obtaining approval or approval for a more limited indication than originally sought.

We do not know whether any trials we are currently conducting or future clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval, clearance or CE marking to market our products where required. If any product for which we are conducting clinical trials is found to be unsafe or lack efficacy, we will not be able to obtain regulatory approval or clearance, if necessary, for it. In addition, if any product for which we are conducting clinical trials is found to be unsafe, we could be required to cease marketing such product in markets where such product is already commercially available. If we are inhibited in our ability to continue marketing our commercially available products or are unable to bring any of our future products to market, our business would be harmed and our ability to create long-term stockholder value will be limited.

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product and could substantially increase the costs of commercializing our products.

We may incur significant liability if it is determined that we are promoting off-label use of our products in violation of federal and state regulations in the United States or elsewhere.

The FDA and other regulatory authorities strictly regulate the promotional claims that may be made about drugs, medical devices and combination products. In particular, the FDA requires that drugs, medical devices, and combination products be labeled, advertised and promoted only in accordance with their approved or cleared indications for use. Equivalent limitations are imposed by national and international rules outside of the United States. In April 2016, we received FDA approval of our KXL system and our Photrexa formulations for the treatment of progressive keratoconus and in July 2016, we received FDA approval of our KXL system and our Photrexa formulations for the treatment of corneal ectasia following refractive surgery. Outside the United States, our KXL system and Mosaic system are approved and used not only to treat keratoconus and post-refractive surgery ectasia, but are also used by clinicians to improve outcomes of laser vision correction, or LVC, procedures, such as LASIK and photorefractive keratectomy, by performing corneal cross-linking in association with LVC surgery. We market the KXL system for this corneal cross-linking procedure outside of the United States as Lasik Xtra. We are not currently seeking FDA approval of our KXL system and its associated Photrexa formulations for corneal cross-linking during LVC surgery.

Regulatory authorities in the United States generally do not regulate the behavior of physicians in their choice of treatments. While physicians may choose to prescribe drugs, medical devices, and combination products for uses that are not described in the product’s labeling and for uses that differ from those tested in clinical studies and approved by regulatory authorities, our promotional materials, promotional activities, and

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training methods must comply with applicable FDA regulations and other applicable federal, state and foreign laws and regulations, including the prohibition on the promotion of off-label uses of our products. Our policy is to avoid off-label promotion of our products, and we train our marketing and sales force against promoting our products for uses outside of the approved indications for use. We have also implemented compliance and monitoring policies and procedures, including a process for internal review of promotional materials, to deter the promotion of the KXL system and its associated Photrexa formulations for off-label uses. We cannot guarantee that these policies and procedures will always prevent or timely detect off-label promotion by sales representatives or other personnel in their communications with physicians, patients and others, particularly if these activities are concealed from us.

If the FDA or equivalent foreign authorities determines that our labeling, promotional materials or other communications (including communications by our employees or other agents) constitute promotion of an off- label use, they could request or require that we modify our promotional materials or subject us to regulatory or enforcement actions, including the issuance of a warning letter or untitled letter, suspension or withdrawal of an approved product from the market, or requiring a recall or institution of fines, which could result in the disgorgement of money, operating restrictions, injunctions, civil fines and criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an off-label use, which could result in significant fines or penalties under other statutes, such as laws prohibiting false or fraudulent claims for payment of government funds, such as the U.S. federal civil False Claims Act. In that event, our reputation could be damaged and adoption of our products could be impaired.

Notwithstanding the regulatory restrictions on off-label promotion, the FDA and other regulatory authorities allow pharmaceutical and medical device companies to engage in truthful, non-misleading and non-promotional scientific exchange concerning their products. We engage in medical education activities and communicate with investigators and potential investigators regarding our clinical trials. If the FDA or other regulatory or enforcement authorities determine that our communications regarding our marketed product are not in compliance with the relevant regulatory requirements and that we have improperly promoted off-label uses, or that our communications regarding our investigational products are not in compliance with the relevant regulatory requirements and that we have improperly engaged in pre-approval promotion, we may be subject to significant liability, including civil, criminal and administrative penalties.

Delays in clinical trials are common and have many causes, and any delay could result in increased costs to us and could jeopardize or delay our ability to obtain regulatory approval or clearance and commence product sales.

We may experience delays in clinical trials of our products. Our planned clinical trials may not begin on time, have an effective design or be completed on schedule, if at all. Our clinical trials may be delayed for a variety of reasons, including, but not limited to the following:

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Further, changes in regulatory requirements and guidance may occur and we may need to amend clinical study protocols to reflect these changes. Amendments may require us to resubmit our clinical study protocols to IRBs or Ethics Committees for reexamination, which may impact the costs, timing or successful completion of a clinical study.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or other regulatory authority. The FDA or other regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA or other regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or other regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our products.

If initiation or completion of our planned clinical trials is delayed for any of the above reasons or other reasons, our development costs may increase, regulatory approval or CE marking process for future products could be delayed and our ability to commercialize our products could be materially harmed, which could have a material adverse effect on our business.

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We rely on third parties to conduct and support our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials.

We rely on third parties, such as CROs, consultants, medical monitors, medical institutions and clinical investigators, to perform and support our clinical trials. Our reliance on these third parties for clinical activities reduces our control over these activities but does not relieve us of our responsibilities, including responsibilities set forth in FDA regulations and guidance. We remain responsible for ensuring that each of our clinical trials is conducted in accordance with such regulations and guidance, as well as with the general investigational plan and protocols for the study and investigator initiated trials. Moreover, the FDA and equivalent foreign authorities require us to comply with standards, commonly referred to as good clinical practices, or GCP, for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, safety, integrity, and confidentiality of patients in clinical trials are protected. Further, these third parties may also have relationships with other entities, including our competitors for whom they also conduct clinical trials. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if these third parties need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended, or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our products on a timely basis, if at all, and our business, operating results, and prospects may be adversely affected. Further, our third-party clinical trial investigators and sites may be delayed in conducting our clinical trials for reasons outside of their control. We also rely on third parties to store and distribute supplies, including our products, for our clinical trials, which may require storage and shipment under specific temperature and other environmental conditions. Any performance failure on the part of our existing or future third party contractors could delay clinical development or regulatory approval of our products or commercialization of our products, producing additional losses and depriving us of potential product revenues.

Our products and operations are subject to extensive governmental regulation in the United States and other countries, and our failure to comply with applicable requirements could cause our business to suffer.

The medical device and pharmaceutical industry is regulated extensively by governmental authorities, principally the FDA in the United States and corresponding state and foreign regulatory agencies, authorities and notified bodies. The FDA and other U.S. and foreign governmental agencies and authorities regulate and oversee, among other things, with respect to medical devices and pharmaceuticals:

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The regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales.

Our failure, or our distributors’ failure, to comply with U.S. federal and state regulations and equivalent foreign rules could lead to the issuance of warning letters or untitled letters, the imposition of injunctions, suspensions or loss of regulatory clearance or approvals, product recalls, termination of distribution, product seizures, or civil penalties. In the most extreme cases, criminal sanctions or closure of our manufacturing facilities are possible.

The regulatory approval processes of the FDA and comparable foreign authorities and notifying conformity assessment by notified bodies are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our products, our business will be substantially harmed.

Our products are subject to rigorous regulation by the FDA and numerous other federal, state, and foreign governmental authorities and notified bodies. The process of obtaining regulatory clearances or approvals from the FDA and comparable foreign authorities and notified bodies can be costly, and we may not be able to obtain these clearances or approvals on a timely basis, if at all. The time required to obtain approval or clearance from the FDA, comparable foreign authorities or to conduct a conformity assessment procedure and obtain a related EC Certificate of Conformity from the notified bodies is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product’s clinical development and may vary among jurisdictions. We have received FDA approval for our KXL system and its associated Photrexa formulations for the treatment of progressive keratoconus and corneal ectasia following refractive surgery, and these products are CE marked in the European Union as stand-alone medical devices and are approved in certain other countries. However, it is possible that none of our products we may seek to develop in the future will ever obtain regulatory approval in the United States or other jurisdictions, or notified bodies may refuse to grant a related EC Certificate of Conformity in the European Union. Failure to obtain marketing approval for a product will prevent us from commercializing the product.

Our products could fail to receive regulatory approval, clearance or EC Certificates of Conformity for many reasons, including, but not limited to, the following:

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This lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval or EC Certificates of Conformity from notified bodies permitting us to market and/or distribute our products, which would harm our business, results of operations and prospects significantly.

Foreign governmental authorities that regulate the manufacture and sale of medical devices and drugs have become increasingly stringent, and to the extent we continue to market and sell our products in foreign countries, we will be subject to rigorous regulation in the future. In such circumstances, where we utilize distributors in foreign countries to market and sell our products, we would rely significantly on our distributors to comply with the varying regulations, and any failures on their part could result in restrictions on the sale of our products in foreign countries.

In addition, regulatory authorities may approve any of our products for fewer or more limited indications and notified bodies may issue EC Certificates of Conformity for fewer intended uses than we request. Moreover, competent authorities may not approve the price we intend to charge for our products, may grant approval or clearance contingent on the performance of costly post-marketing clinical trials or may approve a product with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product. Any of the foregoing scenarios could harm the commercial prospects for our products.

The type of marketing application required for our new or modified products is subject to discussion with and review by applicable regulatory authorities, and different types of marketing applications may involve different content, review timelines, and level of cost and effort in preparing the application. This could cause increased cost and delay in bringing new or modified products to market.

Even though we have obtained regulatory approval and marketing authorizations for certain of our products, we still face extensive regulatory requirements and may face future regulatory hurdles.

Even though we have obtained regulatory approval in the United States for our KXL system and its associated Photrexa formulations, the FDA and state regulatory authorities may still impose significant restrictions on the indicated uses or marketing of our KXL system and its associated Photrexa formulations, or impose ongoing requirements for potentially costly post-approval studies or post-marketing surveillance. Any future products which are approved or cleared by the FDA will also be subject to extensive post-approval obligations.

We are subject to ongoing post-approval FDA and other regulatory agency requirements, including those governing the labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, record-keeping and reporting of safety and other post-approval information. The holder of an approved NDA is obligated to monitor and report adverse effects and any failure of a product to meet the specifications in the NDA. Under the FDA medical device reporting regulations, companies with FDA approved or cleared medical devices, including device constituents of a drug-device combination product, are required to report to the FDA

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information that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device or one of our similar devices were to recur.

We rely on our distributors, which are the registration holders in certain markets, to meet their obligations outlined in our distribution agreements with them, including obligations relating to regulatory requirements and timelines for adverse event reporting and for providing compliance documentation such as installation and training records. If any of our distributors fails to comply with these obligations, it may result in delays or errors in our post-market surveillance reporting, which will negatively impact our business.

The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA regulations and may be subject to other potentially applicable federal and state laws. The applicable regulations in countries outside the United States grant similar powers to the competent authorities and impose similar obligations on companies.

In addition, manufacturers of drug products and their facilities are subject to payment of substantial user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations and adherence to commitments made in the NDA. Since our approved product in the United States is regulated as a drug/device combination product, we will also need to comply with some of the FDA’s manufacturing regulations for devices. In addition to drug cGMP, the FDA requires that our drug-device combination products comply with the QSR, which sets forth the FDA’s manufacturing quality standards for medical devices, and other applicable government regulations and corresponding foreign standards. Compliance with applicable regulatory requirements is subject to continual review and is monitored rigorously through periodic inspections by the FDA, the notified body or other regulatory authority. If we, or a regulatory authority, discover previously unknown problems with our products, such as adverse effects, of unanticipated severity or frequency, stability issues relating to our drug formulations, or problems with a facility where the product is manufactured, a regulatory authority may impose restrictions relative to our products or our manufacturing facilities, including requiring recall or withdrawal of the product from the market, suspension of manufacturing, or other FDA action or other action by foreign regulatory authorities.

If we fail to comply with applicable regulatory requirements, a regulatory authority may take certain actions against us, including, but not limited to, the following:

FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our products or modifications to our existing products. For example, in December 2016, the 21st Century Cures Act, or Cures Act, was signed into law. The Cures Act, among other

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things, is intended to modernize the regulation of drugs and devices and spur innovation, but its ultimate implementation is unclear. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability. Additionally, we cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. For example, certain policies of the Trump administration may impact our business and industry. Namely, the Trump administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. It is difficult to predict how these executive actions will be implemented, and the extent to which they will impact FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

Any government investigation of alleged violations of law could also require us to expend significant time and resources in response and could generate negative publicity. If we are not able to maintain regulatory compliance or if we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, regulatory sanctions may be applied or we may lose any marketing approval or clearance that we may have obtained, and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

Modifications to our products may require new regulatory clearances or approvals or may require us to recall or cease marketing our products until clearances or approvals are obtained.

Modifications to our products may require new regulatory approvals or clearances or new or modified EC Certificates of Conformity, or require us to recall or cease marketing the modified products until these clearances, approvals or modified EC Certificates of Conformity are obtained. For example, the FDA requires device manufacturers to initially make and document a determination of whether or not a modification requires a new approval, supplement or clearance. A manufacturer may determine that a modification could not significantly affect safety or efficacy and does not represent a major change in its intended use, so that no new 510(k) clearance is necessary. However, the FDA can review a manufacturer’s decision and may disagree. The FDA may also on its own initiative determine that a new clearance or approval is required.

We may not be able to obtain those additional clearances, approvals or modified EC Certificates of Conformity for the modifications or additional indications in a timely manner, or at all. Obtaining clearances and approvals can be a time consuming process, and delays in obtaining required future clearances or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth.

We may in the future conduct clinical trials for our products outside the United States, and the FDA and applicable foreign regulatory authorities may not accept data from such trials.

We may in the future choose to conduct one or more of our clinical trials outside the United States, including in the European Union. The acceptance of study data from clinical trials conducted outside the United States or another jurisdiction by the FDA or applicable foreign regulatory authority may be subject to certain conditions. In all cases, the clinical trials must be conducted in accordance with GCP and the applicable regulatory requirements and ethical principles that have their origin in the Declaration of Helsinki. In cases where data from foreign clinical trials are intended to support an application for marketing approval or clearance in the United States, the FDA may not accept the foreign data as supportive unless that data is applicable to the United States population and United States medical practice; the studies were performed by clinical investigators of recognized competence; the FDA’s clinical trial design requirements, including sufficient size of patient

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populations and statistical powering, are met; the clinical trial is either conducted under an IND application and in compliance with IND regulations or is conducted outside of an IND but in compliance with GCP and accompanied by a sufficient description of actions taken to ensure that the trial conformed to GCP, and the data are considered valid without the need for an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. Many foreign regulatory bodies have similar requirements requiring demonstration of ethnic equivalence. In addition, such foreign studies would be subject to the applicable local laws of the foreign jurisdictions where the studies are conducted. There can be no assurance the FDA or applicable foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable jurisdiction. If the FDA or any applicable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and/or which may result in our products not receiving approval or clearance for commercialization in the applicable jurisdiction.

We may not be able to obtain orphan drug designation or orphan drug exclusivity for our future products.

Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, defined as one occurring in a patient population of fewer than 200,000 individuals annually in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, the EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the European Union. Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating, or serious and chronic condition when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention, or treatment, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.

In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax credits for qualified clinical testing, and user-fee waivers. In addition, if a product receives the first FDA approval of that drug for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the rare disease or condition. In the European Union, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity following approval for the approved therapeutic indication. This period may be reduced to six years if, at the end of the fifth year, the orphan drug designation criteria are no longer met, including where it is shown that the drug is sufficiently profitable not to justify maintenance of market exclusivity. In the European Union, a marketing authorization for an orphan designated product will not be granted if a similar drug has been approved in the European Union for the same therapeutic indication, unless the applicant can establish that its product is safer, more effective or otherwise clinically superior. A similar drug is a product containing a similar active substance or substances as those contained in an already authorized product. Similar active substance is defined as an identical active substance, or an active substance with the same principal molecular structural features, but not necessarily all of the same molecular features, and which acts via the same mechanism.

While we have received orphan drug designations and were afforded orphan exclusivity from the FDA that cover our Photrexa formulations used with our KXL system for the treatment of progressive keratoconus and corneal ectasia following refractive surgery upon approval, we may seek orphan drug designations for other

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products or in other jurisdictions and may be unable to obtain such designations. If our competitors obtain orphan drug designation and approval of a product and the FDA or other regulatory authority determines that the product is the same drug and treats the same indication as one of our unapproved products, the competitor’s orphan drug exclusivity may prevent us from obtaining approval of our product for seven years after the competitor’s receipt of approval.

Even if we obtain orphan drug designation for a product, we may not be able to obtain orphan drug exclusivity for that product or we may be unable to maintain such designation even if granted upon approval. Generally, a product with orphan drug designation only becomes entitled to orphan drug exclusivity if it receives the first marketing approval for the indication for which it has such designation, or if it is shown to be clinically superior to any previously approved version of the same drug for the same indication. If orphan exclusivity is awarded, the FDA will be precluded from approving another marketing application for the same drug for that indication for the applicable exclusivity period, except in limited circumstances. In addition, exclusive marketing rights in the United States may be unavailable if we seek approval for an indication broader than the orphan-designated indication.

Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition and the same drug can be approved for a different condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. Orphan exclusivity may also be lost in the United States if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the drug to meet the needs of patients with the rare disease or condition following approval. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process. In addition, while we may seek orphan drug designation for other existing and future products, we may never receive such designations.

Our products are currently regulated in some territories outside the United States as medical devices, and our future products could be considered to be medical devices and subject to extensive regulation by the FDA, including the requirement to obtain premarket approval and the requirement to report adverse events and violations of the Federal Food, Drug and Cosmetic Act that could present significant risk of injury to patients.

If any of our products are determined to be regulated in accordance with the FDA’s medical device requirements as opposed to regulation as a drug/device combination product subject to the FDA’s drug regulatory authority, they will be subject to rigorous medical device regulation by the FDA and numerous other federal, state and foreign governmental authorities. The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time consuming, and we may not be able to obtain these clearances or approvals on a timely basis, if at all. In particular, the FDA permits commercial distribution of a new medical device, or new use of, new claim for or significant modification to an existing medical device only after the device has received clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or is the subject of an approved premarket approval application, or PMA, unless the device is specifically exempt from those requirements. In the 510(k) clearance process, before a device may be marketed, the FDA must determine that a proposed device is “substantially equivalent” to a legally-marketed “predicate” device, which includes a device that has been previously cleared through the 510(k) process, a device that was legally marketed prior to May 28, 1976 (preamendments device), a device that was originally on the U.S. market pursuant to an approved premarket approval, or PMA, application and later downclassified, or a 510(k)-exempt device. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data are sometimes required to support substantial equivalence. The FDA will also grant de novo applications for low risk devices that are not substantially equivalent to other 510(k)-cleared products where the benefits of those devices are demonstrated to outweigh the risks. High-risk devices deemed to pose the greatest risk, such as life-

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sustaining, life-supporting, or implantable devices, or devices not deemed substantially equivalent to a previously cleared device, require the approval of a PMA. The PMA process is more costly, lengthy and uncertain than the 510(k) clearance process. A PMA application must be supported by extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the device for its intended use. The FDA may not approve or clear our future products for the indications that are necessary or desirable for successful commercialization. Indeed, the FDA may refuse our requests for 510(k) clearance or premarket approval of new products. Failure to receive clearance or approval for our new products would have an adverse effect on our ability to expand our business.

In the European Union, the riboflavin drug formulations manufactured by Medio-Haus and intended for use with our KXL system and Mosaic system are compliant with the Essential Requirements set out in Annex I to the EU Medical Devices Directive and are CE marked and commercialized as medical devices. These devices were subject to assessment by a Notified Body. By issuing related EC Certificates of Conformity, and later renewing them, the Notified Body confirmed its opinion that the riboflavin formulations are appropriately classified as medical devices in the European Union. Version 1.19 (published in April 2018) of the European Commission’s Classification and Borderline Expert Group’s Manual on Borderline and Classification in the Community Regulatory Framework for Medical Devices, or the Borderline Classification Manual, discusses the regulatory classification of a riboflavin drug formulation for treatment of keratoconus (a similar discussion was included in earlier versions of the Borderline Classification Manual since July 2014). The riboflavin drug formulation is administered into the eye and is activated via illumination with UVA light for approximately 30 minutes. The intended purpose of the product is to increase the collagen cross linking by using riboflavin in treatment of keratoconus by causing the collagen fibrils to thicken, stiffen and cross link and reattach to each other making the cornea stronger, more stable and in turn halting the disease progression. The riboflavin causes new bonds to form across adjacent collagen strands in the stromal layer of the cornea which increases the tensile strength of the cornea. The Borderline Classification Manual concludes that available information indicates that, in these circumstances, the riboflavin has a dual function, firstly on the production of oxygen free radicals, and secondly by absorbing the UVA radiation and preventing damage to deeper ocular structures, such as corneal endothelium, the lens and the retina. The application of riboflavin in these circumstances results in an alteration of the normal chemical process of cross-linking of collagen as a result the riboflavin solution for treatment of keratoconus that was the subject of the opinion should not be classified as a medical device. The above position expressed in the Borderline Classification Manual as early as July 2014 is not legally binding and the competent authorities of the EU member states are not legally required to classify riboflavin solutions for treatment of keratoconus as medicinal products. It rather serves as one out of many elements supporting the competent authorities of the EU member states in their case-by-case decision on individual products. The Borderline Classification Manual does however reflect the views of the European Commission’s working party on borderline and classification comprised of the European Commission services, EU Member State experts and other stakeholders. While riboflavin solutions manufactured by Medio-Haus and intended for use with our KXL system and Mosaic system were placed on the market in the European Union as medical devices and were subject to continuous oversight by Notified Bodies, we cannot, therefore, rule out that one or more of the competent authorities of the EU member states could follow the views expressed in 2014 in the Borderline Classification Manual and conclude that the riboflavin formulations intended for use with our KXL and Mosaic systems should be classified as a medicinal product and not as a medical devices. In such case, these riboflavin formulations would need to undergo an EU or EU member states medicinal product marketing authorization process before they can be commercialized in the European Union.

If we fail to comply with U.S. federal, state and foreign governmental regulations, such failure could lead to the issuance of warning letters or untitled letters, the imposition of injunctions, suspensions or loss of regulatory clearance or approvals, product recalls, termination of distribution, product seizures or civil penalties. In the most extreme cases, criminal sanctions or closure of our manufacturing facility are possible.

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If we fail to comply with healthcare and other regulations, we could face substantial penalties and our business operations and financial condition could be adversely affected.

Healthcare providers and third party payors play a primary role in the recommendation, prescription, treatment and coverage of procedures and FDA-approved prescription drugs and devices. Our arrangements and interactions with healthcare professionals, third-party payors, patients and others will expose us to broadly applicable fraud and abuse, anti-kickback, false claims and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute our products. The U.S. federal and state laws and regulations that may affect our ability to operate include, without limitation:

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State and federal regulatory and enforcement agencies continue to actively investigate violations of healthcare laws and regulations, and the U.S. Congress continues to strengthen the arsenal of enforcement tools. Most recently, the Bipartisan Budget Act of 2018 increased the criminal and civil penalties that can be imposed for violating certain federal healthcare laws, including the federal healthcare Anti-Kickback Statute. Enforcement agencies also continue to pursue novel theories of liability under these laws. In particular, government agencies recently have increased regulatory scrutiny and enforcement activity with respect to manufacturer reimbursement support activities and patient support programs, including bringing criminal charges or civil enforcement actions

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under the federal healthcare Anti-Kickback statute, civil False Claims Act and violations of healthcare fraud statute and HIPAA privacy provisions.

To support patient access to treatment, we created the Avedro Reimbursement Customer Hub, or ARCH, program. The ARCH program educates on and assists with coverage and reimbursement questions related to the KXL procedure and Photrexa formulations, provides no-charge drug to uninsured or government-insured patients who meet financial eligibility criteria and, for a limited time, offers healthcare providers a discount on future purchases of Photrexa formulations in certain qualifying circumstances. We have worked to structure the ARCH program in compliance with applicable laws and regulations, including the federal Anti-Kickback Statute, HIPAA fraud and privacy requirements, and other regulatory guidance available. Ensuring compliance with these laws and regulations requires substantial resources. We monitor implementation of the ARCH program, enhance safeguards as appropriate, and respond to instances of noncompliance. However, the government could challenge the design of the ARCH program under one or more of these laws, particularly if some if our vendors or personnel do not follow the established safeguards.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under such laws, it is possible that some of our business activities, including the ARCH program, certain sales and marketing practices and financial arrangements with physicians and other healthcare providers, some of whom recommend, use, prescribe or purchase our products, and other customers, could be subject to challenge under one or more such laws. If our operations are found to be in violation of any of these laws or regulations, we may be subject to penalties, including potentially significant civil and criminal penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, such as Medicare and Medicaid in the United States and similar programs outside the United States, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results. Companies settling federal false claims, kickback or Civil Monetary Penalty cases also may be required to enter into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General in order to avoid exclusion from participation (i.e., loss of coverage for their products) in federal healthcare programs such as Medicare and Medicaid. Corporate Integrity Agreements typically impose substantial costs on companies to ensure compliance. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Defending against any such actions can be costly, time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.

We may be subject to, or may in the future become subject to, U.S. federal and state, and foreign laws and regulations imposing obligations on how we collect, use, disclose, store and process personal information. Our actual or perceived failure to comply with such obligations could result in liability or reputational harm and could harm our business. Ensuring compliance with such laws could also impair our efforts to maintain and expand our customer base, and thereby decrease our revenue.

In many activities, including the conduct of clinical trials, we are subject to laws and regulations governing data privacy and the protection of health-related and other personal information. These laws and regulations govern our processing of personal data, including the collection, access, use, analysis, modification, storage, transfer, security breach notification, destruction and disposal of personal data. We must comply with laws and regulations associated with the international transfer of personal data based on the location in which the personal data originates and the location in which it is processed. Although there are legal mechanisms to facilitate the transfer of personal data from the European Economic Area, or EEA, and Switzerland to the United States, the decision of the European Court of Justice that invalidated the safe harbor framework has increased uncertainty around compliance with EU privacy law requirements. As a result of the decision, it was no longer

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possible to rely on safe harbor certification as a legal basis for the transfer of personal data from the European Union to entities in the United States. In February 2016, the European Commission announced an agreement with the Department of Commerce, or DOC, to replace the invalidated safe harbor framework with a new EU-U.S. “Privacy Shield.” On July 12, 2016, the European Commission adopted a decision on the adequacy of the protection provided by the Privacy Shield. The Privacy Shield is intended to address the requirements set out by the European Court of Justice in its recent ruling by imposing more stringent obligations on companies, providing stronger monitoring and enforcement by the DOC and Federal Trade Commission and making commitments on the part of public authorities regarding access to information.

The privacy and security of personally identifiable information stored, maintained, received or transmitted, including electronically, subject to significant regulation in the United States and abroad. While we strive to comply with all applicable privacy and security laws and regulations, legal standards for privacy continue to evolve and any failure or perceived failure to comply may result in proceedings or actions against us by government entities or others, or could cause reputational harm, which could have a material adverse effect on our business.

Numerous foreign, federal and state laws and regulations govern collection, dissemination, use and confidentiality of personally identifiable health information, including state privacy and confidentiality laws (including state laws requiring disclosure of breaches); federal and state consumer protection and employment laws; HIPAA; and European and other foreign data protection laws. These laws and regulations are increasing in complexity and number, may change frequently and sometimes conflict.

HIPAA establishes a set of national privacy and security standards for the protection of individually identifiable health information, including protected health information, or PHI, by health plans, certain healthcare clearinghouses and healthcare providers that submit certain covered transactions electronically, or covered entities, and their ‘‘business associates,’’ which are persons or entities that perform certain services for, or on behalf of, a covered entity that involve creating, receiving, maintaining or transmitting PHI. While we are not currently a covered entity or business associate under HIPAA, we may receive identifiable information from these entities. Failure to receive this information properly could subject us to HIPAA’s criminal penalties, which may include fines up to $250,000 per violation and/or imprisonment. In addition, responding to government investigations regarding alleged violations of these and other laws and regulations, even if ultimately concluded with no findings of violations or no penalties imposed, can consume company resources and impact our business and, if public, harm our reputation.

In addition, various states, such as California and Massachusetts, have implemented similar privacy laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of health information and other personally identifiable information. In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused. California’s patient privacy laws, for example, provide for penalties of up to $250,000 and permit injured parties to sue for damages. The interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and our clients and potentially exposing us to additional expense, adverse publicity and liability. Further, as regulatory focus on privacy issues continues to increase and laws and regulations concerning the protection of personal information expand and become more complex, these potential risks to our business could intensify.

In addition, the interpretation and application of consumer, health-related, and data protection laws are often uncertain, contradictory, and in flux.

U.S.-based companies may certify compliance with the privacy principles of the Privacy Shield. Certification to the Privacy Shield, however, is not mandatory. If a U.S.-based company does not certify compliance with the Privacy Shield, it may rely on other authorized mechanisms to transfer personal data.

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The privacy and data security landscape is still in flux. In October 2016, an action for annulment of the European Commission decision on the adequacy of Privacy Shield was brought before the European Court of Justice by three French digital rights advocacy groups, La Quadrature du Net, French Data Network and the Fédération FDN. This case, Case T-738/16, is currently pending before the European Court of Justice. Should the European Court of Justice invalidate the Privacy Shield, it will no longer be possible to transfer data from the European Union to entities in the United States under a Privacy Shield certification, in which case other legal mechanisms would need to be put in place.

The legislative and regulatory landscape for privacy and data security continues to evolve, and there has been an increasing focus on privacy and data security issues which may affect our business. Failure to comply with current and future laws and regulations could result in government enforcement actions (including the imposition of significant penalties), criminal and civil liability for us and our officers and directors, private litigation and/or adverse publicity that negatively affects our business.

If we or our vendors fail to comply with applicable data privacy laws, or if the legal mechanisms we or our vendors rely upon to allow for the transfer of personal data from the EEA or Switzerland to the United States (or other countries not considered by the European Commission to provide an adequate level of data protection) are not considered adequate, we could be subject to government enforcement actions and significant penalties against us, and our business could be adversely impacted if our ability to transfer personal data outside of the EEA or Switzerland is restricted, which could adversely impact our operating results. The EU General Data Protection Regulation, which was effective as of May 25, 2018, introduced new data protection requirements in the European Union relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the documentation we must retain, the security and confidentiality of the personal data, data breach notification and the use of third party processors in connection with the processing of personal data. The EU General Data Protection Regulation has increased our responsibility and potential liability in relation to personal data that we process, and we may be required to put in place additional mechanisms to ensure compliance with the EU General Data Protection Regulation. However, our ongoing efforts related to compliance with the EU General Data Protection Regulation may not be successful and could increase our cost of doing business. In addition, data protection authorities of the different EU member states may interpret the EU General Data Protection Regulation differently, and guidance on implementation and compliance practices are often updated or otherwise revised, which adds to the complexity of processing personal data in the European Union.

In the United States, California recently adopted the California Consumer Privacy Act of 2018, or CCPA, which will come into effect beginning in January 2020. The CCPA has been characterized as the first “GDPR-like” privacy statute to be enacted in the United States because it mirrors a number of the key provisions of the EU General Data Protection Regulation. The CCPA establishes a new privacy framework for covered businesses by creating an expanded definition of personal information, establishing new data privacy rights for consumers in the State of California, imposing special rules on the collection of consumer data from minors, and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches.

Guidelines, regulations and recommendations published by government agencies can reduce the use of our products.

Government agencies promulgate regulations and guidelines applicable to our current products and the products that we are developing. Recommendations of government agencies may relate to such matters as usage, dosage, route of administration, categorization and use of combination therapies. Regulations or guidelines suggesting the reduced use of our current products and the products that we are developing or the use of competitive or alternative products as the standard of care to be followed by patients and healthcare providers could result in decreased use of our products and products or negatively impact our ability to gain market acceptance and market share.

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Healthcare reform measures could hinder or prevent our products’ commercial success.

The Healthcare Reform Act, is a sweeping measure in the United States which has substantially changed the way healthcare is financed by both governmental and private insurers and significantly impacts the pharmaceutical industry. Among the ways in which it may impact our business, particularly if in the future Medicare or Medicaid covers or reimburses our drug formulations, the Healthcare Reform Act:

Some of the provisions of the Healthcare Reform Act have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the Healthcare Reform Act, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the Healthcare Reform Act. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the Healthcare Reform Act or otherwise circumvent some of the requirements for health insurance mandated by the Healthcare Reform Act. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the Healthcare Reform Act. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the Healthcare Reform Act have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Healthcare Reform Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Additionally, the 2018 Appropriations Resolution delayed the implementation of certain Healthcare Reform Act-mandated fees, including, without limitation, the medical device excise tax. More recently, in July 2018, CMS published a final rule permitting further collections and payments to and from certain Healthcare Reform Act qualified health plans and health insurance issuers under the Healthcare Reform Act risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. We continue to evaluate the potential impact of the Healthcare Reform Act and its possible repeal or replacement on our business.

In addition, other legislative changes have been proposed and adopted since the Healthcare Reform Act was enacted. On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals for spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several government

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programs. This includes reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2027 unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

In addition, drug pricing by pharmaceutical companies is currently, and is expected to continue to be, under close scrutiny, including with respect to companies that have increased the price of products after acquiring those products from other companies. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient support programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. The United States Health and Human Services has already started the process of soliciting feedback on some of these measures and, at the same time, is immediately implementing others under its existing authority. Although a number of these, and other proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We expect there will continue to be a number of legislative and regulatory changes to the United States healthcare system in ways that could affect our future revenue and profitability and the future revenue and profitability of our potential customers. We anticipate that Congress, state legislatures and the private sector will continue to consider and may adopt healthcare policies and reforms intended to curb healthcare costs, particularly given the current atmosphere of mounting criticism of prescription drug costs in the U.S.

We could be adversely affected by violations of the United States Foreign Corrupt Practices Act, or FCPA, and other worldwide anti-bribery laws.

We are subject to the FCPA, which prohibits companies and their intermediaries from making payments in violation of law to non-United States government officials for the purpose of obtaining or retaining business or securing any other improper advantage. The FCPA and similar third country anti-bribery laws to which we may be subject are complex and far-reaching in nature and generally prohibit improper offering, promising, giving, or authorizing others to offer, promise, or give anything of value, either directly or indirectly, to foreign officials for the purpose of improperly influencing any act or decision, securing any other improper advantage, or obtaining or retaining business.

Our current success depends on our network of distribution partners located in markets around the globe, including in Europe, the Middle East, China, Japan and South Korea. Our significant reliance on foreign suppliers, manufacturers, distributors and collaborators creates a risk of liability under the FCPA and similar anti-bribery and anti-corruption laws in other jurisdictions and demands a high degree of vigilance in preventing our partners, employees and consultants from participation in corrupt activity, because these foreign entities could be deemed our agents and we could be held responsible for their actions. Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical and medical device industry because, in many countries, hospitals are operated by the government and doctors and other hospital employees are considered

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foreign officials. In some cases, certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the company and to maintain an adequate system of internal accounting controls. Although we do not control our international distributors, collaborators or other third party agents, we may nevertheless be liable for their actions and no assurance can be made that all employees, distributors, collaborators and other third party agents will comply with the FCPA and similar foreign laws. We also cannot assure you that we would not be required in the future to alter one or more of our practices to be in compliance with these laws or any changes in these laws or the interpretation thereof.

Any violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction, and involve significant costs and expenses, including legal fees. We could also suffer severe penalties, including criminal sanctions and civil penalties such as monetary fines, disgorgement of past profits, and other remedial measures, any of which could have a material and adverse impact on our business, financial conditions, results of operations and growth prospects.

Our employees, collaborators, independent contractors, principal investigators, consultants, vendors and CROs may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk that our employees, collaborators, independent contractors, principal investigators, consultants, vendors and CROs may engage in fraudulent or other illegal activity with respect to our business. Misconduct by these employees could include intentional, reckless and/or negligent conduct or unauthorized activity that violates:

In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by these parties could also involve individually identifiable information, including, without limitation, the improper use of information obtained in the course of clinical trials, or illegal misappropriation of drug product, which could result in regulatory sanctions and serious harm to our reputation. Any incidents or any other conduct that leads to an employee receiving an FDA or equivalent third country debarment could result in a loss of business from third parties and severe reputational harm.

In connection with this offering, we will adopt a Code of Business Conduct and Ethics to govern and deter such behaviors, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure

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to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, disgorgement, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal or third country healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations.

A recall of our products, or the discovery of serious safety issues with our products, could have a significant adverse impact on us.

The FDA and equivalent third country authorities have the authority to require the recall of commercialized drugs or medical devices in the event of material deficiencies, defects in design or manufacture, or stability failures. Manufacturers may, under their own initiative, recall a product if any material deficiency in a drug or device is found. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, stability failures, drug contamination or impurities, design or labeling defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our reputation, financial condition and operating results, which could impair our ability to produce our products in a cost-effective and timely manner. The FDA and equivalent third country authorities require that certain classifications of recalls be reported to them within a defined period of time (within ten working days for the FDA) after the recall is initiated. Companies are required to maintain certain records of recalls, even if they are not reportable to the FDA or equivalent third country authorities. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA or equivalent third country authorities. If the FDA or equivalent third country authorities disagree with our determinations, they could require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA or equivalent third country authorities could take enforcement action for failing to report the recalls when they were conducted.

An increase in the frequency or severity of adverse events, or repeated product complaints or malfunctions may result in a voluntary or involuntary product recall, which could divert managerial and financial resources, impair our ability to manufacture our products in a cost-effective and timely manner and have an adverse effect on our reputation, financial condition, and operating results.

Depending on the corrective action we take to redress a product’s deficiencies or defects, the FDA or an equivalent third country authority may require, or we may decide, that we will need to obtain new approvals or clearances for the products, or a new EC Certificate of Conformity before we may market or distribute the corrected products. Seeking such approvals or clearances may delay our ability to replace the recalled products in a timely manner. Moreover, if we do not adequately address problems associated with our products, we may face additional regulatory enforcement action, including FDA or equivalent third country authorities’ warning letters, product seizure, injunctions, administrative penalties, or civil or criminal fines. We may also be required to bear other costs or take other actions that may have a negative impact on our sales as well as face significant adverse publicity or regulatory consequences, which could harm our business, including our ability to market our products in the future.

Any adverse event involving our products could result in future voluntary corrective actions, such as recalls or customer notifications, or regulatory agency action, which could include inspection, mandatory recall or other enforcement action. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results.

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U.S. legislative or FDA regulatory reforms, or equivalent third country reforms, may make it more difficult and costly for us to obtain regulatory approval of our products and to manufacture, market and distribute our products after approval is obtained.

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory approval, manufacture and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of future products. FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether legislative changes will be enacted or FDA regulations, guidance or interpretations changed, and what the impact of such changes, if any, may be.

In May 2017, the EU Medical Devices Regulation, or MDR, (Regulation 2017/745) was adopted. The MDR repeals and replaces the EU Medical Devices Directive and the Active Implantable Medical Devices Directive. Unlike directives, which must be implemented into the national laws of the EU member states, the MDR will be directly applicable in the EU member states and on the basis of the EEA agreement in Iceland, Lichtenstein and Norway. The MDR is, among other things, intended to establish a uniform, transparent, predictable and sustainable regulatory framework across the EEA for medical devices and ensure a high level of safety and health while supporting innovation. The MDR will be applicable from May 26, 2020. Once applicable, the MDR will, among other things:

Once applicable, the MDR will impose increased compliance obligations for us to access the EU market. Moreover, the scrutiny imposed by notified bodies for the technical documentation related these devices will increase considerably.

Risks Related to this Offering and Ownership of Our Common Stock

There has been no prior public market for our common stock, and an active trading market for our common stock may not develop or be sustained.

Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters, and the negotiated price may not be indicative of the market price of the common stock after the offering. Based on the estimated offering price of our common stock in this offering, our initial market capitalization is expected to be modest and as a result our common stock may not be an attractive investment for a number of institutional investors, which could reduce the trading activity in our stock and make the trading price of our stock more volatile. Although we

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have applied to list our common stock on the Nasdaq Global Market, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult for our stockholders to sell shares purchased in this offering without depressing the market price for the shares or at all.

Our stock price may be volatile, and you may not be able to sell the shares you purchase in this offering at or above the offering price.

Our stock price is likely to be volatile. The stock market in general and the market for smaller medical device companies and pharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell the shares you purchase in this offering at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including the following:

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Broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. These fluctuations may be even more pronounced in the trading market for our common stock shortly following this offering. If the market price of shares of our common stock after this offering does not ever exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment.

In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could harm our business.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our common stock.

Immediately after this offering, we will have outstanding              shares of common stock based on the number of shares outstanding as of September 30, 2018. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates. All of the remaining shares of our common stock will be restricted as a result of securities laws or lock-up agreements but will be able to be sold after the offering as described in the section of this prospectus titled “Shares Eligible for Future Sale.” Moreover, immediately after this offering, holders of an aggregate of up to              shares of our common stock will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also intend to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the section of this prospectus titled “Underwriting.”

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the balance of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. We intend to use the proceeds from this offering to fund the ongoing U.S. commercialization activities of the KXL system and its associated Photrexa formulations, to fund the ongoing development, regulatory and international commercialization activities of the latest-generation KXL system, the

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Mosaic system and their respective associated drug formulations and for working capital, capital expenditures and other general corporate purposes, which may include the acquisition or licensing of other products, product candidates, businesses or technologies.

The failure by our management to apply these funds effectively could result in financial losses that could harm our business, cause the price of our common stock to decline, and delay the development of our products. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

After this offering, our executive officers, directors and principal stockholders will maintain the ability to control or significantly influence all matters submitted to stockholders for approval.

Prior to this offering, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock, and their respective affiliates, in the aggregate, beneficially owned shares representing approximately      % of our common stock, and upon consummation of this offering, that same group, in the aggregate, will beneficially own approximately     % of our common stock. As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these stockholders, if they choose to act together, will control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire, which in turn could depress our stock price and may prevent attempts by our stockholders to replace or remove the board of directors or management.

If you purchase shares of common stock in this offering, you will experience immediate and substantial dilution in the net tangible book value of your investment.

The assumed initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock immediately after this offering. Therefore, if you purchase our common stock in this offering, you will incur an immediate dilution of $             in net tangible book value per share from the price you paid, based on an assumed initial public offering price of $             per share, the midpoint of the range set forth on the cover page of this prospectus. In addition, new investors who purchase shares in this offering will contribute approximately     % of the total amount of equity capital raised by us through the date of this offering, but will only own approximately     % of the outstanding share capital. The exercise of outstanding options and warrants will result in further dilution. For a further description of the dilution that you will experience as a result of investing in this offering, see the section of this prospectus titled “Dilution.”

Future issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

We expect that significant additional capital will be needed in the future to continue our planned operations. To raise capital, we may sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. These future issuances of common stock or common stock-related securities, together with the exercise of outstanding options, warrants and any additional shares issued in connection with acquisitions, if any, may result in material dilution to our investors. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to those of holders of our common stock, including shares of common stock sold in this offering.

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We are an “emerging growth company” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, which was enacted in April 2012. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may suffer or be more volatile.

As an “emerging growth company,” the JOBS Act allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors.

Complying with the laws and regulations affecting public companies will increase our costs and the demands on management and could harm our operating results.

As a public company, and particularly after we cease to be an “emerging growth company,” we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the Securities and Exchange Commission, or the SEC, and the Nasdaq Stock Market impose numerous requirements on public companies, including requiring changes in corporate governance practices. Additionally, the Securities Exchange Act of 1934, as amended, or the Exchange Act, requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. Our management and other personnel will need to devote a substantial amount of time to compliance with these laws and regulations. These burdens may increase as new legislation is passed and implemented, including any new requirements that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 may impose on public companies. These requirements have increased and will continue to increase our legal, accounting, and financial compliance costs and have made and will continue to make some activities more time consuming and costly. We estimate that we will incur significant additional costs associated with being a publicly traded company, although it is possible that our actual additional costs will be higher than we currently estimate. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and in the future we may be required to accept reduced policy limits and coverage or to incur substantial costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board committees or as executive officers.

The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures

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quarterly. Section 404 of the Sarbanes-Oxley Act, or Section 404, requires us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm potentially to attest to, the effectiveness of our internal control over financial reporting. As an “emerging growth company,” we expect to avail ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404. However, we may no longer avail ourselves of this exemption when we cease to be an “emerging growth company.” When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of our compliance with Section 404 will correspondingly increase. Our compliance with applicable provisions of Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

Further, investor perceptions of our company may suffer if deficiencies are found, and this could cause a decline in the market price of our stock. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could have an adverse effect on our stated operating results and harm our reputation. If we are unable to implement these requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on our internal control over financial reporting from our independent registered public accounting firm.

Provisions in our corporate charter documents could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our corporate charter and our bylaws that will become effective upon the closing of this offering may discourage, delay, or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. Among others, these provisions include the following:

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Provisions under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

In addition to provisions in our corporate charter and our bylaws that will become effective upon the closing of this offering, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any holder of at least 15% of our capital stock for a period of three years following the date on which the stockholder became a 15% stockholder. See the section of this prospectus titled “Description of Capital Stock—Anti-Takeover Provisions” for additional information.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation will be your sole source of gain, if any.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, current and any future debt agreements may preclude us from paying dividends. For example, we are currently subject to covenants under our debt arrangement with OrbiMed that places restrictions on our ability to pay dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws or (4) any action asserting a claim governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. For example, stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near the State of Delaware. The Court of Chancery and federal district courts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are contained principally in the sections of this prospectus titled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” but are also contained elsewhere in this prospectus. In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain.

These forward-looking statements include statements about:

We caution you that the foregoing list may not contain all of the forward-looking statements made in this prospectus.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions described under the section titled “Risk Factors” and elsewhere in this prospectus. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors

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on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances described in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements contained in this prospectus.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, events, circumstances or achievements reflected in the forward-looking statements will ever be achieved or occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.

You should read this prospectus and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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INDUSTRY AND MARKET DATA

Unless otherwise indicated, information contained in this prospectus concerning our industry and the market in which we operate, including our market position, market opportunity and market size, is based on information from various sources. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Although neither we nor the underwriters have independently verified the accuracy or completeness of any third-party information, we believe the market position, market opportunity and market size information included in this prospectus is reliable.

In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section of this prospectus titled “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

The reports described herein represent data, research opinions or viewpoints published as part of a syndicated subscription service by each of the respective publishers thereof and are not representations of fact. Such reports speak as of their respective original publication dates (and not as of the date of this prospectus) and the opinions expressed in such reports are subject to change without notice.

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USE OF PROCEEDS

We estimate that the net proceeds to us from this offering will be approximately $         million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise in full their option to purchase additional shares from us, we estimate that our net proceeds will be approximately $         million.

Each $1.00 increase or decrease in the assumed initial public offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the net proceeds to us from this offering by approximately $         million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions payable by us. We may also increase or decrease the number of shares we are offering. Each 1,000,000 share increase or decrease in the number of shares offered by us would increase or decrease the net proceeds to us from this offering by approximately $             million, assuming that the assumed initial public offering price remains the same, and after deducting estimated underwriting discounts and commissions payable by us. We do not expect that a change in the initial price to the public or the number of shares by these amounts would have a material effect on uses of the proceeds from this offering, although a decrease in the initial offering price without a corresponding increase in the number of shares offered may accelerate the time at which we will need to seek additional capital.

The principal purposes of this offering are to obtain additional capital to support our operations, to create a public market for our common stock and to facilitate our future access to the public equity markets. We intend to use the net proceeds of this offering as follows:

We may use a portion of our net proceeds to acquire and invest in complementary products, technologies or businesses; however, we currently have no agreements or commitments to complete any such transaction. Pending these uses, we intend to invest our net proceeds from this offering primarily in investment-grade, interest-bearing instruments.

The expected use of net proceeds from this offering represents our intentions based upon our present plans and business conditions. We cannot predict with certainty all of the particular uses for the proceeds of this offering or the amounts that we will actually spend on the uses set forth above. Accordingly, our management will have significant flexibility in applying the net proceeds of this offering. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business.

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DIVIDEND POLICY

We have never declared or paid any dividends on our capital stock. We currently intend to retain all available funds and any future earnings for the operation and expansion of our business and, therefore, we do not anticipate declaring or paying cash dividends in the foreseeable future. The payment of dividends will be at the discretion of our board of directors and will depend on our results of operations, capital requirements, financial condition, prospects, contractual arrangements, any limitations on payment of dividends present in our current and future debt agreements, and other factors that our board of directors may deem relevant. We are currently subject to covenants under our credit agreement with OrbiMed that place restrictions on our ability to pay dividends.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2018:

The information below is illustrative only, and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of the offering determined at the pricing of this offering.

You should read this table together with the sections of this prospectus titled “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes appearing elsewhere in this prospectus.

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The number of shares of our common stock shown in the table above is based on 53,651,366 shares of our common stock outstanding as of September 30, 2018 and excludes:

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DILUTION

If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share after this offering.

Our historical net tangible book value (deficit) as of September 30, 2018 was $(67.4) million, or $(10.75) per share of common stock. Our historical net tangible book value (deficit) is the amount of our total tangible assets less our liabilities and convertible preferred stock, which is not included within stockholders’ deficit. Historical net tangible book value (deficit) per share is our historical net tangible book value (deficit) divided by the number of shares of common stock outstanding as of September 30, 2018.

Our pro forma net tangible book value as of September 30, 2018 was $1.7 million, or $0.03 per share of common stock. Pro forma net tangible book value per share is our pro forma net tangible book value divided by the total number of shares of common stock outstanding as of September 30, 2018, after giving effect to (1) the automatic conversion of all of our outstanding shares of preferred stock into an aggregate of 47,329,908 shares of our common stock immediately prior to the closing of this offering, (2) the settlement of 51,518 restricted stock units for which we expect the liquidity event-related performance vesting condition will be satisfied upon effectiveness of this offering, and for which the time-based service condition had been satisfied as of September 30, 2018 and (3) the conversion of all outstanding warrants to purchase shares of our convertible preferred stock into warrants to purchase 774,446 shares of our common stock.

Our pro forma as adjusted net tangible book value is our pro forma net tangible book value, after giving further effect to the sale of             shares of common stock in this offering at an assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Our pro forma as adjusted net tangible book value as of September 30, 2018 was $            million, or $            per share of common stock. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $            per share to our existing stockholders and an immediate dilution of $            per share to new investors participating in this offering. We determine dilution per share to new investors by subtracting pro forma as adjusted net tangible book value (deficit) per share after this offering from the assumed initial public offering price per share paid by new investors.

The following table illustrates this dilution on a per share basis to new investors:

The dilution information discussed above is illustrative only and will be change based on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase or

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decrease in the assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted net tangible book value per share by $            per share and the dilution per share to investors participating in this offering by $            per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions payable by us. We may also increase or decrease the number of shares we are offering. Each 1,000,000 share increase in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase the pro forma as adjusted net tangible book value per share by $            and decrease the dilution per share to investors participating in this offering by $            , assuming the assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions payable by us. Each 1,000,000 share decrease in the number of shares offered by us, as set forth on the cover page of this prospectus, would decrease the pro forma as adjusted net tangible book value per share after this offering by $            and increase the dilution per share to new investors participating in this offering by $            , assuming the assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions payable by us.

If the underwriters exercise in full their option to purchase an additional            shares of our common stock in this offering, the pro forma as adjusted net tangible book value would increase to $            per share, representing an immediate increase to existing stockholders of $            per share and an immediate dilution of $            per share to investors participating in this offering.

The following table summarizes as of September 30, 2018, on the pro forma as adjusted basis described above, the number of shares of our common stock, the total consideration and the average price per share (1) paid to us by our existing stockholders and (2) to be paid by investors purchasing our common stock in this offering at an assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The table above assumes no exercise of the underwriters’ option to purchase additional shares in this offering. If the underwriters exercise in full their option to purchase             additional shares from us, the number of shares held by the existing stockholders after this offering would be reduced to     % of the total number of shares of our common stock outstanding after this offering, and the number of shares held by new investors would increase to    % of the total number of shares of our common stock outstanding after this offering.

The tables and calculations above are based on 53,651,366 shares of our common stock outstanding as of September 30, 2018 and excludes:

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To the extent that any options or warrants are exercised, new options or other securities are issued under our equity incentive plans or we issue additional equity securities in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

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SELECTED FINANCIAL DATA

The following tables set forth our selected financial data for the periods ended on and as of the dates indicated. We derived the selected statements of operations data for the years ended December 31, 2016 and 2017 and the selected balance sheet data as of December 31, 2016 and 2017 from our audited financial statements included elsewhere in this prospectus. We derived the selected statements of operations data for the nine months ended September 30, 2017 and 2018 and the selected balance sheet data as of September 30, 2018 from our unaudited financial statements included elsewhere in this prospectus. We have prepared the unaudited financial statements on the same basis as the audited financial statements, and the unaudited financial data include, in our opinion, all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of our financial position and results of operations for these periods. Our historical results are not necessarily indicative of the results to be expected in the future and results for the nine months ended September 30, 2018 are not necessarily indicative of results to be expected for the full year ending December 31, 2018 or any other period.

The data should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in conjunction with the financial statements, related notes, and other financial information included elsewhere in this prospectus. The selected financial data in this section is not intended to replace the financial statements and is qualified in its entirety by the financial statements, related notes and other financial information included elsewhere in this prospectus.

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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 in conjunction with our financial statements and the related notes to those statements included elsewhere in this prospectus. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would” or the negative or plural of these words or similar expressions or variations and such forward-looking statements include, but are not limited to, statements with respect to our future financial and business performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere in this prospectus.

Overview

We are a leading commercial-stage ophthalmic medical technology company focused on treating corneal ectatic disorders and improving vision to reduce dependency on eyeglasses or contact lenses. Our proprietary Avedro Corneal Remodeling Platform is designed to strengthen, stabilize and reshape the cornea utilizing corneal cross-linking in minimally invasive and non-invasive outpatient procedures to treat corneal ectatic disorders and correct refractive conditions, which are caused by changes in the shape of the eye that prevent light from focusing on the retina, causing blurred vision. Our Avedro Corneal Remodeling Platform is comprised of our KXL and Mosaic systems, each of which delivers ultraviolet A, or UVA, light, and a suite of proprietary single-use riboflavin drug formulations, which, when applied together to the cornea, induce a biochemical reaction called corneal collagen cross-linking, or corneal cross-linking. Our KXL system in combination with our Photrexa drug formulations, which we launched in the United States in September 2016, is the first and only minimally invasive product offering approved by the U.S. Food and Drug Administration, or the FDA, indicated for the treatment of progressive keratoconus and corneal ectasia following refractive surgery. Additionally, the FDA granted us orphan drug designations and we have orphan drug exclusivity until 2023 that covers our Photrexa formulations used with our KXL system for our approved indications. We have obtained a Conformité Européene, or CE, mark for our Mosaic system, which allows it to be marketed throughout the European Union. The Mosaic System is capable of performing vision correction procedures and treating corneal ectatic disorders and we began a targeted international launch in late 2017.

We sell our products primarily to ophthalmologists, hospitals and ambulatory surgery centers, or ASCs. The physicians primarily involved in corneal cross-linking are ophthalmologists who are either corneal specialists or trained in refractive procedures. According to Market Scope estimates, there are approximately 1,100 corneal refractive centers in the United States. Of these centers, we estimate there are approximately 800 centers in which a majority of cataract and refractive surgeons, as well as corneal specialists who treat keratoconus, are located. As of September 30, 2018, our KXL systems are placed in 305 centers. In the United States, we sell our products through a direct sales team that, as of September 30, 2018, consisted of 12 sales professionals. If we are able to obtain FDA approval for our Mosaic system and its associated drug formulations for the treatment of presbyopia, we expect to leverage our existing sales force to cross-sell our KXL and Mosaic systems and their respective drug formulations, as they share the same target customers. In addition to the approximately 800 centers we are targeting for keratoconus, we expect to sell the Mosaic system and its associated drug formulations, if approved, to the remaining 300 corneal refractive centers that focus exclusively on refractive procedures. Outside the United States, we sell our products through a broad network of distribution partners located in markets where we see the greatest potential for corneal cross-linking procedures.

We have invested heavily in our research and development activities, including product development and clinical studies to demonstrate the safety and efficacy of our corneal cross-linking platform to support regulatory submissions. We intend to continue to make significant investments in research and development efforts to support our pivotal Phase 3 clinical trial of the Epi-On procedure using our KXL system, its associated

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drug formulations and our Boost Goggles for the treatment of progressive keratoconus and the Phase 2a clinical trial of our Mosaic system and its associated drug formulations for the treatment of presbyopia. We also intend to make significant investments in our commercial organization by increasing the number of reimbursement specialists to support the establishment of consistent and favorable payment policies. Because of these and other factors, we expect to continue to incur net losses for the next several years and we expect to require substantial additional funding, which may include future equity and debt financings.

To date, we have financed our operations primarily through sales of our convertible preferred stock, debt financings and, more recently, sales of our proprietary Photrexa formulations and our KXL systems, and have devoted substantially all of our resources to the research, development and engineering of our products, seeking regulatory approval of our products and the commercial launch of our KXL system and its associated drug formulations. For the years ended December 31, 2016 and 2017 and the nine months ended September 30, 2018, we generated revenue of $14.9 million, $20.2 million and $19.5 million, respectively. For the years ended December 31, 2016 and 2017, and the nine months ended September 30, 2018, we had net losses of $16.4 million, $21.3 million and $18.7 million, respectively. As of September 30, 2018, we had an accumulated deficit of approximately $175.7 million.

Components of Our Results of Operations

Revenue

We generate revenue from sales of our single-use riboflavin drug formulations and our KXL and Mosaic systems. Recent revenue growth in single-use riboflavin drug formulations has been favorably impacted primarily by an increase in the average selling price in the United States, which took effect in July 2017, and we expect continued revenue growth as a result of increased patient and physician adoption of our products. The recent decrease in our U.S. device revenue has been driven by early market adoption due to significant market demand upon the U.S. commercial launch of our KXL system in September 2016, which has normalized in 2018. We expect our revenue growth may be impacted to the extent we are able to support the establishment of consistent and favorable payment policies, increase patient and physician awareness of our products and continue to drive device placements in existing geographies and expansion of sales to additional corneal refractive centers in the United States. We intend to continue to expand our sales, reimbursement and marketing organization to help us drive and support revenue growth and further penetrate the market. The single-use riboflavin drug formulations represent disposable items that are used on a treatment-by-treatment basis. As we sell more devices, we expect the number of treatments performed by ophthalmologists and, correspondingly, sales of our single-use riboflavin drug formulations, to grow. As demand for new products can fluctuate significantly and delays in market adoption and healthcare reimbursement policies may occur, we anticipate that our revenue, expense and operating losses will be difficult to predict. Our revenue may also fluctuate on a quarterly basis in the future due to a variety of factors, including the impact of the buying patterns of our distributors.

Cost of Goods Sold and Gross Margin

We manufacture our KXL and Mosaic systems at our manufacturing facilities in Burlington, Massachusetts and Dublin, Ireland. We contract third-party manufacturers to produce our single-use riboflavin drug formulations. Cost of goods sold primarily consist of manufacturing overhead costs, material costs and direct labor. Our material costs include raw materials, reserves for expected warranty costs, scrap and inventory obsolescence. Our manufacturing overhead costs include the cost of quality assurance, material procurement, inventory control, facilities, equipment, operations supervision and management, depreciation expense for production equipment, amortization of leasehold improvements, shipping costs and royalty expense payable in connection with sales of certain products. Our labor costs include salaries, bonus, benefits and stock-based compensation. We expect cost of goods sold to increase in absolute dollars primarily as, and to the extent, our revenue grows.

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We expect our overall gross margin, which is calculated as revenue less cost of goods sold for a given period divided by revenue, to improve in future periods as, and to the extent, sales of our single-use riboflavin drug formulations increase and as additional medical devices are purchased. Our gross margin has been, and we expect it will continue to be, affected by a variety of factors, including product and geographic sales mix, pricing, production volumes and manufacturing costs, production yields and scrap costs, and to a lesser extent the implementation of cost-reduction strategies. We sell our products in the United States at a higher price point than what we have received historically in the international markets and therefore, as we gain market share in the United States, we believe our gross margins may be positively impacted. We believe our gross margins may be further positively improved as, and to the extent, we increase drug production volume and scale our business. As we are in the earlier stages of commercialization, we have not yet been able to take advantage of economies of scale in our manufacturing and purchasing, so gross margins may continue to be negatively impacted until such time as these efficiencies can be achieved.

Selling, General and Administrative Expenses

Selling, general and administrative, or SG&A, expenses are expensed as incurred and primarily consist of personnel-related expenses, including salaries, sales commissions, bonuses, fringe benefits and stock-based compensation for our executive, financial, marketing, sales and administrative functions. Other significant SG&A expenses include marketing programs, advertising, conferences and travel expenses, as well as the costs associated with obtaining and maintaining our patent portfolio and professional fees for accounting, auditing, consulting and legal services.

We expect SG&A expenses to continue to grow in the foreseeable future as we increase our sales and marketing infrastructure globally and our clinical education and general administration infrastructure in the United States. In addition, we expect our general and administrative expenses will significantly increase as we increase our headcount and expand administrative personnel to support our growth and operations as a public company including finance personnel and information technology services. We also anticipate increased expenses related to audit, legal, and tax-related services, director and officer insurance premiums and investor relations costs associated with being a public company.

Research and Development Expenses

Research and development, or R&D, expenses are expensed as incurred and primarily consist of personnel-related expenses, including salaries, bonuses, fringe benefits and stock-based compensation for our R&D employees. Other significant R&D expenses include new product development projects and the cost of conducting our ongoing clinical trials, including the pivotal Phase 3 clinical trial of the Epi-On procedure using our KXL system, its associated drug formulations and our Boost Goggles for the treatment of progressive keratoconus and the Phase 2a clinical trial of our Mosaic system and its associated drug formulations for the treatment of presbyopia, which may include payments to investigational sites and investigators, clinical research organizations, consultants and other outside technical services and the costs of materials, supplies and travel. We expect our R&D expenses to increase as we initiate and advance our development programs and clinical trials.

Other Expense, Net

Other expense, net, consists primarily of (1) changes in fair value of our derivative and convertible preferred stock warrant liabilities, (2) interest expense, which includes cash and non-cash interest related to our outstanding debt owed to outside lenders associated with debt facilities including accretion of debt discount on the debt facilities and (3) interest income from interest earned on our cash equivalents. In connection with this offering, our convertible preferred stock warrants will convert into common stock warrants and we expect the liability will be reclassified as additional paid-in capital.

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Results of Operations

Comparison of the Nine Months Ended September 30, 2017 and 2018