OMIDRIA Royalty Obligation

9 Months Ended

Sep. 30, 2022

OMIDRIA Royalty Obligation [Abstract]

Royalty Obligation [Text Block]

Note 8—OMIDRIA Royalty Obligation

On September 30, 2022, we sold to DRI an interest in our future OMIDRIA royalty receipts and received $125.0 million in cash consideration. DRI is entitled to receive royalties on OMIDRIA net sales between September 1, 2022 and December 31, 2030, subject to annual caps. DRI receives their prorated monthly cap amount before we receive any royalty proceeds. DRI is not entitled to carry-forward nor recoup any shortfall if the royalties paid by Rayner for an annual period are less than the cap amount applicable to each discrete calendar year. Additionally, DRI has no recourse to or security interest in our assets other than our OMIDRIA royalty receipts, and we retain all royalty receipts in excess of the respective cap in any given calendar year. The maximum payout DRI is entitled to receive is $188.4 million which, if fully paid, would be an effective interest rate of 9.4%.

The annual caps are as follows:

● $1.7 million for the remainder of calendar year 2022

● $13.0 million for calendar year 2023

● $20.0 million for calendar year 2024

● $25.0 million for calendar years 2025 through 2028

● $26.3 million for calendar year 2029

● $27.5 million for calendar year 2030

The OMIDRIA royalty obligation is classified as a Level 3 liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. As of September 30, 2022, the carrying value approximates its estimated fair value.