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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2022
or
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-36152
Aerie Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware
20-3109565
Delaware
20-3109565
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification Number)
2030 Main Street,4301 Emperor Boulevard, Suite 1500400
Irvine, California 92614Durham, North Carolina 27703
(949) 526-8700(919) 237-5300
(Address of principal executive offices, zip code and telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareAERINasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes:  ý☒    No:  o☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes:  ý☒    No:  o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Large accelerated fileroAccelerated filerý
Non-accelerated filer
o (Do not check if a smaller reporting company)
Smaller reporting companyo
Emerging growth companyý☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý☐

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

As of November 2, 2017,April 29, 2022, there were 36,704,72948,622,987 shares of the registrant’s common stock, par value $0.001 per share, outstanding.


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Item 1.
1
Condensed Consolidated Balance Sheets at September 30, 2017March 31, 2022 and December 31, 20162021
1
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022and nine2021
2
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the three months ended September 30, 2017March 31, 2022 and 20162021
23
Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2022 and 20162021
34
Notes to the Condensed Consolidated Financial Statements
45
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Unless otherwise indicated or the context requires, the terms “Aerie,” “Company,” “we,” “us” and “our” refer to Aerie Pharmaceuticals, Inc. and its subsidiaries. References to “products” mean products approved by the U.S. Food and Drug Administration (“FDA”) or other regulatory authorities; references to “product candidates” mean products that are in development but not yet approved by the FDA or other regulatory authorities; and references to “future product candidates” mean products that have not yet been developed.


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may, in some cases, use terms such as “predicts,” “believes,” “potential,” “proposed,” “continue,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “would,” “could,” “might,” “will,” “should,” “exploring,” “pursuing” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements.
Forward-looking statements appear in a number of places throughout this report and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things:
•the broad impact of the coronavirus (“COVID-19”) pandemic on our business;
•the sales of Rhopressa® (netarsudil ophthalmic solution) 0.02% (“Rhopressa®”) or of Rocklatan® (netarsudil and latanoprost ophthalmic solution) 0.02%/0.005% (“Rocklatan®”), in the United States, and the potential future sales in the United States of any product candidates or future product candidates, if approved;
•the potential future sales in jurisdictions outside of the United States of Rhopressa®, named Rhokiinsa® (netarsudil ophthalmic solution) 0.02%(“Rhokiinsa®”) in Europe, or Rocklatan®, named Roclanda® (netarsudil and latanoprost ophthalmic solution) 0.02%/0.005% (“Roclanda®”) in Europe, or their equivalents, and those of any product candidates or future product candidates;
•our commercialization, marketing, manufacturing and supply management capabilities and strategies in and outside of the United States;
•third-party payer coverage and reimbursement for our products, product candidates and any future product candidates, if approved;
•the glaucoma patient market size and the rate and degree of market adoption of our products, product candidates and any future product candidates, if approved, by eye-care professionals and patients;
•the timing, cost or other aspects of the commercial launch of our products, product candidates and any future product candidates, if approved;
•the success, timing and cost of our ongoing and anticipated preclinical studies and clinical trials for our current product candidates and potentialany future product candidates, including statements regarding the timing of initiation and completion of the studies and trials;
•our expectations regarding the clinical effectiveness of our products, product candidates and any future product candidates and our expectations regarding the results of ourany clinical trials;trials and preclinical studies;
•the timing of and our ability to request, obtain and maintain U.S. Food and Drug Administration (“FDA”)FDA or other regulatory authority approval of, or other action with respect to our products, product candidates and any future product candidates in the U.S., Canada,United States, Europe, Japan and elsewhere, including the expected timing of, and regulatory and/or other review of, filings for oursuch products, product candidates and any future product candidates;
•our expectations related to the use of proceeds from our financing activities;
•our estimates regarding anticipated operating expenses and capital requirements and our needs for additional financing;
the commercial launch and potential future sales
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Table of our current or any other future product candidates;Contents
our commercialization, marketing, manufacturing and supply management capabilities and strategies;
third-party payor coverage and reimbursement for our product candidates;
the glaucoma patient market size and the rate and degree of market adoption of our product candidates by eye-care professionals and patients;
the timing, cost or other aspects of the commercial launch of our product candidates;
•our plans to pursue development of additional product candidates and technologies in ophthalmology, including development of our products or product candidates for additional indications, and our preclinical retinal programs and other therapeutic opportunities;
•the potential advantages of our products, product candidates and any future product candidates;
our plans to explore possible uses of our existing proprietary compounds beyond glaucoma;
•our ability to protect our proprietary technology and enforce our intellectual property rights; and
•our expectations regarding existing and future collaborations, licensing, acquisitions and strategic operations, including our ability to in-license or acquire additional ophthalmic products, product candidates or product candidates; and
our stated objective of building a major ophthalmic pharmaceutical company.technologies.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics, industry changechanges and other factors beyond our control, and depend on regulatory approvals and economic and other environmental circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. We discuss many of these risks in greater detail under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2021, as filed with the Securities and Exchange Commission (“SEC”) on March 9, 2017,February 25, 2022, and other documents we have filed or furnished with the SEC.
You should not rely upon forward-looking statements as predictions of future events.

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In particular, our receipt of a Prescription Drug User Fee Act (“PDUFA”) goal date notification and the FDA advisory committee’s vote in favor of RhopressaTM do not constitute FDA approval of the RhopressaTM New Drug Application (“NDA”), and there can be no assurance that the FDA will complete its review by the PDUFA goal date, that the FDA will not require changes or additional data that must be made or received before it will approve the NDA, if ever, or that the FDA will approve the NDA.
Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and liquidity, and events in the industry in which we operate, are consistent with the forward-looking statements contained in this report, they may not be predictive of results or developments in future periods.
In particular, FDA and European Medicines Agency (“EMA”) approval of Rhopressa® and Rocklatan®, and Medicines and Healthcare products Regulatory Agency (“MHRA”) authorization of Roclanda® does not guarantee regulatory approval of Rhopressa®, Rocklatan® or Roclanda® in other jurisdictions, and there can be no assurance that we will receive regulatory approval for Rhopressa®, Rocklatan® or Roclanda® in such other jurisdictions. In addition, FDA approval of Rhopressa® and Rocklatan® does not guarantee FDA approval of our product candidates or any future product candidates and there can be no assurance that we will receive FDA approval for our product candidates or any future product candidates. Furthermore, the acceptance of the Investigational New Drug Applications by the FDA for our product candidates does not guarantee FDA approval of such product candidates and the outcomes of later clinical trials for our product candidates may not be sufficient to submit a New Drug Application (“NDA”) with the FDA or to receive FDA approval. In addition, the clinical trials discussed in this report are preliminary and the outcome of such clinical trials may not be predictive of the outcome of later clinical trials. Any future clinical trial results may not demonstrate safety and efficacy sufficient to obtain regulatory approval related to the clinical trials findings discussed in this report, and we may suspend or discontinue research programs at any time for any reason.
Any forward-looking statements that we make in this report speak only as of the date of this report. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether as athe result of new information, future events or otherwise, after the date of this report.

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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AERIE PHARMACEUTICALS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
SEPTEMBER 30, 2017 DECEMBER 31, 2016MARCH 31, 2022DECEMBER 31, 2021
Assets   Assets
Current assets   Current assets
Cash and cash equivalents$194,078
 $197,945
Cash and cash equivalents$56,441 $37,187 
Short-term investments87,256
 35,717
Short-term investments138,807 102,614 
Accounts receivable, netAccounts receivable, net63,617 68,828 
InventoryInventory40,190 40,410 
Licensing receivableLicensing receivable— 90,000 
Prepaid expenses and other current assets2,065
 4,028
Prepaid expenses and other current assets17,911 16,611 
Total current assets283,399
 237,690
Total current assets316,966 355,650 
Long-term investments901
 —
Long-term investments3,985 — 
Property, plant and equipment, net19,246
 7,857
Property, plant and equipment, net51,226 51,472 
Operating lease right-of-use assetsOperating lease right-of-use assets21,916 22,669 
Other assets2,656
 2,707
Other assets1,453 1,600 
Total assets$306,202
 $248,254
Total assets$395,546 $431,391 
Liabilities and Stockholders’ Equity   
Liabilities and Stockholders’ (Deficit) EquityLiabilities and Stockholders’ (Deficit) Equity
Current liabilities   Current liabilities
Accounts payable and other current liabilities$18,045
 $18,820
Interest payable551
 551
Accounts payableAccounts payable$7,877 $8,285 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities102,950 112,341 
Operating lease liabilitiesOperating lease liabilities4,464 4,365 
Total current liabilities18,596
 19,371
Total current liabilities115,291 124,991 
Convertible notes, net123,769
 123,539
Convertible notes, net311,678 234,527 
Deferred revenue, non-currentDeferred revenue, non-current70,000 64,315 
Operating lease liabilities, non-currentOperating lease liabilities, non-current21,033 21,751 
Other non-current liabilities4,569
 —
Other non-current liabilities3,256 3,140 
Total liabilities146,934
 142,910
Total liabilities521,258 448,724 
Commitments and contingencies (Note 11)
 
Stockholders’ equity   
Preferred stock, $0.001 par value; 15,000,000 shares authorized as of September 30, 2017 and December 31, 2016; None issued and outstanding—
 —
Common stock, $0.001 par value; 150,000,000 shares authorized as of September 30, 2017 and December 31, 2016; 36,426,830 and 33,458,607 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively36
 33
Commitments and contingencies (Note 12)Commitments and contingencies (Note 12)00
Stockholders’ deficitStockholders’ deficit
Preferred stock, $0.001 par value; 15,000,000 shares authorized as of March 31, 2022 and December 31, 2021; none issued and outstandingPreferred stock, $0.001 par value; 15,000,000 shares authorized as of March 31, 2022 and December 31, 2021; none issued and outstanding— — 
Common stock, $0.001 par value; 150,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 48,635,700 and 48,444,473 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectivelyCommon stock, $0.001 par value; 150,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 48,635,700 and 48,444,473 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively48 48 
Additional paid-in capital562,545
 422,002
Additional paid-in capital1,016,510 1,136,656 
Accumulated other comprehensive loss(98) (68)Accumulated other comprehensive loss(430)(126)
Accumulated deficit(403,215) (316,623)Accumulated deficit(1,141,840)(1,153,911)
Total stockholders’ equity159,268
 105,344
Total liabilities and stockholders’ equity$306,202
 $248,254
Total stockholders’ deficitTotal stockholders’ deficit(125,712)(17,333)
Total liabilities and stockholders’ deficitTotal liabilities and stockholders’ deficit$395,546 $431,391 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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AERIE PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per share data)
 THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
 2017 2016 2017 2016
Operating expenses       
Selling, general and administrative$19,774
 $10,627
 $51,402
 $29,814
Research and development12,408
 12,688
 33,977
 38,301
Total operating expenses32,182
 23,315
 85,379
 68,115
Loss from operations(32,182) (23,315) (85,379) (68,115)
Other income (expense), net(141) (460) (1,071) (1,490)
Net loss before income taxes(32,323) (23,775) (86,450) (69,605)
Income tax expense49
 39
 142
 132
Net loss$(32,372) $(23,814) $(86,592) $(69,737)
Net loss per common share - basic and diluted$(0.89) $(0.81) $(2.48) $(2.52)
Weighted average number of common shares outstanding - basic and diluted36,210,329
 29,380,453
 34,932,551
 27,632,090
        
Net loss$(32,372) $(23,814) $(86,592) $(69,737)
Unrealized (loss) gain on available-for-sale investments(17) (3) (30) 166
Comprehensive loss$(32,389) $(23,817) $(86,622) $(69,571)

 THREE MONTHS ENDED MARCH 31,
 20222021
Product revenues, net$29,835 $22,970 
Total revenues, net29,835 22,970 
Costs and expenses:
Cost of goods sold6,780 6,700 
Selling, general and administrative31,524 32,598 
Research and development25,174 17,891 
Total costs and expenses63,478 57,189 
Loss from operations(33,643)(34,219)
Other expense, net(1,555)(7,714)
Loss before income taxes(35,198)(41,933)
Income tax expense693 31 
Net loss$(35,891)$(41,964)
Net loss per common share—basic and diluted$(0.76)$(0.91)
Weighted average number of common shares
 outstanding—basic and diluted		47,520,045 46,109,080 
Net loss$(35,891)$(41,964)
Unrealized loss on available-for-sale investments, net(304)(12)
Comprehensive loss$(36,195)$(41,976)
The accompanying notes are an integral part of these condensed consolidated financial statements.

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AERIE PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Cash FlowsStockholders’ (Deficit) Equity
(Unaudited)
(in thousands)thousands, except share data)

 COMMON STOCKADDITIONAL
PAID-IN
CAPITAL		ACCUMULATED OTHER
COMPREHENSIVE LOSS		ACCUMULATED
DEFICIT		TOTAL
 SHARESAMOUNT
Balances at December 31, 202046,821,644 $47 $1,103,074 $(52)$(1,079,101)$23,968 
Issuance of common stock upon exercise of stock options and warrants62,016 — 26 — — 26 
Issuance of common stock for restricted stock awards, net10,162 — (1,127)— — (1,127)
Stock-based compensation— — 8,741 — — 8,741 
Other comprehensive loss— — — (12)— (12)
Net loss— — — — (41,964)(41,964)
Balances at March 31, 202146,893,822 $47 $1,110,714 $(64)$(1,121,065)$(10,368)
 NINE MONTHS ENDED 
 SEPTEMBER 30,
 2017 2016
Cash flows from operating activities   
Net loss$(86,592) $(69,737)
Adjustments to reconcile net loss to net cash used in operating activities   
Depreciation916
 702
Amortization of deferred financing costs and debt discount230
 227
Amortization and accretion of premium or discount on available-for-sale investments, net52
 403
Stock-based compensation18,072
 11,514
Unrealized foreign exchange loss522
 —
Changes in operating assets and liabilities   
Prepaid, current and other assets1,718
 (916)
Accounts payable and other current liabilities(1,981) (3,187)
Net cash used in operating activities(67,063) (60,994)
Cash flows from investing activities   
Purchase of available-for-sale investments(101,217) (19,948)
Proceeds from sales and maturities of investments48,696

35,355
Purchase of property, plant and equipment(7,073) (1,392)
Net cash (used in) provided by investing activities(59,594) 14,015
Cash flows from financing activities   
Proceeds from sale of common stock, net122,046
 167,387
Proceeds related to issuance of stock for stock-based compensation arrangements, net744
 470
Net cash provided by financing activities122,790
 167,857
Net change in cash and cash equivalents(3,867) 120,878
Beginning of period197,945
 91,060
End of period$194,078
 $211,938
Supplemental disclosures   
Income taxes paid$—
 $1,790
Interest paid$1,636
 $1,641
Non-cash investing and financing activities   
Build-to-suit lease transaction (Note 8)
 

 COMMON STOCKADDITIONAL
PAID-IN
CAPITAL		ACCUMULATED OTHER
COMPREHENSIVE LOSS		ACCUMULATED
DEFICIT		TOTAL
 SHARESAMOUNT
Balances at December 31, 202148,444,473 $48 $1,136,656 $(126)$(1,153,911)$(17,333)
Cumulative effect adjustment from adoption of ASU 2020-06— — (124,666)— 47,962 (76,704)
Issuance of common stock for restricted stock awards, net191,227 — (358)— — (358)
Stock-based compensation— — 4,878 — — 4,878 
Other comprehensive loss— — — (304)— (304)
Net loss— — — — (35,891)(35,891)
Balances at March 31, 202248,635,700 $48 $1,016,510 $(430)$(1,141,840)$(125,712)
The accompanying notes are an integral part of these condensed consolidated financial statements.

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AERIE PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 THREE MONTHS ENDED 
MARCH 31,
 20222021
Cash flows from operating activities
Net loss$(35,891)$(41,964)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation1,604 1,499 
Amortization and accretion2,007 7,408 
Stock-based compensation4,632 8,749 
Other non-cash(50)1,116 
Changes in operating assets and liabilities
Accounts receivable, net5,211 9,872 
Inventory538 (1,052)
Prepaid, current and other assets(1,211)(4,286)
Licensing receivable90,000 — 
Accounts payable, accrued expenses and other current liabilities(9,517)(10,297)
Operating lease liabilities(1,097)(1,846)
Deferred revenue5,685 747 
Net cash provided by (used in) operating activities61,911 (30,054)
Cash flows from investing activities
Purchase of available-for-sale investments(70,308)(25,236)
Proceeds from sales and maturities of investments29,605 28,288 
Purchase of property, plant and equipment(1,597)(772)
Net cash (used in) provided by investing activities(42,300)2,280 
Cash flows from financing activities
Payments related to issuance of stock for stock-based compensation arrangements, net(357)(1,101)
Net cash used in financing activities(357)(1,101)
Net change in cash and cash equivalents19,254 (28,875)
Cash and cash equivalents, at beginning of period37,187 151,570 
Cash and cash equivalents, at end of period$56,441 $122,695 
Non-cash investing and financing activities
Purchase of property, plant and equipment in accounts payable and accrued expenses and other current liabilities$742 $182 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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AERIE PHARMACEUTICALS, INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. The Company
Aerie Pharmaceuticals, Inc. (“Aerie”), with its wholly-owned subsidiaries, Aerie Distribution, Inc., Aerie Pharmaceuticals Limited, and Aerie Pharmaceuticals Ireland Limited and Avizorex Pharma S.L. (“Aerie Distribution,” “Aerie Limited,” “Aerie Ireland Limited” and “Aerie Ireland Limited,“Avizorex,” respectively, together with Aerie, the “Company”), is a clinical-stage pharmaceutical company focused on the discovery, development and commercialization of first-in-class ophthalmic therapies for the treatment of patients with eye diseases and conditions including open-angle glaucoma, dry eye, diabetic macular edema (“DME”) and other diseases of the eye.wet age-related macular degeneration (“AMD”). The Company has its principal executive offices in Irvine, California,Durham, North Carolina, and operates as one1 business segment.
U.S. Commercialization of the Glaucoma Franchise
The Company has two advanced-stage product candidatesdeveloped and commercialized 2 U.S. Food and Drug Administration (“FDA”) approved products, Rhopressa® (netarsudil ophthalmic solution) 0.02% (“Rhopressa®”) and Rocklatan® (netarsudil/latanoprost ophthalmic solution) 0.02%/0.005% (“Rocklatan®”), which are sold in the United States and comprise its glaucoma franchise. Rhopressa® is a once-daily eye drop designed to lowerreduce elevated intraocular pressure (“IOP”) in patients with open-angle glaucoma or ocular hypertension that it intends to commercialize on its own in North American markets, if approved. The Company’s strategy also includes pursuing regulatory approval for these product candidates in Europe and Japan on its own. The first product candidate, RhopressaTM (netarsudil ophthalmic solution) 0.02% (“RhopressaTM”),hypertension. Rocklatan® is a once-daily eye drop designed to lower IOP infixed-dose combination of Rhopressa® and latanoprost, a commonly prescribed drug for the treatment of patients with open-angle glaucoma or ocular hypertension, which the Company has submitted a New Drug Application (“NDA”) with the U.S. Food and Drug Administration (“FDA”) on February 28, 2017. The Prescription Drug User Fee Act goal date has been set for February 28, 2018.hypertension. The Company also intends to file for European regulatory approval ofis commercializing RhopressaTM in the second half of 2018. Additionally, the Company has commenced Phase 1 and Phase 2 clinical trial activities for RhopressaTM on Japanese patients®, which was launched in the United States in April 2018, and anticipates conducting futureRocklatan®, which was launched in the United States in May 2019.
In March 2022, the Company commenced a Phase 4 program that was designed to further demonstrate that Rocklatan® is a highly effective single bottle, once daily therapy.
Efforts Outside the United States
In addition to actively promoting Rhopressa® and Rocklatan® in the United States, the Company is also developing business opportunities outside of the United States and has made progress in its efforts to commercialize Rhopressa® and Rocklatan® in Europe, Japan and other regions of the world.
The Company partnered and has collaboration agreements in place with Santen Pharmaceuticals Co., Ltd. (“Santen Pharmaceuticals”) and Santen SA (“Santen SA” and, together with Santen Pharmaceuticals, “Santen”) to develop and commercialize its products in Japan and South Korea, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam and Taiwan (collectively, “East Asia”), as well as Europe, China, India, the Middle East, Commonwealth of Independent States (“CIS”), Africa, parts of Latin America and the Oceania countries. The initial Collaboration and License Agreement with Santen was executed in October 2020 (the “First Santen Agreement”) to advance the Company’s clinical development and ultimately commercialize Rhopressa® and Rocklatan® in Japan and East Asia. The second Collaboration and License Agreement with Santen (the “Second Santen Agreement” and, together with the First Santen Agreement, the “Santen Agreements”) was executed in December 2021 to develop and commercialize Rhopressa® and Rocklatan® in Europe, China, India, the Middle East, CIS, Africa, parts of Latin America and the Oceania countries. See Note 3 for additional information. In Europe, Rhopressa® and Rocklatan® will be marketed under the namesRhokiinsa® andRoclanda®, respectively.
Rhokiinsa® and Roclanda® were granted a Centralised Marketing Authorisation (“Centralised MA”) by the European Commission (“EC”) in November 2019 and January 2021, respectively. In April 2021, Roclanda® received marketing authorisation from the Medicines and Healthcare Products Regulatory Agency (“MHRA”) in Great Britain.
In Japan, in October 2021, the Company reported positive topline results for its Phase 3 clinical trial of netarsudil ophthalmic solution 0.02% (“netarsudil 0.02%”), the first of three expected Phase 3 clinical trials in Japan. A second, confirmatory Phase 3 study, required for approval in Japan, is currently underway. Santen is taking the lead on next steps in preparation for registration in Japan under the terms of the First Santen Agreement. Clinical trials for Rocklatan® in Japan have not yet begun.
Glaucoma Product Manufacturing
The Company has a sterile fill manufacturing facility in Athlone, Ireland (“Athlone plant”), for the production of its FDA approved products and clinical supplies. In addition, the Athlone plant has also manufactured clinical supplies of Rhopressa® for the Phase 3 clinical trials in Japan as well as registration batches to support product approval in Japan.
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Product Candidates in Development
The Company is furthering the development of its product candidates focused on dry eye and retinal diseases as described below.
Dry Eye Program
The Company is developing AR-15512 ophthalmic solution for the treatment of patients with dry eye disease. The active ingredient in AR-15512 is a potent and selective agonist of the TRPM8 ion channel, a cold sensor and osmolarity sensor that regulates tear production and blink rate. In addition, activating the TRPM8 receptor may reduce ocular discomfort by promoting a cooling sensation.
In September 2021, the Company reported topline results of its Phase 2b clinical study, named COMET-1, for AR-15512. The Company completed a dose ranging study evaluating two concentrations of AR-15512 (0.0014% and 0.003%) in a 90-day trial with 369 subjects. The COMET-1 clinical study achieved statistical significance for multiple pre-specified and validated signs and symptoms. The greatest efficacy was demonstrated with the objective of receiving regulatory approval of RhopressaTM in Japan. The second product candidate is once-daily RoclatanTM (netarsudil/latanoprost ophthalmic solution) 0.02%/0.005% (“RoclatanTM”), a fixed-dose combination of RhopressaTM and latanoprost forhigher concentration 0.003% formulation, which the Company plans to submit an NDAadvance to Phase 3 studies. The study did not achieve statistical significance at the pre-determined primary endpoints at Day 28. The Company gained alignment with the FDA in the secondfirst quarter of 2018. 2022 on the results of the Phase 2b clinical trial and confirmed the design of the Phase 3 registrational trials.
Retina Program
The Company is currently conductingdeveloping two sustained-release implants focused on retinal diseases, AR-1105 and AR-14034 SR. For AR-1105, a dexamethasone steroid implant, the Company completed a Phase 32 clinical trial named Mercury 3for patients with macular edema due to retinal vein occlusion (“RVO”) in Europe comparing RoclatanTMJuly 2020 and reported topline results indicating sustained efficacy of up to Ganfort®, which if successful,six months.
The preclinical sustained-release implant AR-14034 SR is expectedbeing designed to improve its commercialization prospects in that region. Mercury 3 is not necessary for approval indeliver the United States. The Company is also conducting ongoing research to evaluate injectable sustained release formulation technologies withactive ingredient axitinib, a potent small molecule pan vascular endothelial growth factor (“VEGF”) receptor inhibitor. AR-14034 SR has the potential capabilityto provide a duration of delivering Aerie’s preclinical molecule AR-13154 internally in the eye over several months for the treatmenteffect of retinalapproximately one year with a once per-year injection. It may potentially be used to treat DME, wet AMD and related diseases such as wet age-related macular degeneration (“AMD”) and diabetic macular edema (“DME”), and is also evaluating possible uses for its existing proprietary portfolio of Rho kinase inhibitors beyond ophthalmology.
In 2015, the Company revised its corporate structure to align with its business strategy outside of North America by establishing Aerie Limited and Aerie Ireland Limited. Aerie assigned the beneficial rights to its non-U.S. and non-Canadian intellectual property for its lead product candidates to Aerie Limited (the “IP Assignment”). As part of the IP Assignment, Aerie and Aerie Limited entered into a research and development cost-sharing agreement pursuant to which Aerie and Aerie Limited will share the costs of the development of intellectual property and Aerie Limited and Aerie Ireland Limited entered into a license arrangement pursuant to which Aerie Ireland Limited will develop and commercialize the beneficial rights of the intellectual property assigned as part of the IP Assignment. In 2016, Aerie assigned the beneficial rights to certain of Aerie’s intellectual property in the U.S. and Canada to Aerie Distribution, and amended and restated the research and development cost-sharing agreement to transfer Aerie’s rights and obligations under the agreement to Aerie Distribution.retina.
The Company has not yet commenced commercial operations and therefore has not generated product revenue. Liquidity
The Company’s activities since inception haveprior to the commercial launch of Rhopressa® had primarily consisted of developing product candidates, raising capital and performing research and development activities. The Company does not expect to generate revenue until and unless it receives regulatory approval of and successfully commercializes its current product candidates. The Company has incurred losses and experienced negative operating cash flows since inception. The Company hashad previously funded its operations primarily through the sale of equity securities and issuance of convertible notes (Note 7).
Ifprior to generating product revenues. In September 2019, the Company does not successfully commercializeissued an aggregate principal amount of $316.25 million of 1.50% convertible senior notes due October 2024 (the “Convertible Notes”). See Note 10 for additional information. Further, the Company entered into the First Santen Agreement and Second Santen Agreement in October 2020 and December 2021, respectively, pursuant to which Santen made upfront payments of $50.0 million and $88.0 million, respectively. In December 2021, the Company also earned a $2.0 million supplemental upfront payment associated with the Second Santen Agreement. Total aggregate upfront payments of $90.0 million associated with the Second Santen Agreement (the “Second Santen Agreement Upfront Payment”) were received in January 2022. See Note 3 for additional information. As of March 31, 2022, the Company had $199.2 million in cash, cash equivalents and investments. The Company believes that its cash, cash equivalents and investments and projected cash flows from revenues, will provide sufficient resources to support its operations, including interest payments for its Convertible Notes, through at least the next twelve months from the date of this filing.
The Company expects to incur ongoing operating losses until such a time when Rhopressa® or Rocklatan® or any of its current or future product candidates, it may be unableif approved, generate sufficient cash flows for the Company to generate product revenue or achieve profitability. Accordingly, the Company may be required to obtain further funding through debt or equity offerings or other public or private offerings, debt financing,sources. In addition, the Company continues to evaluate collaboration and licensing arrangements or other sources.opportunities related to its product candidates in development. Adequate additional funding may not be available to the Company on acceptable terms, or at all. If the Company is unable to raise capital when needed or on attractiveacceptable terms, it may be forced to delay, reduce or eliminate its research and development programs or commercialization and manufacturing efforts.

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2. Significant Accounting Policies
Basis of Presentation
The Company’s interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position and results of operations for the interim periods presented. Certain information and disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 20162021 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 9, 2017.February 25, 2022. The results for the three and nine months ended September 30, 2017March 31, 2022 are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.
Principles of Consolidation
The interim condensed consolidated financial statements include the accounts of Aerie and its wholly-owned subsidiaries. All intercompany accounts, transactions and profits have been eliminated in consolidation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of income and expenses during the reporting periods. Significant items subject to such estimates and assumptions include revenue recognition, leases, acquisitions, stock-based compensation and fair value measurements. On March 11, 2020, the valuationWorld Health Organization declared the coronavirus (“COVID-19”) outbreak a pandemic. The COVID-19 pandemic continues to evolve, which the Company considered in its critical and significant accounting estimates as future developments continue to be uncertain, including as a result of stock optionsnew information that may emerge concerning COVID-19 and operating expense accruals.its variants and the actions taken to contain or treat it, as well as the economic impact on eye-care professionals, patients, third parties and markets. Actual results could differ from the Company’s estimates.
InvestmentsAdoption of New Accounting Standards
The Company determinesIn August 2020, the appropriate classification of its investments in debt and equity securities at the time of purchase. The Company’s investments are comprised of certificates of deposit, commercial paper, corporate bonds and government agency securities that are classified as available-for-sale in accordance with Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting Standards Codificationfor Convertible Instruments and Contracts in an Entity's Own Equity (“ASC”ASU 2020-06”) 320, Investments—Debt. This ASU simplifies the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and Equity Securities. The Company classifies investments available to fund current operations as current assets on its consolidated balance sheets. Investments are classified as long-term assetsequity. More specifically, the amendments focus on the consolidated balance sheets if (i)guidance for convertible instruments and the derivative scope exception for contracts in an entity’s own equity. Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument, such as the Convertible Notes, will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments and requires additional disclosures. The guidance became effective for the Company has the intentbeginning on January 1, 2022, and abilitywas applied using a modified retrospective approach through a cumulative-effect adjustment to hold the investments for a period of at least one year and (ii) the contractual maturity dateretained earnings as of the investments is greater than one year.
Available-for-sale investments are recorded at fair value, with unrealized gains or losses includedeffective date. As such, financial results reported in comprehensive lossprior periods were not adjusted. The impact of adopting ASU 2020-06 on January 1, 2022, was comprised of a $124.7 million decrease to additional paid-in capital, a $76.7 million increase to convertible notes, net to reduce debt discounts and a $48.0 million decrease to accumulated deficit. Upon adoption of ASU 2020-06, the Company’s interest expense, recognized as a component of other expense, net in its condensed consolidated statements of operations and comprehensive loss, and in accumulated other comprehensive loss on the condensed consolidated balance sheets. Realized gains and losses are determined using the specific identification method and are included as a component of other income (expense), net (Note 3). There werewill decrease which primarily relates to no realized gains or losses recognized for the three and nine months ended September 30, 2017 or 2016.
The Company reviews investments for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers its intent to sell, or whether it is more likely than not that the Company will be required to sell the investment before recovery of the investment’s amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, the severity and the duration of the impairment and changes in value subsequent to period end. As of September 30, 2017, there were no investments with a fair value that was significantly lower than the amortized cost basis or any investments that had been in an unrealized loss position for a significant period.

Fair Value Measurements
The Company records certain financial assets and liabilities at fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair value of the Company’s financial instruments, including cash and cash equivalents and accounts payable, approximate their respective carrying values due to the short-term nature of these instruments. The estimated fair value of the 2014 Convertible Notes (as defined in Note 7) was $269.8 million and $209.6 million as of September 30, 2017 and December 31, 2016, respectively. The increase in the estimated fair value of the 2014 Convertible Notes was primarily attributable to the increase in the closing price of Aerie’s common stock on September 30, 2017 as compared to December 31, 2016.
Adoption of New Accounting Standards
In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). The new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired, or disposed of, is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The new standard is effective for the Company beginning on January 1, 2018; however, Aerie has elected to early adopt this standard as of July 1, 2017. The adoption of ASU 2017-01 had no impact on the Company’s financial statements for the three and nine months ended September 30, 2017, but may impact the accounting for subsequent business development transactions. See Note 12, “Subsequent Events,” for additional information.
Recent Accounting Pronouncements
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under ASU 2017-09, an entity will not apply modification accounting to a share-based payment award if the award’s fair value, vesting conditions and classification as an equity or liability instrument are the same immediately before and after the change. ASU 2017-09 will be applied prospectively to awards modified on or after the adoption date. The guidance is effective for the Company beginning on January 1, 2018. Early adoption is permitted. The Company is evaluating the impact of the adoption of this guidance on its consolidated financial statements but does not expect it to have a material impact.
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which eliminates the exception to the principle in ASC 740, Income Taxes,that generally requires comprehensive recognition of current and deferred income taxesfor all intra-entity sales of assets other than inventory. As a result, a reporting entity would recognize the taxlonger recognizing non-cash interest expense from the salediscount amortization, partially offset by an increase in amortization of debt issuance costs. See Note 10 for additional information.
Recently Issued Accounting Standards
There have been no new accounting pronouncements issued since the filing of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. The new standard is effectiveAnnual Report on Form 10-K for the Company beginning on January 1, 2018, with early adoption permitted, and must be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. At September 30, 2017, the Company has deferred $2.3 million of income tax effects from past intercompany transactionsyear ended December 31, 2021 that are recorded as other assets that it expects to adjust through opening accumulated deficit when the Company adopts the standard on January 1, 2018.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. Currently, U.S. GAAP delays recognition ofmaterially impact the full amount of credit losses until the loss is probable of occurring. Under this new standard, the income statement will reflect an entity’s current estimate of all expected credit losses. The measurement of expected credit losses will be based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down of the security. The new standard is effective for the Company beginning on January 1, 2020. Early adoption is permitted for fiscal year beginning January 1, 2019. The new guidance prescribes different transition methods for the various provisions. The Company is currently evaluating the impact of this accounting standard update on itsCompany’s consolidated financial statements and disclosures.statements.

7
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize a right
Table of use asset and related lease liability for those leases classified as operating leases at the commencement date and for those leases that have lease terms of more than 12 months. The guidance is effective for the Company beginning on January 1, 2019, and all annual and interim periods thereafter, with early adoption permitted, and must be adopted using a modified retrospective transition approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, and provides for certain practical expedients. The Company is currently evaluating the impact of this accounting standard update on the its consolidated financial statements and disclosures.Contents
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which provides guidance related to the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The guidance is effective for the Company beginning on January 1, 2018, with early adoption permitted. The new guidance prescribes different transition methods for the various provisions. The Company is currently evaluating the impact of this accounting standard update on the its consolidated financial statements and disclosures, but does not expect it to have a material impact.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The standard states that an entity should recognize revenue based on the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB has subsequently issued amendments to ASU 2014-09 that have the same effective date of January 1, 2018. The future impact of ASU 2014-09 will be dependent on the nature of the Company’s future revenue contracts and arrangements, if any.
Net Loss per Common Share
Basic net loss per common share (“Basic EPS”) is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period, without consideration for potentially dilutive securities with the exception of warrants for common stock with a $0.05 exercise price, which are exercisable for nominal consideration and are therefore included in the calculation of the weighted-average number of shares of common stock as common stock equivalents.securities. Diluted net loss per share (“Diluted EPS”) gives effect to all dilutive potential shares of common stock outstanding during this period. For Diluted EPS, net loss used in calculating Basic EPS ismay be adjusted for certain items related to the dilutive securities.
For all periods presented, Aerie’s potential common stock equivalents have been excluded from the computation of Diluted EPS as their inclusion would have had an anti-dilutive effect.
The potential common stock equivalents that have been excluded from the computation of Diluted EPS consist of the following:
 THREE MONTHS ENDED 
MARCH 31,
 20222021
Convertible Notes (1)
12,662,650 — 
Outstanding stock options6,711,485 8,720,368 
Non-vested restricted stock awards1,077,745 714,005 
Non-vested restricted stock units151,282 95,238 
Total20,603,162 9,529,611 
(1)     Upon adoption of ASU 2020-06 on January 1, 2022, the if-converted method is applied to the Convertible Notes in the calculation of earnings per share. Prior to the adoption of ASU 2020-06, the Company did not include the conversion value of the Convertible Notes in the diluted earnings per share computation.
 THREE MONTHS ENDED 
 SEPTEMBER 30,		 NINE MONTHS ENDED 
 SEPTEMBER 30,
 2017 2016 2017 2016
2014 Convertible Notes(1)
5,040,323
 5,040,323
 5,040,323
 5,040,323
Outstanding stock options6,237,959
 5,152,024
 6,237,959
 5,152,024
Stock purchase warrants157,500
 157,500
 157,500
 157,500
Unvested restricted common stock awards439,549
 171,734
 439,549
 171,734
(1)Conversion is limited to a 9.985% ownership cap in shares of common stock by the holder. In addition to the common stock equivalents presented above, the 2014 Convertible Notes provide for an increase in the conversion rate if conversion is elected in connection with a significant corporate transaction. Refer to Note 7 for further information regarding the 2014 Convertible Notes.

3. Revenue Recognition
Product Revenues
Net product revenues for the three months ended March 31, 2022 and 2021 were generated from sales of Rhopressa® and Rocklatan®, the Company’s glaucoma franchise products, which were commercially launched in the United States in April 2018 and May 2019, respectively. Aerie’s customers include a limited number of national and select regional wholesalers (the “distributors”). For the three months ended March 31, 2022, 3 distributors accounted for 38%, 35% and 26% of total revenues, respectively. For the three months ended March 31, 2021, 3 distributors accounted for 36%, 30% and 33% of total revenues, respectively. Product affordability for the patient drives consumer acceptance, and this is generally managed through coverage by third-party payers, such as government or private healthcare insurers and pharmacy benefit managers (“Third-party Payers”) and such product may be subject to rebates and discounts payable directly to those Third-party Payers.
Product revenues are recorded net of trade discounts, allowances, rebates, chargebacks, estimated returns and other incentives in the condensed consolidated statements of operations and comprehensive loss, discussed below. These reserves are classified as either reductions of accounts receivable or as current liabilities in the condensed consolidated balance sheets. Amounts billed or invoiced are included in accounts receivable, net on the condensed consolidated balance sheets. The Company did not have any contract assets (unbilled receivables) as of March 31, 2022 or December 31, 2021, as customer invoicing generally occurs before or at the time of revenue recognition. The Company did not have any contract liabilities as of March 31, 2022 or December 31, 2021, as the Company did not receive payments in advance of fulfilling its performance obligations to its customers. The Company calculates its net product revenues based on the wholesale acquisition cost that the Company charges its distributors for Rhopressa® and Rocklatan® less provisions for (i) trade discounts and allowances, such as discounts for prompt payment and distributor fees, (ii) estimated rebates to Third-party Payers, estimated payments for Medicare Part D prescription drug program coverage gap (commonly called the “donut hole”), patient co-pay program coupon utilization, chargebacks and other discount programs and (iii) reserves for expected product returns. Provisions for revenue reserves reduced product revenues by $63.8 million and $50.8 million in aggregate for the three months ended March 31, 2022 and 2021, respectively, a significant portion of which related to commercial and Medicare Part D rebates.
Trade Discounts and Allowances: The Company generally provides discounts on sales of Rhopressa® and Rocklatan® to its distributors for prompt payment and pays fees for distribution services and for certain data that distributors provide to the Company. The Company expects its distributors to earn these discounts and fees, and accordingly deducts the full amount of these discounts and fees from its gross product revenues at the time such revenues are recognized.
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Rebates, Chargebacks and Other Income (Expense), Net
Discounts: The Company contracts with Third-party Payers for coverage and reimbursement of Rhopressa® and Rocklatan®. The Company estimates the rebates, donut hole and chargebacks it expects to be obligated to provide to Third-party Payers and deducts these estimated amounts from its gross product revenue at the time the revenue is recognized. The Company estimates the rebates, donut hole and chargebacks that it expects to be obligated to provide to Third-party Payers based upon (i) the Company's contracts and applicable negotiations with these Third-party Payers, (ii) estimates regarding the payer mix for Rhopressa® and Rocklatan® based on utilization of both third-party and the Company’s historical data, (iii) inventory held by distributors and (iv) estimates of inventory held at the retail channel. Other income (expense), net consistsdiscounts include the Company’s co-pay assistance coupon programs for commercially-insured patients meeting certain eligibility requirements. The calculation of the following:accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to pay associated with product that has been recognized as revenue.
Product Returns: The Company estimates the amount of Rhopressa® and Rocklatan® that will be returned and deducts these estimated amounts from its gross revenue at the time the revenue is recognized. The Company currently estimates product returns based on historical information regarding returns of Rhopressa® and Rocklatan® as well as historical industry information regarding rates for comparable pharmaceutical products and product portfolios, the estimated remaining shelf life of Rhopressa® and Rocklatan® shipped to distributors, and contractual agreements with the Company's distributors intended to limit the amount of inventory they maintain. Reporting from the distributors includes distributor sales and inventory held by distributors, which provides the Company with visibility into the distribution channel to determine when the product would be eligible to be returned.
Santen Collaboration and License Agreements
Second Santen Agreement
In December 2021, Aerie Ireland Limited entered into the Second Santen Agreement with Santen which expands the scope of the First Santen Agreement, entered into in October 2020. Pursuant to the Second Santen Agreement, Aerie Ireland Limited granted to Santen the exclusive right to develop and commercialize Rhopressa® and Rocklatan® (the “Licensed Products”) in Europe, China, India, the Middle East, CIS, Africa, parts of Latin America and the Oceania countries (such jurisdictions collectively, the “Expanded Territories”). The Company is the sole manufacturer of the Licensed Products for Santen and Santen may manufacture, in certain circumstances, upon mutual agreement of both parties. In addition, Aerie Ireland Limited granted Santen a first right of refusal to commercialize the Licensed Products in Canada.
Under the agreement, Santen made the Second Santen Agreement Upfront payment in January 2022 to Aerie Ireland Limited which was comprised of an $88.0 million upfront payment and a $2.0 million supplemental upfront payment that was earned based on the achievement of an event that occurred in December 2021. Upon the achievement of certain events, Aerie Ireland Limited will earn various development milestones of up to $15.5 million and sales milestones of up to $60.0 million. In addition, Santen will pay Aerie Ireland Limited a royalty in excess of 25% of the Licensed Products’ net sales in the Expanded Territories, excluding China and India (and in excess of 20% of the Licensed Products’ net sales in China and India), such consideration consisting of the cost of products supplied to Santen from Aerie Ireland Limited and a royalty for the Company’s intellectual property. While the royalty rate decreases when the Licensed Products are manufactured by or on behalf of Santen, there is a guaranteed minimum percentage.
The term of the Second Santen Agreement continues on a country-by-country and product-by-product basis until the expiration of the obligation to make payments under the Second Santen Agreement with respect to each Licensed Product in each country or region. The Second Santen Agreement may be terminated by either Aerie Ireland Limited or Santen upon the other party’s material breach, bankruptcy or insolvency. Aerie Ireland Limited may also terminate the agreement upon a patent challenge by Santen or on a country-by-country basis upon a breach by Santen of its obligation to develop, obtain marketing approval of and commercialize the Licensed Products in certain of the Expanded Territories. Santen may terminate the Second Santen Agreement in its discretion if Santen reasonably determines that the Licensed Products are not commercially viable in the Expanded Territory (effective upon 180 days’ prior written notice). In addition, in the event that patents are issued that may prevent the commercialization of the Licensed Products during the three-year period following marketing authorization of Rhopressa® in China, Santen would have the right to terminate the agreement with respect to China only and require Aerie Ireland Limited to repay $8.0 million of the Second Santen Agreement Upfront Payment. In the event of termination, the Licensed Products in the applicable Expanded Territories will revert to Aerie Ireland Limited.
9
 THREE MONTHS ENDED 
 SEPTEMBER 30,		 NINE MONTHS ENDED 
 SEPTEMBER 30,
(in thousands)2017 2016 2017 2016
Interest and amortization expense$(597) $(600) $(1,799) $(1,910)
Foreign exchange loss(163) (4) (565) (14)
Investment income619
 144
 1,293
 434
 $(141) $(460) $(1,071) $(1,490)
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The foreign exchange loss duringCompany recognized deferred revenue, non-current as of March 31, 2022 and December 31, 2021 as follows:
(in thousands)MARCH 31, 2022DECEMBER 31, 2021
First Santen Agreement:
Upfront payment (1)
$50,000 $50,000 
Developmental milestones (2)
6,000 — 
Santen’s portion of shared costs (3)
6,000 6,315 
Second Santen Agreement:
Upfront payment (4)
8,000 8,000 
Total$70,000 $64,315 
(1)While the threeCompany determined that the license was a right to use the Company’s intellectual property and nine months ended September 30, 2017as of the effective date of the First Santen Agreement, the Company had provided all necessary information to Santen to benefit from the license and the license term had begun, revenue was not recognized upon satisfaction of the performance obligation due to the uncertainty around potential termination in the event that patents are issued that may prevent the commercialization of the Licensed Products.
The Company will recognize the $50.0 million upfront payment received under the First Santen Agreement, and any other current and potential future development milestones and sales milestones, when it is primarilyprobable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
(2)In March 2022, Santen made a $6.0 million developmental milestone payment in connection with the First Santen Agreement.
(3)This item represents Santen’s portion of shared costs related to conducting the remeasurementfirst Rhopressa® Phase 3 clinical trial in Japan, which commenced in the fourth quarter of 2020, as described above.
(4)As of March 31, 2022 and December 31, 2021, the Company recognized $8.0 million of the Company’s Euro-denominated monetary liability relatedSecond Santen Agreement Upfront Payment as deferred revenue, non-current in its consolidated balance sheet due to its build-to-suit lease obligation (Note 8), which is held by a subsidiary with a U.S. dollar functional currency.the uncertainty around potential termination in China in the event that patents are issued that may prevent the commercialization of the Licensed Products.
4. Investments
Cash, cash equivalents and investments as of September 30, 2017March 31, 2022 included the following:
GROSSGROSS
AMORTIZEDUNREALIZEDUNREALIZEDFAIR
(in thousands)COSTGAINSLOSSESVALUE
Cash and cash equivalents:
Cash and cash equivalents$56,441 $— $— $56,441 
Total cash and cash equivalents$56,441 $— $— $56,441 
Investments:
Certificates of deposit (due within 1 year)$9,044 $— $(14)$9,030 
Commercial paper (due within 1 year)54,456 — (186)54,270 
Corporate bonds (due within 1 year)41,747 — (178)41,569 
Corporate bonds (due within 2 years)4,020 — (35)3,985 
U.S. Government and government agencies (due within 1 year)33,955 — (17)33,938 
Total investments$143,222 $— $(430)$142,792 
Total cash, cash equivalents and investments$199,663 $— $(430)$199,233 

10
(in thousands)
AMORTIZED
COST
 
GROSS
UNREALIZED
GAINS
 
GROSS
UNREALIZED
LOSSES
 
FAIR
VALUE
Cash and cash equivalents:       
Cash and money market funds$194,078
 $—
 $—
 $194,078
Total cash and cash equivalents$194,078
 $—
 $—
 $194,078
Investments:       
Commercial paper (due within 1 year)$43,225
 $—
 $—
 $43,225
Corporate bonds (due within 1 year)44,125
 —
 (94) 44,031
Corporate bonds (due within 2 years)905
 —
 (4) 901
Total investments$88,255
 $—
 $(98) $88,157
Total cash, cash equivalents and investments$282,333
 $—
 $(98) $282,235
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Cash, cash equivalents and investments as of December 31, 20162021 included the following:
GROSSGROSS
AMORTIZEDUNREALIZEDUNREALIZEDFAIR
(in thousands)COSTGAINSLOSSESVALUE
Cash and cash equivalents:
Cash and cash equivalents$37,187 $— $— $37,187 
Total cash and cash equivalents$37,187 $— $— $37,187 
Investments:
Certificates of deposit (due within 1 year)$9,047 $— $(9)$9,038 
Commercial paper (due within 1 year)50,975 — (55)50,920 
Corporate bonds (due within 1 year)42,718 — (62)42,656 
Total investments$102,740 $— $(126)$102,614 
Total cash, cash equivalents and investments$139,927 $— $(126)$139,801 
Interest income earned on the Company’s cash, cash equivalents and investments was $0.1 million in each of the three months ended March 31, 2022 and 2021, respectively. Realized gains or losses were immaterial during the three months ended March 31, 2022 and 2021.
(in thousands)
AMORTIZED
COST
 
GROSS
UNREALIZED
GAINS
 
GROSS
UNREALIZED
LOSSES
 
FAIR
VALUE
Cash and cash equivalents:       
Cash and money market funds$196,445
 $—
 $—
 $196,445
Commercial paper1,500
 —
 —
 1,500
Total cash and cash equivalents$197,945
 $—
 $—
 $197,945
Investments:       
Certificates of deposit (due within 1 year)$6,920
 $4
 $(1) $6,923
Corporate bonds (due within 1 year)27,615
 4
 (75) 27,544
Government agencies (due within 1 year)1,250
 —
 —
 1,250
Total investments$35,785
 $8
 $(76) $35,717
Total cash, cash equivalents and investments$233,730
 $8
 $(76) $233,662
As of March 31, 2022 and December 31, 2021, the Company did not hold any equity securities.
5. Fair Value Measurements
The Company records certain financial assets and liabilities at fair value in accordance with the provisions of ASC 820 on fair value measurements. As defined in the guidance, fair value, defined as an exit price, represents the amount that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering these assumptions, the guidance defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.
Level 1—Unadjusted quoted prices in active, accessible markets for identical assets or liabilities.
Level 2—Other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs that are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The following tables summarize the fair value of financial assets and liabilities that are measured at fair value and the classification by level of input within the fair value hierarchy:
FAIR VALUE MEASUREMENTS AS OF
MARCH 31, 2022
(in thousands)LEVEL 1LEVEL 2LEVEL 3TOTAL
Cash and cash equivalents:
Cash and cash equivalents$56,441 $— $— $56,441 
Total cash and cash equivalents:$56,441 $— $— $56,441 
Investments:
Certificates of deposit$— $9,030 $— $9,030 
Commercial paper— 54,270 — 54,270 
Corporate bonds— 45,554 — 45,554 
U.S. Government and government agencies— 33,938 — 33,938 
Total investments$— $142,792 $— $142,792 
Total cash, cash equivalents and investments:$56,441 $142,792 $— $199,233 
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FAIR VALUE MEASUREMENTS AS OF
FAIR VALUE MEASUREMENTS AS OF
SEPTEMBER 30, 2017
DECEMBER 31, 2021
(in thousands)Level 1 Level 2 Level 3 Total(in thousands)LEVEL 1LEVEL 2LEVEL 3TOTAL
Cash and cash equivalents:       Cash and cash equivalents:
Cash and money market funds$194,078
 $—
 $—
 $194,078
Total cash and cash equivalents$194,078
 $—
 $—
 $194,078
Cash and cash equivalentsCash and cash equivalents$37,187 $— $— $37,187 
Total cash and cash equivalents:Total cash and cash equivalents:$37,187 $— $— $37,187 
Investments:       Investments:
Certificates of depositCertificates of deposit$— $9,038 $— $9,038 
Commercial paper$—
 $43,225
 $—
 $43,225
Commercial paper— 50,920 — 50,920 
Corporate bonds—
 44,932
 —
 44,932
Corporate bonds— 42,656 — 42,656 
Total investments$—
 $88,157
 $—
 $88,157
Total investments$— $102,614 $— $102,614 
Total cash, cash equivalents and investments$194,078
 $88,157
 $—
 $282,235
Total cash, cash equivalents and investments:Total cash, cash equivalents and investments:$37,187 $102,614 $— $139,801 

 
FAIR VALUE MEASUREMENTS AS OF
DECEMBER 31, 2016
(in thousands)Level 1 Level 2 Level 3 Total
Cash and cash equivalents:       
Cash and money market funds$196,445
 $—
 $—
 $196,445
Commercial paper—
 1,500
 —
 1,500
Total cash and cash equivalents$196,445
 $1,500
 $—
 $197,945
Investments:       
Certificates of deposit$—
 $6,923
 $—
 $6,923
Corporate bonds—
 27,544
 —
 27,544
Government agencies—
 1,250
 —
 1,250
Total investments$—
 $35,717
 $—
 $35,717
Total cash, cash equivalents and investments$196,445
 $37,217
 $—
 $233,662

Convertible Notes
As of September 30, 2017 and December 31, 2016, the estimatedThe fair value of the 2014 Convertible Notes, was $269.8 millionwhich differs from their carrying value, is influenced by interest rates, stock price and $209.6 million, respectively.stock price volatility and is determined by prices observed in market trading. The market for trading of the Convertible Notes is not considered to be an active market and therefore the estimate of fair value is based on Level 2 inputs. The estimated fair value of the 2014 Convertible Notes was $284.8 million and $270.4 million at March 31, 2022 and December 31, 2021, respectively.
There were no transfers between the different levels of the fair value hierarchy during the three months ended March 31, 2022 and 2021.
6. Inventory
Inventory consists of the following:
(in thousands)MARCH 31, 2022DECEMBER 31, 2021
Raw materials$4,968 $5,368 
Work-in-process30,480 30,989 
Finished goods4,742 4,053 
Total inventory$40,190 $40,410 
For the three months ended March 31, 2022 and 2021, $3.9 million and $4.4 million, respectively, of production costs associated with underutilized capacity at the Company’s Athlone plant were recorded to costs of goods sold. The underutilization results from the manufacturing plant having not yet reached full capacity as it commenced operations in early 2020.
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7. Property, Plant and Equipment, Net
Property, plant and equipment, net consists of the following:
(in thousands)MARCH 31, 2022DECEMBER 31, 2021
Manufacturing equipment$22,485 $22,464 
Laboratory equipment9,509 9,182 
Furniture and fixtures1,612 1,569 
Software, computer and other equipment7,857 7,779 
Leasehold improvements31,452 31,175 
Construction-in-progress2,703 2,037 
 Property, plant and equipment75,618 74,206 
Less: Accumulated depreciation(24,392)(22,734)
Property, plant and equipment, net$51,226 $51,472 
8. Leases
The Company has operating leases for corporate offices, research and development facilities and a fleet of vehicles. The properties primarily relate to the Company’s principal executive office and research facility located in Durham, North Carolina, regulatory, commercial support and other administrative activities located in Irvine, California, and clinical, finance and legal operations located in Bedminster, New Jersey. The Durham, North Carolina, facility consists of approximately 61,000 square feet of laboratory and office space under a lease that was renewed in the third quarter of 2021 and expires in June 2029. The Irvine, California, location consists of approximately 27,000 square feet of office space under a lease that was renewed in the third quarter of 2021 and expires in October 2027. The Bedminster, New Jersey, location consists of approximately 34,000 square feet of office space under a lease that expires in October 2029. There are also small offices in Ireland, the United Kingdom and Japan.
The Company is leasing approximately 30,000 square feet of interior floor space for its manufacturing plant in Athlone, Ireland. The Company is reasonably certain it will remain in the lease through the end of its lease term in 2037, however, the Company is permitted to terminate the lease as early as September 2027.
The Company’s operating leases have remaining lease terms of approximately 1 year to 15 years, some of which include options to extend the leases.
9. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
(in thousands)MARCH 31, 2022DECEMBER 31, 2021
Accrued expenses and other current liabilities:
Accrued compensation and benefits$11,855 $15,881 
Accrued consulting and professional fees3,976 5,007 
Accrued research and development (1)
3,089 2,262 
Accrued revenue reserves (2)
79,213 85,381 
Accrued other (3)
4,817 3,810 
Total accrued expenses and other current liabilities$102,950 $112,341 
(1)Comprised primarily of accruals related to fees for investigative sites, contract research organizations and other service providers that assist in conducting preclinical research studies and clinical trials.
(2)Comprised primarily of accruals related to commercial and government rebates as well as returns.
(3)Comprised primarily of accruals related to interest payable as well as other business-related expenses.
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10. Debt
Convertible Notes
In September 2019, the Company issued an aggregate principal amount of $316.25 million of Convertible Notes to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended. The Convertible Notes, governed by an indenture between the Company and a trustee, are senior, unsecured obligations and do not include financial and operating covenants nor any restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by Aerie or any of its subsidiaries. Interest on the Convertible Notes is payable semi-annually in cash in arrears at a rate of 1.50% per annum on April 1 and October 1 of each year, which began on April 1, 2020. The Convertible Notes will mature on October 1, 2024 unless they are redeemed, repurchased or converted prior to such date. Prior to April 1, 2024, the Convertible Notes will be convertible at the option of holders only during certain periods and upon satisfaction of certain conditions. On and after April 1, 2024, the Convertible Notes will be convertible at the option of the holders any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Convertible Notes may be settled in shares of Aerie common stock, cash or a combination, thereof, at the Company's election. The Company intends to pay cash upon conversion of the Convertible Notes. See Note 2 for additional information.
The Convertible Notes have an initial conversion rate of 40.04 shares of Aerie common stock per $1,000 principal amount of the Convertible Notes, which will be subject to customary anti-dilution adjustments in certain circumstances. This represents an initial effective conversion price of approximately $24.98 per share, which represents a premium of approximately 35% to the $18.50 per share closing price of Aerie common stock on September 4, 2019, the date the Company priced the offering.
The Company may redeem all or any portion of the Convertible Notes, at its option, on or after October 3, 2022, at a cash redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price of Aerie common stock exceeds 130% of the conversion price of $24.98, which amounts to $32.47, then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately before the date the Company provides written notice of redemption; and the trading day immediately before the notice is sent.
Holders of Convertible Notes may require the Company to repurchase their Convertible Notes upon the occurrence of certain events that constitute a fundamental change under the indenture governing the Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
During the three months ended March 31, 2022, the conditions allowing holders of the Convertible Notes to elect to convert had not been met. As of March 31, 2022, the if-converted value of the Convertible Notes did not exceed the principal amount of the Convertible Notes.
The estimated fair value of the liability component of the Convertible Notes at the time of issuance was $187.9 million, and was determined usingbased on a scenariodiscounted cash flow analysis and Monte Carlo simulation model to capture the various features of the 2014 Convertible Notes.a binomial lattice model. The scenario analysis and Monte Carlo simulation requirevaluation required the use of Level 3 unobservable inputs and subjective assumptions, including but not limited to the probability of conversion, stock price volatility the risk-freeand bond yield. The effective interest rate and credit spread. The increase in the estimated fair value of the 2014 Convertible Notes was primarily attributable to the increase in the closing price of Aerie’s common stock on September 30, 2017 as compared to December 31, 2016. The estimates presented are not necessarily indicative of amounts that could be realized in a current market exchange. The use of alternative market assumptions and estimation methodologies could have a material effect on these estimates of fair value.
6. Accounts Payable & Other Current Liabilities
Accounts payable and other current liabilities consist of the following:
(in thousands)SEPTEMBER 30, 2017 DECEMBER 31, 2016
Accounts payable$3,651
 $5,610
Accrued expenses and other current liabilities:   
Employee benefits and compensation related accruals(1)
4,585
 4,111
Selling, general and administrative related accruals(2)
6,853
 2,908
Research and development related accruals(3)
2,956
 6,191
 $18,045
 $18,820
(1)Comprised of accrued bonus, accrued vacation and other employee-related expenses.
(2)Comprised of accruals such as outside professional fees, accruals related to commercial manufacturing activities and other business-related expenses.
(3)Comprised of accruals such as fees for investigative sites, contract research organizations, contract manufacturing organizations and other service providers that assist in conducting preclinical research studies and clinical trials.


7. Convertible Notes
On September 30, 2014, Aerie issued $125.0 million aggregate principal amount of senior secured convertible notes (“the 2014 Convertible Notes”) to Deerfield Partners, L.P., Deerfield International Master Fund, L.P., Deerfield Private Design Fund III, L.P., Deerfield Special Situations Fund, L.P. and Deerfield Special Situations International Master Fund, L.P. On January 1, 2015, Deerfield Special Situations International Master Fund, L.P. transferred all of its rights under the 2014 Convertible Notes to Deerfield Special Situations Fund, L.P. (together with the other Deerfield entities listed above, “Deerfield”). The 2014 Convertible Notes were issued pursuant to a note purchase agreement (as amended and supplemented from time to time, the “Note Purchase Agreement”), dated as of September 8, 2014, among Aerie and the Deerfield entities party thereto.
The 2014 Convertible Notes bear interest at a rate of 1.75% per annum payable quarterly in arrears on the first business day of each January, April, July and October. The 2014 Convertible Notes mature onliability component was 10.5% for the seventh anniversaryperiod from the date of issuance unless earlier converted.
through March 31, 2021. The 2014equity component of the Convertible Notes are guaranteed on a senior secured basis by Aerie Distribution. The 2014 Convertible Notes constitutewas recognized at issuance and represents the senior secured obligations of Aerie and Aerie Distribution, collateralized by a first priority security interest in substantially all of the assets of Aerie and Aerie Distribution. The Note Purchase Agreement provides that, upon the request of Aerie, Deerfield will release all of the liens on the collateral and the security agreement will terminate if both of the following occur: (i) beginning one month after FDA approval of either RhopressaTM or RoclatanTM, shares of Aerie’s common stock have traded at a price above $30 per share (subject to adjustment for any subdivision or combination of outstanding common stock) for 30 consecutive trading days, and (ii) Aerie is prepared to close a financing that will be secured by a lien on Aerie’s assets, subject only to the release of the lien on Aerie’s assets held by Deerfield.
The 2014 Convertible Notes are convertible at any time at the option of Deerfield, in whole or in part, into shares of common stock, including upon the repayment of the 2014 Convertible Notes at maturity (the “Conversion Option”). However, upon conversion, Deerfield (together with their affiliates) is limited to a 9.985% ownership cap in shares of common stock (the “9.985% Cap”). The 9.985% Cap would remain in place upon any assignment of the 2014 Convertible Notes by Deerfield.
The initial conversion price is $24.80 per share of common stock (equivalent to an initial conversion rate of 40.32 shares of common stock per $1,000 principal amount of 2014 Convertible Notes), representing a 30% premium over the closing price of the common stock on September 8, 2014. The conversion rate and the corresponding conversion price are subject to adjustment for stock dividends (other than a dividend for which Deerfield would be entitled to participate on an as-converted basis), stock splits, reverse stock splits and reclassifications. In addition, in connection with certain significant corporate transactions, Deerfield, at its option, may (i) require Aerie to prepay all or a portion ofdifference between the principal amount of the 2014 Convertible Notes plus accrued and unpaid interest, or (ii) convert all or a portionthe fair value of the principal amountliability component of the 2014 Convertible Notes at issuance. The equity component was approximately $128.4 million at the time of issuance and its fair value is not remeasured as long as it continues to meet the conditions for equity classification.
In connection with the issuance of the Convertible Notes, the Company incurred debt issuance costs of $9.2 million for the three months ended December 31, 2019. In accordance with ASC Topic 470, Debt, these costs were allocated to debt and equity components in proportion to the allocation of proceeds. Issuance costs of $5.5 million were recorded as debt issuance costs in the net carrying value of Convertible Notes. The debt issuance costs are amortized on an effective interest basis over the term of the Convertible Notes. The remaining issuance costs of $3.7 million were recorded as additional paid-in capital, net with the equity component and such amounts are not subject to amortization.
Upon the Company’s adoption of ASU 2020-06 on January 1, 2022, as further discussed in Note 2, embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, the Convertible Notes will be accounted for as a single liability measured at its amortized cost. The effective interest rate was 2.1% for the three months ended March 31, 2022.
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The following table summarizes the carrying value of the Convertible Notes:
(in thousands)MARCH 31, 2022DECEMBER 31, 2021
Gross proceeds$316,250 $316,250 
Unamortized debt discount— (78,395)
Unamortized issuance costs(4,572)(3,328)
Carrying value$311,678 $234,527 
The following table summarizes the interest expense recognized related to the Convertible Notes:
THREE MONTHS ENDED 
MARCH 31,
(in thousands)20222021
Stated interest$1,186 $1,186 
Amortized debt discount— 5,482 
Amortized issuance costs447 232 
Interest expense$1,633 $6,900 
Separately, in September 2019, the Company entered into privately negotiated capped call options with financial institutions. The capped call options cover, subject to customary anti-dilution adjustments, the number of shares of Aerie common stock or receivethat initially underlie the consideration Deerfield would have received had Deerfield converted the 2014 Convertible Notes immediately prior to the consummation of the transaction.Notes. The 2014 Convertible Notes provide for an increase in the conversion rate if Deerfield elects to convert their 2014 Convertible Notes in connection with a significant corporate transaction. The current maximum increase to the initial conversion rate, in connection with a significant corporate transaction, is 12.07 shares of common stock per $1,000 principal amount of 2014 Conversion Notes, which decreases over time and is determined by reference to thecap price of the capped call options is $37.00 per share of Aerie common stock, priorrepresenting a premium of 100% above the closing price of $18.50 per share of Aerie common stock on September 4, 2019, and is subject to certain adjustments under the consummationterms of the significant corporate transactioncapped call options. The capped call options are generally intended to reduce or the value of the significant corporate transaction.
The Note Purchase Agreement contains various representations and warranties, and affirmative and negative covenants, customary for financings of this type, including restrictions on the incurrence of additional debt and liens on Aerie’s and its subsidiaries’ assets. As of September 30, 2017,offset potential dilution to Aerie was in compliance with the covenants. The Note Purchase Agreement also provides for certain events of default, including the failure to pay principal and interest when due; inaccuracies in Aerie’s or Aerie Distribution’s representations and warranties to Deerfield; failure to comply with any of the covenants; Aerie’s or Aerie Distribution’s insolvency or the occurrence of certain bankruptcy-related events; certain judgments against Aerie and its subsidiaries; the suspension, cancellation or revocation of governmental authorizations that are reasonably expected to have a material adverse effect on Aerie’s business; the acceleration of a specified amount of indebtedness; and the failure to deliver shares of common stock upon conversion of the 2014 Convertible Notes. If any event of default were to occur, and continue beyond any applicable cure period, the holders of more than 50% of the aggregate principal amount of the then outstanding 2014 Convertible Notes wouldwith such reduction and/ or offset, as the case may be, permittedsubject to declare the principal and accrued and unpaid interest to be immediately due and payable.

The Company recorded the 2014 Convertible Notes as long-term debt at face value less debt discounts relating to fees and certain expenses paid to Deerfield in connection with the transaction. The Conversion Option is a derivative that qualifies for an exemption from bifurcation and liability accounting as provided for in ASC 815, Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815”). Since the Conversion Option is not bifurcated as a derivative pursuant to ASC 815, the Company further evaluated the Conversion Option to determine whether it is considered a beneficial conversion feature (“BCF”). The Company determined that the initial accounting conversion price was greater than the fair value of the common stock at the close of trading on the date of issuance, therefore no BCF existed at inception. However, if Deerfield elects to convert their 2014 Convertible Notes in connection with a significant corporate transaction, the increase to the initial conversion rate may cause a contingent BCF to exist at the time of conversion. The contingent BCF, if any, will be recognized in earnings when the contingency is resolved and will be measured using the fair value of the common stock at the close of trading on the date of issuance and the accounting conversion price as adjusted for such an increase to the initial conversion rate.
In connection with the IP Assignment, Aerie granted Deerfield a security interest in certain intercompany promissory notes and pledged 65% of the voting stock of Aerie Limited. Upon the request of Aerie, Deerfield will release the lien on the intercompany promissory notes under certain circumstances.
Unamortized debt discounts were $1.2 million as of September 30, 2017. Debt discounts are amortized using the effective interest method through the earlier of maturity or the conversion of the 2014 Convertible Notes.
The table below summarizes the carrying value of the 2014 Convertible Notes as of September 30, 2017:
(in thousands)SEPTEMBER 30, 2017
Gross proceeds$125,000
Initial value of issuance costs recorded as debt discount(2,146)
Amortization of debt discount and issuance costs915
Carrying value$123,769
For the three and nine months ended September 30, 2017 interest expense related to the 2014 Convertible Notes was $0.5 million and $1.6 million, respectively. For the three and nine months ended September 30, 2016 interest expense related to the 2014 Convertible Notes was $0.6 million and $1.6 million, respectively.
8. Build-to-Suit Lease
In January 2017, the Company entered into a Euro-denominated lease agreement, expiring in September 2037, for a new manufacturing plant in Athlone, Ireland, under which the Company is leasing approximately 30,000 square feet of interior floor space for build-out. The Company is permitted to terminate the lease beginning in September 2027. Total expected rental payments, using foreign exchange rates in effect at September 30, 2017, are approximately $2.7 million through September 2027 and approximately $6.4 million through the expiration of the lease.
The Company is not the legal owner of the leased space. However, in accordance with ASC 840, Leases, the Company is deemed to be the owner of the leased space, including the building shell, during the construction period because of the Company’s expected level of direct financial and operational involvement in the substantial tenant improvements required. As a result, the Company capitalized approximately $4.2 million as a build-to-suit asset within property, plant and equipment, net and recognized a corresponding build-to-suit facility lease obligation as a liability on its consolidated balance sheets equal to the estimated replacement cost of the building at the inception of the lease.

Additionally, construction costs incurred as part of the build-out and tenant improvements will also be capitalized within property, plant and equipment, net. Costs of approximately $10.0 million have been capitalized through September 30, 2017 related to both equipment purchases and the build-out of the facility. Rental payments made under the lease will be allocated to interest expense and the build-to-suit facility lease obligationcap based on the implicit rate of the build-to-suit facility lease obligation.cap price. The build-to-suit facility lease obligation was approximately $4.8 million as of September 30, 2017, of which $0.2 million was classified as other current liabilities as of September 30, 2017. The lease obligation is denominated in Euros and is remeasured to U.S. dollars at the balance sheet date with any foreign exchange gain or loss recognized within other income (expense), net on the condensed consolidated statements of operations and comprehensive loss. Unrealized foreign currency loss related to the remeasurement of the lease obligation for the three and nine months ended September 30, 2017 was $0.2 million and $0.5 million, respectively.
9. Stockholders’ Equity
From the Company’s initial public offering (“IPO”) through December 31, 2016, the Company has issued and sold (1)paid a total of 5,933,712 shares of common stock under its “at-the-market” sales agreements and received net proceeds of approximately $146.6$32.9 million after deducting commissions atin premiums for the capped call options, which was recorded as additional paid-in capital, using a rate of up to 3%portion of the gross sales priceproceeds from the issuance and sale of the Convertible Notes. The capped call options are excluded from diluted earnings per share sold and other fees and expenses, and (2) 2,542,373 shares of common stock pursuant to an underwriting agreement, dated September 15, 2016, for whichbecause the Company received net proceeds of approximately $71.0 million, after deducting the underwriting discount, fees and expenses of approximately $4.0 million.impact would be anti-dilutive.
During the nine months ended September 30, 2017, the Company has issued and sold 906,858 shares of common stock under its “at-the-market” sales agreement, for which the Company received net proceeds of approximately $49.3 million, after deducting commissions, fees and expenses of $0.6 million. Further, on May 25, 2017, the Company entered into an underwriting agreement relating to the registered public offering of 1,395,349 shares of the Company’s common stock at a price to the public of $53.75 per share. The Company received net proceeds of approximately $72.7 million, after deducting underwriting discounts, fees and expenses of $2.3 million.
Warrants
As of September 30, 2017, the Company also has the following equity-classified warrants to purchase common stock outstanding:
NUMBER OF
UNDERLYING
SHARES
 
EXERCISE
PRICE PER
SHARE
 
WARRANT
EXPIRATION
DATE
75,000
 $5.00
 February 2019
75,000
 $5.00
 November 2019
7,500
 $5.00
 August 2020
223,482
 $0.05
 December 2019
The warrants outstanding as of September 30, 2017 are all currently exercisable with a weighted-average remaining life of 2.0 years.

10. Stock-based11. Stock-Based Compensation
Stock-based compensation expense for options andgranted, restricted stock awards (“RSAs”), RSAs with non-market performance and service conditions (“PSAs”), restricted stock units (“RSUs”) and stock appreciation rights (“SARs”) is reflected in the condensed consolidated statements of operations and comprehensive loss as follows:
 THREE MONTHS ENDED 
 SEPTEMBER 30,		 NINE MONTHS ENDED 
 SEPTEMBER 30,
(in thousands)2017 2016 2017 2016
Selling, general and administrative

$4,995
 $3,406
 $14,032
 $9,295
Research and development1,562
 693
 4,040
 2,219
Total$6,557
 $4,099
 $18,072
 $11,514

The estimated fair value of options to purchase common stock is determined on the date of grant using the Black-Scholes option pricing model. Options granted to non-employees are revalued at each financial reporting period until the required service is performed. The fair value of RSAs granted is based on the market value of Aerie’s common stock on the date of grant. Compensation expense related to time-based RSAs is expensed on a straight-line basis over the vesting period. For RSAs with non-market performance conditions, the Company evaluates the criteria for each grant to determine the probability that the performance condition will be achieved. Compensation expense for RSAs with non-market performance conditions is recognized over the respective service period when it is deemed probable that the performance condition will be satisfied.
As of September 30, 2017, the Company had $51.9 million of unrecognized compensation expense related to options granted under its equity plans. This expense is expected to be recognized over a weighted average period of 2.9 years as of September 30, 2017.
As of September 30, 2017, the Company had $10.8 million of unrecognized compensation expense, related to unvested RSAs. This expense is expected to be recognized over the weighted average contractual term period of 3.2 years as of September 30, 2017.

 THREE MONTHS ENDED 
MARCH 31,
(in thousands)20222021
Cost of goods sold$162 $507 
Selling, general and administrative3,134 6,255 
Research and development1,336 1,987 
Total$4,632 $8,749 
Equity Plans
The Company maintains three3 equity compensation plans,plans: the 2005 Aerie Pharmaceutical Stock Plan (the “2005 Plan”), the 2013 Omnibus Incentive Plan (the “2013 Equity Plan”), which was amended and restated as the Aerie Pharmaceuticals, Inc. Second Amended and Restated Omnibus Incentive Plan (the “Amended“Second Amended and Restated Equity Plan”), as described below, and the Aerie Pharmaceuticals, Inc. Inducement Award Plan (the “Inducement Award Plan”), which was amended and restated as the Aerie Pharmaceuticals, Inc. Second Amended and Restated Inducement Award Plan (the “Second Amended and Restated Inducement Award Plan”), as described below. The 2005 Plan, the Second Amended and Restated Equity Plan and the Second Amended and Restated Inducement Award Plan are referred to collectively as the “Plans.”
On October 30, 2013, the effective date of the 2013 Equity Plan, the The 2005 Plan was frozen in 2013 and no additional awards have been or will be made under the 2005 Plan. Any remaining shares available for future grant under the 2005 Plan were allocated to the 2013 Equity Plan.
On April 10, 2015,
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In 2018, Aerie’s stockholders approved the adoption of the Second Amended and Restated Equity Plan and no additional awards have been or will be madeto increase the number of shares issuable under the 2013 Equity Plan. Any remaining shares available under the 2013 Equity Plan were allocated to the Amended and Restated Equity Plan.by 4,500,000. The Second Amended and Restated Equity Plan provides for the granting of up to 5,729,06810,229,068 equity awards in respect of common stock of Aerie, including equity awards that were previously available for issuance under the 2013 Equity Plan.
On December 7,In 2016, Aerie’s Board of Directors approved the Inducement Award Plan which provides for the granting of up to 418,000 equity awards in respect of common stock of Aerie which plan wasand subsequently amended and restated the Inducement Award Plan twice in 2017 to increase the equity awards that may be issued by 463,500a total of an additional 874,500 shares. In 2019, the Second Amended and Restated Inducement Award Plan was further amended by Aerie’s Board of Directors to increase the number of shares duringissuable under the nine months ended September 30, 2017.plan by 100,000 shares. On December 9, 2021, Aerie’s Board of Directors approved an increase to the number of shares issuable under the plan for grants made to the Company’s new Chief Executive Officer in connection with his hiring, including 602,952 shares for grants made in December 2021 and additional shares for grants made in the first quarter of 2022. On March 11, 2022, Aerie’s Board of Directors approved an amendment to the Second Amended and Restated Inducement Award Plan to increase the number of shares that may be issued under the plan to 4,092,500 shares, which includes the 602,952 shares granted to our Chief Executive Officer in December 2021 as well as an additional 2,097,048 shares to cover his previously approved March 2022 grant and other new hire grant projections. Awards granted under the Second Amended and Restated Inducement Award Plan, as amended from time to time are intended to qualify as employment inducement awards under NASDAQ Listing Rule 5635(c)(4).

Options to Purchase Common Stock
The following table summarizes the stock option activity under the Plans:
NUMBER OF
SHARES		WEIGHTED
 AVERAGE EXERCISE PRICE		WEIGHTED
AVERAGE
REMAINING
CONTRACTUAL
LIFE (YEARS)		AGGREGATE
INTRINSIC
VALUE
(000’s)
Options outstanding at December 31, 20216,550,610 $26.87 
Granted673,888 8.73 
Canceled(513,013)23.91 
Options outstanding at March 31, 20226,711,485 $25.27 6.4$2,354 
Options exercisable at March 31, 20224,569,275 $30.42 5.1$1,716 
As of March 31, 2022, the Company had $18.0 million of unrecognized compensation expense related to options granted under its equity plans. This expense is expected to be recognized over a weighted average period of 2.5 years as of March 31, 2022.
 NUMBER OF
SHARES		 WEIGHTED AVERAGE
EXERCISE PRICE		 WEIGHTED
AVERAGE
REMAINING
CONTRACTUAL
LIFE (YEARS)		 AGGREGATE
INTRINSIC
VALUE
(000’s)
Options outstanding at December 31, 20165,255,930
 $14.34
 
 

Granted1,203,459
 46.30
    
Exercised(202,134) 11.05
    
Canceled(19,296) 32.82
    
Options outstanding at September 30, 20176,237,959
 $20.56
 7.3 $176,569
Options exercisable at September 30, 20173,954,715
 $12.57
 6.4 $142,558

Restricted Stock Awards
The following table summarizes the RSA, including PSA, activity under the Plans:
NUMBER OF
SHARES		WEIGHTED AVERAGE
FAIR VALUE PER SHARE
Non-vested RSAs at December 31, 2021977,244 $18.32 
Granted347,814 8.80 
Vested(132,905)34.07 
Canceled(114,408)19.43 
Non-vested RSAs at March 31, 20221,077,745 13.21 
 
NUMBER OF
SHARES
 
WEIGHTED AVERAGE
FAIR VALUE PER SHARE
Nonvested RSAs at December 31, 2016164,194
 $19.87
Granted332,512
 47.61
Vested(54,591) 20.47
Canceled(2,566) 43.90
Nonvested RSAs at September 30, 2017439,549
 $40.64
As of March 31, 2022, the Company had $12.0 million of unrecognized compensation expense related to unvested RSAs, including PSAs. This expense is expected to be recognized over the weighted average period of 2.8 years as of March 31, 2022.
The vesting of time-basedthe RSAs is service-basedtime and service based with terms of one1 to four4 years. During the nine months ended September 30,In 2017, the Company granted 98,817 RSAs with non-marketPSAs that vested in 2020 upon the satisfaction of certain performance conditions thatand service conditions. During the three months ended March 31, 2022, the Company granted 218,418 PSAs which vest upon the satisfaction of certain performance conditions and service conditions.conditions, none of which have vested.
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11.Restricted Stock Units
The following table summarizes the RSU activity under the Plans:
NUMBER OF
SHARES		WEIGHTED AVERAGE
FAIR VALUE PER SHARE
Non-vested RSUs at December 31, 2021156,873 $14.88 
Granted1,989 6.88 
Vested(7,143)7.00 
Canceled(437)16.22 
Non-vested RSUs at March 31, 2022151,282 15.14 
As of March 31, 2022, the associated unrecognized compensation expense totaled $2.8 million. This expense is expected to be recognized over the weighted average period of 2.8 years as of March 31, 2022.
Stock Appreciation Rights
The following table summarizes the SARs activity under the Plans:
NUMBER OF
SHARES		WEIGHTED 
AVERAGE
EXERCISE PRICE		WEIGHTED
AVERAGE
REMAINING
CONTRACTUAL
LIFE (YEARS)		AGGREGATE
INTRINSIC
VALUE
(000’s)
SARs outstanding at December 31, 2021238,349 $27.67 
Granted3,000 6.97 
Canceled(13,434)28.02 
SARs outstanding at March 31, 2022227,915 $27.37 2.8$7 
SARs exercisable at March 31, 202296,106 $39.26 1.9$— 
Holders of the SARs are entitled under the terms of the Plans to receive cash payments calculated based on the excess of Aerie’s common stock price over the exercise price in their award; consequently, these awards are accounted for as liability-classified awards and the Company measures compensation cost based on their estimated fair value at each reporting date, net of actual forfeitures, if any.
12. Commitments and Contingencies
Milestone Payments
In the first quarter of 2022, the Company gained alignment with the FDA on the results of its Phase 2b clinical trial for AR-15512 and confirmed the design of the Phase 3 trials, which the Company currently expects to initiate in the second quarter of 2022. This resulted in the achievement of a regulatory milestone in which the Company paid the former shareholders of Avizorex $8.0 million in the first quarter of 2022.
Litigation
The Company may periodically become subject to legal proceedings and claims arising in connection with its business. TheAs of March 31, 2022, the Company is not a party to any known litigation, is not aware of any unasserted claimsmaterial pending legal or administrative proceedings and, to its knowledge, no such proceedings are threatened or contemplated. The Company does not have contingency reserves established for any litigation liabilities.liabilities as of March 31, 2022.
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12. Subsequent Events
On October 4, 2017, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Envisia Therapeutics Inc. (“Envisia”) to acquire the rights to use PRINT® technology in ophthalmology, as well as rights relating to ENV1105, Envisia’s preclinical dexamethasone steroid product candidate for the treatment
Table of diabetic macular edema, which also utilizes the PRINT® technology. Under the terms of the Agreement, the Company (a) made an upfront cash payment of $10.5 million and issued 263,146 shares of Aerie’s common stock valued at approximately $14.3 million and (b) agreed to make contingent milestone payments, subject to achievement of certain product regulatory approvals. Under the provisions of ASU 2017-01, the Company expects to account for the transaction as an asset acquisition and expects that substantially all of the purchase price will be allocated to acquired in-process research and development and expensed as research and development in the consolidated statement of operations and comprehensive loss during the three months ended December 31, 2017.Contents


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following management’s discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear elsewhere in this report and with our audited financial statements and related notes and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2021, as filed with the SEC on March 9, 2017February 25, 2022 (“20162021 Form 10-K”). This management’s discussion and analysis contains forward-looking statements that involve risks and uncertainties. Please see “Special Note Regarding Forward-Looking Statements” for additional factors relating to such statements and see “Risk Factors” in our 20162021 Form 10-K and other documents we have filed or furnished with the SEC for a discussion of certain risk factors applicable to our business, financial condition and results of operations. Past operating results are not necessarily indicative of operating results in any future periods.
Overview
We are a clinical-stage pharmaceutical company focused on the discovery, development and commercialization of first-in-class ophthalmic therapies for the treatment of patients with eye diseases and conditions including open-angle glaucoma, dry eye, DME and other diseaseswet AMD.
U.S. Commercialization of the eye. Glaucoma Franchise
Our strategy is to advancegrow the market share of our product candidates,FDA approved glaucoma franchise products, RhopressaTM (netarsudil ophthalmic solution) 0.02% (“RhopressaTM”)® and RoclatanTM (netarsudil/latanoprost ophthalmic solution) 0.02%/0.005% (“RoclatanTM”),Rocklatan® in the United States. Both Rhopressa® and Rocklatan® are being sold to regulatory approvalnational and commercialize these products ourselves in North American markets. If approved, we planregional U.S. pharmaceutical distributors, and patients have access to build a commercial team that will include approximately 100 sales representatives to target approximately 12,000 high prescribing eye-care professionals throughoutthem through pharmacies across the United States. We have obtained broad formulary coverage for Rhopressa® and Rocklatan® for the lives covered under commercial plans and Medicare Part D plans. Our commercial team responsible for sales of Rhopressa® and Rocklatan® is targeting select eye-care professionals who treat glaucoma throughout the United States.
In March 2022, we commenced a Phase 4 program that was designed to further demonstrate that Rocklatan® is a highly effective single bottle, once daily therapy. We expect topline data for this Phase 4 Multi-center Open-label Rocklatan® Evaluation (“MORE”) study to be available in the first half of 2023.
aeri-20220331_g1.jpg
Rhopressa® is a once-daily eye drop designed to reduce elevated IOP in patients with open-angle glaucoma or ocular hypertension. Rhopressa® is taken in the evening and has shown in preclinical and clinical trials to be effective in reducing IOP, with a favorable safety profile.

The active ingredient in Rhopressa®, netarsudil, is an Aerie-owned Rho kinase (“ROCK”) inhibitor. Rhopressa® increases the outflow of aqueous humor through the trabecular meshwork (“TM”), which accounts for approximately 80% of fluid drainage from the healthy eye and is the diseased tissue responsible for elevated IOP in glaucoma. Using this mechanism of action (“MOA”), we believe that Rhopressa® represents the first of a new drug class for reducing IOP in patients with glaucoma in over 20 years.
aeri-20220331_g2.jpg
Rocklatan® is a once-daily fixed-dose combination of Rhopressa® and latanoprost, a commonly prescribed drug for the treatment of patients with open-angle glaucoma or ocular hypertension. Rocklatan® is also taken in the evening, and similar to Rhopressa®, has shown in preclinical and clinical trials to be highly effective in reducing IOP, with a favorable safety profile.
Based on our clinical data, we believe that Rocklatan® has the potential to provide a greater IOP-reducing effect than any glaucoma medication currently marketed in the United States.
Efforts Outside the United States
In addition to growing the market share of Rhopressa® and Rocklatan® in the United States, our strategy also includes developing business opportunities outside of the United States and we continue to make progress in our efforts to commercialize Rhopressa® and Rocklatan® in Europe, Japan and other regions of the world.
We have partnered and have collaboration agreements in place with Santen to develop and commercialize our products in Japan, East Asia, as well as Europe, China, India, the Middle East, CIS, Africa, parts of Latin America and the Oceania countries. The First Santen Agreement was executed in October 2020 to advance our clinical development and ultimately
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commercialize Rhopressa® and Rocklatan® in Japan and East Asia. The Second Santen Agreement was executed in December 2021 to develop and commercialize Rhopressa® and Rocklatan® in Europe, China, India, the Middle East, CIS, Africa, parts of Latin America and the Oceania countries.
In Europe, Rhopressa® and Rocklatan® will be marketed under the names Rhokiinsa® and Roclanda®, respectively. Rhokiinsa® and Roclanda® were granted a Centralised MA by the EC in November 2019 and January 2021, respectively. In April 2021, Roclanda® received marketing authorisation from the MHRA in Great Britain.
In Japan, we reported positive topline results for our Phase 3 clinical trial of netarsudil ophthalmic solution 0.02% in October 2021, the first of three expected Phase 3 clinical trials in Japan. The results evaluated netarsudil 0.02% versus ripasudil hydrochloride hydrate ophthalmic solution 0.4% (“ripasudil 0.4%”) and showed that netarsudil 0.02% once daily was superior to ripasudil 0.4% twice daily in lowering IOP after four weeks (p<0.0001), the primary endpoint of the study. The medications were safe and well tolerated. The most common treatment emergent adverse event was conjunctival hyperemia, which is treatable. In March 2022, Santen made a $6.0 million developmental milestone payment in connection with the conclusion of this Phase 3 clinical trial. A second, confirmatory Phase 3 study, required for approval in Japan, is currently underway. Santen is taking the lead on next steps in preparation for registration in Japan under the terms of the First Santen Agreement. Clinical trials for Rocklatan® have not yet begun.
Glaucoma Product Manufacturing
We have a sterile fill production facility in Athlone, Ireland, for the production of our FDA approved products and clinical supplies, with the intent of having the Athlone plant supply our ophthalmic products in all markets for which we received regulatory approval and are alsocommercialized. The Athlone plant began manufacturing commercial supplies of Rocklatan® in the first quarter of 2020 and Rhopressa® in the third quarter of 2020 for distribution to the United States. Shipments of commercial supply of both Rocklatan®and Rhopressa®from the Athlone plant to the United States commenced in the second half of 2020. In addition, the Athlone plant has manufactured clinical supplies of Rhopressa® for the Phase 3 clinical trials in Japan as well as registration batches to support product approval in Japan. We expect to commence shipments of Roclanda® to Santen pursuant to the Second Santen Agreement in the fourth quarter of 2022.
As the Athlone plant commenced operations in early 2020, it has not reached full capacity. We expect that the Athlone plant will have adequate capacity to produce for the markets included in the Santen Agreements, as needed, which include Europe, Japan, East Asia and certain other regions of the world, if approved for commercial distribution in those markets. The Athlone plant manufactures most of our ongoing needs for Rhopressa® and Rocklatan®in the United States. We may continue to use contract manufacturers to produce commercial supplies of Rhopressa® and Rocklatan® for distribution in the United States, but at reduced levels as a result of the Athlone plant commencing manufacturing operations.
Product Candidates in Development
Our strategy includes enhancing our longer-term commercial potential by identifying and advancing additional product candidates and drug delivery technologies, including through our internal discovery efforts, andour entry into potential research collaborations or in-licensing arrangements or acquisitionsour acquisition of additional ophthalmic products, or technologies or product candidates that would complement our current product portfolio, includingportfolio.
Dry Eye Program
We are developing AR-15512 ophthalmic solution for the treatment of patients with dry eye disease. In September 2021, we reported topline results of our recent collaborationPhase 2b clinical study, named COMET-1, for AR-15512. We completed a dose ranging study evaluating two concentrations of AR-15512 (0.0014% and 0.003%) in a 90-day trial with DSM whereby369 subjects. The COMET-1 clinical study achieved statistical significance for multiple pre-specified and validated signs and symptoms. The greatest efficacy was demonstrated with the higher concentration 0.003% formulation, which we plan to advance to Phase 3 studies. The study did not achieve statistical significance at the pre-determined primary endpoints at Day 28. We gained alignment with the FDA in the first quarter of 2022 on the results of the Phase 2b clinical study and confirmed the design of the Phase 3 registrational trials, which we currently expect to initiate in the second quarter of 2022. The first Phase 3 registrational trial, named COMET-2, will be a multi-center, vehicle-controlled, double-masked, randomized study that will evaluate a single concentration of AR-15512 (0.003%) compared to the AR-15512 vehicle, administered twice daily for 90 days. COMET-2 is expected to enroll about 460 participants at approximately 20 sites in the United States.
Retina Program
Furthermore, we are currently developing two sustained-release implants focused on retinal diseases, AR-1105 and AR-14034 SR. For AR-1105, we completed a Phase 2 clinical trial for patients with macular edema due to RVO in July 2020 and reported
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topline results indicating sustained efficacy of up to six months. We have access to their bio-erodible polymer technology,received advice from regulatory agencies in both Europe and our acquisition of assets from Envisia Therapeutics Inc. (“Envisia”), designedthe United States regarding clinical and regulatory pathways for Phase 3 clinical trials. We are currently evaluating Phase 3 development options as well as partnership opportunities. In addition, we are also working to advance our progress in developing product candidates to treatpreclinical sustained-release retinal diseases, as discussed below.
Our strategy also includes developing our business outside of North America, including obtaining regulatory approval in Europe and Japan on our ownimplant, AR-14034 SR, for our product candidates. In 2015, we revised our corporate structure to align with our business strategy outside of North America by establishing Aerie Pharmaceuticals Limited, a wholly-owned subsidiary (“Aerie Limited”), and Aerie Pharmaceuticals Ireland Limited, a wholly-owned subsidiary (“Aerie Ireland Limited”). We assigned the beneficial rights to our non-U.S. and non-Canadian intellectual property for our lead product candidates to Aerie Limited (the “IP Assignment”). As part of the IP Assignment, we and Aerie Limited entered into a research and development cost-sharing agreement pursuant to which we and Aerie Limited will share the costs of the development of intellectual property and Aerie Limited and Aerie Ireland Limited entered into a license arrangement pursuant to which Aerie Ireland Limited will develop and commercialize the beneficial rights of the intellectual property assigned as part of the IP Assignment. In 2016, we assigned the beneficial rights to certain of our intellectual property in the U.S. and Canada to Aerie Distribution, Inc., a wholly-owned subsidiary (“Aerie Distribution”), and amended and restated the research and development cost-sharing agreement to transfer our rights and obligations under the agreement to Aerie Distribution.
In January 2017, we announced that we are building a new manufacturing plant in Athlone, Ireland, although we will continue to use product sourced from our current contract manufacturer based in the U.S. This will be our first manufacturing plant, expected to produce commercial supplies of our current product candidates, RhopressaTMand RoclatanTM. If we obtain regulatory approval, commercial product supply from the plant is expected to be available by 2020. We are also in the process of adding a second contract manufacturer, which we expect to produce commercial supply by as early as the end of 2018.
Product Candidate Overview
Our two advanced-stage product candidates are designed to lower intraocular pressure (“IOP”) in patients with open-angle glaucoma or ocular hypertension. Both product candidates are taken once-daily in the evening and have shown in preclinical and clinical trials to be effective in lowering IOP, with novel mechanisms of action (“MOAs”) and a favorable safety profile.
We own the worldwide rights to all indications for our current Aerie product candidates. Our intellectual property portfolio contains patents and pending patent applications related to composition of matter, pharmaceutical compositions, methods of use, and synthetic methods. We have patent protection for our current product candidates, RhopressaTM and RoclatanTM, in the United States through at least 2030.
RhopressaTM

Our first product candidate, RhopressaTM,is a novel once-daily eye drop designed to lower IOP in patients with glaucoma or ocular hypertension. We are developing RhopressaTM as the first of a new class of compounds that is designed to lower IOP in patients through novel MOAs. We believe that, if approved, RhopressaTM will represent the first new MOAs for lowering IOP in patients with glaucoma in over 20 years. Based on preclinical studies and clinical data to date, we expect that RhopressaTM, if approved, will have the potential to compete with non-prostaglandin analogue products as a preferred adjunctive therapy to prostaglandin analogues (“PGAs”), due to its targeting of the diseased tissue known as the trabecular meshwork (“TM”), its demonstrated IOP-lowering ability across tested baselines with once-daily dosing, its potential synergistic effect with PGA products, and its lack of drug-related serious or systemic adverse events. Adjunctive therapies currently represent approximately one-half of the entire glaucoma therapy market in the United States, according to IMS. In addition, if approved, we believe that RhopressaTM may also potentially become a preferred therapy where PGAs are contraindicated, for patients who do not respond to PGAs and for patients who choose to avoid the cosmetic issues associated with PGA products. Also, in a 24-hour, 12-patient pilot study comparing RhopressaTM efficacy to that of placebo, RhopressaTM demonstrated similar levels of IOP lowering during nocturnal and diurnal periods. This is potentially a further differentiating feature of RhopressaTM when considering that currently marketed products have demonstrated little or no efficacy at night and eye pressure is typically highest when patients are asleep.
We resubmitted ouranticipate filing an Investigational New Drug Application (“NDA”IND”) with the U.S. Food and Drug Administration (“FDA”) for RhopressaTMon February 28, 2017. Our initial submission, announced in September 2016, was withdrawn as a result of a contract manufacturer of our drug product not being prepared for pre-approval inspection by the FDA. The NDA submission included our second Phase 3 registration trial for RhopressaTM, named “Rocket 2,” as the pivotal clinical trial and our initial Phase 3 registration trial, named “Rocket 1,” as supportive in nature. Our Rocket 2 trial achieved its primary efficacy endpoint of demonstrating non-inferiority of RhopressaTM compared to timolol. In addition, the 12-month safety data from this registration trial also confirmed a favorable safety profile for the drug and demonstrated a consistent IOP-lowering effect throughout the 12-month period at the specified measurement time points. We also included as supportive data the 90-day efficacy results of our Rocket 4 and Mercury 1 trials, each as further discussed below, with the NDA submission for RhopressaTM.
Our fourth Phase 3 registration trial for RhopressaTM, named “Rocket 4,” in the U.S., was designed to generate adequate six-month safety data for European regulatory approval, for which we expect to fileFDA in the second half of 2018. 2022.
Pipeline
We own over 4,000 ROCK inhibitor molecules that provide a basis for further research and development opportunities. We discovered and developed the active ingredient in Rhopressa® and Rocklatan® and netarsudil through a rational drug design approach that coupled medicinal chemistry with high content screening of compounds in proprietary cell-based assays. We selected and formulated netarsudil for preclinical in vivo testing following a detailed characterization of over 3,000 synthesized ROCK inhibitors, a number that has since grown to approximately 4,000. We evaluate this library on an ongoing basis for additional development opportunities. Early-stage evaluations of these molecules are underway for other ophthalmic indications. We continue to evaluate external business development opportunities to provide access to technologies developed outside of Aerie to complement our internal research and development efforts.
Impact of the COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the coronavirus (“COVID-19”) outbreak a pandemic. As the COVID-19 pandemic continues to evolve, we considered this in our critical and significant accounting estimates as future developments continue to be uncertain, including as a result of new information that may emerge concerning COVID-19 and its variants and the actions taken to contain or treat it, as well as the economic impact on eye-care professionals, patients, third parties and markets. Actual results could differ from our estimates.
The six-monthhealth and safety of our employees, patients, prescribers and efficacy data were largely consistentcommunity are of utmost importance during this time. We are complying with observationsall requirements and mandates from various agencies and governments and we continue to monitor applicable federal and state regulations, including with respect to vaccination mandates and required weekly testing of unvaccinated employees. We have taken precautionary measures to protect our employees and our stakeholders and adapted company policy to maintain the continuity of our business. We have continued to operate effectively as most of our manufacturing plant personnel are working at the manufacturing plant with precautionary measures in place, while the balance of our workforce has the option to work remotely or to return to the office in accordance with state and local mandates. We may take further actions as government authorities require or recommend or as we determine to be in the other RhopressaTM Phase 3 registration trials and the 90-day efficacy results achieved the primary efficacy endpoint of demonstrating non-inferiority of RhopressaTM compared to timolol. A third Phase 3 registration trial for RhopressaTM, named “Rocket 3,” was a 12-month safety-only study in Canada. We have commenced Phase 1 and 2 clinical trial activities in the United States relating to pursuing regulatory approval of RhopressaTM in Japan, and expect to initiate the clinical trials in the fourth quarter of 2017.
The RhopressaTM Phase 3 registration trial results have shown minimal drug-related serious adverse events or drug-related systemic adverse events, with the most common adverse event reported being conjunctival hyperemia, or eye redness, with incidence rates of approximately 50% across all Phase 3 registration trials for RhopressaTM, the majority of which was reported as mild.
On October 13, 2017, the FDA held an advisory committee meeting to discuss the RhopressaTM NDA. The advisory committee voted in favor of RhopressaTM regarding (a) whether the clinical trials supported the efficacy of RhopressaTM for reducing elevated IOP in patients with open-angle glaucoma or ocular hypertension and (b) whether the efficacy outweighs the safety risk. The FDA is not bound by the advice of the advisory committee, but takes the advice into consideration when reviewing investigational medicines. The Prescription Drug User Fee Act (“PDUFA”) goal date for the completion of the FDA’s review of the RhopressaTM NDA is set for February 28, 2018, which reflects a standard 12-month review period.
RoclatanTM
Our second product candidate is once-daily RoclatanTM, a fixed-dose combination of RhopressaTM and latanoprost. We believe, based on our preclinical studies and clinical trials to date, that RoclatanTM, if approved, will be the only glaucoma product that covers the full spectrum of currently known IOP-lowering MOAs, giving it the potential to provide a greater IOP-lowering effect than any currently marketed glaucoma product. Therefore, we believe that RoclatanTM, if approved, could compete with both PGA and non-PGA therapies for patients requiring maximal IOP lowering, including those with higher IOPs and those who present with significant disease progression despite currently available therapies.

We recently completed two Phase 3 registration trials for RoclatanTM. The first Phase 3 registration trial for RoclatanTM, named “Mercury 1,” was a 12-month safety trial with a 90-day efficacy readout. Mercury 1 achieved its primary efficacy endpoint of demonstrating superiority of RoclatanTM to each of its components. The safety and tolerability results for RoclatanTM from the 90-day efficacy period of Mercury 1 showed no drug-related serious adverse events or drug-related systemic adverse events. On July 19, 2017, we announced the results of the Mercury 1 12-month safety study, noting the safety results for RoclatanTM for the 12-month period were consistent with those observed for the 90-day efficacy period. There were no new adverse events that developed over the 12-month period, and there were no drug-related serious or systemic adverse events.
The second Phase 3 registration trial for RoclatanTM, named “Mercury 2,” was a 90-day efficacy and safety trial also designed to demonstrate superiority of RoclatanTM to each of its components. The Mercury 2 trial design was identical to that of Mercury 1, except that Mercury 2 was a 90-day trial without the additional nine-month safety extension included in Mercury 1. Both Mercury 1 and Mercury 2 achieved their 90-day primary efficacy endpoints of demonstrating statistical superiority over each of its components, including RhopressaTM and market-leading PGA, latanoprost, at all measured time points. The superiority of RoclatanTM over its components was consistently in the range of 1 to 3 mmHg (millimeters of mercury). We are permitted to submit the RoclatanTM NDA while the RhopressaTM NDA is still being reviewed by the FDA. We expect to submit an NDA for RoclatanTM in the second quarter of 2018.
Mercury 1 and Mercury 2 will also be used for European approval of RoclatanTM, and we initiated a third Phase 3 registration trial for RoclatanTM, named “Mercury 3,” in Europe during the third quarter of 2017. Mercury 3 is designed to compare RoclatanTM to Ganfort®, a fixed-dose combination product of bimatoprost and timolol marketed in Europe, which if successful, is expected to improve our commercialization prospects in that region.
Pipeline Opportunities
Our stated objective is to build a major ophthalmic pharmaceutical company. In addition to our primary product candidates, RhopressaTM and RoclatanTM, we plan to continue exploring the benefits of RhopressaTM on 24-hour IOP lowering, normal tension glaucoma, as well antifibrotic effects on the diseased TM. We are also evaluating possible usesbest interest of our existing proprietary portfolio of Rho kinase inhibitors beyond glaucoma. Our owned preclinical small molecule, AR-13154, has demonstrated the potential for the treatment of wet age-related macular degeneration (“AMD”) by inhibiting Rho kinase and Protein kinase C and has shown lesion size decreases in an in vivo preclinical model of wet AMD at levels similar to the current market-leading wet AMD anti-VEGF product, and even greater lesion size reduction in combination with the current market-leading wet AMD anti-VEGF product. Further, in our preclinical studies, we have seen a promising potential of this molecule to reduce neovascularization in a model of proliferative diabetic retinopathy. Pending additional studies, the active metabolite of AR-13154 and related molecules may have the potential to provide an entirely new mechanism and pathway to treat wet AMD and other diseases of the retina, such as diabetic macular edema (“DME”). This molecule has not yet been tested in humans in a clinical trial setting.employees.
We have and may continue to enter into research collaboration arrangements, license, acquire or develop additional product candidates and technologies to broaden our presence in ophthalmology, and we continually explore and discuss potential additional opportunities for new ophthalmic products, delivery alternatives and new therapeutic areas with potential partners. We are currently focused on the evaluation of technologies for the delivery of our owned molecules to the front and back of the eye over sustained periods.
On July 31, 2017, we announced that we entered into a collaborative research, development and licensing agreement with DSM, a global science-based company headquartered in the Netherlands. The research collaboration agreement includes an option to license DSM’s bio-erodible polymer implant technology for evaluating its application to the delivery of certain Aerie compounds, initially focused on retinal diseases. This technology uses polyesteramide polymers to produce an injectable, thin fiber that is minute in size. Preclinical experiments have demonstrated early success in conjunction with AR-13154, including demonstration of linear, sustained elution rates over several months and achievement of target retinal drug concentrations.
On October 4, 2017, we acquired from Envisia the rights to use PRINT® technology in ophthalmology and certain other assets. The PRINT® technology is a proprietary system capable of creating precisely engineered sustained release products utilizing fully-scalable manufacturing processes. Our initial focus will be in using PRINT® to manufacture injectable implants containing AR-13154, potentially in conjunction with the biodegradable polymer from DSM. In addition, we acquired Envisia’s intellectual property rights relating to ENV1105, Envisia’s preclinical dexamethasone steroid product candidate for the treatment of DME, which also utilizes the PRINT® technology.

Financial Overview
Our cash, cash equivalents and investments totaled $199.2 million as of March 31, 2022. We believe that our cash, cash equivalents and investments totaled $282.2 million as of September 30, 2017 and are currently expected toprojected cash flows from revenues will provide sufficient resources for our current ongoing needs.needs through at least the next twelve months from the date of this filing, though there may be need for additional financing activity as we continue to grow, in addition to our aggregate principal amount of $316.25 million of Convertible Notes which mature on October 1, 2024. We continue to evaluate our product candidates in development for collaboration and licensing opportunities. See “—Liquidity and Capital Resources” below and Note 10 to our condensed consolidated financial statements included in this report for further discussion.
We have incurred net losses since our inception in June 2005. To date,Until 2018, when we have not generatedcommenced commercial operations, our business activities were primarily limited to developing product revenuecandidates, raising capital and performing research and development activities. As of March 31, 2022, we do nothad an accumulated deficit of $1,141.8 million and recognized a net loss of $35.9 million for the three months ended March 31, 2022. For the three months ended March 31, 2021 we recognized a net loss of $42.0 million. Our capital resources and business efforts are largely focused on activities relating to the commercialization of Rhopressa® and Rocklatan®, advancing our product candidates in development, international expansion and operating our Athlone plant.
We expect to incur operating losses until such a time when Rhopressa® or Rocklatan® or any current or future product candidates, if approved, or proceeds in connection with collaboration and licensing arrangements, generate sufficient cash flows for us to achieve profitability. Accordingly, we may be required to obtain further funding through debt or equity offerings or other sources. Adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on acceptable terms, we may be forced to delay, reduce or eliminate our research and development programs or commercialization or manufacturing efforts.
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Product Revenues, Net
Rhopressa® and Rocklatan®, our glaucoma franchise products, were launched in the United States in April 2018 and May 2019, respectively. We commenced generating product revenuerevenues from sales of Rhopressa® and Rocklatan® during the second quarter of 2018 and 2019, respectively. Product affordability for the patient drives consumer acceptance, and this is generally managed through coverage by third-party payers, such as government or private healthcare insurers and pharmacy benefit managers (“Third-party Payers”) and such product may be subject to rebates and discounts payable directly to those Third-party Payers. Our product revenues are recorded net of provisions relating to estimates for (i) trade discounts and allowances, such as discounts for prompt payment and distributor fees, (ii) estimated rebates to Third-party Payers, estimated payments for Medicare Part D prescription drug program coverage gap (commonly called the “donut hole”), patient co-pay program coupon utilization, chargebacks and other discount programs and (iii) reserves for expected product returns. These estimates reflect current contractual and statutory requirements, known market events and trends, industry data, forecasted customer mix and lagged claims. Actual amounts may ultimately differ from these estimates. If actual results vary, estimates may be adjusted in the period such change in estimate becomes known, which may have an impact on earnings in the period of adjustment.
We will not generate any revenues from any product candidates or future product candidates unless and until we obtain regulatory approval for and successfully commercialize one or moresuch products.
Licensing Revenues
Licensing revenues consist of the upfront license fee and supplemental upfront payment earned from the licensing of our currentintellectual property. We recognize revenues from license fees when the license is considered a right to use the intellectual property and we have provided all necessary information to the licensee to benefit from the license and the license term has begun. If it is probable that a significant reversal in the amount of cumulative revenue recognized will occur, we record the upfront license fees in deferred revenue, non-current until the uncertainty is resolved.
Cost of Goods Sold
Cost of goods sold consists of direct and indirect costs to procure and manufacture product candidates. Oursold, including third-party manufacturing costs. Prior to receiving FDA approval, these costs for Rhopressa® and Rocklatan® were expensed as pre-approval commercial manufacturing expenses (as defined below). We began capitalizing inventory costs for Rhopressa® and Rocklatan® after receipt of FDA approval. In January 2020 and September 2020, we received FDA approval to produce Rocklatan® and Rhopressa®, respectively, at the Athlone plant for commercial distribution in the United States. Shipments of commercial supply of both Rocklatan® and Rhopressa® from the Athlone plant to the United States commenced in the second half of 2020. Production costs related to underutilized capacity at the Athlone plant, are not included in the cost of inventory but are charged directly to cost of goods sold in the condensed consolidated statements of operations to date have primarily been limited to research and development and raising capital. Ascomprehensive loss in the period incurred. We expect cost of September 30, 2017, we had an accumulated deficit of $403.2 million. We recorded net losses of $32.4 million and $86.6 million for the three and nine months ended September 30, 2017, respectively. We recorded net losses of $23.8 million and $69.7 million for the three and nine months ended September 30, 2016, respectively. A substantial portion of our capital resources and efforts are focused on completing the development and obtaining regulatory approval and preparing for potential commercialization and manufacturing of our product candidates. As a result, we expectgoods sold in 2022 to continue to incur significant operating losses until suchbe unfavorably impacted by production costs due to the underutilization at the Athlone plant as a result of the Athlone plant having become operational in early 2020 and having not yet reached full capacity. We expect the underutilization to continue to have an unfavorable impact on cost of goods sold that will decrease over time when our product candidates are commercially successful, if at all. If we do not successfully commercialize any of our current product candidates, we may be unable to generate product revenue or achieve profitability.as the manufacturing plant reaches full capacity.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of employee-related expenses, including salaries, benefits and stock-based compensation for all officers and employees in general management, sales and marketing, finance and administration. Other significant expenses include pre-approval commercial-related manufacturing costs, pre-launch salesselling and marketing planning activities,expenses, facilities expenses, shipping and handling costs and professional fees for audit, tax, legal and other services.
We expect that our selling, general and administrative expenses will increase with the continued advancement of our product candidates as we prepare for potential commercialization. We expect these increases will likely be associated with the hiring of additional employees in areas such as sales and marketing, and medical affairs, along with increased levels of manufacturing activity and overhead expenses associated with the growth of our employee base.
Research and Development Expenses
The following table shows ourWe expense research and development (“R&D”) expenses for our advanced-stage product candidates for the three and nine months ended September 30, 2017 and 2016:
 THREE MONTHS ENDED 
 SEPTEMBER 30,		 NINE MONTHS ENDED 
 SEPTEMBER 30,
 2017 2016 2017 2016
 (in thousands)
RhopressaTM

$1,887
 $3,004
 $4,230
 $10,929
RoclatanTM

1,809
 4,920
 8,160
 12,211
Other research and development activities491
 183
 725
 1,290
Unallocated8,221
 4,581
 20,862
 13,871
Total research and development expense$12,408
 $12,688
 $33,977
 $38,301
We expense R&D costs to operations as incurred. OtherResearch and development expenses consist primarily of costs incurred for the research and development activities include direct of our preclinical and clinical candidates, which include:
•employee-related expenses, including salaries, benefits, travel and stock-based compensation expense for research and development personnel;
•expenses incurred under agreements with CROs, contract manufacturing organizations and service providers that assist in conducting clinical trials and preclinical studies;
•costs associated with any collaboration arrangements, licenses or acquisitions of preclinical molecules, product candidates or technologies;
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•costs associated with preclinical activities and pipeline activities, including our ongoing preclinical activities. Expenses relating to activities that support more than one development program or activity such as employee-related activities;
•costs including stock-based compensation, facilities expensesassociated with regulatory operations; and
•depreciation expense for assets used in R&Dresearch and development activities.
Our expenses related to clinical trials are based on estimates of patient enrollment and related expenses at clinical investigator sites as well as estimates for the services received and efforts expended pursuant to contracts with research institutions, consultants and CROs that assist in conducting and managing clinical trials. We accrue expenses related to clinical trials based on contracted amounts applied to the level of patient enrollment and activity according to the protocol. If future timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we modify our estimates of accrued expenses accordingly on a prospective basis. Historically, such modifications have not allocated to specific product or potential product candidates and are separately classified as “unallocated.”

been material.
Other Income (Expense),Expense, Net
Other income (expense)expense, net primarily includes investment income, interest expense, andinterest income, foreign exchange gains and losses. Investmentlosses and other income primarily consists of interest earned on our cash and cash equivalents and investments, and amortization or accretion of discounts and premiums on our investments.expense. Interest expense consists of interest expense under the 2014 Convertible Notes, including the amortization of debt discounts and issuance costs.costs incurred. Interest income primarily consists of interest earned on our cash, cash equivalents and investments. See “—Liquidity and Capital Resources” below and Note 10 to our condensed consolidated financial statements included in this report for further discussion. Foreign exchange gains and losses are primarily due to the remeasurement of our Euro-denominated liability related to our build-to-suit lease obligation,liabilities, which isare denominated in a foreign currency and held by a subsidiary with a U.S. dollar functional currency. Also included in other income and expense are changes in the fair value of equity securities (sold during the three months ended March 31, 2021) and research and development tax credit refunds.
Income Tax Expense
Income tax expense primarily includes branch taxes of our non-U.S. subsidiaries and withholding taxes related to the $6.0 million developmental milestone made by Santen Pharmaceuticals pursuant to the First Santen Agreement.
Critical Accounting Policies and Use of Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States or (“U.S. GAAP.GAAP”). The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses and related disclosures. We evaluate our estimates and judgments on an ongoing basis. Significant estimates include assumptions used in the determination of revenue recognition, leases, acquisitions, stock-based compensation and operating expense accruals.fair value measurements. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our critical accounting policies and the methodologies and assumptions we apply under themsignificant estimates have not materially changed since the date we filed our 20162021 Form 10-K. For more information on our critical accounting policies and estimates, refer to our 20162021 Form 10-K.
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Results of Operations
Comparison of the Three Months Ended September 30, 2017March 31, 2022 and 20162021
The following table summarizes the results of our operations for the three months ended September 30, 2017March 31, 2022 and 2016:2021: 
 THREE MONTHS ENDED 
MARCH 31,		$
CHANGE		%
CHANGE
 20222021
 (in thousands, except percentages)
Product revenues, net$29,835 $22,970 $6,865 30 %
Total revenues, net29,835 22,970 6,865 30 %
Costs and expenses:
Cost of goods sold6,780 6,700 80 1 %
Selling, general and administrative expenses31,524 32,598 (1,074)(3)%
Research and development expenses25,174 17,891 7,283 41 %
Total costs and expenses63,478 57,189 6,289 11 %
Loss from operations(33,643)(34,219)576 (2)%
Other expense, net(1,555)(7,714)6,159 (80)%
Loss before income taxes$(35,198)$(41,933)$6,735 (16)%
Product revenues, net
 THREE MONTHS ENDED 
 SEPTEMBER 30,		 CHANGE 
%
CHANGE
 2017 2016  
 (in thousands, except percentages)
Selling, general and administrative$19,774
 $10,627
 $9,147
 86 %
Research and development12,408
 12,688
 (280) (2)%
Total operating expenses32,182
 23,315
 8,867
 38 %
Loss from operations(32,182) (23,315) (8,867) 38 %
Other income (expense), net(141) (460) 319
 (69)%
Net loss before income taxes$(32,323) $(23,775) $(8,548) 36 %
        
Product revenues, net were $29.8 million and $23.0 million for the three months ended March 31, 2022 and 2021, respectively, and related to sales of our U.S. glaucoma franchise products, Rhopressa® or Rocklatan®. The year-over-year revenue increase is primarily due to an increase in the number of units shipped to wholesalers and improved margins per bottle.
Cost of goods sold
Cost of goods sold was $6.8 million and $6.7 million for the three months ended March 31, 2022 and 2021, respectively. Our gross margin percentage was 77.3% and 70.8% for the three months ended March 31, 2022 and 2021, respectively. The increase in the gross margin percentage was driven by the increase in product revenues, net as discussed above. Our cost of goods sold and gross margin percentage for the three months ended March 31, 2022 and 2021 were unfavorably impacted by costs due to underutilized capacity at the Athlone plant, which increased the cost of goods sold by $3.9 million and $4.4 million and lowered the gross margin percentage by 13.0% and 19.0%, respectively. We expect the underutilization to continue to have an unfavorable impact on cost of goods sold that will decrease over time as the Athlone plant reaches full capacity.
Selling, general and administrative expenses
Selling, general and administrative expenses increased by $9.1were $31.5 million and $32.6 million for the three months ended March 31, 2022 and 2021, respectively. Selling, general and administrative expenses decreased by $1.1 million primarily due to lower stock-based compensation partially offset by higher employee-related and sales and marketing expenses. We expect selling, general and administrative expenses to decrease for the remainder of 2022.
Research and development expenses
Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of costs incurred for the research and development of our preclinical and clinical product candidates, which include but are not limited to: (1) expenses incurred under agreements with contract research organizations, contract manufacturing organizations and service providers that assist in conducting clinical and preclinical studies; (2) costs associated with any collaboration arrangements, licenses or acquisitions of preclinical molecules, product candidates or technologies; and (3) costs associated with our preclinical activities, development activities and regulatory operations. We do not allocate employee-related expenses,
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stock-based compensation or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs.
 THREE MONTHS ENDED 
MARCH 31,		$
CHANGE		%
CHANGE
 20222021
 (in thousands, except percentages)
Direct research and development expenses by program:
Rhopressa®
$135 $1,257 $(1,122)(89)%
Rocklatan®
132 — 132 *
AR-1551210,733 4,004 6,729 *
Retina programs (1)
573 194 379 *
Other direct research and development program costs (2)
424 80 344 *
Total direct research and development program costs11,997 5,535 6,462 *
Employee-related costs6,851 6,666 185 3 %
Stock-based compensation1,336 1,987 (651)(33)%
Other indirect costs (3)
4,990 3,703 1,287 35 %
Research and development expenses$25,174 $17,891 $7,283 41 %
*Percentage not meaningful
(1) Consists of AR-1105, AR-13503 SR and AR-14034 SR in 2021 and 2022.
(2) Other direct research development program costs primarily include AR-6121.
(3) Consists primarily of other indirect costs incurred for the research and development of preclinical and clinical product candidates, including expenses associated with our research facilities such as lab supplies, depreciation and other research facility related costs.
Research and development expenses were $25.2 million and $17.9 million for the three months ended March 31, 2022 and 2021, respectively. Research and development expenses increased by $7.3 million primarily due to an increase of $6.7 million in expenses associated with AR-15512. In September 30, 20172021, we reported topline results on safety and efficacy for COMET-1, a Phase 2b clinical trial in which we completed a dose ranging study evaluating two concentrations of AR-15512 (0.0014% and 0.003%). In January 2022, the Company gained alignment with the FDA on the results of its Phase 2b clinical trial and confirmed the design of the Phase 3 trials. This resulted in the achievement of a regulatory milestone in which the Company paid the former shareholders of Avizorex $8.0 million. We expect to initiate Phase 3 clinical trials for AR-15512 in the second quarter of 2022, and therefore expect an increase in these costs through the end of the year.
The increase was offset by a $1.1 million decrease in expenses for Rhopressa® for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Furthermore, expenses for Rhopressa® in the three months ended March 31, 2021 consisted of ongoing costs for the Rhopressa® Phase 3 clinical trial in Japan. Santen’s portion of shared costs related to conducting the first Rhopressa® Phase 3 clinical trial in Japan were recorded as deferred revenue, non-current on the condensed consolidated balance sheets.
Costs related to the development of our retina programs were relatively flat for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.In addition, we are also working to advance our preclinical sustained-release retinal implant, AR-14034 SR, for which we anticipate filing an IND with the FDA in the second half of 2022.
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Other expense, net
Other expense, net consists of the following:
THREE MONTHS ENDED 
MARCH 31,		$
CHANGE
20222021
(in thousands)
Interest income$55 $51 $4 
Interest expense(1,633)(6,901)5,268 
Other income (expense)23 (864)887 
Other expense, net$(1,555)$(7,714)$6,159 
Other expense, net changed by $6.2 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.
This change was primarily due to an decrease of $5.3 million in interest expense due to the impact of adopting Accounting Standards Update 2020-06 on January 1, 2022 which accounts for convertible debt instruments, such as the Convertible Notes, as a single liability measured at its amortized cost, partially offset by a change of $0.9 million in other income (expense) during the three months ended March 31, 2022 as compared to the three months ended September 30, 2016. This increase wasMarch 31, 2021. The change in other income (expense) primarily associated withconsists of $1.0 million in realized loss on equity securities in the expansion of our employee baseprior period. See Notes 2 and preparatory commercial operations and manufacturing activities. 
Employee-related expenses increased by $3.6 million, including an increase in salaries and other employee-related expenses of $2.0 million due to increased headcount and an increase in stock-based compensation of $1.6 million.

Total costs related to preparatory commercial operations and manufacturing were approximately $4.5 million for the three months ended September 30, 2017, an increase of $2.7 million as compared to the three months ended September 30, 2016, and included scale-up of our current manufacturing activities. Certain of our direct preparatory commercial operations and manufacturing activities are recognized in selling, general and administrative expenses untilsuch time when we determine such costs should be capitalized as saleable inventory. Expenses related10 to our pre-launch sales and marketing planning activities increased by $1.1 millioncondensed consolidated financial statements for additional information on the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. In addition, professional fees increased by $0.8 million, primarily due to consulting fees for compliance-related activities and legal fees to support the growth of our operations.Convertible Notes.
Research and development expenses
Research and development expenses decreased by $0.3 million for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. During the three months ended September 30, 2016, our research and development activity was primarily associated with Phase 3 registration trials for RhopressaTM and RoclatanTM. The Phase 3 registration trials for both RhopressaTM and RoclatanTM have been completed for purposes of applying for FDA approval in the U.S. As such, R&D costs for RoclatanTM and RhopressaTMdecreased by $3.1 million and $1.1 million, respectively, for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. Unallocated expenses increased by $3.6 million primarily driven by increased employee-related expenses, including stock-based compensation.
Comparison of the Nine Months Ended September 30, 2017 and 2016
The following table summarizes the results of our operations for the nine months ended September 30, 2017 and 2016:
 NINE MONTHS ENDED SEPTEMBER 30, CHANGE 
%
CHANGE
 2017 2016  
 (in thousands, except percentages)
Selling, general and administrative$51,402
 $29,814
 $21,588
 72 %
Research and development33,977
 38,301
 (4,324) (11)%
Total operating expenses85,379
 68,115
 17,264
 25 %
Loss from operations(85,379) (68,115) (17,264) 25 %
Other income (expense), net(1,071) (1,490) 419
 (28)%
Net loss before income taxes

$(86,450) $(69,605) $(16,845) 24 %
        
Selling, general and administrative expenses
Selling, general and administrative expenses increased by $21.6 million for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. This increase was primarily associated with the expansion of our employee base and preparatory commercial operations and manufacturing activities. 
Employee-related expenses increased by $9.0 million, including an increase in stock-based compensation expense of $4.7 million and an increase in salaries and other employee-related expenses of $4.3 million due to increased headcount.
Expenses related to our preparatory commercial operations and manufacturing activities were approximately $9.3 million for the nine months ended September 30, 2017, an increase of $5.6 million as compared to the nine months ended September 30, 2016, and included scale-up of our current manufacturing activities, as discussed above. Our pre-launch sales and marketing planning activities increased $3.2 million for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, and professional fees increased by $2.1 million, primarily due to consulting fees for compliance-related activities and legal fees to support the growth of our operations.

Research and development expenses
Research and development expenses decreased by $4.3 million for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. During the nine months ended September 30, 2016, our research and development activity was primarily associated with Phase 3 registration trials for RhopressaTM and RoclatanTM. The Phase 3 registration trials for both RhopressaTM and RoclatanTM have been completed for purposes of applying for FDA approval in the U.S. As such, R&D costs for RhopressaTM and RoclatanTMdecreased by $6.7 million and $4.1 million, respectively, for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. Unallocated expenses increased by $7.0 million primarily driven by increased employee-related expenses, including stock-based compensation.
Liquidity and Capital Resources
Since our inception, we have funded operations primarily through the sale of equity securities and the issuance of convertible notes. In addition, we generate cash flow from product revenues related to sales of Rhopressa® and Rocklatan® in the United States. Further, we entered into the Second Santen Agreement in December 2021 which included the Second Santen Agreement Upfront Payment, consisting of (a) $88.0 million which we received in January 2022 and (b) a supplemental upfront payment of $2.0 million. This expands the scope of the First Santen Agreement pursuant to which Santen made an upfront payment of $50.0 million in the fourth quarter of 2020.
We have incurred losses and experienced negative operating cash flows since our inception and anticipate that we will continue to incur losses until such a time when our current products and any future products, if commercialized, generate adequate revenues to render us profitable. We will not generate any revenue from any product candidates are commercially successful, if at all.or future product candidates unless and until we obtain regulatory approval and commercialize such products.
Sources of Liquidity
PriorOur product revenue, net amounted to our initial public offering (“IPO”), we raised net cash proceeds of $78.6$29.8 million fromfor the private placement of convertible preferred stock and convertible notes. Priorthree months ended March 31, 2022, which relate to and in connection with our IPO, all outstanding shares of convertible preferred stock and all convertible notes were converted into shares of common stock. On October 30, 2013, we completed our IPO and raised net proceeds of approximately $68.3 million, after deducting underwriting discounts, fees and expenses.
Since our IPO, we have issued:
$125.0 million aggregate principal amount of senior secured convertible notes (the “2014 Convertible Notes”), for which we received net proceeds of approximately $122.9 million, after deducting discounts and certain expenses of $2.1 million, and
10.8 million sharessales of our common stock through September 30, 2017, for which we receivedglaucoma franchise products, Rhopressa® and Rocklatan®. Accounts receivable, net proceedsamounted to $63.6 million as of approximately $339.5 million, after deducting commissions and other fees and expenses. This includes $195.9 million raised from “at-the-market” sales agreements, of which $49.3 million in net proceeds was raised during the nine months ended September 30, 2017. Additionally, we raised net proceeds of $143.6 million from the issuance of shares of our common stock pursuant to underwriting agreements, of which approximately $72.7 million was raised during the nine months ended September 30, 2017.March 31, 2022.
As of September 30, 2017,March 31, 2022, our principal sources of liquidity were our cash, cash equivalents and investments, which totaled approximately $282.2$199.2 million. In January 2022, we received an aggregate $90.0 million associated with the Second Santen Agreement Upfront Payment. See Note 3 to our condensed consolidated financial statements included in this report for additional information. We believe that our cash, cash equivalents and investments and projected cash flows from revenues will provide sufficient resources for our current ongoing needs through at least the next twelve months. See “—Operating Capital Requirements.”
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Cash Flows
The following table summarizes our sources and uses of cash:
NINE MONTHS ENDED 
 SEPTEMBER 30,		 THREE MONTHS ENDED 
MARCH 31,
2017 2016 20222021
(in thousands)(in thousands)
Net cash (used in) provided by:   Net cash (used in) provided by:
Operating activities$(67,063) $(60,994)Operating activities$61,911 $(30,054)
Investing activities(59,594) 14,015
Investing activities(42,300)2,280 
Financing activities122,790
 167,857
Financing activities(357)(1,101)
Net change in cash and cash equivalents$(3,867) $120,878
Net change in cash and cash equivalents$19,254 $(28,875)
Operating Activities
During the ninethree months ended September 30, 2017March 31, 2022, net cash provided by operating activities of $61.9 million related to a net loss of $35.9 million, adjusted for non-cash items of $8.2 million primarily related to amortization and 2016,accretion, stock-based compensation expense and depreciation, partially offset by a net cash inflow of $89.6 million related to changes in operating assets and liabilities. During the three months March 31, 2021, net cash used in operating activities was $67.1of $30.1 million related to a net loss of $42.0 million, adjusted for non-cash items of $18.8 million primarily related to stock-based compensation expense, amortization and $61.0accretion and depreciation, offset by a net cash outflow of $6.9 million respectively. related to changes in operating assets and liabilities.
The increase in net cash used inprovided by operating activities during the ninethree months ended September 30, 2017March 31, 2022 as compared to the ninethree months ended September 30, 2016March 31, 2021 was primarily due to the expansionreceipt of our employee basethe $90.0 million Second Santen Agreement Upfront Payment from Santen in connection with the Second Santen Agreement and commercial operations and manufacturing activities in preparation for the launch of RhopressaTM, assuming FDA approval. This is partially offset by a reduction in expenditures for clinical trials in 2017 compared to 2016.higher net cash collections generated from product revenues.
Investing Activities
During the ninethree months ended September 30, 2017, ourMarch 31, 2022, net cash used in investing activities used net cash of $59.6$42.3 million primarily related to purchases of available-for-sale investments of $101.2$70.3 million and purchases of fixed assetsproperty, plant and equipment of $7.1$1.6 million primarily associated withrelated to the build-out of our manufacturing plant in Ireland. These purchases wereAthlone, Ireland partially offset by sales and maturities of available-for-sale investments of $48.7$29.6 million. During the ninethree months ended September 30, 2016, our March 31, 2021, net cash provided by investing activities provided net cash of approximately $14.0$2.3 million primarily related to sales and maturities of available-for-sale investments of $35.4$28.3 million, which were partially offset by purchases of available-for-sale investments of $19.9 million.$25.2 million and purchases of property, plant and equipment of $0.8 million primarily related to the Athlone plant.
Financing Activities
During the ninethree months ended September 30, 2017 and 2016, ourMarch 31, 2022, net cash used in financing activities provided net cash of $122.8was $0.4 million and $167.9 million, respectively. The net cash provided by financing activities for the nine months ended September 30, 2017 and 2016 was primarily related to tax payments made on employees’ behalf through withholding of shares on restricted stock grants. During the issuance and sale of common stock pursuant to our “at-the-market” sales agreements and underwriting agreement from which we received total net proceeds of approximately $122.0 million and $167.4 million during the ninethree months ended September 30, 2017 and 2016, respectively.March 31, 2021, net cash used in financing activities of $1.1 million primarily related to tax payments made on employees’ behalf through withholding of shares on restricted stock grants.
Operating Capital Requirements
We expect to incur ongoing operating losses until such a time when ourRhopressa®, Rocklatan®, Rhokiinsa® or Roclanda® or any product candidates are commercially successful,or future product candidates, if at all. approved, generate sufficient cash flows for Aerie to achieve profitability.
Our principal liquidity requirements are for: working capital; future increased operational expenses; pre-commercialization planningoperating expenses, including for commercialization and manufacturing activities; expenses associated with developing our pipeline opportunities, including pursuing strategic growth opportunities; costs associated with executing our global expansion strategy, to expand into Europeincluding clinical and Japan;potential commercialization activities outside the United States; contractual obligations; and capital expenditures, including completing our manufacturing plant in Ireland; and debt service payments.expenditures.
In January 2017, we entered into a lease agreement for a new manufacturing plant in Ireland under which we are leasing approximately 30,000 square feet of interior floor space for build-out. Estimated project-wide equipment, construction and other related project costs are expected to total approximately $39 million (excluding ongoing labor-related and lease expenses and the potential impact of foreign exchange rate fluctuations), of which approximately $16 million is expected to be spent in 2017.
We believe that our cash, and cash equivalents and investments as of September 30, 2017and projected cash flows from revenues, will provide sufficient resources to support our operations, including interest payments for our Convertible Notes, through at least the expected approval and planned commercializationnext twelve months.
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Table of RhopressaTMandRoclatanTMin the U.S.Contents
Our future funding requirements will depend on many factors, including, but not limited to the following:
•commercial performance of Rhopressa®, Rocklatan®, Rhokiinsa® or Roclanda® or any current or future product candidates, if approved;
•costs of commercialization activities for Rhopressa®, Rocklatan®, Rhokiinsa® or Roclanda® and any current or future product candidates, if approved;
•costs of building inventory to support sales growth and other associated working capital needs;
•costs, timing and outcome of seeking regulatory approval;
the costs of commercialization activities for our product candidates, if we receive regulatory approval, including the costs and timing of establishing product sales, marketing, manufacturing and distribution capabilities;
the commercial performance of our future product candidates;
•timing and costs of our ongoing and future clinical trials and preclinical studies and clinical trials forincluding those related to our product candidates outside of the U.S.;global expansion;
costs to complete our new manufacturing plant in Ireland;
•costs of any follow-on development or products, including the exploration and/or development of any additional indications or additional opportunities for new ophthalmic products,product candidates, delivery alternatives and new therapeutic areas;
costs of any new business strategies;
costs of operating as a public company, including legal, compliance, accounting and investor relations expenses;

•terms and timing of any acquisitions, collaborations, licensing, consulting or other arrangements;
•costs related to the Convertible Notes; and
•costs related to filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against intellectual property related claims.
We based our projections on assumptions that may prove to be incorrect or unreliable or may change due to circumstances beyond our control, and as a result, we may consume our available capital resources earlier than we originally projected. WeAccordingly, we may needbe required to obtain additional financing to fund our future operationsfurther funding through debt or we may decide, based on various factors, that additional financings are desirable.equity offerings or other sources. If such funding is required, we cannot guarantee that it will be available to us on favorable terms, if at all.
Outstanding Indebtedness
As ofIn September 30, 2017, our total indebtedness consisted of our $125.0 million2019, we issued an aggregate principal amount of 2014$316.25 million of Convertible Notes.
The Convertible Notes are senior, unsecured obligations with interest payable semi-annually in cash in arrears at a rate of 1.50% per annum on April 1 and October 1 of each year, which began on April 1, 2020. The Convertible Notes will mature on October 1, 2024 unless they are due in September 2021. For a discussionredeemed, repurchased or converted prior to such date. Prior to April 1, 2024, the Convertible Notes will be convertible at the option of holders only during certain periods and upon satisfaction of certain conditions. On and after April 1, 2024, the Convertible Notes will be convertible at the option of the 2014holders any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Convertible Notes seemay be settled in shares of our common stock, cash or a combination, thereof, at our election. We currently intend to settle the principal and interest amounts of the Convertible Notes in cash.
See Note 710 to our condensed consolidated financial statements included in this report.report for additional information.
Contractual Obligations and Commitments
The following table summarizesThere have been no material changes to our contractual obligations at September 30, 2017:and commitments as included in our 2021 Form 10-K.
 TOTAL 
LESS THAN
1 YEAR
 1 TO 3 YEARS 3 TO 5 YEARS 
MORE THAN
5 YEARS
(in thousands) 
Lease obligations(1)
$14,620
 $2,478
 $5,946
 $3,896
 $2,300
2014 Convertible Notes(2)
125,000
 —
 —
 125,000
 —
 $139,620
 $2,478
 $5,946
 $128,896
 $2,300

(1)Our lease obligations are primarily related to our principal executive office in Irvine, California, corporate offices in Bedminster, New Jersey, and Dublin, Ireland, and our research facility in Durham, North Carolina. Additionally, in January 2017, we entered into a lease agreement for a new manufacturing plant in Athlone, Ireland, under which we are leasing approximately 30,000 square feet of interior floor space for build-out. We are permitted to terminate the lease agreement beginning in September 2027. Obligations denominated in foreign currencies have been translated to U.S. dollars at the foreign exchange rates in effect at September 30, 2017.
(2)On September 30, 2014, we issued the 2014 Convertible Notes, which mature on the seventh anniversary from the date of issuance, unless earlier converted. Refer to Note 7 to our condensed consolidated financial statements included in this report for further information.

In October 2017, we entered into an Asset Purchase Agreement (the “Agreement”) with Envisia pursuant to which we made an upfront cash payment of $10.5 million and issued 263,146 shares of Aerie’s common stock valued at approximately $14.3 million. Under the terms of the Agreement, we may also be required to make additional milestone payments contingent upon the achievement of regulatory approval. Contingent milestone payments are excluded from the table above as the timing in which we may be required to make such payments in the future, if at all, is highly uncertain. We have no other contractual obligations or commitments that are not subject to our existing financial statement accrual processes.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements as defined under SEC rules.None.

Jumpstart Our Business Startups Act of 2012
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) provides that an emerging growth company can take advantage of certain exemptions from various reporting and other requirements that are applicable to public companies that are not emerging growth companies. We currently take advantage of some, but not all, of the reduced regulatory and reporting requirements that are available to us for as long as we qualify as an emerging growth company. We have irrevocably elected under Section 107 of the JOBS Act not to take advantage of the extension of time to comply with new or revised financial accounting standards available under Section 102(b) of the JOBS Act and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting for as long as we qualify as an emerging growth company.
We may take advantage of these exemptions until we are no longer an “emerging growth company.” We would cease to be an “emerging growth company” upon the earliest of: (i) December 31, 2018; (ii) the last day of the first fiscal year in which our annual gross revenues are $1.07 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or (iv) as of the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year.
Since the market value of our common stock held by non-affiliates exceeded $700 million as of June 30, 2017, as of the year ending December 31, 2017, we will cease to be an “emerging growth company.” As a result, beginning with our Annual Report on Form 10-K for the year ending December 31, 2017, we will be subject to Section 404(b) of the Sarbanes-Oxley Act, which requires that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting.
Recent Accounting Pronouncements
For a discussion of recently issued accounting standards, see Note 2 to our condensed consolidated financial statements included in this report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We have market risk exposure to interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. Our cash, and cash equivalents as of September 30, 2017, totaled $194.1 million and consisted of cash and money market funds. Our investments totaled $88.2 million as of September 30, 2017 and consisted of commercial paper and corporate bonds. We had cash, cash equivalents and investments of $233.7totaled $199.2 million and $139.8 million as of March 31, 2022 and
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Table of Contents
December 31, 2016.2021, respectively. Given the short-term nature of our cash, cash equivalents and investments, and our investment policy,we do not believe that a sudden change in market interest rates would not be expected to have a material impact on our financial condition or results of operations. We do not currently engage in any hedging activities against changes in interest rates. The 2014 Convertible Notes carry a fixed interest rate and, as such, are not subject to interest rate risk.
Aerie willWe face market risks attributable to fluctuations in foreign currency exchange rates and exposure on the remeasurement of foreign currency-denominated monetary assets or liabilities into U.S. dollars. In particular, our operations and subsidiary in Ireland may enter into certain obligations or transactions in Euros or other foreign currencies but has a U.S. dollar functional currency. We currently do not currently have any derivative instruments or a foreign currency hedging program. To date and during the ninethree months ended September 30, 2017,March 31, 2022, foreign currency exposure and foreign currency financial instruments have not been material.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officerprincipal executive officer and Chief Financial Officer,principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)), as of the end of the period covered by this report. Based upon the evaluation, the Chief Executive Officerour principal executive officer and Chief Financial Officerprincipal financial officer concluded that, as of September 30, 2017,March 31, 2022, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file andor submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officerprincipal executive officer and Chief Financial Officer,principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Changes in Internal Control Over Financial Reporting
There have beenwere no significant changes in our internal control over financial reporting during our most recent fiscalthe quarter ended March 31, 2022 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We may periodically become subject to legal proceedings and claims arising in connection with our business. WeAs of March 31, 2022, we are not a party to any known litigation,material pending legal or administrative proceedings and, to our knowledge, no such proceedings are not aware of any unasserted claims and do not have contingency reserves established for any litigation liabilities.threatened or contemplated.
Item 1A. Risk Factors
You should consider carefully the risks described below and set forth under “Risk Factors” in our 20162021 Form 10-K, and other documents that we have filed or furnished with the SEC. There have been no material changes to these risk factors.
As of December 31, 2017, we will no longer be an “emerging growth company” and, as a result, we will have to comply with increased disclosure and governance requirements.
As a result of the significant increase in our market capitalization as of June 30, 2017, we will cease to be an “emerging growth company” as defined in the JOBS Act as of December 31, 2017. We will, as of December 31, 2017, be a large accelerated filer and, as such, will be subject to certain requirements that apply to other public companies but did not previously apply to us due to our status as an emerging growth company. These requirements include:
the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting;
the requirement to provide detailed compensation discussion and analysis in proxy statements and reports filed under the Exchange Act; and
the “say on pay” provisions (requiring a non-binding stockholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding stockholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Act and some of the disclosure requirements of the Dodd-Frank Act relating to compensation of its chief executive officer.
Beginning with our Annual Report on Form 10-K for the year ending December 31, 2017, we will be subject to Section 404(b) of the Sarbanes-Oxley Act, which requires that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting. Compliance with Section 404 will be expensive and time consuming for management and could result in the detection of internal control deficiencies of which we are currently unaware. Moreover, if we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis, and our financial statements may be materially misstated. We or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading price of our common stock to fall. We expect that the loss of “emerging growth company” status and compliance with the additional requirements will substantially increase our legal and financial compliance costs and make some activities more time consuming and costly.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Use of Proceeds from Registered Securities
On November 3, 2014, we filed a shelf registration statement on Form S-3 (the “2014 Registration Statement”) that permitted the offering, issuance and sale by us of up to a maximum aggregate offering price of $150.0 million of our common stock and permits sales of common stock by certain selling stockholders.

On September 15, 2016, we filed a shelf registration statement on Form S-3 (Registration No. 333-213643), which was effective on September 15, 2016. The shelf registration statement permits the offering, issuance and sale by us of our common stock. In addition, on May 25, 2017, we filed a prospectus supplement to the base prospectus dated September 15, 2016 (the “2017 Prospectus Supplement”). The prospectus supplement permits the offering, issuance and sale by us of up to a maximum aggregate offering price of $50.0 million of our common stock.
From November 10, 2014 through September 30, 2017, we issued and sold 6,840,570 shares of common stock under our “at-the-market” sales agreements, of which 906,858 shares were issued and sold during the nine months ended September 30, 2017, and received net proceeds of approximately $195.9 million, of which $49.3 million were received during the nine months ended September 30, 2017, in each case, after deducting commissions and other fees and expenses. Sales under the “at-the-market” sales agreements were made pursuant to the 2014 Registration Statement, the prospectus supplement (the “2016 Prospectus Supplement”), dated September 15, 2016, to the base prospectus dated September 15, 2016 and the 2017 Prospectus Supplement. As of September 30, 2017, no shares remain available for issuance under the 2014 Registration Statement, the 2016 Prospectus Supplement or the 2017 Prospectus Supplement.
Any remaining net proceeds from these sales are held as cash deposits and in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.

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Item 6. Exhibits
31.1*10.1*†#
10.2*#
10.3*†
31.1*
31.2*
32.1***
32.2***
10.1
Amended and Restated Employment Agreement, dated July 25, 2017, by and between Aerie Pharmaceuticals, Inc. and Vicente Anido, Jr., Ph.D. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36152) filed on July 26, 2017).
101.INS***
101.INS**XBRL Instance Document.
101.SCH***XBRL Taxonomy Extension Schema Document.
101.CAL***XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB***XBRL Taxonomy Extension Label Linkbase Database.
101.PRE***XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF***XBRL Taxonomy Extension Definition Linkbase Document.
104***Cover Page Interactive Data File
*†Filed herewith.Exhibit is a management contract or compensatory plan or arrangement.
#Portions of this exhibit (indicated by asterisks) have been redacted in accordance with Item 601(b)(10)(iv) of Regulation S-K.
*Filed herewith.
**Furnished herewith.
***Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language):
(i) Condensed Consolidated Balance Sheets at September 30, 2017March 31, 2022 and December 31, 20162021 (unaudited), (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2017March 31, 2022 and 20162021 (unaudited), (iii) Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the three months ended March 31, 2022 and 2021 (unaudited), (iv) Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2022 and 20162021 (unaudited) and (iv)(v) Notes to Condensed Consolidated Financial Statements (unaudited).
***Furnished herewith.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AERIE PHARMACEUTICALS, INC.
Date: November 9, 2017May 6, 2022/s/ RICHARD J. RUBINOPETER LANG
Richard J. RubinoPeter Lang
Chief Financial Officer
(Principal Financial andOfficer)
/s/ JEFFREY M. CALABRESE, CPA
Jeffrey M. Calabrese, CPA
Vice President, Finance
(Principal Accounting Officer)











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