Note 8—OMIDRIA Royalty Obligation

On September 30, 2022, we sold to DRI an interest in our future OMIDRIA royalty receipts and received $125.0 million in cash consideration which was recorded as an OMIDRIA royalty obligation on our condensed consolidated balance sheet. DRI is entitled to receive royalties on OMIDRIA net sales through December 31, 2030, subject to annual caps. DRI receives their prorated monthly cap amount before we receive any royalty proceeds. DRI is not entitled to carry-forward nor recoup any shortfall if the royalties paid by Rayner for an annual period are less than the cap amount applicable to each discrete calendar year. Additionally, DRI has no recourse to or security interest in our assets other than our OMIDRIA royalty receipts, and we retain all royalty receipts in excess of the respective cap in any given calendar year. At March 31, 2023, the maximum remaining amount that DRI is entitled to receive through the term of the agreement (December 31, 2030) is $183.5 million, which, if fully paid, would be at an implied effective interest rate of 9.4% over the entire term of the loan.

As of March 31, 2023, the OMIDRIA royalty obligation’s carrying value approximates fair value, which is a Level 3 estimate as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. As of March 31, 2023, the obligation’s carrying value approximates fair value.

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For the three months ended March 31, 2023, we incurred $3.0 million of cash interest expense.

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As of March 31, 2023, the maximum scheduled principal and interest payments (based on an implied effective interest rate of 9.4%) are as follows:

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