RISK FACTORS

         Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including our financial statements and related notes, before deciding whether to purchase shares of our common stock. If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the price of our common stock could decline and you could lose part or all of your investment.

Risks Related to Our Business

We have incurred significant losses since inception and there can be no guarantee as to when, if ever, we may be able to achieve or sustain profitability.

        Since inception in July 1998, we have incurred significant operating losses. For the years ended December 31, 2013 and 2014 and for the three months ended March 31, 2015, we had net losses of $14.2 million, $14.1 million and $1.5 million, respectively. As of March 31, 2015, we had an accumulated deficit of approximately $160.3 million. Losses have resulted principally from costs incurred in our clinical trial, research and development programs and from our general and administrative expenses. To date, we have financed our operations primarily through the private placement of our preferred equity securities, debt financing through a credit line and, more recently, sales of the iStent . We have devoted substantially all of our resources to the research and development of our products, the commercial launch of the iStent , the development of our proprietary sales network, and the assembly of a management team to build our business.

        To implement our business strategies we need to, among other things, grow our sales and marketing infrastructure to increase market acceptance of the iStent and any other products that receive Food and Drug Administration, or FDA, approval, fund ongoing research and development activities, expand our manufacturing capabilities, and obtain regulatory clearance or approval to commercialize our existing products in international markets or to commercialize those currently under development in the United States and internationally. As a result, we expect our expenses to increase significantly as we pursue these objectives. The extent of our future operating losses and the timing of profitability are highly uncertain, especially given that we only recently began commercializing the iStent , which makes forecasting our sales more difficult. We will need to generate significant additional net sales to achieve and maintain profitability, and even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time. Our failure to achieve or sustain profitability could have an adverse effect on the value of our common stock.

        As a result of our recurring losses from operations and ongoing negative cash flows, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of, and for the year ended, December 31, 2014, describing the existence of substantial doubt about our ability to continue as a going concern. If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or a part of their investment. We may also be forced to make reductions in spending, including delaying or curtailing our planned clinical programs, or to extend payment terms with our suppliers or licensors. Future reports from our independent registered public accounting firm may also contain statements expressing doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding on

13

Table of Contents

commercially reasonable terms or at all. Such substantial doubt does not give effect to the receipt of any proceeds from this offering.

Substantially all of our net sales are generated from sales of the iStent, which has a limited commercial history, and we are completely dependent on its success. If the iStent or our other products under development fail to gain widespread market acceptance, our business will suffer.

        Our primary sales-generating commercial product is the iStent , which we began selling in the United States in the third quarter of 2012. We rely heavily upon sales in the United States, which comprised 94.2% and 92.8% of our net sales for the year ended December 31, 2014 and three months ended March 31, 2015, respectively. We expect to continue to derive a significant portion of our net sales from sales of the iStent in the United States, even if we are successful in commercializing our iStent products outside the United States, or receive necessary approvals to commercialize the iStent Inject and iStent Supra . Accordingly, our ability to generate net sales is highly dependent on our ability to market and sell the iStent .

        We have pioneered Micro-Invasive Glaucoma Surgery, or MIGS, to revolutionize the traditional glaucoma treatment and management paradigm. The iStent is our first MIGS device and we are leveraging our platform technology to build a comprehensive and proprietary portfolio of micro-scale injectable therapies designed to address the complete range of glaucoma disease states and progression. MIGS and our MIGS devices may not gain sufficient market acceptance among eye care professionals, patients, healthcare payors and the medical community. There are a number of other available therapies marketed for the treatment of glaucoma, including medication therapies that are well established and are widely accepted by the medical community. Eye care professionals, patients, healthcare payors and the medical community may be slow or fail to adopt our products for a variety of reasons, including, among others:

•

lack of experience with our products;



•

lack of availability of adequate coverage and reimbursement for hospitals, ambulatory surgery centers and physicians;



•

our inability to convince key opinion leaders to provide recommendations regarding our products, or to convince eye care professionals, patients and healthcare payors that our products are attractive alternatives to other products and treatment solutions;



•

lack of evidence supporting cost benefits or cost-effectiveness of our products over existing alternatives;



•

perception that our products are unproven, investigational or experimental;



•

the price our products relative to competing treatment alternatives;



•

liability risks generally associated with the use of new products and procedures; and



•

training required to use new products.

        If we are not successful in increasing market acceptance of our products, overall utilization of our products may fall below targeted levels and our future net sales will be adversely impacted. Because of the numerous risks and uncertainties associated with our commercialization efforts, we are unable to predict the extent to which we will continue to generate net sales from our products or the timing for when or the extent to which we will become profitable. Even if we do achieve profitability, we may not be able to sustain or increase profitability on an ongoing basis.

14

Table of Contents

We have limited experience marketing and selling the iStent. If our current investment in the expansion of our sales and marketing infrastructure does not lead to an increase in market penetration or acceptance of our products, we may not achieve sufficient net sales growth to become profitable.

        We began marketing the iStent in the United States after receiving FDA approval in 2012. Since that time, we have expanded our U.S. field sales organization from the initial 13 sales representatives to 55 as of March 31, 2015, including regional business managers, sales directors, clinical relations personnel and reimbursement specialists. As a result, we have limited experience marketing and selling the iStent . Our operating results are directly dependent upon the sales and marketing efforts of our employees. If our direct sales representatives fail to adequately promote, market and sell our products, our sales may suffer.

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

        As a result, the further expansion of our sales force will require significant additional investment and time. If we are unable to expand our sales and marketing capabilities, we may not be able to effectively commercialize our products, which would adversely affect our business, results of operations and financial condition. Additionally, if we overestimate the size and growth of our user base, or their expected utilization of our product post-training, we could both overspend on sales and marketing programs and infrastructure and/or suffer material diminishing returns on these investments. Because the iStent is a first-in-class treatment for mild-to-moderate open-angle glaucoma and has a unique indication of use in combination with cataract surgery, there are no specific commercial models of other companies that we can utilize to project our resource and investment needs. If we fail to forecast our commercial infrastructure needs correctly, over- or under-investing in market reach, acceptance and penetration, it could negatively impact our financial operating results as we may not see sufficient net sales growth to become profitable.

We face manufacturing risks that may adversely affect our ability to manufacture products and could reduce our gross margins and negatively affect our operating results.

        Our business strategy depends on our ability to manufacture our current and proposed products in sufficient quantities and on a timely basis so as to meet customer demand, while adhering to product quality standards, complying with regulatory requirements and managing manufacturing costs. We have a single manufacturing facility located at our corporate headquarters in Laguna Hills, California, where we manufacture, inspect, package, release and ship all final products. If this facility suffers a crippling event, or a force majeure event, this could materially impact our ability to operate.

        We are also subject to numerous other risks relating to our manufacturing capabilities, including:

•

quality and reliability of product components that we source from third-party suppliers, including the risk of receiving contaminated heparin or sourcing quality heparin in quantities sufficient to coat our products;



•

our inability to secure product components in a timely manner, in sufficient quantities or on commercially reasonable terms;

15

Table of Contents

•

our inability to maintain compliance with quality system requirements;



•

our failure to increase production capacity or volumes to meet demand;



•

our inability to design or modify production processes to enable us to produce efficiently future products or implement changes in current products in response to design or regulatory requirements; and



•

difficulty identifying and qualifying alternative suppliers for components in a timely manner.

        These risks are likely to be exacerbated by our limited experience with our current products and manufacturing processes. As demand for our products increases, we will have to invest additional resources to purchase components, hire and train employees and enhance our manufacturing processes. If we fail to increase our production capacity efficiently, our sales may not increase in line with our expectations and our operating margins could fluctuate or decline. In addition, although we expect some of our products in development to share product features and components with the iStent , the manufacture of these products may require the modification of our current production processes or unique production processes, the hiring of specialized employees, the identification of new suppliers for specific components or the development of new manufacturing technologies. It may not be possible for us to manufacture these products at a cost or in quantities sufficient to make these products commercially viable or to maintain current operating margins.

We depend on a limited number of third-party suppliers for certain components, and the loss of any of these suppliers, or their inability to provide us with an adequate supply of materials, could harm our business.

        We rely on a limited number of third-party suppliers to supply components for the iStent , the iStent Inject and its unique injector system and our other pipeline products. Other than agreements with key suppliers, we generally do not enter into long-term supply agreements with our suppliers, and we order most components on a purchase order basis. In some cases, we have a sole supplier or a limited number of suppliers. For example, we rely on one machining company to manufacture the titanium iStent implant and one pharmaceutical supplier for the heparin used in the iStent 's heparin coating. While we believe that there are at least several other vendors that could supply the titanium implant, and other pharmaceutical vendors that could supply heparin, we have not yet qualified any of these vendors, which could cause delay, thereby impairing our ability to meet the demand of our customers. Although we maintain inventory to mitigate supply interruptions, we are nevertheless exposed to risks, including limited control over costs, availability, quality and delivery schedules.

        Moreover, due to the recent commercialization of the iStent and the limited amount of sales to date, we do not have long-standing relationships with our suppliers and may not be able to convince suppliers to continue to make components available to us unless the volume of our orders continues to increase. As a result, there is a risk that certain components could be discontinued and no longer available to us.

        We have in the past been, and we may in the future be, required to make significant "last time" purchases of components that are being discontinued by the supplier to ensure supply continuity. In addition, given our limited experience with these suppliers, it may be difficult for us to assess their ability to timely meet our demand in the future based on past performance. If any one or more of our suppliers cease to provide us with sufficient quantities of components in a timely manner or on terms acceptable to us, we would have to seek alternative sources of supply. Because of factors such as the proprietary nature of our products, our quality control standards and regulatory requirements, we cannot quickly engage additional or replacement suppliers for some of our critical components. Even if we are able to identify and qualify a suitable second source to replace one of our key suppliers, if necessary, that replacement supplier would not have access to our previous supplier's proprietary processes and would therefore be required to develop its own, which could result in further delay.

16

Table of Contents

        Failure of any of our suppliers to deliver products at the level our business requires would limit our ability to meet our sales commitments, which could harm our reputation and could have a material adverse effect on our business. We may also have difficulty obtaining similar components from other suppliers that are acceptable to the FDA or other regulatory agencies, and the failure of our suppliers to comply with strictly enforced regulatory requirements could expose us to regulatory action including warning letters, product recalls, termination of distribution, product seizures or civil penalties. It could also require us to cease using the components, seek alternative components or technologies and modify our products to incorporate alternative components or technologies, which could result in a requirement to seek additional regulatory approvals. Our suppliers may also encounter financial or other hardships unrelated to our demand for components, which could inhibit their ability to fulfill our orders and meet our requirements. Any disruption of this nature or increased expense could harm our commercialization efforts and adversely affect our operating results.

        In addition, we rely on our suppliers to supply us with components that comply with regulatory requirements and quality control standards, and meet agreed upon specifications, all at acceptable costs and on a timely basis. Although we expect our third-party suppliers to act consistent with such standards, we do not control our suppliers, as they operate and oversee their own businesses. There is a risk that our suppliers will not always act consistent with our best interests, and may not always supply components that meet our needs. Accordingly, if we fail to obtain sufficient quantities of high-quality components to meet demand for our products on a timely basis, we could lose customer orders, our reputation may be harmed and our business could suffer.

We operate primarily at a facility in a single location and any crippling accident, force majeure event or disruption at this facility could materially affect our ability to operate and produce saleable products and could shut down our manufacturing capacity for an extended period.

        Our principal office is located in one building in Laguna Hills, California. Substantially all of our operations are conducted at this location, including our manufacturing processes, research and development activities, customer and technical support, and management and administrative functions. In addition, substantially all of our inventory of component supplies and finished goods is held at this location. Despite our efforts to safeguard our facility, including acquiring insurance, adopting environmental health and safety protocols and utilizing off-site storage of computer data, vandalism, terrorism or a natural or other disaster, such as an earthquake, fire or flood, could damage or destroy our manufacturing equipment or our inventory of component supplies or finished goods, cause substantial delays in our operations, result in the loss of key information, and cause us to incur additional expenses, including relocation expenses. Our insurance may not cover our losses in any particular case. In addition, regardless of the level of insurance coverage, damage to our facilities may have a material adverse effect on our business, financial condition and operating results.

Failure to secure and maintain adequate coverage or reimbursement by third-party payors in the United States for procedures using the iStent or our other products in development, or changes in current coverage or reimbursement, could materially impact our net sales and future growth.

        We currently derive nearly all our net sales from sales of the iStent in the United States and expect this to continue for the next several years. Hospitals and ambulatory surgery centers that purchase the iStent typically bill various third-party payors, including Medicare, Medicaid, private commercial insurance companies, health maintenance organizations and other healthcare-related organizations, to cover all or a portion of the costs and fees associated with the MIGS procedures in which the iStent is used and bill patients for any applicable deductibles or co-payments. Access to adequate coverage and reimbursement for the procedures using the iStent (and our other products in development) by third-party payors is essential to the acceptance of our products by our customers.

17

Table of Contents

        Because there is generally no separate reimbursement for medical devices and other supplies used in such procedures, including the iStent , the additional cost associated with the use of our iStent device could impact the profit margin of the hospital or surgery center where the cataract surgery is performed if the incremental facility fee payment is not sufficient. Some of our target customers may be unwilling to adopt our iStent in light of the additional associated cost. Further, any decline in the amount payors are willing to reimburse our customers for MIGS procedures could make it difficult for existing customers to continue using, or new customers to adopt, our iStent devices and could create additional pricing pressure for us. If we were forced to lower the price we charge for our products, our gross margins would decrease, which would adversely affect our ability to invest in and grow our business.

        Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in the United States, no uniform policy of coverage and reimbursement for medical device products and services exists among third-party payors. Therefore, coverage and reimbursement for medical device products and services can differ significantly from payor to payor. In addition, payors continually review new technologies for possible coverage and can, without notice, deny coverage for these new products and procedures. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained, or maintained if obtained.

        Many third-party payors in the United States model their coverage policies and payment amounts after those determined by the Centers for Medicare & Medicaid Services, or CMS, the federal agency responsible for administering the Medicare program. CMS relies on a network of Medicare Administrative Contractors, or MACs, which process nearly 4.9 million Medicare claims each day and disburse more than $365 billion annually, to develop coverage policies when no national coverage determination exists for a procedure. Because there currently is no Medicare national coverage determination for procedures using our iStent devices, we are required to provide scientific and clinical support for the use of the iStent (including the iStent Inject device and iStent Supra device, if approved) to each MAC separately, with no assurance that coverage and adequate reimbursement will be obtained. Although all MACs currently provide coverage and reimbursement for the MIGS procedure using the iStent , difficulties in processing reimbursement or regional differences in the reimbursement amount for the physician professional services could negatively impact further iStent penetration or usage by customers. These differences in MAC reimbursement could also negatively impact the amount paid by private commercial insurance companies, further negatively affecting customer penetration or usage.

        Some third-party payors in the United States, including Medicaid and TRICARE and certain commercial payors, have developed policies that deny coverage for the MIGS procedure using the iStent . To support changes in these policies, we may need to conduct prospective, randomized controlled clinical trials and present data from such trials to payors to demonstrate the medical necessity or cost-effectiveness of the iStent . There can be no assurance that coverage for our products will be expanded. In addition, those private payors that do not follow the Medicare guidelines may adopt different coverage and reimbursement policies for MIGS procedures performed with the iStent , though we cannot predict whether coverage will be sufficient or if there will be coverage at all. Failure to obtain favorable payor policies could have a material adverse effect on our business and operations.

        We believe that Medicare coverage and existing coverage by third-party payors represents approximately 90% of our target patient population. U.S. third-party payors representing more than 76% of individuals covered by commercial insurance currently reimburse the iStent procedure. While we anticipate gaining coverage and reimbursement from additional third-party payors, we cannot guarantee that we will be successful or that coverage and reimbursement will be at levels that support

18

Table of Contents

continued penetration and usage by our customers. Moreover, compliance with the administrative procedures and requirements of third-party payors may result in delays in processing approvals by those third-party payors for customers to obtain coverage and reimbursement for procedures using the iStent . Failure to secure or maintain adequate coverage or reimbursement for procedures using the iStent by third-party payors, or delays in processing approvals by those payors, could result in the cancellations of procedures to insert the iSten t in combination with cataract surgery, resulting in the loss of net sales from these procedures. If these issues remain unresolved, they could have a material adverse effect on our business, financial condition and operating results.

        In addition, although we have obtained temporary Category III Current Procedural Terminology codes for the MIGS procedures associated with the insertion of our iStent products, there is no guarantee that these billing codes or the payment amounts associated with such codes will not change in the future. Category III codes expire five years after the date they become effective. Prior to expiration, there are two options: submit an application to convert to a permanent Category I code; or submit an application for a five year extension of Category III status. If we are unable to maintain our existing codes or obtain new permanent Category I codes for procedures using our iStent products, or obtain new reimbursement codes for our other products in development, we will be subject to significant pricing pressure, which could harm our business, results of operations, financial condition and prospects.

        Further, we believe that future coverage and reimbursement will likely be subject to increased restrictions both in the United States and in international markets. Coverage decisions may depend upon clinical and economic standards that disfavor new products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Adequate coverage and reimbursement from governmental and commercial payors are critical to new product acceptance. Third-party coverage and reimbursement for our products or any of our product candidates for which we may receive regulatory approval may not be available or adequate in either the United States or international markets.

The medical device industry is highly competitive and subject to rapid technological change. If our competitors are better able to develop and market products that are safer, more effective, less costly or otherwise more attractive than the iStent or any new products that we may develop, our commercial opportunity may be reduced or eliminated.

        The medical device industry is highly competitive and subject to rapid and profound technological change. Our success depends, in part, upon our ability to maintain a competitive position in the development of MIGS products.

        We compete primarily with the use of medication therapy for treating glaucoma and with manufacturers of medical devices used in surgical therapy procedures for treating glaucoma, including Alcon, Inc., Abbott Medical Optics Inc., STAAR Surgical Company, Lumenis Ltd., NeoMedix,Inc. and Ellex Medical Lasers Limited. Alcon, Inc. and Abbott Medical Optics Inc. are the leading manufacturers of aqueous shunts, and Alcon, Inc. also markets the EX-PRESS Glaucoma Filtration Device. Lumenis Ltd. is a leading manufacturer of selective laser trabeculoplasty equipment. Neomedix, Inc. markets an electrosurgical device, and Ellex Medical Lasers Limited markets a canaloplasty device that some physicians employ to lower intraocular pressure in glaucoma.

        Many of our current competitors are large public companies or divisions of publicly-traded companies and have several competitive advantages, including:

•

greater financial and human resources for product development, sales and marketing and patent litigation;



•

significantly greater name recognition;

19

Table of Contents

•

longer operating histories;



•

established relationships with healthcare professionals, customers and third-party payors;



•

additional lines of products, and the ability to offer rebates or bundle products to offer higher discounts or incentives;



•

more established sales and marketing programs and distribution networks; and



•

greater experience in conducting research and development, manufacturing, clinical trials, preparing regulatory submissions and obtaining regulatory clearance or approval for products and marketing approved products.

        Our competitors, medical companies, academic and research institutions or others could develop new drugs, therapies, medical devices or surgical procedures to treat glaucoma that could render our products obsolete. For example, we are aware of several companies, including Transcend Medical, Inc., AqueSys, Inc., InnFocus Inc. and Ivantis Inc. that are conducting investigational device exemption, or IDE, approved clinical trials of MIGS devices. These products or other products that may be developed could demonstrate better safety or effectiveness, clinical results, ease of use or lower costs than our iStent or other products under development. If approved for marketing, these devices may compete directly with the iStent and our products under development. If any of these alternative technologies gain market acceptance, this may reduce demand for our primary product, the iStent , as well as for our products in development.

        Demand for the iStent or our future products would decline if such a product or technology were introduced, and our business would be harmed.

The training required for surgeons to use the iStent could reduce the market acceptance of our products.

        As with any new method or technique, ophthalmic surgeons must undergo a thorough training program before they are qualified to perform the iStent procedure. Surgeons could experience difficulty with the technique necessary to successfully insert the iStent , intraoperative gonioscopy, and not achieve the technical competency necessary to be qualified to insert our stents. Also, even after successfully completing the training program, the physicians could experience difficulty inserting our products and cease utilizing them or limit their use significantly in practice.

        We could also experience difficulty meeting expected levels of ophthalmic surgeons who complete our training program. This could happen due to less demand than expected, the length of time necessary to train each surgeon being longer than expected, the capacity of our sales representatives to train surgeons being less than anticipated, or if we are unable to sufficiently increase our sales organization. All of these events would lead to fewer trained ophthalmic surgeons qualified to insert the iStent , which could negatively impact our operating and financial results.

Ophthalmic surgeons not completing the iStent training program may nevertheless elect to perform iStent procedures and experience inferior clinical outcomes.

        Although our sales representatives manage the training program for ophthalmic surgeons to become qualified to insert the iStent in combination with cataract surgery, once training is completed the surgeon and/or surgical facility that the surgeon utilizes are cleared to order and maintain an iStent supply. There is a risk that untrained or unqualified ophthalmic surgeons could gain access to iStent devices from a facility's inventory and conduct iStent procedures without having received qualified status from us. If performing iStent procedures by unqualified ophthalmic surgeons were to become pervasive, this could raise the risk of complications and inferior clinical outcomes, which could result in negative patient experiences or experiences being published and damaging our reputation and that of

20

Table of Contents

the iStent . This could result in lower penetration and utilization by ophthalmic surgeons and could have a material adverse effect on our net sales growth, expected operating results and financial condition.

The safety and efficacy of the iStent and our other products are not yet supported by long-term clinical data in large numbers of patients. Ophthalmic surgeons may not use our products if they do not believe they are safe, efficient, effective and preferable alternatives to other treatment solutions in the market.

        We believe that ophthalmic surgeons will not use our products unless they conclude that our products provide a safe, efficient, effective and preferable alternative to currently available treatment options. If longer-term patient studies or clinical experience indicate that treatment with our products is less effective, less efficient or less safe than our current data suggest, our sales would be harmed, and we could be subject to significant liability. Further, unsatisfactory patient outcomes or patient injury could cause negative publicity for our products, particularly in the early phases of product introduction. In addition, physicians may be slow to adopt our products if they perceive liability risks arising from their use. It is also possible that as our products become more widely used, latent defects could be identified, creating negative publicity and liability problems for us and adversely affecting demand for our products. If an increasing number of ophthalmic surgeons do not continue to adopt the use of our products, our operating and financial results will be negatively impacted.

Product liability suits brought against us could cause us to incur substantial liabilities, limit sales of our existing products and limit commercialization of any products that we may develop.

        If our product offerings, including the iStent , are defectively designed or manufactured, contain defective components, or are used or deployed improperly, or if someone claims any of the foregoing, whether or not such claims are meritorious, we may become subject to substantial and costly litigation. Any product liability claims brought against us, with or without merit, could divert management's attention from our business, be expensive to defend, result in sizable damage awards against us, damage our reputation, increase our product liability insurance rates, prevent us from securing continuing coverage, or prevent or interfere with commercialization of our products. In addition, we may not have sufficient insurance coverage for all future claims. Product liability claims brought against us in excess of our insurance coverage would likely be paid out of cash reserves, harming our financial condition and results of operations.

Operating results could be unpredictable and may fluctuate significantly from quarter to quarter, which could adversely affect our business, financial condition, results of operations and the trading price of our common stock.

        We have only recently begun generating net sales from the sale of the iStent and we may experience volatility due to a number of factors, many of which are beyond our control, including:

•

our ability to drive increased sales of our products;



•

our ability to establish and maintain an effective and dedicated sales organization;



•

fluctuations in the demand for our products;



•

pricing pressure applicable to our products, including adverse third-party coverage and reimbursement outcomes;



•

results of clinical research and trials on our products;



•

fluctuations in the number of cataract procedures performed by our customers, which could decrease significantly during holiday seasons and summer months, when significant numbers of physicians and patients may schedule vacations;

21

Table of Contents

•

timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors;



•

deferrals of customer orders in anticipation of the introduction of new products or product enhancements by us;



•

regulatory approvals and legislative changes affecting the products we may offer or those of our competitors;



•

interruption in the manufacturing or distribution of our products;



•

the ability of our suppliers to timely provide us with an adequate supply of product components;



•

the effect of competing technological, industry and market developments;



•

changes in our ability to obtain regulatory clearance or approval for our products or to obtain or maintain our CE Certificates of Conformity for our products;



•

variances in the sales terms, timing or volume of customer orders from period to period;



•

the length of our sales cycle, which varies and may be unpredictable; and



•

our ability to expand the geographic reach of our sales and marketing efforts.

        As a result, you should not rely on our results in any past period as an indication of future results and you should anticipate that fluctuations in our quarterly and annual operating results may continue and could generate volatility in the price of our common stock. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

Our long-term growth depends on our ability to develop and commercialize additional products using our iStent technologies. If we are not able to commercialize products in development in a timely manner, our products may become obsolete over time, customers may not buy our products and our net sales and profitability may decline.

        Demand for our products may change in ways we may not anticipate due to:

•

changing coverage and reimbursement, coding and payments;



•

changing customer needs;



•

the introduction of new products and technologies;



•

evolving surgical practices;



•

evolving industry standards; and



•

other unforeseen reasons.

        As a result, it is important that we continue to build a more complete product offering using our iStent technologies. Developing additional products is expensive and time-consuming, and could divert management's attention away from expanding acceptance of the iStent and harm our business. Even if we are successful in developing additional products, including those currently in development, the success of our new product offerings, if any, will depend on several factors, including our ability to:

•

properly identify and anticipate customer needs;



•

commercialize new products in a cost-effective and timely manner;



•

manufacture and deliver products in sufficient volumes on time;



•

obtain regulatory approval for new products;

22

Table of Contents

•

receive adequate coverage and reimbursement for procedures performed with our products;



•

differentiate our offerings from competitors' offerings;



•

achieve positive clinical outcomes;



•

satisfy the increased demands from healthcare payors, providers and patients for lower-cost procedures;



•

innovate and develop new materials, product designs and surgical techniques; and



•

provide adequate medical and consumer education relating to new products and attract key ophthalmologists and other eye care professionals to advocate these new products.

        Moreover, we will need to make a substantial investment in research and development before we can determine the commercial viability of any innovations, and we may not have the financial resources required to fund such research and development. In addition, even if we are able to successfully develop product enhancements or new products, these enhancements or new products may not produce net sales in excess of the costs of development, or they may be quickly rendered obsolete by changing customer preferences or the introduction by our competitors of products embodying superior technologies or features.

        Research programs to identify new products will require substantial technical, financial and human resources, whether or not any such products are ultimately identified. We may determine that one or more of our pre-clinical programs does not have sufficient potential to warrant the allocation of such resources. Our research programs may initially show promise in identifying potential products, yet fail to yield product candidates for clinical development for many reasons, including the following:

•

the research methodology used may not be successful in identifying potential products;



•

competitors may develop alternatives that render our future products, if any, obsolete;



•

our products may not be deployed safely or effectively;



•

our future products, if any, may, on further study, be shown to have harmful side effects or other characteristics that indicate they are unlikely to be effective;



•

our clinical trials may not be successful; and



•

we may not receive regulatory approval.

If we fail to manage our anticipated growth effectively, our business could suffer.

        Since commercial launch of the iStent in July 2012, we have seen significant period-to-period growth in our business. We anticipate that this rapid growth will continue in the near term as the iStent continues to gain market acceptance. Not only do we expect this growth to continue, but we must continue to grow in order to meet our business and financial objectives. However, continued growth may create numerous challenges, including:

•

new and increased responsibilities for our management team;



•

increased pressure on our operating and financial systems, controls and reporting systems;



•

the need to hire, train and manage additional qualified personnel;



•

management of an increasing number of relationships with our customers, suppliers and other third parties;



•

strain on our ability to source a larger supply of components that meet our required specifications on a timely basis; and

23

Table of Contents

•

additional manufacturing capacity requirements.

        If we fail to manage any of the above challenges effectively, our business may be harmed.

Our future growth depends on our ability to retain members of our senior management and other key employees. If we are unable to retain or recruit qualified personnel for growth, our business results could suffer.

        We have benefited substantially from the leadership and performance of our senior management as well as certain key employees. For example, our chief executive officer, as well as other key members of our senior management, have experience successfully developing novel technologies and scaling early-stage medical device companies to achieve profitability. Our success will depend on our ability to retain our current management and key employees, and to attract and retain qualified personnel in the future. Competition for senior management and key employees in our industry is intense and we cannot guarantee that we will be able to retain our personnel or attract new, qualified personnel. The loss of services of certain members of our senior management or key employees could prevent or delay the implementation and completion of our strategic objectives, or divert management's attention to seeking qualified replacements. Each member of senior management as well as our key employees may terminate employment without notice and without cause or good reason. The members of our senior management are not subject to non-competition agreements. Accordingly, the adverse effect resulting from the loss of certain members of senior management could be compounded by our inability to prevent them from competing with us.

        In addition to competing for market share for our products, we also compete against these companies for personnel, including qualified sales representatives that are necessary to grow our business. Also, we compete with universities and research institutions for scientific and clinical personnel that are important to our research and development efforts.

        In addition, recruiting and retaining qualified operations, finance and accounting, scientific, clinical and sales and marketing personnel will be critical to our success. We may not be able to attract and retain these personnel on acceptable terms, given the competition among numerous medical device and pharmaceutical companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions.

        We also rely on consultants and advisors in our research, operations, clinical and commercial efforts to implement our business strategies. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

        Our strategic plan requires us to continue growing our sales, marketing, clinical and operational infrastructure in order to generate, and meet, the demand for our products. If we fail to retain or attract these key personnel, we could fail to take advantage of the market for our iStent technologies and our business, financial condition and operating results could be adversely affected.

Our iDose implant will be regulated as a drug and be subject to a different regulatory approval process than our other products in development. iDose is in early stages of development and may never be commercialized.

        As a drug delivery implant, the iDose will be subject to a regulatory approval process similar to that for pharmaceuticals. This process is often a more lengthy and complex process than obtaining regulatory approval as a medical device. The future success of our iDose product candidate depends on our ability to complete pre-clinical development and clinical trials, and will require significant development activities, pre-clinical studies, clinical trials, regulatory approvals, and substantial additional investment.

24

Table of Contents

        This development program may not lead to a commercially viable product for several reasons. For example, we may fail to demonstrate safety and efficacy in pre-clinical tests or clinical trials, or we may have inadequate financial or other resources to pursue drug development efforts. From time to time, we may establish and announce certain development goals for our iDose product candidate; however, it is difficult to predict accurately if and when we will achieve these goals. We may be unsuccessful in advancing this drug delivery implant into clinical testing or in obtaining FDA approval, and our long-term business prospects could be harmed.

Our business requires substantial capital and operating expenditures to operate and grow.

        Although we generate net sales from sales of our first FDA-approved product, the iStent , and are conducting this offering, we may nevertheless need to raise substantial additional capital in the future to:

•

expand our sales and marketing organization in the United States and internationally;



•

fund our operations, clinical trials and commercialization efforts for new products, if any such products receive regulatory approval for commercial sale;



•

scale-up our manufacturing operations;



•

pursue additional research and development;



•

defend, in litigation or otherwise, any claims that we infringe third-party patent or other intellectual property rights; and



•

acquire companies or in-license products or intellectual property.

        We believe that the net proceeds from this offering, together with our existing cash, cash equivalents, short-term investment balances and interest we earn on these balances will be sufficient to meet our anticipated cash requirements for the next 24 months. However, our future funding requirements will depend on many factors, including:

•

the scope, rate of progress and cost of our clinical trials and other research and development activities;



•

the cost of filing and prosecuting patent applications and defending and enforcing our patent and other intellectual property rights;



•

the cost of defending, in litigation or otherwise, any claims that we infringe third-party patent or other intellectual property rights;



•

the terms and timing of any collaborative, licensing and other arrangements that we may establish;



•

the cost and timing of regulatory approvals;



•

the cost and timing of establishing sales, marketing and distribution capabilities;



•

the cost of establishing clinical and commercial supplies of our products and any products that we may develop;



•

the effect of competing technological and market developments;



•

licensing technologies for future development; and



•

the extent to which we acquire or invest in businesses, products and technologies, although we currently have no commitments or agreements relating to any of these types of transactions.

25

Table of Contents

        If we raise additional funds through further issuances of equity or issuances of convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock, including shares of common stock sold in this offering. Any debt financing obtained by us in the future would likely be senior to our common stock, would likely cause us to incur interest expense, and could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may increase our expenses and make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may also be required to secure any such debt obligations with some or all of our assets.

        We cannot assure you that we will be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, or if we expend capital on projects that are not successful, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, or we may even have to scale back our operations.

We may enter into acquisitions, collaborations, in-licensing agreements, joint ventures, alliances or partnerships with third parties that fail to result in a commercial product or net sales.

        Aside from our agreement to purchase the glaucoma assets of DOSE Medical Corporation, or DOSE, we do not have any other current commitments to enter into any acquisitions, collaborations, in-licensing agreements, joint ventures, alliances or partnerships. We may in the future choose to undertake one or more of these transactions in order to retain our competitive position within the marketplace or to expand into new markets. However, we cannot assure you that we would be able to successfully complete any acquisition we choose to pursue, or that we would be able to successfully integrate any acquired business, product or technology in a cost-effective and non-disruptive manner. If we were unable to integrate any acquired businesses, products or technologies effectively, our business would likely suffer.

Significant disruptions to our information technology infrastructure could materially impact operations and financial results.

        The efficient operation of our business depends on our information technology systems. We rely on our information technology systems to effectively manage sales and marketing data, accounting and financial functions, inventory management, product development tasks, clinical data, customer service and technical support functions. Our information technology systems are vulnerable to damage or interruption from earthquakes, fires, floods and other natural disasters, terrorist attacks, attacks by computer viruses or hackers, power losses, and computer system or data network failures. In addition, a variety of our software systems are cloud-based data management applications, hosted by third-party service providers whose security and information technology systems are subject to similar risks.

        The failure of either our or our service providers' information technology could disrupt our entire operation or result in decreased sales, increased overhead costs and product shortages, all of which could have a material adverse effect on our reputation, business, financial condition and operating results.

Our existing revolving credit and term loan agreement contains restrictive covenants that may limit our operating flexibility.

        Our existing revolving credit and term loan agreement contains certain restrictive covenants that limit our ability to transfer or dispose of assets, merge with other companies or consummate certain changes of control, acquire other companies, pay dividends, incur additional indebtedness and liens, experience changes in management and enter into new businesses. We therefore may not be able to

26

Table of Contents

engage in any of the foregoing transactions unless we obtain the consent of the lender or terminate the agreement. In addition, we are required to maintain certain financial covenants to be considered in compliance with the terms of the agreement. Currently, and until such time as the below described debt service coverage ratio covenant becomes effective, we must comply with a revenue performance covenant and a cash availability covenant. The revenue performance covenant requires that we achieve 85% of operating plan revenues measured on a monthly basis for the three-month period then ended. The cash availability covenant requires that we maintain a combined balance of cash plus unused revolving credit availability of not less than $5.0 million, with such cash balance to be not less than $2.0 million, measured on a monthly basis. In the event that we fail the cash availability covenant, we are required to obtain within 30 days a term sheet for new equity or subordinated debt proceeds in an amount of not less than $10.0 million, which financing must subsequently be funded within 60 days. The debt service coverage ratio covenant becomes effective on the date that we achieve for three consecutive months a ratio of no less than 1.2 to 1.0 measured for the six-month period then ended, for which the numerator is adjusted EBITDA (as defined in the agreement to be earnings before interest, taxes, depreciation, amortization and non-cash expenses, less the sum of unfinanced capital expenditures, taxes, and any capital returned to stockholders) and the denominator is the sum of all principal and interest payments that become due and payable in cash during such period. Once the debt service coverage ratio covenant becomes effective, the revenue performance and cash availability covenants are no longer in effect. If we fail to meet the required covenants and such non-compliance is not waived, or we are unable to negotiate amended terms, we could be in default under our revolving credit and term loan agreement, which could have an adverse effect on our financial condition.

Planned expansion into new markets outside of the United States will subject us to additional business and regulatory risks, and there can be no assurance that our products will be accepted in those markets.

        Engaging in international business inherently involves a number of other difficulties and risks, including:

•

competition from established companies, many of which are well-positioned within their local markets with longer operating histories, more recognizable names and better established distribution networks;



•

the availability and level of coverage and reimbursement within prevailing foreign healthcare payment systems and the ability of patients to elect to privately pay for the iStent and our other products;



•

difficulties in enforcing intellectual property rights;



•

pricing pressure;



•

required compliance with existing and changing foreign regulatory requirements and laws;



•

laws and business practices favoring local companies;



•

longer sales and payment cycles;



•

difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;



•

political and economic instability;



•

foreign currency risks that could adversely affect our financial results;



•

potentially adverse tax consequences, tariffs and other trade barriers;



•

exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act, and similar laws and regulations in other jurisdictions;



•

international terrorism and anti-American sentiment;



•

difficulties and costs associated with staffing and managing foreign operations; and



•

export restrictions and controls relating to technology.

27

Table of Contents

        If we or our suppliers are unable to address these international risks, we may fail to establish and maintain an international presence, and our business, financial condition and results of operations would suffer.

We cannot be certain that our net operating loss tax carryforwards will be available to offset future taxable income.

        As of December 31, 2014, we had net operating loss carryforwards of approximately $121.0 million for U.S. federal income tax purposes and approximately $104.7 million of net operating loss carryforwards for state income tax purposes, which begin to expire in various amounts, if not used, between 2015 and 2018. At December 31, 2014, we had federal and state research and development carryforwards of $3.9 million and $4.2 million, respectively, which begin to expire in 2020 for federal purposes and carry over indefinitely for state purposes. We have recorded a full valuation allowance against these tax attributes because we believe that uncertainty exists with respect to the future realization of the tax attributes as well as with respect to the amount of the tax attributes that will be available in future periods. To the extent available, we intend to use these net operating loss carryforwards to offset future taxable income associated with our operations. There can be no assurance that we will generate sufficient taxable income in the carryforward period to utilize any remaining net operating loss carryforwards before they expire.

        In addition, Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, contains rules that limit for U.S. federal income tax purposes the ability of a corporation that undergoes an "ownership change" to utilize its net operating losses (and certain other tax attributes) existing as of the date of such ownership change. Under these rules, a corporation is treated as having had an "ownership change" if there is more than a 50% increase in stock ownership by one or more "five percent shareholders," within the meaning of Section 382 of the Code, during a rolling three-year period. We believe a portion of our existing net operating losses are subject to limitations arising from previous ownership changes, and if we undergo an ownership change in connection with or after this offering, our ability to utilize our net operating losses to offset future taxable income could be further limited, which could have a negative effect on our liquidity. For these reasons, we may not be able to utilize a material portion of our net operating losses, even if we attain profitability.

Risks Related to the Regulatory Environment

We and our suppliers are subject to extensive federal and state regulation, and if we fail to comply with applicable regulations, we could suffer severe criminal or civil sanctions or be required to make significant changes to our operations that could adversely affect our business, financial condition and operating results.

        The iStent is classified as a medical device. As a result, we are subject to extensive government regulation in the United States by the FDA and state regulatory authorities and by foreign regulatory authorities in the countries in which we conduct business. These regulations relate to, among other things, research and development, design, testing, clinical trials, manufacturing, clearance or approval, environmental controls, safety and efficacy, labeling, advertising, promotion, pricing, recordkeeping, reporting, import and export, post-approval studies and the sale and distribution of the iStent and our other products in development.

        In the United States, before we can market a new medical device, or a new use of, new claim for, or significant modification to, an existing product, we must first receive either clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act or approval of a premarket approval, or PMA, application from the FDA, unless an exemption applies. The process of obtaining PMA approval, which was required for the iStent , is much more costly and uncertain than the 510(k) clearance process. In the 510(k) clearance process, the FDA must determine that a proposed device is "substantially equivalent" to a device legally on the market, known as a "predicate" device, in order to clear the

28

Table of Contents

proposed device for marketing. To be "substantially equivalent," the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data is sometimes required to support substantial equivalence. In the PMA approval process, the FDA must determine that a proposed device is safe and effective for its intended use based, in part, on extensive data, including, but not limited to, technical, pre-clinical, clinical trial, manufacturing and labeling data. The PMA process is typically required for devices for which the 510(k) process cannot be used and that are deemed to pose the greatest risk.

        Modifications to products that are approved through a PMA application generally need FDA approval. Similarly, some modifications made to products cleared through a 510(k) may require a new 510(k). The FDA's 510(k) clearance process usually takes from three to 12 months, but may last longer. The process of obtaining a PMA generally takes from one to three years, or even longer, from the time the PMA is submitted to the FDA until an approval is obtained. Any delay or failure to obtain necessary regulatory approvals would have a material adverse effect on our business, financial condition and prospects.

        The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:

•

our inability to demonstrate to the satisfaction of the FDA or the applicable regulatory entity or notified body that our products are safe or effective for their intended uses;



•

the disagreement of the FDA or the applicable foreign regulatory body with the design or implementation of our clinical trials or the interpretation of data from pre-clinical studies or clinical trials;



•

serious and unexpected adverse device effects experienced by participants in our clinical trials;



•

the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required;



•

our inability to demonstrate that the clinical and other benefits of the device outweigh the risks;



•

the manufacturing process or facilities we use may not meet applicable requirements; and



•

the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance or approval.

        The research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of drug products is also subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, which regulations differ from country to country. We are not permitted to market any drug product candidate in the United States until we receive approval of a new drug application, or NDA, from the FDA. To gain approval to market a drug product, we must provide the FDA and any applicable foreign regulatory authorities with data from well-controlled clinical trials that adequately demonstrate the safety, efficacy and compliant manufacturing of the product for the intended indication applied for in the NDA or other respective regulatory filing. Obtaining regulatory approval of an NDA can be a lengthy, expensive and uncertain process.

        The FDA or other applicable foreign regulatory bodies can delay, limit or deny approval of a drug candidate for many reasons, including, but not limited to, the following:

•

our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory body that the drug candidate is safe and effective for the requested indication;

29

Table of Contents

•

the FDA's or the applicable foreign regulatory body's disagreement with design or implementation of our clinical trials or the interpretation of data from preclinical studies or clinical trials;



•

serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates;



•

our inability to demonstrate that the clinical and other benefits of the drug candidate outweigh any safety or other perceived risks;



•

the FDA's or the applicable foreign regulatory body's requirement for additional preclinical or clinical studies;



•

the FDA's or the applicable foreign regulatory body's non-approval of the drug candidate's chemistry, manufacturing or controls or labeling;



•

the FDA's or the applicable foreign regulatory body's failure to approve the manufacturing processes or facilities of third-party manufacturers; or



•

the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for approval.

        Further, we are subject to laws directed at preventing fraud and abuse, which subject our marketing, training and other practices to government scrutiny. To ensure compliance with Medicare, Medicaid and other regulations, government agencies or their contractors often conduct routine audits and request customer records and other documents to support claims submitted for payment of services rendered. Government agencies or their contractors also periodically open investigations and obtain information from healthcare providers. Violations of federal and state regulations can result in severe criminal, civil and administrative penalties and sanctions, including debarment, suspension or exclusion from Medicare, Medicaid and other government reimbursement programs, any of which would have a material adverse effect on our business.

Legislative or regulatory reform of the healthcare system may affect our ability to sell our products profitably .

        In the United States and in certain foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the regulatory and healthcare systems in ways that could impact our ability to sell our products profitably, if at all. In the United States in recent years, new legislation has been proposed and adopted at the federal and state levels that is effecting major changes in the healthcare system. In addition, new regulations and interpretations of existing healthcare statutes and regulations are frequently adopted.

        For example, in 2011, the FDA announced a Plan of Action to modernize and improve the FDA's premarket review of medical devices, and has implemented, and continues to implement, reforms intended to improve the timeliness and predictability of the premarket review process. In addition, as part of the Food and Drug Administration Safety and Innovation Act of 2012, Congress enacted several reforms entitled the Medical Device Regulatory Improvements and additional miscellaneous provisions that will further affect medical device regulation both pre- and post-approval.

        If, as a result of legislative or regulatory healthcare reform, we cannot sell the iStent (or our other products in development if approved) profitably, our business would be harmed. In addition, any change in the laws or regulations that govern the clearance and approval processes relating to our current and future products could make it more difficult and costly to obtain clearance or approval for new products, or to produce, market and distribute existing products.

30

Table of Contents

        In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or PPACA, was signed into law. While the goal of health care reform is to expand coverage to more individuals, it also involves increased government price controls, additional regulatory mandates and other measures designed to constrain medical costs. The PPACA substantially changes the way healthcare is financed by both governmental and private insurers, encourages improvements in the quality of healthcare items and services and significantly impacts the medical device industry. Among other things, the PPACA:

•

imposes an annual excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in the United States, with limited exceptions (described in more detail below);



•

establishes a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectiveness research in an effort to coordinate and develop such research;



•

implements payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models; and



•

creates an independent payment advisory board that will submit recommendations to Congress to reduce Medicare spending if projected Medicare spending exceeds a specified growth rate.

        In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation's automatic reduction to several government programs. This includes reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and will remain in effect through 2024 unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012, or the ATRA, was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

        We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or product candidates or additional pricing pressures.

        In September 2012, the European Commission published proposals for the revision of the EU regulatory framework for medical devices. The proposal would replace the Medical Devices Directive and two related directives concerning active implantable medical devices and in vitro diagnostic medical devices respectively with a new regulation concerning medical devices and another concerning in vitro diagnostic medical devices. Unlike Directives that must be implemented into national laws, the Regulations would be directly applicable in all European Economic Area, or EEA, Member States and so are intended to eliminate current national differences in regulation of medical devices.

        In October 2013, the European Parliament approved a package of reforms to the European Commission's proposals. Under the revised proposals, only designated "special notified bodies" would be entitled to conduct conformity assessments of high-risk devices. These special notified bodies will need to notify the European Commission when they receive an application for a conformity assessment for a new high-risk device. The Commission will then forward the notification and the accompanying documents on the device to the Medical Devices Coordination Group for an opinion. These new procedures may result in the re-assessment of our existing medical devices, or a longer or more

31

Table of Contents

burdensome assessment of our new products. We anticipate that further amendments to this proposal may be agreed as a compromise among the various EU legislative bodies before the final regulation on medical devices is adopted, most likely in 2015 or 2016.

The clinical trial process required to obtain regulatory approvals is lengthy and expensive with uncertain outcomes, and could result in delays in new product introductions.

        Because of the indication we chose to pursue for the iStent , the FDA required that we seek PMA approval rather than clearance under the 510(k) process. In order to obtain PMA approval for a product, the sponsor must conduct well-controlled clinical trials designed to assess the safety and efficacy of the product candidate. Similarly, a sponsor generally must conduct well-controlled clinical trials designed to assess the safety and efficacy of a drug product candidate in order to obtain FDA approval of a drug product. We therefore will be required to conduct clinical trials to obtain approval of iDose , our drug delivery implant, new indications for the iStent or new product candidates. Conducting clinical trials is a complex and expensive process, can take many years, and outcomes are inherently uncertain. We incur substantial expense for, and devote significant time to, clinical trials but cannot be certain that the trials will ever result in commercial sales. We may suffer significant setbacks in clinical trials, even after earlier clinical trials showed promising results, and failure can occur at any time during the clinical trial process. Any of our products may malfunction or may produce undesirable adverse effects that could cause us or regulatory authorities to interrupt, delay or halt clinical trials. We, the FDA, or another regulatory authority may suspend or terminate clinical trials at any time to avoid exposing trial participants to unacceptable health risks.

        Successful results of pre-clinical studies are not necessarily indicative of future clinical trial results, and predecessor clinical trial results may not be replicated in subsequent clinical trials. Additionally, the FDA may disagree with our interpretation of the data from our pre-clinical studies and clinical trials, or may find the clinical trial design, conduct or results inadequate to prove safety or efficacy, and may require us to pursue additional pre-clinical studies or clinical trials, which could further delay the clearance or approval of our products. The data we collect from our pre-clinical studies and clinical trials may not be sufficient to support FDA clearance or approval, and if we are unable to demonstrate the safety and efficacy of our future products in our clinical trials, we will be unable to obtain regulatory clearance or approval to market our products.

        In addition, we may estimate and publicly announce the anticipated timing of the accomplishment of various clinical, regulatory and other product development goals, which are often referred to as milestones. These milestones could include the obtainment of the right to affix the CE Mark in the European Union; the submission to the FDA of an IDE application, or an Investigational New Drug application, or IND, to commence a pivotal clinical trial for a new product candidate; the enrollment of patients in clinical trials; the release of data from clinical trials; and other clinical and regulatory events. The actual timing of these milestones could vary dramatically compared to our estimates, in some cases for reasons beyond our control. We cannot assure you that we will meet our projected milestones and if we do not meet these milestones as publicly announced, the commercialization of our products may be delayed and, as a result, our stock price may decline.

        Clinical trials are necessary to support PMA applications for our device product candidates and may be necessary to support PMA supplements for modified versions of our marketed device products. This would require the enrollment of large numbers of suitable subjects, which may be difficult to identify, recruit and maintain as participants in the clinical trial. The clinical trials supporting the PMA application for the iStent involved 289 randomized patients. We expect that we will provide the FDA with data on the results of approximately 968 patients in three post-approval studies. If the FDA were to require us to submit data on a greater number of patients or a longer follow-up period, we would incur additional expenses that could be significant. Adverse outcomes in the post-approval studies could also result in restrictions or withdrawal of approval of the PMA.

32

Table of Contents

        Before we can obtain regulatory approval for any drug product candidate, such as our iDose drug delivery implant, we must undertake extensive clinical testing in humans to demonstrate safety and efficacy to the satisfaction of the FDA and other regulatory agencies. Clinical trials of drug product candidates are expensive and take years to complete, and the outcome of such trials is uncertain. We are currently conducting a Phase I clinical trial of iDose in Armenia. We initiated discussions with FDA regarding that study and regarding the data and information necessary to support an IND application to conduct clinical trials of iDose in the United States. Our ability to conduct additional clinical trials depends on many factors, including the data obtained in the Phase I clinical trial.

        Delays in the commencement or completion of clinical testing could significantly affect our product development costs. We do not know whether planned clinical trials will begin on time, need to be redesigned, enroll an adequate number of patients in a timely manner or be completed on schedule, if at all. The commencement and completion of clinical trials can be delayed or terminated for a number of reasons, including delays or failures related to:

•

the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical studies;



•

obtaining regulatory approval to commence a clinical trial;



•

reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;



•

manufacturing sufficient quantities of a product candidate for use in clinical trials;



•

obtaining institutional review board, or IRB, or ethics committees approval to conduct a clinical trial at each prospective site;



•

recruiting and enrolling patients and maintaining their participation in clinical trials;



•

having clinical sites observe trial protocol or continue to participate in a trial;



•

addressing any patient safety concerns that arise during the course of a clinical trial;



•

addressing any conflicts with new or existing laws or regulations; and



•

adding a sufficient number of clinical trial sites.

        Patient enrollment in clinical trials and completion of patient follow-up depend on many factors, including the size of the patient population, the nature of the trial protocol, the proximity of patients to clinical sites, the eligibility criteria for the clinical trial, patient compliance, competing clinical trials and clinicians' and patients' perceptions as to the potential advantages of the product being studied in relation to other available therapies, including any new treatments that may be approved for the indications we are investigating. For example, patients may be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and efficacy of a product candidate, or they may be persuaded to participate in contemporaneous clinical trials of a competitor's product candidate. In addition, patients participating in our clinical trials may drop out before completion of the trial or suffer adverse medical events unrelated to our products. Delays in patient enrollment or failure of patients to continue to participate in a clinical trial may delay commencement or completion of the clinical trial, cause an increase in the costs of the clinical trial and delays, or result in the failure of the clinical trial.

        We could also encounter delays if the FDA concluded that our financial relationships with our principal investigators resulted in a perceived or actual conflict of interest that may have affected the interpretation of a study, the integrity of the data generated at the applicable clinical trial site or the utility of the clinical trial itself. Principal investigators for our clinical trials may serve as scientific

33

Table of Contents

advisors or consultants to us from time to time and receive cash compensation and/or stock options in connection with such services. If these relationships and any related compensation to or ownership interest by the clinical investigator carrying out the study result in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship may have affected interpretation of the study, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of our application by the FDA. Any such delay or rejection could prevent us from commercializing any of our products currently in development.

        Further, clinical trials may also be delayed as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or terminated by us, the FDA, the IRB overseeing the clinical trial at issue, the Data Safety Monitoring Board for such trial, any of our clinical trial sites with respect to that site, or other regulatory authorities due to a number of factors, including:

•

failure to conduct the clinical trial in accordance with applicable regulatory requirements or our clinical protocols;



•

inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;



•

inability of a clinical investigator or clinical trial site to continue to participate in the clinical trial;



•

unforeseen safety issues or adverse side effects;



•

failure to demonstrate a benefit from using the product candidate; and



•

lack of adequate funding to continue the clinical trial.

        Additionally, changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the costs, timing or successful completion of a clinical trial. If we experience delays in completion of, or if we terminate, any of our clinical trials, the commercial prospects for our product candidates may be harmed and our ability to generate product revenues from these product candidates will be delayed or not realized at all. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of a clinical trial may also ultimately lead to the denial of regulatory approval of the subject product candidate.

If the FDA does not conclude that the iDose drug delivery implant satisfies the requirements for the 505(b)(2) regulatory approval pathway, or if the requirements for approval of the iDose drug delivery implant under Section 505(b)(2) are not as we expect, the approval pathway will likely take significantly longer, cost significantly more and encounter significantly more complications and risks than anticipated, and in any case may not be successful.

        We intend to seek FDA approval through the 505(b)(2) regulatory pathway for our drug delivery implant, iDose . The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the Federal Food, Drug and Cosmetic Act. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies that were not conducted by or for the applicant.

        If the FDA does not allow us to pursue the 505(b)(2) regulatory pathway for iDose as anticipated, we may need to conduct additional clinical trials, provide additional data and information and meet

34

Table of Contents

additional standards for regulatory approval. If this were to occur, the time and financial resources required to obtain FDA approval would likely substantially increase. Moreover, the inability to pursue the 505(b)(2) regulatory pathway could result in new competitive products reaching the market faster than our product candidate, which could materially adversely impact our competitive position and prospects. Even if we are allowed to pursue the 505(b)(2) regulatory pathway for iDose , we cannot assure you that we will receive the requisite or timely approvals for commercialization of this product candidate.

Failure to comply with post-marketing regulatory requirements could subject us to enforcement actions, including substantial penalties, and might require us to recall or withdraw a product from the market.

        Once a medical device is approved, a manufacturer must notify the FDA of any modifications to the device. Any modification to a device that has received FDA clearance or approval that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design or manufacture, requires premarket clearance or approval from the FDA pursuant to a new 510(k) clearance or approval of a PMA supplement. The FDA requires every manufacturer to make the determination in the first instance regarding whether a modification to a cleared or approved device necessitates the filing of a new 510(k) notification or PMA supplement. The FDA may review any manufacturer's decision and can disagree. If the FDA disagrees with any future determination by us that a new clearance or approval is not required, we may need to cease marketing or to recall the modified product until and unless we obtain clearance or approval. In addition, we could also be subject to significant regulatory fines or penalties. Any of these outcomes would harm our business.

        A manufacturer must also submit periodic reports to the FDA as a condition of PMA approval. These reports include safety and effectiveness information about the device after its approval. Failure to submit such reports, or failure to submit the reports in a timely manner, could result in enforcement action by the FDA. Following its review of the periodic reports, the FDA might ask for additional information or initiate further investigation.

        The PMA approval for the iStent is subject to several conditions of approval, including postmarket study and registry study requirements. Failure to comply with the conditions of approval could result in the withdrawal of PMA approval, and the inability to continue to market the device. Failure to conduct the required studies in accordance with IRB and informed consent requirements could also be grounds for withdrawal of approval of the PMA.

        The regulations to which we are subject are complex and have become more stringent over time. Regulatory changes could result in restrictions on our ability to continue or expand our operations, higher than anticipated costs, or lower than anticipated sales. Even after we have obtained the proper regulatory clearance or approval to market a product, we have ongoing responsibilities under FDA regulations and applicable foreign laws and regulations. The FDA, state and foreign regulatory authorities have broad enforcement powers. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory authorities, which may include any of the following sanctions:

•

untitled letters or warning letters;



•

fines, injunctions, consent decrees and civil penalties;



•

recalls, termination of distribution, administrative detention, or seizure of our products;



•

customer notifications or repair, replacement or refunds;



•

operating restrictions or partial suspension or total shutdown of production;



•

delays in or refusal to grant our requests for future 510(k) clearances, PMA approvals or foreign regulatory approvals of new products, new intended uses, or modifications to existing products;

35

Table of Contents

•

withdrawals or suspensions of current 510(k) clearances or PMAs or foreign regulatory approvals, resulting in prohibitions on sales of our products;



•

FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and



•

criminal prosecution.

        Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and have a material adverse effect on our reputation, business, results of operations and financial condition.

We must continually monitor the performance of our products once approved and marketed for signs that their use may elicit serious and unexpected adverse effects. Any recall of our products, either voluntarily or at the direction of the FDA or another governmental authority, or the discovery of serious safety issues with our products that leads to corrective actions, could have a significant adverse impact on us.

        Our ability to achieve our strategic objectives will depend, among other things, on the long-term clinical performance of the iStent for lowering intraocular pressure in mild-to-moderate open-angle glaucoma patients undergoing cataract surgery. Our original PMA approval for the iStent included several post-marketing study requirements and future approvals may be subject to similar requirements. Failure to conduct required post-marketing studies in a timely manner could result in the revocation of the clearance or approval for the product that is subject to such a requirement and could also result in the recall or withdrawal of the product, which would prevent us from generating sales from that product in the United States.

        Although we believe follow-up at two years continues to support efficacy and safety of the iStent for lowering intraocular pressure in mild-to-moderate open-angle glaucoma patients undergoing cataract surgery, in the future, longer term study outcomes could demonstrate conflicting clinical effectiveness, a reduction of effectiveness, no clinical effectiveness or longer term safety issues with the iStent . This type of differing data could have a detrimental effect on the market penetration and usage of the iStent by customers treating mild-to-moderate open-angle glaucoma and/or the risk/benefit profile of using the iStent to treat mild-to-moderate open-angle glaucoma in combination with cataract surgery. As a result, our sales may decline or expected growth would be negatively impacted. This could put pressure on our ability to execute key components of our business strategy and/or negatively impact our operating condition and financial results.

        More generally, all medical devices, such as the iStent , can experience performance problems that require review and possible corrective action by us or a component supplier. We cannot provide assurance that component failures, manufacturing errors, noncompliance with quality system requirements or good manufacturing practices, design defects and/or labeling inadequacies in any device or drug products that could result in an unsafe condition or injury to the patient will not occur. The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health. Manufacturers may also, under their own initiative, stop shipment or recall a product if any material deficiency is found or withdraw a product to improve device performance or for other reasons. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, noncompliance with good manufacturing practices or quality system requirements, design or labeling defects or other deficiencies and issues. Similar regulatory agencies in other countries have similar authority to recall products because of material deficiencies or defects in design or manufacture that could endanger health. Any recall would divert management attention and financial resources, could cause the price of our stock to decline and expose

36

Table of Contents

us to product liability or other claims and harm our reputation with customers. A recall involving our products could be particularly harmful to our business, financial and operating results.

        The FDA requires that certain classifications of recalls be reported to the FDA within 10 working days after the recall is initiated. Notice to the FDA of a correction or removal is required when undertaken to reduce a risk to health, including when there is a reasonable probability that the product will cause serious adverse health consequences or death, or when use of the device may cause temporary or medically reversible adverse health consequences or an outcome where the probability of serious adverse health consequences is remote. In addition, companies are required to maintain certain records of corrections and removal, even if they are not reportable to the FDA or similar foreign governmental authorities. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA or foreign governmental authorities. If the FDA or foreign governmental authorities disagree with our determinations, they could require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA or a foreign governmental authority could take enforcement action for failing to report the recalls when they were conducted.

        In addition, under the FDA's medical device reporting regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Repeated product malfunctions may result in a voluntary or involuntary product recall. We are subject to similar obligations in the EEA and other countries in which we market our products.

        Depending on the corrective action we take to redress a product's deficiencies or defects, the FDA or applicable foreign regulatory authority may require, or we may decide, that we will need to obtain new approvals or clearances for the device before we may market or distribute the corrected device. Seeking such approvals or clearances may delay our ability to replace the recalled devices in a timely manner. Moreover, we may face additional regulatory enforcement action, including FDA warning letters, product seizure, injunctions, administrative penalties, civil penalties or criminal fines. We may also be required to bear other costs or take other actions that may have a negative impact on our sales as well as face significant adverse publicity or regulatory consequences, which could harm our business, including our ability to market our products in the future.

        Any adverse event involving our products, whether in the United States or abroad, could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection, mandatory recall, orders of repair, replacement or refund or other enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results.

If we or our component manufacturers fail to comply with the FDA's Quality System Regulation or Good Manufacturing Practice regulations, our manufacturing operations could be interrupted, and our product sales and operating results could suffer.

        We and some of our component manufacturers are required to comply with regulatory requirements known as the FDA's Quality System Regulation, or QSR, which covers the procedures and documentation of the design, testing, production, control, quality assurance, inspection, complaint handling, recordkeeping, management review, labeling, packaging, sterilization, storage and shipping of our device products. The FDA's current Good Manufacturing Practices, or cGMPs apply to the manufacture of drug substance and finished drug products. The FDA audits compliance with these regulatory requirements through periodic announced and unannounced inspections of manufacturing and other facilities. The FDA may conduct inspections or audits at any time, and we and some of our

37

Table of Contents

component suppliers are subject to such inspections. Although we believe our manufacturing facilities and those of our critical component suppliers are in compliance with the QSR requirements, and with applicable cGMPs for our iDose drug delivery implant, we cannot provide assurance that any future inspection will not result in adverse findings. If our manufacturing facilities or those of any of our component suppliers are found to be in violation of applicable laws and regulations, or we or our suppliers have significant noncompliance issues or fail to timely and adequately respond to any adverse inspectional observations or product safety issues, or if any corrective action plan that we or our suppliers propose in response to observed deficiencies is not sufficient, the FDA could take enforcement action, including any of the following sanctions:

•

untitled letters or warning letters;



•

fines, injunctions, consent decrees and civil penalties;



•

customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;



•

operating restrictions or partial suspension or total shutdown of production;



•

refusing or delaying our requests for clearance or approval of new products or modified products;



•

withdrawing clearances or approvals that have already been granted;



•

refusal to grant export approval for our products; or



•

criminal prosecution.

        Any of these sanctions could adversely affect our business, financial conditions and operating results.

        Outside the United States, our products and operations are also often required to comply with standards set by industrial standards bodies, such as the International Organization for Standardization. Foreign regulatory bodies may evaluate our products or the testing that our products undergo against these standards. The specific standards, types of evaluation and scope of review differ among foreign regulatory bodies. If we fail to adequately comply with any of these standards, a foreign regulatory body may take adverse actions similar to those within the power of the FDA. Any such action may harm our reputation and could have an adverse effect on our business, results of operations and financial condition.

If we fail to obtain and maintain regulatory approval in foreign jurisdictions, our market opportunities will be limited.

        The iStent is currently approved for sale in 20 countries outside of the United States, where it is sold through a direct sales network in Germany as well as distributors in other countries. In order to market our products in the European Union, Asia or other foreign jurisdictions, we must obtain and maintain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies from country to country and can involve additional testing. The time required to obtain approval abroad may be longer than the time required to obtain FDA clearance or approval. Foreign regulatory approval processes include many of the risks associated with obtaining FDA clearance or approval and we may not obtain foreign regulatory approvals on a timely basis, if at all. FDA clearance or approval does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries. However, the failure to obtain clearance or approval in one jurisdiction may have a negative impact on our ability to obtain clearance or approval elsewhere. If we do not obtain or

38

Table of Contents

maintain necessary approvals to commercialize our products in markets outside the United States, it would negatively affect our overall market penetration.

We may be subject to fines, penalties, injunctions or other enforcement actions if we are determined to be promoting the use of our products for unapproved or "off-label" uses, resulting in damage to our reputation and business.

        Our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of the promotion of a drug or medical device for a use that has not been cleared or approved by the FDA. Use of a drug or device outside of its cleared or approved indications is known as "off-label" use. Physicians may use our products off-label, as the FDA does not restrict or regulate a physician's choice of treatment within the practice of medicine. However, if the FDA determines that our promotional materials or training constitutes promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of warning letters, untitled letters, fines, penalties, consent decrees, injunctions, or seizures, which could have an adverse impact on our reputation and financial results. We could also be subject to enforcement action under other federal or state laws, including the federal False Claims Act, or FCA.

Failure to comply with the Federal Health Insurance Portability and Accountability Act of 1996, the Health Information Technology for Economic and Clinical Health Act, and implementing regulations affecting the transmission, security and privacy of health information could result in significant penalties.

        Numerous federal and state laws and regulations, including the Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, and the Health Information Technology for Economic and Clinical Health Act, or HITECH Act, govern the collection, dissemination, security, use and confidentiality of patient-identifiable health information. HIPAA and the HITECH Act may require us to comply with standards for the use and disclosure of health information within our company and with third parties. The Privacy Standards and Security Standards under HIPAA establish a set of basic national privacy and security standards for the protection of individually identifiable health information by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services. Notably, whereas HIPAA previously directly regulated only these covered entities, the HITECH Act, which was signed into law as part of the stimulus package in February 2009, makes certain of HIPAA's privacy and security standards also directly applicable to covered entities' business associates. As a result, both covered entities and business associates are now subject to significant civil and criminal penalties for failure to comply with the Privacy Standards and Security Standards.

        HIPAA and the HITECH Act also include standards for common healthcare electronic transactions and code sets, such as claims information, plan eligibility and payment information. Covered entities, such as healthcare providers, are required to conform to such transaction set standards pursuant to HIPAA.

        HIPAA requires healthcare providers to develop and maintain policies and procedures with respect to protected health information that is used or disclosed, including the adoption of administrative, physical and technical safeguards to protect such information. The HITECH Act expands the notification requirement for breaches of patient-identifiable health information, restricts certain disclosures and sales of patient-identifiable health information and provides a tiered system for civil monetary penalties for HIPAA violations. The HITECH Act also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney fees and costs associated with pursuing federal civil actions. Additionally, certain states have adopted comparable privacy and security laws and regulations, some of which may be more stringent than HIPAA.

39

Table of Contents

        If we do not comply with applicable existing or new laws and regulations related to patient health information, we could be subject to criminal or civil sanctions. New health information standards, whether implemented pursuant to HIPAA, the HITECH Act, congressional action or otherwise, could have a significant effect on the manner in which we handle healthcare related data and the cost of complying with these standards could be significant.

        The 2013 final HITECH Act omnibus rule modifies the breach reporting standard in a manner that will likely make more data security incidents qualify as reportable breaches. Any liability from a failure to comply with the applicable requirements of HIPAA or the HITECH Act could adversely affect our financial condition. The costs of complying with privacy and security-related legal and regulatory requirements are burdensome and could have a material adverse effect on our results of operations. These new provisions, as modified, will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us, as well as our clients and strategic partners. In addition, we are unable to predict what changes to the HIPAA Privacy Standards and Security Standards might be made in the future or how those changes could affect our business. Any new legislation or regulation in the area of privacy and security of personal information, including personal health information, could also adversely affect our business operations.

If we fail to comply with state and federal healthcare regulatory laws, we could face substantial penalties, damages, fines, disgorgement, exclusion from participation in governmental healthcare programs, and the curtailment of our operations, any of which could adversely affect our business, operations, and financial condition.

        Although we do not provide healthcare services, submit claims for third-party reimbursement, or receive payments directly from Medicare, Medicaid or other third-party payors for our products, we are subject to healthcare fraud and abuse regulation and enforcement by federal and state governments, which could significantly impact our business. The laws that may affect our ability to operate include, but are not limited to:

•

the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering, or paying remuneration, directly or indirectly, in cash or in kind, in exchange for or to induce either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of this statute or specific intent to violate it;



•

the civil FCA, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent; knowingly making using, or causing to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government; or knowingly making, using, or causing to be made or used, a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government;



•

the criminal FCA, which imposes criminal fines or imprisonment against individuals or entities who make or present a claim to the government knowing such claim to be false, fictitious or fraudulent;



•

HIPAA, which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;



•

the federal civil monetary penalties statute, which prohibits, among other things, the offering or giving of remuneration to a Medicare or Medicaid beneficiary that the person knows or should

40

Table of Contents

know is likely to influence the beneficiary's selection of a particular supplier of items or services reimbursable by a Federal or state governmental program;

•

the federal physician sunshine requirements under PPACA, which require certain manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members. The period between August 1, 2013 and December 31, 2013 was the first reporting period, and manufacturers were required to report aggregate payment data by March 31, 2014, and to report detailed payment data and submit legal attestation to the accuracy of such data by June 30, 2014. Thereafter, manufacturers must submit reports by the 90th day of each subsequent calendar year; and



•

state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the device industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures.

        Further, the PPACA, among other things, amended the intent requirements of the federal Anti-Kickback Statute and certain criminal statutes governing healthcare fraud. A person or entity can now be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. In addition, PPACA provided that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. Moreover, while we do not submit claims and our customers make the ultimate decision on how to submit claims, from time to time, we may provide reimbursement guidance to our customers. If a government authority were to conclude that we provided improper advice to our customers or encouraged the submission of false claims for reimbursement, we could face action against us by government authorities. Any violations of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, results of operations and financial condition.

        We have entered into consulting and scientific advisory board arrangements with physicians and other healthcare providers, including some who influence the ordering of and use of our products in procedures they perform. Compensation for some of these arrangements includes the provision of stock options. While we have worked to structure our arrangements to comply with applicable laws, because of the complex and far-reaching nature of these laws, regulatory agencies may view these transactions as prohibited arrangements that must be restructured, or discontinued, or for which we could be subject to other significant penalties. We could be adversely affected if regulatory agencies interpret our financial relationships with providers who influence the ordering of and use our products to be in violation of applicable laws.

        The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Responding to investigations can be time-and resource-consuming and can divert management's attention from the business. Additionally, as a result of these investigations, healthcare providers and entities may have to agree to

41

Table of Contents

additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.

        If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in federal and state healthcare programs and the curtailment or restricting of our operations, any of which could harm our ability to operate our business and our financial results.

Foreign governments tend to impose strict price controls, which may adversely affect our future profitability.

        We currently sell the iStent and iStent Inject outside the United States and we plan to further expand our international operations. In some foreign countries, particularly in the European Union, the pricing of medical devices is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to supply data that compares the cost-effectiveness of our products to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, it may not be profitable to sell our products in certain foreign countries, which could negatively affect the long-term growth of our business.

Our financial performance may be affected by medical device tax provisions in the healthcare reform laws.

        The PPACA imposes among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in the United States beginning in 2013. Under these provisions, the Congressional Research Services predicts that the total cost to the medical device industry may be up to $29 billion over the next decade. The iStent is subject to this tax and the other products in our pipeline will be subject to this tax. There are no assurances that our business will not be materially adversely affected by the current, or possible future additional tax, provisions implemented under healthcare reform.

Our operations involve hazardous materials, and we must comply with environmental laws and regulations, which can be expensive.

        We are subject to a variety of federal, state and local regulations relating to the use, handling, storage, disposal, and human exposure to hazardous and toxic materials. We could incur costs, fines, and civil and criminal sanctions, third-party property damage or personal injury claims, or could be required to incur substantial investigation or remediation costs, if we were to violate or become liable under environmental laws. Compliance with current or future environmental and safety laws and regulations could restrict our ability to expand our facilities, impair our research, development or production efforts, or require us to incur other significant expenses. There can be no assurance that violations of environmental laws or regulations will not occur in the future as a result of the inability to obtain permits, human error, accident, equipment failure or other causes.

Risks Related to Our Intellectual Property

If we are unable to adequately protect our intellectual property, our competitors and other third parties could develop and commercialize products similar or identical to ours, which would substantially impair our ability to compete.

        Our success and ability to compete depends significantly upon our ability to maintain and protect our proprietary rights to the technologies and inventions used in or embodied by our products. We rely on a combination of patents and trademark rights, and to a lesser extent on trade secrets and

42

Table of Contents

copyrights, together with licenses and nondisclosure agreements to protect our intellectual property. These legal means, however, afford only limited protection and may not adequately protect our intellectual property rights. We also have not pursued or maintained, and may not pursue or maintain in the future, patent protection for our products in every country or territory in which we sell or will in the future sell our products. In addition, we cannot be sure that any of our pending patent applications or pending trademark applications will issue or that, if issued, they will issue in a form that will be advantageous to us. The United States Patent and Trademark Office, or USPTO, or other foreign patent offices may deny or significantly narrow claims made under our patent applications and our issued patents may be successfully challenged, may be designed around, or may otherwise be of insufficient scope to provide us with any meaningful protection for our present or future commercial products. Further, the USPTO or other foreign trademark offices may deny our trademark applications and, even if published or registered, these trademarks may be ineffective in protecting our brand and goodwill and may be successfully opposed or challenged.

        The patent prosecution process itself is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. The patent prosecution process requires compliance with complex laws, rules and regulations imposed by patent authorities. Failure to comply with these laws, rules and regulations may derive, among other bases, from various defects of form in the preparation or filing of our patents or patent applications, which may include defects that relate to our making proper priority claims and inventorship determinations. If any such defects are identified, we may need to take corrective action. For example, we recently filed petitions with the USPTO to request in part that Dr. Richard Hill, one of our consultants, be added as an inventor on patents related to our iStent and iStent Inject products and iStent Supra product candidate that were developed during Dr. Hill's consultancy. Dr. Hill has assigned his rights in these patents and certain other patent applications to us pursuant to the terms of his consulting agreement. We cannot assure you, however, that our petitions to the USPTO will be successful. Dr. Hill was employed as an Associate Professor at the University of California, Irvine, or the University, during the period when these patents and patent applications were developed. We engaged in discussions with the University to address whether it has any ownership claim to these patents and patent applications as a result of Dr. Hill's employment, and in December 2014, we entered into an agreement with the University pursuant to which the University agreed not to challenge our ownership of these patents and patent applications. In addition, if any material defects are found in the form or preparation of any of our patents or patent applications, such patents or applications may be invalid and unenforceable. Any of these outcomes could impair our ability to prevent competition from third parties, which could harm our business. Moreover, the USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In addition, periodic maintenance fees on issued patents often must be paid to the USPTO and foreign patent agencies over the lifetime of the patent. While an unintentional lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment or delay in payment of fees or annuities (whether intentional or unintentional), failure to specify proper entity status, and failure to properly legalize and submit formal documents. If we fail to maintain the patents and patent applications covering our products or procedures, we may not be able to stop a competitor from marketing products that are the same as or similar to our products, which would have a material adverse effect on our business.

        The patent position of medical device companies is generally highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In the United

43

Table of Contents

States and in many foreign jurisdictions, policies regarding the breadth of claims allowed in patents can be inconsistent. The U.S. Supreme Court and the Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted. Similarly, foreign courts have made, and will likely continue to make, changes in how the patent laws in their respective jurisdictions are interpreted. We cannot predict future changes in the interpretation of patent laws or changes to patent laws that might be enacted into law by U.S. and foreign legislative bodies. Those changes may materially affect our patents or patent applications and our ability to obtain patents. Future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage, which could adversely affect our business, financial condition and results of operations.

        Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art, may affect patent litigation, and switch the U.S. patent system from a "first-to-invent" system to a "first-to-file" system. Under a "first-to-file" system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether another inventor had made the invention earlier. The USPTO developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first-to-file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition. In addition, patent reform legislation may pass in the future that could lead to additional uncertainties and increased costs surrounding the prosecution, enforcement, and defense of our patents and applications.

        We may be subject to a third-party preissuance submission of prior art to the USPTO or to another foreign patent office, or become involved in opposition, derivation, reexamination, inter partes review, post-grant review, or other patent office proceedings or litigation, in the United States or elsewhere, challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.

        We have a number of foreign patents and patent applications, and expect to pursue patent protection in the most significant markets in which we do business. The laws of other countries in which our product offerings are or may be sold may not protect our product offerings and intellectual property to the same extent as U.S. laws, if at all. Many companies have encountered significant difficulties in obtaining, protecting and defending such rights in such markets. In addition, many countries limit the enforceability of patents against other parties, including government agencies or government contractors. In these countries, the patent owner may have limited remedies, and certain countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to other parties. We also may be unable to protect our rights in trade secrets and unpatented proprietary technology in these countries. If we encounter such difficulties or we are otherwise precluded from effectively protecting our intellectual property rights in these jurisdictions, our business, financial condition and results of operations could be substantially harmed.

44

Table of Contents

        Despite our efforts to safeguard our unpatented and unregistered intellectual property rights, we may not be successful in doing so, or the steps taken by us in this regard may not be adequate to detect or deter misappropriation of our technology or to prevent an unauthorized third party from copying or otherwise obtaining and using our products, technology or other information that we regard as proprietary. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how. Competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. Our inability to adequately protect our intellectual property could allow our competitors and other third parties to produce products based on our patented or proprietary technology and other intellectual property rights, which could substantially impair our ability to compete.

        We may not be able to accurately estimate or control our future operating expenses in relation to obtaining, enforcing and/or defending intellectual property, which could lead to cash shortfalls. Our operating expenses may fluctuate significantly in the future as a result of the costs of preparing, filing, prosecuting, defending and enforcing patent claims and other patent related costs, including litigation costs and the results of such litigation.

We are currently and may in the future become involved in patent and other intellectual property litigation or administrative proceedings to enforce or defend our intellectual property rights, which could be costly, time consuming and unsuccessful and could interfere with our ability to successfully commercialize our products.

        We are currently asserting and may in the future need to assert claims of infringement against third parties to protect our intellectual property. Since March 2013, we have been engaged in a dispute with Transcend Medical, Inc., or Transcend, in which Transcend is challenging certain of our patents as invalid and seeking a declaratory judgment that they do not infringe our patents. We answered this challenge with a counterclaim alleging Transcend's infringement of our patents. Transcend has also asserted an inequitable conduct defense in connection with three patents in the lawsuit, and has alleged a pattern of inequitable conduct in connection with the inventorship of such patents and certain additional patents not directly at issue in the lawsuit. While we deny and dispute Transcend's claims, there is no guarantee that we will prevail in this litigation, or that we will receive any damages or other relief if we do prevail. In the event of an adverse judgment in this matter, the court could hold that some or all of our asserted patents are not infringed, or that they are invalid or unenforceable, which would diminish the extent of patent protection we have on our iStent Supra product. Furthermore, if Transcend were to prevail on its general theories of alleged inequitable conduct, some of these other patents that Transcend is not challenging in its suit, but which Transcend has identified in its pleadings in this suit to support its allegations of inequitable conduct, could later be subject to similar claims from other third parties, which could potentially weaken the general scope of protection these patents afford our products. See "Business—Legal Proceedings" for more information regarding our dispute with Transcend.

        Regardless of the final outcome, any litigation to enforce our intellectual property rights in patents, copyrights, trade secrets or trademarks is highly unpredictable and could result in substantial costs and diversion of resources, which could have a material adverse effect on our business, financial condition and results of operations. Any claims we assert against alleged infringers could provoke these third parties to assert counterclaims against us alleging that we infringe their own intellectual property rights, or that our rights are invalid or unenforceable. A court could hold that some or all of our asserted intellectual property rights are not infringed, or could invalidate our rights, hold our rights unenforceable, or substantially narrow the scope of protection. Any such adverse result would undermine our competitive position.

45

Table of Contents

We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from selling our products, require us to obtain licenses from third parties, require us to develop non-infringing alternatives and/or subject us to substantial monetary damages and injunctive relief.

        The medical device industry is characterized by the existence of a large number of patents and frequent litigation based on allegations of patent infringement. Moreover, because patent applications can take many years to issue, there may be currently pending applications, unknown to us, which may later result in issued patents that materially and adversely affect our business. Additionally, our competitors could later pursue additional patent protection related to their earlier patent disclosures, where such patent filings are prepared with intent to cover our products. Third parties could also assert infringement or misappropriation claims against us with respect to our products. Whether or not such claims are valid, we cannot be certain that we have not infringed the intellectual property rights of such third parties or others. Any infringement or misappropriation claim could result in significant costs, substantial damages and our inability to manufacture, market or sell our existing or future products that are found to infringe. Even if we were to prevail in any such action, the litigation could result in substantial cost and diversion of resources that could materially and adversely affect our business. If a court determined, or if we independently discovered, that our product offerings violated third-party proprietary rights, there can be no assurance that we would be able to re-engineer our products to avoid those rights or to obtain a license under those rights on commercially reasonable terms, if at all. As a result, we could be prohibited from selling products that are found to infringe, or we could elect not to sell or to stop selling products that we believe have a substantial probability of infringing a third-party's intellectual property rights. Even if obtaining a license were feasible, it may be costly and time-consuming. A court could also enter orders that temporarily, preliminarily or permanently enjoin us or our customers from making, using, selling, offering to sell, distributing, exporting or importing the iStent or future products, such as the iStent Inject, iStent Supra or iDose, or could enter orders mandating that we undertake certain remedial activities. A court could also order us to pay compensatory damages for such infringement, plus prejudgment interest, and if we are found to have willfully infringed third-party rights, could in addition treble the compensatory damages and award attorneys' fees. These damages could be substantial and could harm our reputation, business, financial condition and results of operations.

        Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could hurt the price of our common stock. Such litigation proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.

If any of our employees, consultants or others breach their proprietary information agreements, our competitive position could be harmed.

        We protect our proprietary technology, in part, through proprietary information and inventions agreements with employees, consultants and other parties. These agreements with employees and consultants generally contain standard provisions requiring those individuals to assign to us, without additional consideration, inventions conceived or reduced to practice by them while employed or

46

Table of Contents

retained by us, subject to customary exceptions. Although it is our policy to require each of our employees, consultants and any other parties who may be involved in the development of intellectual property on our behalf to execute such agreements, we may be unsuccessful in doing so with each party who in fact develops intellectual property that we regard as our own. The relevant assignment provisions may not be self-executing or may be breached. As a result, our competitors may learn our trade secrets or we may be required to pursue litigation in order to determine the ownership of the intellectual property rights at issue.

        Even if we file suit to prevent or stop such disclosure, there is a risk that a court could find we have not adequately protected the information as a trade secret and allow use of the disclosed information by our competitors. Additionally, we may need to file suit to force the employee, consultant or other party in breach to assign his, her or its rights to us, or we may need to pay additional compensation to such employee, consultant or other party in order to quiet or obtain legal title to the intellectual property rights at issue.

We may be subject to claims that we or our employees have misappropriated the intellectual property of a third party, including trade secrets or know-how, or are in breach of non-competition or non-solicitation agreements with our competitors and third parties may claim an ownership interest in intellectual property we regard as our own.

        Many of our employees and consultants were previously employed at or engaged by other medical device, biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these employees, consultants and contractors, may have executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our employees and consultants do not use the intellectual property, proprietary information, know-how or trade secrets of others in their work for us, we may be subject to claims that we or these individuals have, inadvertently or otherwise, misappropriated the intellectual property or disclosed the alleged trade secrets or other proprietary information, of these former employers or competitors. Additionally, we may be subject to claims from third parties challenging our ownership interest in intellectual property we regard as our own, based on claims that our employees or consultants have breached an obligation to assign inventions to another employer, to a former employer, or to another person or entity. For example, Dr. Hill, one of our consultants, was also employed as an Associate Professor at the University during the period when certain patents and patent applications to which Dr. Hill contributed were developed. We were in discussions with the University to address whether it has any ownership claim to these patents as a result of Dr. Hill's employment. In December 2014, we entered into an agreement with the University pursuant to which the University agreed not to challenge our ownership of the patents and patent applications to which Dr. Hill contributed while he was both a consultant for us and a faculty member at the University. Litigation may be necessary to defend against any other claims, and it may be necessary or we may desire to enter into a license to settle any such claim; however, there can be no assurance that we would be able to obtain a license on commercially reasonable terms, if at all. If our defense to those claims fails, in addition to paying monetary damages, a court could prohibit us from using technologies or features that are essential to our products, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of the former employers. An inability to incorporate technologies or features that are important or essential to our products could have a material adverse effect on our business, and may prevent us from selling our products. In addition, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against these claims, litigation could result in substantial costs and could be a distraction to management. Any litigation or the threat thereof may adversely affect our ability to hire employees or contract with independent sales representatives. A loss of key personnel or their work product could hamper or prevent our ability to commercialize our products, which could have an adverse effect on our business, results of operations and financial condition.

47

Table of Contents

Risks Related to Being a Public Company

We will incur increased costs as a result of operating as a public company and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

        As a public company, and increasingly after we are no longer an "emerging growth company," we will incur significant legal, accounting, administrative and other costs and expenses that we have not previously incurred as a private company. We will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, which will require, among other things, that we file with the Securities and Exchange Commission, or the SEC, annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, and rules subsequently implemented by the SEC and the New York Stock Exchange impose numerous requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted additional rules and regulations in these areas, such as mandatory "say on pay" voting requirements that will apply to us when we cease to be an emerging growth company. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and may impact the manner in which we operate our business in ways we cannot currently anticipate. Our management and other personnel will need to devote a substantial amount of time to compliance with these laws and regulations. These requirements have increased and will continue to increase our legal, accounting and financial compliance costs and have made and will continue to make some activities more time consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board committees or as executive officers.

        The increased costs will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

If we experience material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

        The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly. In particular, Section 404(a) of the Sarbanes-Oxley Act, or Section 404(a), will require us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting. Section 404(b) of the Sarbanes-Oxley Act, or Section 404(b), also requires our independent registered public accounting firm to attest to the effectiveness of our internal control over financial reporting. As an "emerging growth company" we expect to avail ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404(b). However, we may no longer avail ourselves of this exemption when we are no longer an "emerging growth company." When our

48

Table of Contents

independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of our compliance with Section 404(b) will correspondingly increase. Our compliance with applicable provisions of Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements.

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

We are an "emerging growth company," and the reduced disclosure requirements applicable to such companies could make our common stock less attractive to investors.

        We are an "emerging growth company," as defined in the Jumpstart Our Business Startups, or JOBS Act, enacted in April 2012, and may remain an "emerging growth company" until the last day of the fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenues equals or exceeds $1.0 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period. For as long as we remain an "emerging growth company," we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not "emerging growth companies." These exemptions include:

•

being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure;



•

not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;



•

reduced disclosure obligations regarding executive compensation; and



•

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

        We have taken advantage of reduced reporting burdens in this prospectus. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be reduced or more volatile. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected not to avail ourselves of this exception and therefore will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

49

Table of Contents

Risks Related to Our Common Stock and Ownership of Our Common Stock

Our common stock has not been publicly-traded, and we expect that the price of our common stock will fluctuate substantially.

        Before this offering, there has been no public market for our common stock. Although our common stock has been approved for listing on the New York Stock Exchange, an active public trading market may not develop or be sustained following the completion of this offering. The price of the common stock sold in this offering will not necessarily reflect the market price of our common stock after this offering. The market price for our common stock after this offering will be affected by a number of factors, including:

•

the depth and liquidity of the market for our common stock;



•

volume, timing and nature of orders for our products;



•

developments generally affecting medical device companies;



•

actual or anticipated quarterly variation in our results of operations or the results of our competitors;



•

the announcements by us or our competitors of new products or product enhancements, significant contracts, commercial relationships or capital commitments;



•

developments or disputes concerning our intellectual property or other proprietary rights;



•

issuance of new or changes in earnings estimates or recommendations or reports by securities analysts;



•

investor perceptions of us and our business, including changes in market valuations of medical device companies;



•

actions by institutional or other large stockholders;



•

commencement of, or our involvement in, litigation;



•

failure to complete significant sales;



•

manufacturing disruptions that could occur if we were unable to successfully expand our production in our current or an alternative facility;



•

any future sales of our common stock or other securities;



•

any major change to the composition of our board of directors or management;



•

our results of operations and financial performance; and



•

general economic, industry and market conditions.

        In addition, the New York Stock Exchange has experienced significant volatility with respect to medical device, medical technology, pharmaceutical, biotechnology and other life science company stocks. The volatility of medical device, medical technology, pharmaceutical, biotechnology and other life science company stocks often does not relate to the operating performance of the companies represented by the stock. Further, there has been particular volatility in the market price of securities of early-stage and development-stage life science and medical device companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance.

50

Table of Contents

There can be no guarantee that an active trading market for our shares will develop and that you will have liquidity for your investments.

        Prior to this offering, there has been no public market for our common stock. We cannot predict the extent to which interest in our company will lead to the development of an active trading market on the New York Stock Exchange or otherwise or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling any or your shares of common stock, and the value of those shares might be materially impaired. The initial public offering price for our common stock will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell shares of our common stock at prices equal to or greater than the price you paid in this offering.

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

        The trading market for our common stock will rely in part on the research and reports that equity research analysts publish about us and our business. We do not currently have and may never obtain research coverage by equity research analysts. Equity research analysts may elect not to provide research coverage of our common stock after the completion of this offering, and such lack of research coverage may adversely affect the market price of our common stock. In the event we obtain equity research analyst coverage, we will not have any control over the analysts or the content and opinions included in their reports. The price of our stock could decline if one or more equity research analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which in turn could cause our stock price or trading volume to decline.

We could be subject to securities class action litigation.

        In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs, potential liabilities and the diversion of management's attention and resources.

Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

        The initial public offering price of our common stock is substantially higher than the pro forma net tangible book value per share of our common stock immediately following this offering. Therefore, if you purchase common stock in the offering, you will experience immediate and substantial dilution of approximately $12.82 in pro forma as adjusted net tangible book value per share as of March 31, 2015 from the price you paid, based on an assumed initial public offering price of $14.00 per share, the mid-point of the price range set forth on the cover page of this prospectus. In addition, new investors who purchase shares in this offering will contribute approximately 32.0% of the total amount of equity capital raised by us through the date of this offering, but will only own approximately 18.0% of the outstanding share capital and voting rights. In addition, we have issued options and other securities to acquire common stock at prices below the initial public offering price. To the extent outstanding securities are ultimately exercised, there will be further dilution to investors who purchase shares in this offering. In addition, if the underwriters exercise their option to purchase additional shares or if we issue additional equity securities, investors purchasing shares in this offering will experience additional dilution. As a result of the dilution to investors purchasing shares in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of our liquidation. For a further description of the dilution that you will experience immediately after this offering, see "Dilution."

51

Table of Contents

Future sales of shares of our common stock may cause the price of our common stock to decline.

        Based on shares outstanding as of March 31, 2015, upon completion of this offering, we will have outstanding a total of 29,705,846 shares of common stock. Of these shares, only the 5,358,000 shares of common stock sold in this offering by us, or 6,161,700 shares if the underwriters exercise their option to purchase additional shares in full, will be freely tradable, without restriction, in the public market immediately after the offering. Each of our officers, directors and certain of our stockholders, have entered into lock-up agreements with the underwriters that restrict their ability to sell or transfer their shares. The lock-up agreements pertaining to this offering will expire 180 days from the date of this prospectus. However, our underwriters may, in their sole discretion, permit our officers, directors and other current stockholders who are subject to the contractual lock-up to sell shares prior to the expiration of the lock-up agreements. After the lock-up agreements expire, based on shares outstanding as of March 31, 2015, up to an additional 24,347,846 shares of common stock will be eligible for sale in the public market, approximately 12.7 million of which are held by our officers, directors and their affiliated entities, and will be subject to volume limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, and various vesting agreements. In addition, 5,583,110 shares of our common stock that are subject to outstanding options as of March 31, 2015 and 387,000 shares of our common stock that are subject to options granted after March 31, 2015 will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements, the lock-up agreements and Rules 144 and 701 under the Securities Act. We cannot predict what effect, if any, sales of our shares in the public market or the availability of shares for sale will have on the market price of our common stock. However, future sales of substantial amounts of our common stock in the public market, including shares issued upon exercise of outstanding options, or the perception that such sales may occur could adversely affect the market price of our common stock and also could adversely affect our future ability to raise capital through the sale of our common stock or our other equity-related securities at times and prices we believe appropriate.

Our officers, directors and principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders.

        Following the completion of this offering, our officers, directors and stockholders holding more than 5% of our outstanding common stock collectively will own or control approximately 74.4% of our outstanding common stock. As a result, our officers, directors and stockholders holding more than 5% of our outstanding common stock, acting as a group, will have substantial influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transactions. These stockholders may also have the effect of delaying or preventing a change in control of us, even if such a change of control would benefit our other stockholders. This significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors' perception that conflicts of interest may exist or arise.

Two members of our board of directors intend to continue as directors of DOSE following closing of the sale of the glaucoma-related intellectual property and assets of DOSE to our company pursuant to the asset purchase agreement. In addition, there is significant overlap between our current stockholders and the stockholders of DOSE. Their interests may conflict with those of our other stockholders.

        Two of our current directors, Thomas W. Burns and William J. Link, Ph.D., currently serve as the sole members of the board of directors of DOSE, and Thomas W. Burns also serves as an officer of DOSE. While Mr. Burns intends to resign as an officer of DOSE upon completion of the proposed sale of the glaucoma-related intellectual property and assets of DOSE to our company pursuant to the asset purchase agreement, neither he nor Dr. Link have informed us that he intends to resign from the DOSE board of directors. This could result in conflicts of interest between their obligations to our

52

Table of Contents

company and DOSE. In addition, there is significant overlap between our current stockholders and the stockholders of DOSE. DOSE's interests and the interests of its stockholders may be different from ours or those of our other stockholders and this could result in conflicts. The resolution of any of these conflicts may not always be in our or your best interest.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

        Provisions in our certificate of incorporation and bylaws, as amended and restated upon the closing of this offering, may have the effect of delaying or preventing a change of control or changes in our management. Our restated certificate of incorporation and amended and restated bylaws to become effective upon completion of this offering include provisions that:

•

authorize our board of directors to issue, without further action by the stockholders, up to 5,000,000 shares of undesignated preferred stock;



•

require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;



•

specify that special meetings of our stockholders may be called only by our board of directors, the chairman of the board of directors, the chief executive officer or the president;



•

establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;



•

establish that our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three year terms;



•

provide that our directors may be removed only for cause by a supermajority vote of our stockholders;



•

provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;



•

specify that no stockholder is permitted to cumulate votes at any election of directors; and



•

require a supermajority vote of the stockholders and a majority vote of the board to amend certain of the above-mentioned provisions and our bylaws.

        These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.

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

        We will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. We intend to use the net proceeds from this offering to fund clinical studies evaluating our pipeline of products under development, to hire additional sales, marketing and customer service personnel and expand marketing programs both in the United States and outside the United States, to purchase the glaucoma-related intellectual property and other assets from our affiliate DOSE, and intend to use the remainder of the net proceeds for working capital and general corporate purposes.

53

Table of Contents

We may also use a portion of our net proceeds to acquire and invest in complementary products, technologies or businesses; however, other than our agreement with DOSE, we currently have no agreements or commitments to complete any such transaction and we have not allocated these net proceeds for any specific purposes. We might not be able to yield a significant return, if any, on any investment of these net proceeds. You will not have the opportunity to influence our management's decisions on how to use the net proceeds from this offering, and our failure to apply these funds effectively could have a material adverse effect on our business and cause the price of our common stock to decline.

We have never paid dividends on our capital stock and do not anticipate paying cash dividends in the foreseeable future.

        We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Accordingly, you may have to sell some or all of your shares of our common stock in order to generate cash flow from your investment. You may not receive a gain on your investment when you sell shares and you may lose the entire amount of the investment.

54

Table of Contents