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Item 1. Business

2023-03-27 compared with 2022-03-28 · 283 added, 430 removed, 411 unchanged (63% of the section changed)

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We are currently focused on advancing a targeted immunotherapy drug candidate, ACU193, through clinical proof of mechanism trials in early AD patients.

ACU193 is a humanized monoclonal antibody, or mAb, that selectively targets AßOs, has demonstrated functional and protective effects in in vitro assays, and has demonstrated in vivo safety and pharmacologic activity in multiple animal species, including transgenic models for AD.

ACU193 is a recombinant humanized immunoglobulin gamma 2, or IgG2, monoclonal antibody, or mAb, that was designed to selectively target AßOs, has demonstrated functional and protective effects in in vitro assays, and has demonstrated in vivo safety and pharmacologic activity in multiple animal species, including transgenic models for AD.

ACU193 is the result of over a decade of research and development undertaken by the company, which included a drug discovery partnership with Merck & Co., Inc., or Merck, from 2003 to 2011.

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We believe the development and commercialization of a drug that reduces toxicity of AßOs is one of the most promising approaches for the potential treatment and prevention of the progression of AD.

In our nonclinical studies, we observed that ACU193 has over 500-fold greater selectivity for targeting AOßs over Aß monomers and has limited or no binding to amyloid plaques.

Also, ACU193 potently prevents binding of AßOs to hippocampal neurons.

Recent laboratory studies conducted by us and others suggest that inhibiting AßOs may enable damaged brain circuits to regain some function and prevent further degeneration from occurring.

In our nonclinical studies, we observed that ACU193 has over 500-fold greater selectivity for targeting AßOs over Aß monomers and, based on immunohistochemical studies of human AD brain tissue, appears to have limited or no binding to amyloid plaques.

Also, ACU193 potently prevents binding of AßOs to hippocampal neurons and preserves long-term potentiation for those cell, an electrophysiological surrogate for brain circuit function such as memory.

Recent laboratory studies conducted by Acumen and others suggest that inhibiting AßOs may enable damaged brain circuits to regain some function and prevent further degeneration from occurring.

ACU193 has demonstrated in vivo biochemical and behavioral activity in several AD mouse models, including crossing the blood-brain barrier and forming complexes with AßOs in a dose-dependent manner.

ACU193 has shown consistent pharmacokinetics and brain penetration properties in four animal species.

Safety toxicology studies in rats and monkeys provide acceptable margins for dosing in the clinic.

Safety toxicology studies in rats and monkeys provide acceptable margins for acute and chronic dosing in the clinic.

Additionally, studies in transgenic mice indicate low potential for microhemorrhage.

Based in part on its binding selectivity for AßOs rather than amyloid plaques, ACU193 has the potential to have a lower rate of amyloid-related imaging abnormalities, or ARIA, than the plaque-clearing anti-amyloid antibody therapies currently in development.

Based in part on its binding selectivity for AßOs rather than amyloid plaques, ACU193 has the potential to have a lower rate of amyloid-related imaging abnormalities, or ARIA, than the plaque-directed anti-amyloid antibody therapies currently in development or approved.

ARIA is a common adverse event for antibodies targeting amyloid plaque and can be a dose-limiting safety liability for those antibodies.

We initiated a Phase 1 clinical trial of ACU193 in the second quarter of 2021, which we named “INTERCEPT-AD.” This trial is enrolling patients with mild dementia or mild cognitive impairment, or MCI, due to AD, conditions referred to as “early AD.” INTERCEPT-AD is a U.S.-based, multi-center, randomized, double-blind, placebo-controlled clinical trial with overlapping single ascending dose, or SAD, and multiple ascending dose, or MAD, cohorts involving a total of approximately 62 patients with early AD.

The overall objective of the trial is to evaluate the safety and tolerability, and establish clinical proof of mechanism of ACU193 administered intravenously.

We initiated a Phase 1 clinical trial of ACU193 in the second quarter of 2021, which we named “INTERCEPT-AD.” This trial enrolled 65 patients with mild dementia or mild cognitive impairment, or MCI, due to AD, conditions referred to as “early AD.” INTERCEPT-AD is a U.S.-based, multi-center, randomized, double-blind, placebo-controlled clinical trial with overlapping single ascending dose, or SAD, and multiple ascending dose, or MAD, cohorts involving patients with early AD.

The overall objective of the trial is to evaluate the safety and tolerability of ACU193 and to establish clinical proof of mechanism of ACU193 administered intravenously.

The primary trial endpoints are focused on safety and immunogenicity.

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Secondary endpoints include pharmacokinetics in plasma and cerebrospinal fluid, or CSF, and target engagement as evidenced by detection of ACU193 bound to AßOs in CSF.

Clinical scales typically used in AD trials as well as computerized cognitive testing are included as exploratory measures.

Clinical scales typically used in AD trials as well as computerized cognitive testing and arterial spin labelling with MRI scans are included as exploratory measures.

In October 2021, we announced the initial dosing of the first patient in the INTERCEPT-AD trial and the subsequent successful sentinel safety review of the first two patients.

Due to delays in clinical trial site activation and patient enrollment that we believe are principally related to effects of the COVID-19 pandemic, we are expanding the anticipated number of trial sites to support our enrollment objectives and anticipated timelines.

Clinical trial site activation and patient recruitment and enrollment is ongoing.

At present, INTERCEPT-AD is in the SAD portion of the trial.

Based on current site activations and enrollment rates, we anticipate reporting our topline data from this trial in the first half of 2023.

Alzheimer’s disease currently affects over 6 million people in the United States and approximately 32 million people worldwide and is the sixth-leading cause of death in the United States.

However, due to the aging population, patient populations in the United States impacted by AD are expected to triple by 2050 without effective preventative measures or safe and effective disease-modifying treatments.

In January 2023, we submitted a protocol amendment to the U.S.

Food and Drug Administration, or FDA, to modify the planned dose level of Cohort 7 of INTERCEPT-AD to 25 mg/kg every two weeks from 60 mg/kg every two weeks.

The proposed change was based in part on a blinded review of preliminary pharmacokinetic data, inclusive of plasma and cerebrospinal fluid levels, which indicated a dose of 60 mg/kg every two weeks should not be needed to attain central

target engagement, and preliminary safety data, inclusive of two asymptomatic cases of ARIA-E (one in Cohort 4 after a single 60 mg/kg dose and one in Cohort 5 after a third 10 mg/kg dose).

We announced the completion of enrollment in INTERCEPT-AD in February 2023 and we anticipate reporting topline data from this trial in the third quarter of 2023.

Alzheimer’s disease is a progressive neurodegenerative disease that destroys memory and other important cognitive functions and ultimately leads to patient death.

AD currently affects over 6 million people in the United States and approximately 32 million people worldwide and is the sixth-leading cause of death in the United States.

However, due to the aging population, patient populations in the United States impacted by AD are expected to grow to approximately 13 million people by 2050 without effective preventative measures or safe and effective disease-modifying treatments.

By 2050, healthcare costs for AD in the United States alone are estimated to exceed $1 trillion.

Until June 2021, the four approved medications for AD provided only modest improvement in AD symptoms.

In June 2021, the FDA granted approval for Biogen’s Aduhelm (aducanumab) under the FDA’s Accelerated Approval Pathway.

Aduhelm is the first new AD product approval since 2004 and the first and only approved disease-modifying product.

The FDA decision to approve Aduhelm has stirred significant controversy among various stakeholders.

In January 2022, the Centers for Medicare and Medicaid Services, or CMS, published a draft guidance opinion for a National Coverage Decision, or NCD, that took the position that Aduhelm should receive reimbursement under a Coverage with Evidence Development, or CED, designation which would limit reimbursement to use of Aduhelm in the context of placebo controlled clinical trials.

The need for a medical breakthrough in AD treatment and prevention becomes more urgent with each passing year, and we believe that our novel approach can potentially help address this pressing need.

The target population for ACU193 and other monoclonal antibodies in development is what is now being called “early AD.” This population includes people with a clinical diagnosis of mild cognitive impairment, or MCI, or mild dementia due to AD who are also amyloid positive based on either imaging studies or cerebrospinal fluid biochemical analyses.

The term “mild cognitive impairment or mild dementia due to AD” has also been used and is accepted by regulators as inclusion/exclusion criteria in clinical trials.

While epidemiologic studies of this population are evolving, approximately 4-5 million people in the United States are likely to have early AD.

In June 2021, the FDA granted approval for Biogen’s Aduhelm (aducanumab) under the FDA’s Accelerated Approval Pathway, or AAP.

Aduhelm was the first new AD product approval since 2004 and the first approved disease-modifying product.

In April 2022, the Centers for Medicare and Medicaid Services, or CMS, released a final National Coverage Decision, or NCD, that restricts reimbursement for monoclonal antibodies directed against amyloid for the treatment of AD, including Aduhelm, under a Coverage with Evidence Development, or CED, designation.

The CED limits reimbursement of anti-amyloid antibodies, including Aduhelm, to placebo-controlled clinical trials.

In May 2022, Biogen announced its decision to eliminate substantially all commercial support for Aduhelm in the U.S.

and withdrew its marketing application for Aduhelm in Europe.

In January 2023, the FDA granted approval for Eisai’s Leqembi™ (lecanemab) under the AAP based on results of its Phase 2 study.

Lecanemab is a recombinant humanized immunoglobulin gamma 1 (IgG1) monoclonal antibody directed against aggregated soluble (protofibrils) and insoluble (plaque) forms of amyloid beta.

In September 2022, Eisai announced positive results of its lecanemab Phase 3 CLARITY-AD trial.

In CLARITY-AD, lecanemab demonstrated highly statistically significant effects on primary and secondary clinical measures and a lower rate of ARIA than observed for aducanumab in the Phase 3 EMERGE and ENGAGE studies.

Though a full FDA approval for Leqembi is anticipated for the third quarter of 2023 based on the Phase 3 CLARITY-AD results, the need for additional options for AD treatment and prevention becomes more urgent with each passing year, and we believe that our novel approach can potentially help address this pressing need.

Understanding the Foundation of Our Therapeutic Approach

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for our purposes, this broadly defined class is referred to as anti-Aß/plaque antibodies.

Several of these antibodies are currently in late-stage development, one having recently received regulatory approval, and collectively they have provided a biological foothold for treating AD.

Several of these antibodies are currently in late-stage development, two having received accelerated regulatory approval, and collectively they have provided a biological foothold for treating AD.

While aducanumab targets deposited amyloid plaques, lecanemab was intended to target soluble aggregated species of Aß known as protofibrils (although it also lowers plaque).

However, the clinical data available to date indicate some of the potential limitations of these approaches with respect to clinically meaningful patient benefit and safety.

Though alternative hypotheses to the amyloid hypothesis propose that amyloid accumulation is a consequence of another process such as infection, the field has now developed an understanding that three predominant pools of Aß species exist in vivo:

Aß monomers (single Aß peptide), amyloid plaques (insoluble fibrillar Aß), and soluble AßOs (dimers and up to 200-mers).

The more recent appreciation of the crucial role of AßOs in the pathologic process is the central tenet of our therapeutic approach.

Our therapeutic approach focuses on targeting AßOs, which we believe are the most toxic and pathogenic form of Aß relative to Aß monomers and amyloid plaques.

Growing evidence, spurred by advances in AD research and analytic techniques, supports our view that AßOs are the main instigators of AD neurodegeneration.

AßOs have been observed to be potent neurotoxins that cause both acute synaptic toxicity and induce

neurodegeneration.

Aß monomers (single Aß peptides), amyloid plaques (insoluble fibrillar Aß), and soluble AßOs (dimers and up to 200-mers).

Some experts in the field differentiate soluble AßO oligomers into globular structures or linear protofibrils.

Linear soluble protofibrils may elongate to form the insoluble fibrils that make up deposited amyloid plaques.

ACU193 was developed to bind to globular AßOs rather than to Aß monomers or deposited amyloid plaques.

The more recent appreciation of the crucial role of soluble AßOs in the pathologic process is the central tenet of our therapeutic approach.

Our therapeutic approach focuses on targeting AßOs, which we believe are the most toxic and pathogenic form of Aß relative to Aß monomers and insoluble amyloid plaques.

Growing evidence, spurred by advances in AD research and analytic techniques, supports our view that AßOs are one of the primary instigators of AD neurodegeneration.

AßOs have been observed to be potent neurotoxins that cause both acute synaptic toxicity and induce neurodegeneration.

Experimentally in animal models, the accumulation of AßOs is associated with core AD neuropathology, including synapse deterioration and loss, tau hyper-phosphorylation, and inflammation.

Research has also shown that the accumulation of AßOs is associated with AD-related behavioral deficits, such as learning and memory impairment.

In light of this evidence, we believe that blocking the toxicity of AßOs is the most promising approach for the treatment of AD, which led us to discover and develop ACU193.

In light of this evidence, we believe that blocking the toxicity of AßOs is a promising approach for maximizing the therapeutic index (efficacy compared to safety) for the treatment of AD, which led us to discover and develop ACU193.

Our Product Candidate

Our product candidate, ACU193, is a humanized monoclonal antibody that targets soluble AßOs.

Our product candidate, ACU193, is a recombinant humanized, affinity-matured, immunoglobulin G2, or IgG2, subclass monoclonal antibody, derived from the murine immunoglobulin G1, or IgG1, parent, ACU3B3.

We are developing ACU193 for intravenous, or IV, administration every four weeks for the treatment of early AD.

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ACU193 has a nanomolar affinity for AßOs, over 500-fold greater selectivity for AßOs over Aß monomers, and limited or no binding to dense core amyloid plaques.

We believe ACU193 is the most advanced immunotherapy candidate in development that selectively targets AßOs.

We believe ACU193 has characteristics that make it a promising potential treatment for AD relative to other antibodies that do not selectively target AßOs.

ACU193 is engineered to reduce immune effector function signaling and to avoid binding to vascular amyloid plaques, which we expect will reduce the incidence of ARIA observed with amyloid plaque-targeting immunotherapies approved and in development for AD.

We are currently assessing ACU193 in INTERCEPT-AD, a proof of mechanism Phase 1 clinical trial involving early AD patients, which we expect to follow with an adaptive Phase 2/3 clinical trial as soon as late 2023 if INTERCEPT-AD is successful.

Summary of Clinical Development Plan

We are currently conducting INTERCEPT-AD, a U.S.-based, multi-center, randomized, placebo-controlled, single and multiple ascending dose Phase 1 clinical trial of ACU193 in patients with early AD.

The early AD patient group is comprised of individuals who have mild dementia or MCI due to AD, and our trial excludes patients with moderate to severe AD dementia.

We plan to enroll a total of 62 early AD patients across seven cohorts, consisting of a single ascending dose in Part A (32 participants) and an overlapping multiple ascending dose in Part B (30 participants).

Part A will contain Cohorts 1 through 4;

each cohort will receive a single IV dose between 2mg/kg and 60 mg/kg, or placebo.

Part B will contain Cohorts 5 through 7;

each cohort will receive a total of three doses of ACU193 or placebo as follows:

10 mg/kg every four weeks (Q4W), 60 mg/kg Q4W, or 60 mg/kg every two weeks (Q2W).

The main objective of INTERCEPT-AD is to evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics, and target engagement of single and multiple ascending doses of ACU193 administered by intravenous infusions.

Exploratory outcomes will include cognitive scales and computerized cognitive testing.

Our goal is to establish clinical proof of mechanism of ACU193 in early AD patients in order to enable rapid progression into an adaptive Phase 2/3 clinical trial.

In October 2021, we announced the initial dosing of the first patient in the INTERCEPT-AD trial and the subsequent successful sentinel safety review of the first two patients.

Clinical trial site activation and patient recruitment and enrollment is ongoing.

At present, INTERCEPT-AD is in the SAD portion of the trial.

Based on current site activations and enrollment rates, we anticipate reporting our topline data from this trial in the first half of 2023.

Following, and subject to the results of, INTERCEPT-AD, we plan to engage with the FDA in an end-of-Phase 2 meeting, which we anticipate will occur in the second half of 2023, to discuss the Phase 2/3 clinical trial design and pathway for potential approval.

Summary of Our Nonclinical Data

In nonclinical studies, ACU193 has demonstrated promising characteristics that indicate its potential to inhibit AßOs as a possible therapeutic treatment of AD.

ACU193 has high selectivity, with over 500-fold binding

selectivity for AßOs compared to Aß monomers and has limited or no binding to amyloid plaques.

ACU193 binds to a broad spectrum of small to large soluble AßOs.

Additionally, ACU193 has been shown to offer protection from synaptic toxicity by inhibiting binding of AßOs to primary hippocampal neurons.

ACU193 has also demonstrated suitable in vivo pharmacology, target engagement, blood-brain barrier penetration and reduction of behavioral deficits.

Based on nonclinical studies, AßO target engagement has the potential to be achieved at doses of ACU193 that will be tested in our Phase 1 clinical trial.

Lastly, ACU193 has been shown to have an adequate safety margin in Good Laboratory Practice, or GLP, toxicity studies conducted in two animal species.

We believe these data indicate that ACU193 has the potential to offer patients a reduction in cognitive decline.

Our objective is to transform the treatment of AD, and potentially other diseases, by developing innovative therapeutics that target primary drivers of disease pathology.

Our initial therapeutic approach is focused on inhibiting and reducing the toxic activity of AßOs, which may allow for synaptic protection and decreased neurodegeneration, leading to more effective treatment for patients with early AD.

To achieve this objective, we are pursuing the following strategies:

Rapidly advance ACU193 through clinical development in patients with early AD.

Based on the strength of the data we observed in our nonclinical studies, we are currently conducting INTERCEPT-AD, which is designed to evaluate safety and tolerability and establish clinical proof of mechanism of ACU193 in early AD patients, which we expect to follow with an adaptive Phase 2/3 clinical trial.

Evaluate combination approaches to complement our core ACU193 monotherapy strategy.

Using ACU193 as the foundation of our AD therapy, we plan to evaluate its potential to be used in combination with drugs currently in development that have complementary mechanisms, which, if successful, could provide additive or even synergistic effects when used with ACU193.

These other drugs include various antibodies and small molecules targeting tau, investigational drugs targeting inflammation (TREM2), regenerative drugs (hepatocyte growth factor/MET receptor stimulator) and drugs which putatively improve astrocyte function.

Selectively explore potential of ACU193 for other diseases.

Toxic AßOs have been implicated in several disease pathologies in nonclinical and epidemiological studies (e.g., dementia associated with Down Syndrome, glaucoma and retinopathies associated with age-related macular degeneration).

Where both human observational data and nonclinical experiments support its therapeutic potential, we may conduct clinical trials of ACU193 in other indications.

Expand our portfolio by developing additional molecules.

In the long term, a key element of our portfolio strategy is to advance additional molecule development through in-licensing or development of alternative formulations for or derivatives of ACU193.

Additional molecules may utilize complementary mechanisms to ACU193, making them candidates for combination therapies or as next-generation products.

Optimize value of ACU193 and future drug candidates in major markets.

We have an exclusive license from Merck to patents claiming the composition and method of use of ACU193.

We plan to develop and pursue approval of ACU193 and other potential future drug candidates in major markets.

We anticipate entering into strategic collaborations and partnerships to maximize the commercial potential of ACU193 and any future programs.

AD represents a significant unmet medical need.

AD is a progressive neurodegenerative disease that destroys memory and other important cognitive functions and ultimately leads to patient death.

AD is the sixth-leading cause of death in the United States.

The disease afflicts more than six million people in the United States and more than 32 million people worldwide, and the patient population in the United States is expected to grow to approximately 13 million people in the United States by 2050.

AD can have a significant burden on family and

In 2020, these caregivers provided an estimated 15.3 billion hours of care valued at nearly $257 billion.

The direct costs of caring for individuals with AD and other dementias in the United States were expected to total $355 billion in 2021, and are projected to increase to $1.1 trillion by 2050, according to the Alzheimer’s Association.

Therapeutic Approaches to AD

The development of effective therapeutics addressing the underlying cause of AD is one of the greatest medical challenges facing society.

Existing treatments for AD consist of drugs that provide modest improvements in symptoms but have no impact on the underlying disease and are unable to halt or slow disease progression.

While the pathology of AD was first described by Dr.

Alois Alzheimer in 1906, the amyloid hypothesis was not developed until the Aß peptide was first identified as a major constituent of amyloid plaques in the 1980s.

The hypothesis was more firmly established when a series of genetic mutations causing the disease were discovered in the early to mid-1990s.

These mutations were found in genes coding for APP or in genes coding for one of the enzymes which cleaves APP, creating the Aß peptide.

Available Treatments:

Symptomatic Treatments

Currently available symptomatic treatments include memantine, an N-methyl-D-aspartate receptor antagonist, and cholinesterase inhibitors, a class of drugs that block the normal breakdown of acetylcholine.

The first approved cholinesterase inhibitor, tacrine, was approved in 1993, but was later withdrawn from the market due to liver toxicity.

Three other cholinesterase inhibitors were subsequently approved and continue to be used clinically.

Memantine is the most recently approved symptomatic treatment drug for AD in 2003 and is indicated for use in moderate to severe AD patients.

Potential Disease-Modifying Approaches focusing on Aß

Because of the lack of significant improvement provided by these symptomatic drugs, there remains a significant need for therapies that target underlying disease pathology and potentially slow or halt disease progression.

Based on the strong linkage between Aß and AD pathology established by decades of research, a range of treatment modalities focusing on Aß have been explored as potential disease-modifying treatments, including g

inhibitors, ß-site APP-cleaving enzyme, or BACE, inhibitors and monoclonal antibodies.

Initial attempts at disease modification were made using small molecule g

-secretase inhibitors and BACE inhibitors, each of which inhibited a different enzyme necessary to produce the Aß peptide.

The first Phase 3 clinical trial results from a g

-secretase inhibitor, semagacestat, were reported in 2010 and unexpectedly showed modest cognitive worsening.

Development of the other g

-secretase inhibitor, avagacestat, was also stopped due to cognitive worsening observed in the clinic.

At least four BACE inhibitors have reached clinical trials;

however, during 2018 and 2019, Phase 3 clinical trial results for many BACE inhibitors, including verubecestat and elenbecestat, also unexpectedly showed modest clinical worsening.

A third class of potential disease-modifying agents, monoclonal antibodies, or mAbs, have targeted Aß monomers or amyloid plaques.

Some of these monoclonal antibodies, such as solanezumab (an Eli Lilly product), target Aß monomers, while others, such as Aduhelm (aducanumab) (a Biogen product), target deposited amyloid plaque, and these monoclonal antibodies have been evaluated in Phase 2 and Phase 3 trials over the period from 2012 to 2021.

The most advanced monoclonal antibody for the treatment of AD is Aduhelm (aducanumab), which received Food and Drug Administration, or FDA, approval in June 2021 under the FDA’s Accelerated Approval Pathway.

As shown in Table 1 below, several of these antibodies have demonstrated some degree of slowing of disease progression in clinical trials, as measured by customary assessments of cognition and function.

Percent Slowing of Cognitive/Functional Decline*

Measured Outcome**

Percent Slowing= [1- [(endpoint score-baseline score)active/(endpoint score-baseline score)placebo]]*100%*(-1)

Alzheimer’s Disease Assessment Scale – Cognitive Subscale

Alzheimer’s Disease Cooperative Study – Activities of Daily Living

Clinical Dementia Rating – Sum of Boxes

Mini-Mental State Examination

Integrated Alzheimer’s Disease Rating Scale

ENGAGE Post-Protocol Version 4 – patients who received at least 14 doses of 10 mg/kg, High Dose cohort achieved 27% improvement on CDR-SB compared to placebo.

A potential limitation of the amyloid plaque-targeting antibodies under development is an adverse effect known as ARIA.

ARIA has two different forms, ARIA-E, or cerebral edema, formerly called vasogenic edema, and ARIA-H, or cerebral microhemorrhages.

While the mechanism of ARIA is not known with certainty, the prevailing theory is that ARIAs are related to the presence of amyloid plaques around blood vessels in the vast majority of people with AD, a condition known as cerebral amyloid angiopathy.

It is generally believed that the removal of these amyloid plaques by the antibody can result in small hemorrhages, or ARIA-H.

ARIA-H occurs in individuals with untreated AD and its occurrence is increased in individuals treated with antibodies that target amyloid plaques.

Increased ARIA-H is correlated with worsening cognition.

In contrast to ARIA-H, ARIA-E is hypothesized to result from the leakage of fluid from the blood vessels into the interstitial spaces in the brain, causing edema, or ARIA-E.

ARIA-E, in particular, is sometimes associated with symptoms that include worsening of cognition, headache, and gait disturbance, which can be severe enough to lead to hospitalization.

ARIA-E usually resolves weeks to months following the cessation of treatment.

In clinical trials for anti-Aß/plaque mAbs, surveillance MRI scans are required to detect asymptomatic ARIA.

Table 2 below illustrates the rates of ARIA observed in Phase 2 or 3 studies for the most advanced mAbs.

Given observed rates of ARIA, from approximately 10% to over 40%, we believe that MRI scans to assess for ARIA are likely to be required in clinical practice for any amyloid plaque-targeting monoclonal antibody that receives regulatory approval.

Percent of ARIA Events for Anti-A

ß/plaque mAbs*

Targeting Amyloid Plaques

4 non-carriers

Any ARIA E or H

PC = Placebo, Low = Low Dose;

High = High Dose

Shows the absence of ARIA after treatment with antibodies targeting Aß monomers (solanezumab) in comparison to the increasing presence of ARIA after treatment at increasing dose levels with antibodies targeting amyloid plaques (aducanumab, BAN2401, and donanemab), indicating that ARIA results from the removal of amyloid plaques around blood vessels and likely does not result from treatment with antibodies that target other species of Aß, i.e.

Aß monomers and AßOs.

AD Product Candidates and Target Selectivity and ARIA Profile

Target Selectivity+

Product Candidate

Aduhelm aducanumab

lecanemab BAN2401

bapineuzumab*

Phase 3 discontinued for primary AD indication

There have been no head-to-head clinical trials between any of the product candidates listed above.

Study designs and protocols for each product candidate were different, and results may not be comparable between product candidates.

Additional Treatment Modalities

While Aß and amyloid are generally considered to be the proximal cause of AD pathology, and alternative hypotheses to the amyloid hypothesis propose that amyloid accumulation is a consequence of other processes such as infection and that other pathogens lead to amyloid accumulation, downstream targets such as tau, inflammation-related targets, and growth factors may eventually be useful approaches in the treatment of AD and are being explored.

Some of these treatment modalities have made nonclinical and early-stage clinical progress, although these efforts are still significantly less advanced than those approaches targeting Aß or amyloid plaques.

Potential Combination Approaches

The pathology of AD is complex, and many experts in the field expect that combination therapy using drugs with different mechanisms of action, such as tau-based therapies and immune inflammatory modulation, will ultimately prove most successful, similar to cutting edge approaches used in oncology.

We believe that a drug targeting AßOs will likely be an important component of a combination treatment.

In addition, because symptomatic treatments, such as memantine and cholinesterase inhibitors, affect neurotransmitter systems rather than the underlying AD pathology, we believe that it is likely that they will be used together with disease-modifying treatments.

Growing Interest in the Anti-AßO Hypothesis and AßOs as a Drug Target for AD

An important refinement of the amyloid hypothesis is the recognition that at least three pools of Aß species exist in vivo—Aß monomers, AßOs, and amyloid plaques.

Because these pools exist in equilibria, manipulation of one pool may have indirect effects on other pools.

For example, reduction of Aß monomers may reduce AßOs to some degree.

Limited successes in the clinic have been demonstrated with antibodies targeting Aß monomers, even though Aß monomers themselves are not widely accepted to have toxic properties.

Similarly, limited successes in the clinic have been demonstrated using antibodies that target amyloid plaques, although insoluble fibrillar Aß and ß-amyloid plaques exhibit relatively low in vitro toxicity and may even serve as an in vivo mechanism for removal of the more toxic soluble Aß species.

Both Aß monomers and amyloid plaques can act as sources of AßOs.

The positive results of monoclonal antibodies targeting Aß monomers and amyloid plaques, even in the absence of targeting AßOs directly, support the significance of Aß and amyloid in AD and have led to a growing confidence in the field in the amyloid hypothesis broadly.

In contrast to the non-toxic Aß monomers

and relatively non-toxic amyloid plaques, AßOs are known to bind to neurons, causing synaptic dysfunction and possibly contributing to cognitive impairment, neurodegeneration and cell death.

As a result, AßOs are now generally believed to be the most toxic form of Aß.

The acute synaptic and chronic neurodegenerative toxicity of AßOs, coupled with their very low in vivo levels, suggests that they may be an optimal therapeutic target compared to Aß monomers and fibrillar Aß species.

Therefore, we believe that drugs that directly target AßOs could represent a promising new approach to the potential treatment of AD.

ß related species and pathophysiology of AD

The precise mechanism of toxicity of AßOs is not fully understood, however numerous studies suggest a mechanism that may include initial reversible memory loss caused by acute AßO-induced disruptions of synaptic plasticity, with progressive dementia attributable, at least in part, to neuronal degeneration induced by chronic exposure to AßOs.

AßOs bind to synapses on hippocampal and cortical neurons.

In rodent hippocampal slice preparations, AßOs cause rapid inhibition of long-term potentiation, or LTP, and direct injection of AßO solutions into rodent brains leads to reversible impairment of cognitive function.

These findings support the view that AßOs may interfere acutely with normal synaptic functions and contribute significantly to the memory loss and cognitive dysfunction characteristic of AD.

With regard to neurodegeneration, binding of AßOs to neurons also causes damage within neurons, such as calcium influx and the hyperphosphorylation of tau, which leads to neurofibrillary tangles, another downstream hallmark of AD pathology.

We believe that ACU193 is the most advanced immunotherapy candidate in development that was designed to selectively target AßOs.

We believe that ACU193 has characteristics that make it a promising potential treatment for AD relative to other antibodies that do not selectively target AßOs.

ACU193 is designed to have reduce immune effector function signaling and to avoid binding to vascular amyloid plaques, which we expect will reduce the incidence of ARIA observed with amyloid plaque-targeting immunotherapies approved and in development for AD.

We are currently assessing ACU193 in INTERCEPT-AD, a proof of mechanism Phase 1 clinical trial involving early AD patients.

We anticipate our next clinical study, pending success in Phase 1, starting as a Phase 2 clinical trial with the potential to expand to a Phase 3 registration trial based in part on an interim expansion analysis.

However, completion of a Phase 2 trial, with or without an expansion to Phase 3, will likely require us to raise capital in an amount sufficient to extend our cash runway into the second half of 2026.

Our Differentiated Approach to the Treatment of AD

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A growing body of evidence indicates that AßOs, rather than Aß monomers or amyloid plaques, are the primary toxic species of Aß that impair neuronal synaptic function and contribute to impairment in memory and cognition and neurodegeneration.

We believe that AßOs are an optimal therapeutic target relative to other Aß species and that ACU193 has the potential to be the first anti-AßO mAb treatment to prevent or slow the progression of AD.

Selectively binds to A

We believe that AßOs are an optimal therapeutic target relative to other Aß species and that ACU193 has the potential to be the first AßO mAb treatment to slow the progression of AD.

• Selectively binds to AßOs.

ACU193 is the first monoclonal antibody discovered and designed to selectively target AßOs.

In our nonclinical studies, ACU193 demonstrated a greater than 500-fold affinity to bind to AßOs over monomers and did not bind vascular amyloid or dense core amyloid plaques.

In comparison, other non-selective anti-Aß/amyloid antibodies in development bind primarily to Aß monomers or amyloid plaques.

Binds to a broad spectrum of toxic A

In immunohistochemical studies using human AD brain tissue, little or no binding to thioflavin-S positive amyloid plaques appeared to be present.

In comparison, most other non-selective anti-Aß/amyloid antibodies in development bind primarily to Aß monomers or amyloid plaques.

• Binds to a broad spectrum of toxic AßOs.

AßOs are present in the brain in a wide range of sizes.

ACU193 has the ability to bind to a broad spectrum of toxic AßOs across various molecular weights.

Nonclinical data shows that ACU193 binds to low- to mid-sized molecular weight oligomeric species.

Nonclinical data shows that ACU193 binds to oligomeric species from dimers to approximately 100-mers of Aß.

Potential for symptomatic improvement and disease modification:

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Potential for higher dosing:

Selectivity for A

ßOs is likely to result in greatly reduced rates of ARIA, allowing a broad therapeutic window.

• Selectivity for AßOs could result in reduced rates of ARIA, allowing a broader therapeutic window.

Amyloid plaque binding antibodies have been associated with ARIA, with IgG1 monoclonal antibodies in particular showing elevated rates of ARIA, which presents a safety concern.

In contrast, ACU193 was engineered as an IgG2m4 subclass monoclonal antibody, which lacks the inflammatory effector functions of other IgG subclasses.

Because ACU193 exhibits limited or no binding to amyloid plaques and lacks inflammatory effector functions, we believe that treatment with ACU193 is likely to result in greatly reduced rates of ARIA adverse events relative to IgG1 monoclonal antibodies that bind to plaque.

In contrast, ACU193 was developed as an IgG2 subclass monoclonal antibody, which has reduced inflammatory effector functions compared to IgG1 antibodies.

Because ACU193 exhibits limited or no binding to amyloid plaques and has reduced inflammatory effector functions, we believe that treatment with ACU193 could result in lower rates of ARIA-E relative to IgG1 monoclonal antibodies that bind to amyloid plaque.

ACU193 has demonstrated a favorable pharmacokinetic profile in nonclinical studies.

Based on the results of GLP safety studies in rats and monkeys, we believe that ACU193 has the potential to be clinically well-tolerated at doses up to 60 mg/kg.

While certain anti-Aß/plaque antibodies have dose limitations due to ARIA, we believe that ACU193 may be well-tolerated at higher doses.

First AD Immunotherapy Candidate to Selectively Target A

Our product candidate, ACU193, is a humanized, affinity-matured, immunoglobulin G2m4, or IgG2m4, subclass monoclonal antibody, derived from the murine immunoglobulin G1, or IgG1, parent, ACU3B3.

ACU193 lacks the inflammatory effector functions of other IgG subclasses.

ACU193 binds with high selectivity to soluble AßOs (over 500-fold versus Aß monomer in a competitive assay), differentiating ACU193 from other therapeutic monoclonal antibodies, which primarily bind Aß monomers or fibrillar forms of Aß.

Binding of ACU193 to AßOs may improve synaptic function and decrease neurodegeneration.

Summary comparison of ACU193 to anti-A

ß/plaque antibodies in clinical development

Based on the results of Good Laboratory Practice, or GLP, safety studies in rats and monkeys, dose-ranging for the INTERCEPT-AD study included doses up to 60 mg/kg, and based on ongoing blinded safety reviews, the ARIA rate to date has been low.

While certain anti-plaque antibodies have dose limitations due to ARIA, we believe that ACU193 may be well-tolerated at higher doses compared to other antibodies.

Summary comparison of ACU193 to anti-Aß/plaque antibodies in clinical development

Despite recognition that AßOs are key structures contributing to AD memory dysfunction, cognitive deficits, and neurodegeneration, drug discovery efforts targeting these species have been hampered by technical difficulties of generating physiologically relevant preparations of synthetic AßOs, or syn-AßOs.

Our founders and early-stage researchers were instrumental in the development of well-characterized preparations of syn-AßOs, initially termed Aß Derived Diffusible Ligands, or ADDLs.

Our founders and early-stage researchers were instrumental in the development of well-characterized preparations of syn-AßOs, initially termed Aß Derived Diffusible Ligands, or ADDLs, which are globular structures.

ADDL preparations were used as the immunogen to generate and discover ACU3B3, the murine IgG1 parent of ACU193.

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Consequently, we regained an exclusive, perpetual, irrevocable, royalty-free, worldwide license for the research, development, manufacturing or commercialization of ADDL antibodies, ADDL antigens, or products, including ACU193.

Product Profile

We are developing ACU193, a humanized monoclonal antibody targeting soluble AßOs, as an IV administered treatment for early AD patients.

The early AD population is defined as individuals with clinical symptoms consistent with MCI, or consistent with mild dementia who have demonstrated amyloid pathology as assessed with either a positron emission tomography, or PET, or cerebrospinal fluid analysis.

A blood test to determine amyloid status may become available in the future.

We believe ACU193 has the potential to reduce the rate of cognitive decline by at least 35%, which would be broadly considered as clinically meaningful.

ACU193 is a humanized, affinity-matured, mAb with high selectivity for toxic AßOs versus Aß monomers (greater than 500-fold) and amyloid plaques.

With its selective targeting of AßOs, we believe that ACU193 could demonstrate a number of potential valuable clinical outcomes, including the slowing of disease progression and downstream changes in tau and neurofibrillary tangles.

Additionally, given the acute toxicity of AßOs in laboratory studies, we believe that some patients could experience an improvement in cognitive function.

ACU193’s epitope is composed of a configuration of the N-terminal regions of Aß monomers within AßOs.

AßOs form when Aß monomers associate co-linearly along the central alpha helical domains through C-terminal regions via stacking phenylalanine polar bonding associations.

This presents an advantage for ACU193 binding because the co-linear association sterically restricts spatial configuration of the N-terminal regions presented by AßOs.

The N-termini within AßOs are anionic and repel one another, resulting in presentation of N-terminal amino acids, which lead to high affinity for ACU193 binding.

In its current formulation, ACU193 deamidates at physiological pH and body temperature.

The rate of deamidation is specific to the matrix and temperature, and results in reduced target binding.

To prevent deamidation prior to administration of ACU193 in the clinic, the current drug product is stored frozen at -20°C.

ACU193 is an IgG2m4 subclass mAb which lacks the inflammatory effector function signaling stimulated by other IgG subclasses.

The product is expected to be given as an IV infusion once every four weeks.

Given the indication, ACU193 treatment would be initiated for patients diagnosed with mild dementia or MCI and would likely be continued for several years.

Based on the target and lack of inflammatory effector function, we believe the rate of ARIA may be reduced compared to approaches targeting amyloid plaques.

Finally, ACU193 could be used in combination with other therapies that might become available for AD, especially those targeting the tau protein or modulating the immune system.

Nonclinical Data Package

Clinical Development Plan

We are currently conducting INTERCEPT-AD, a U.S.-based, multi-center, randomized, placebo-controlled, single and multiple ascending dose Phase 1 clinical trial of ACU193 in 65 patients with early AD.

The early AD patient group is comprised of individuals who have mild dementia or MCI due to AD, and our trial excludes patients with moderate to severe AD dementia.

Patients have been enrolled across seven cohorts, consisting of a single ascending dose in Part A and an overlapping multiple ascending dose in Part B.

Part A contains Cohorts 1 through 4;

each cohort received a single IV dose between 2mg/kg and 60 mg/kg, or placebo.

Part B contains Cohorts 5 through 7;

each cohort receives a total of three doses of ACU193 or placebo as follows:

10 mg/kg every four weeks (Q4W), 60 mg/kg Q4W, or 25 mg/kg every two weeks (Q2W).

Design of INTERCEPT-AD

Trial Design Part A - Single Ascending Dose

In Part A of our clinical trial, participants were randomized in a 6:2 ratio into one of four cohorts to receive a single dose of ACU193 or placebo as follows:

One IV dose of ACU193 (2 mg/kg) or placebo.

One IV dose of ACU193 (10 mg/kg) or placebo.

One IV dose of ACU193 (25 mg/kg) or placebo.

One IV dose of ACU193 (60 mg/kg) or placebo.

The double-blind treatment period for Cohorts 1-4 of Part A was approximately 20 weeks and included ten visits (four inpatient and six outpatient).

A sequential dosing scheme was followed for each cohort in Part A.

Dosing of Cohorts 1-3 began at least one week after all participants in the immediately preceding lower-dose cohort had received one administration of study drug and safety data had been reviewed by our internal blinded safety team.

Dosing of Cohort 4 began at least one week after all participants in Cohort 3 received one administration of study drug and these safety data, along with Cohort 2 aggregate pharmacokinetic data, had been reviewed by our internal blinded safety team.

An unblinded,

independent Data Monitoring Committee, or DMC, also monitored the trial and was able to review safety data on an ad hoc basis if requested by the blinded study team.

Trial Design Part B - Multiple Ascending Dose

In Part B of our clinical trial, participants were randomized in an 8:2 ratio into one of three cohorts to receive a total of three doses of ACU193 or placebo as follows:

One IV dose of ACU193 (10 mg/kg) or placebo once every four weeks.

One IV dose of ACU193 (60 mg/kg) or placebo once every four weeks.

One IV dose of ACU193 (25 mg/kg) or placebo once every two weeks.

Participants in Cohorts 5 and 6 will be evaluated over approximately 35 weeks, consisting of a seven-week screening period followed by a 28-week, double-blind treatment period.

A follow-up safety check will be performed approximately eight weeks after the final visit of the double-blind treatment period.

Participants in Cohort 7 will be evaluated over approximately 31 weeks, consisting of a seven-week screening period, followed by a 24-week, double-blind treatment period.

A follow-up safety check will be performed approximately eight weeks after the final visit of the double-blind treatment period.

In order to maintain participant safety for Part B of the clinical trial, dosing of Cohort 5 began at least one week after all participants in Cohort 2 of Part A had received one administration of ACU193 or placebo and the Cohort 2 safety data had been reviewed by our internal blinded safety team.

For Cohort 6, dosing began at least one week after all participants in Cohort 4 of Part A had received one administration of ACU193 or placebo and the Cohort 4 safety data had been reviewed by our internal blinded safety team.

Dosing of Cohort 7 began after review of Cohort 3 and Cohort 4 safety data at least one week after the last person in the cohort was dosed.

If a potential safety signal, an unexpected adverse reaction, or higher than expected exposure had occurred, our internal blinded safety team would have notified the independent, unblinded DMC to review the safety and pharmacokinetic data and advise on dose escalation.

Cohort 7 will allow for additional pharmacokinetic modeling to more accurately determine if every two-week dosing is necessary and if accumulation of ACU193 occurs with this dosing frequency.

Our goal for the Phase 1 trial is to establish clinical proof of mechanism of ACU193 in patients with early AD.

The endpoints we will measure as part of this trial include:

Primary Endpoint

• safety and immunogenicity, including assessment for ARIA;

Secondary Endpoints and Exploratory Objectives

• pharmacokinetics in plasma;

• determination of CSF concentrations of ACU193;

• evaluation of central target engagement as measured by levels of ACU193 AßO complex in CSF;

• evaluation of possible changes in concentration of biomarkers for AD in CSF or blood;

• evaluation of possible changes in amyloid plaque load as determined by PET imaging;

• exploratory evaluation of possible changes in cerebral blood flow as determined by MRI imaging, using Arterial Spin Labeling (ASL) pulse sequence;

• exploratory evaluation of possible changes in cognitive, functional, and behavioral measures using computerized testing and standard clinical measures for AD.

Exploratory outcomes will include cognitive scales and computerized cognitive testing.

Our goal is to establish clinical proof of mechanism of ACU193 in early AD patients in order to enable progression into an adaptive Phase 2/3 clinical trial.

In October 2021, we announced the initial dosing of the first patient in the INTERCEPT-AD trial and the subsequent successful sentinel safety review of the first two patients.

Due to delays in clinical trial site activation and patient enrollment that we believe are principally related to effects of the COVID-19 pandemic, we expanded the anticipated number of trial sites to support our enrollment objectives and anticipated timelines.

We announced enrollment completion in February 2023 and anticipate reporting our topline data from this trial in the third quarter of 2023.

Following, and subject to the results of, INTERCEPT-AD, we plan to request an end-of-Phase 2/pre-Phase 3 meeting with the FDA, which we anticipate will occur in the fourth quarter of 2023, to discuss the clinical trial design for our next clinical study and potential pathway for registration.

The FDA granted Fast Track designation to ACU193 in October 2022.

Nonclinical and Laboratory Data

In nonclinical studies, ACU193 has demonstrated promising characteristics that indicate its potential to inhibit AßOs as a possible therapeutic treatment of AD.

ACU193 has high selectivity, with over 500-fold binding selectivity for AßOs compared to Aß monomers and has limited or no binding to amyloid plaques.

ACU193 binds to a broad spectrum of small to large soluble AßOs.

Additionally, ACU193 has been shown to offer protection from synaptic toxicity by inhibiting binding of AßOs to primary hippocampal neurons.

ACU193 has also demonstrated suitable in vivo pharmacology, target engagement, blood-brain barrier penetration and reduction of behavioral deficits.

Based on nonclinical studies, AßO target engagement has the potential to be achieved at doses of ACU193 that will be tested in our Phase 1 clinical trial.

Lastly, Good Laboratory Practice, or GLP, toxicity studies conducted in two animal species supported the Phase 1 study.

We believe these data indicate that ACU193 has the potential to offer patients a reduction in cognitive decline.

Summary of Nonclinical Studies

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Key Characteristics and Data

• Binding characterization studies of ACU193 and its murine parent ACU3B3 show significant preferential selectivity for AßOs versus monomeric and amyloid plaques.

– Competitive enzyme-linked immunosorbent assay, or ELISA, data show ACU193 binding to AßOs is 556-fold greater than to Aß monomer based on monomer equivalent weight.

This selectivity value is even higher when adjusted for AßOs’ molecular weight.

– ACU193 binding in brain tissues of transgenic mice following IV dosing shows significant, preferential binding to non-fibrillar, thioflavin-S-negative Aß structures.

The occasional co-localization observed with thioflavin-S-positive fibrillar plaques suggests binding to AßOs reported to surround amyloid plaques.

• ACU193 binds a broad range of synthetic and human-derived low, mid, and higher molecular weight AßOs (dimers to 200-mers).

Protection from AßO-induced synaptic toxicity

• ACU193 and ACU3B3 prevent binding of AßOs to primary hippocampal neurons in vitro (the average IC50 of ACU193 is 17 nM).

• ACU193 and ACU3B3 block AßOs’ inhibition of long-term potentiation ex vivo.

• ACU3B3 blocks AßO mediated intracellular calcium influx in vitro.

In vivo pharmacology

• ACU193 crosses the blood-brain barrier and demonstrates dose-dependent target engagement in the brain following peripheral administration of antibody.

• Blinded studies in transgenic mouse models for AD over a broad range of ages show that treatment with ACU3B3 reduces multiple behavioral deficits.

• QPS study of nine- to ten-month-old transgenic mice treated weekly with 20 mg/kg ACU3B3 for four weeks demonstrated significant behavioral improvements during water maze learning test.

• Stanford University study of five- to seven-month-old transgenic mice treated weekly with 20 and 30 mg/kg ACU3B3 showed significant improvements during open field and Y-maze tests after four to five weeks of treatment.

• Gladstone Institute studies of younger three- to five-month-old transgenic mice with sub-chronic weekly administration of ACU3B3 demonstrated significant behavioral improvements to hyperactivity, emotional response alterations and procedural learning deficits.

• GLP studies via IV route established no observed adverse effect level, or NOAEL, of 300 mg/kg/dose in a 14-week cynomolgus monkey study and 250 mg/kg/dose in a 28-day

• Studies in transgenic mice indicated low potential for cerebral microhemorrhage.

Selectivity • ACU193 binds a broad range of synthetic and human-derived AßOs (~dimers to ~100-mers).

In vivo pharmacology • ACU193 crosses the blood-brain barrier and demonstrates dose-dependent target engagement in the brain following peripheral administration of antibody.

Safety • GLP studies via IV route established no observed adverse effect level, or NOAEL, of 300 mg/kg/dose in a 14-week cynomolgus monkey study and 250 mg/kg/dose in a 28-day rat study.

Selectivity for AßOs

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Thus, ACU193 does not experience “target distraction” from non-toxic Aß monomers in an environment simulating brain interstitial fluid.

[A] Competitive ELISA for ACU193 binding to syn-A

ßO or monomeric A

ß40 [B] 5µM monomeric A

ß did not substantially change binding to syn-A

[A] Competitive ELISA for ACU193 binding to syn-AßO or monomeric Aß40 [B] 5µM monomeric Aß did not substantially change binding to syn-AßO

These results support the conclusion that selectivity of ACU193 for AßOs is maintained in a biochemical environment simulating the brain.

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In Figure 4 below, thioflavin S-positive ß-amyloid plaques are shown in green fluorescence while ACU193 binding is shown in red fluorescence.

ACU193 binds significantly in regions that are thioflavin-S-negative, i.e., without amyloid plaques (Figure 4, Panels B and E), but only infrequently and minimally binds to thioflavin-S-positive fibrillar Aß structures (Figure 4, Panel D);

ACU193 binds significantly in regions that are thioflavin-S-negative, i.e., without

amyloid plaques (Figure 4, Panels B and E), but only infrequently and minimally binds to thioflavin-S-positive fibrillar Aß structures (Figure 4, Panel D);

close examination shows possible co-localization of ACU193 with thioflavin-S-positive Aß deposits in their periphery (Figure 4, Panel F).

We believe the most likely explanation of ACU193 infrequent binding near the periphery of some amyloid plaques is due to binding to AßOs that surround the periphery of amyloid plaques.

We believe a likely explanation of ACU193 infrequent binding near the periphery of some amyloid plaques is due to binding to AßOs that surround the periphery of amyloid plaques.

Taken together, these results are consistent with the concept that ACU193 binds endogenous AßOs, does not block binding by thioflavin-S, and, importantly, preferentially binds AßOs versus fibrillar Aß.

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The merge of these panels (Panel E) shows ACU193 binding with no amyloid plaque present.

On the upper right portion of the Figure, the area that is positive for amyloid plaque (green fluorescence staining, C) shows minimal ACU193 binding (red fluorescence staining, D).

The merge of these panels (F) shows the minimal binding of ACU193 (red fluorescence staining) on the periphery of the amyloid plaque (green fluorescence staining), most likely related to AßO binding in the halo of the amyloid plaque.

On the upper right portion of the figure, the area that is positive for amyloid plaque (green fluorescence staining, C) shows minimal ACU193 binding (red fluorescence staining, Panel D).

The merge of these panels (F) shows the minimal binding of ACU193 (red fluorescence staining) on the periphery of the amyloid plaque (green fluorescence staining), likely related to AßO binding in the halo of the amyloid plaque.

AD stages based on AD neuropathic change, or ADNC, scoring

ADNC scoring is a combination of amyloid plaque levels, neuritic plaque levels, and neurofibrillary tangle pathology, or NFT, levels (Braak stage).

In human tissue samples, ACU193 shows a disease state-relevant signal based on immunohistochemistry shown on the left from aged controls, intermediate AD pathology, and advanced AD pathology.

In human tissue samples, ACU193 shows a disease state-relevant signal based on

immunohistochemistry shown on the left from aged controls, intermediate AD pathology, and advanced AD pathology.

On the far-right panel, ACU193 detects AßOs in soluble hippocampal extracts from an autosomal dominant AD patient, but not from a cognitively normal patient.

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In contrast, hu3D6 (bapineuzumab) binds vascular amyloid (E) at all dose levels assessed.

The data above related to vascular plaque binding support our belief that ACU193 is unlikely to have an ARIA liability.

Given that the amyloid plaque-binding properties of multiple antibodies have been associated with ARIA (e.g., aducanumab, lecenamab, gantenerumab, and donenamab), we believe that ACU193’s negligible binding of amyloid plaques, including amyloid plaques associated with cerebral amyloid angiopathy, provides evidence that ARIA is unlikely to be associated with ACU193.

The data above related to vascular plaque binding support our belief that ACU193 is likely to have limited ARIA liability.

Given that the amyloid plaque-binding properties of multiple antibodies have been associated with ARIA (e.g., aducanumab, lecanemab, gantenerumab, and donenamab), we believe that ACU193’s negligible binding of amyloid plaques, including amyloid plaques associated with cerebral amyloid angiopathy, provides evidence that ACU193 may have a lower rate of ARIA in comparison.

Binding to a broad spectrum of molecular weight AßOs

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In another series of experiments, syn-AßOs were fractionated by size exclusion chromatography and characterized by ELISA using ACU193, hu3D6 (bapineuzumab) or hu266 (solanezumab) as the capture antibody and biotinylated anti-human Aß antibody 82E1 for detection.

These data show ACU193 binds mid to higher molecular weight AßOs, with preferential binding to mid-molecular weight oligomers compared to hu266.

This range of molecular weights is very similar to the range of molecular weights of oligomers thought to be most toxic.

These data show ACU193 binds AßOs ranging from dimers to approximately 100-mers, with preferential binding to mid-molecular weight oligomers compared to hu266.

This range of sizes is very similar to the range of sizes of oligomers thought to be most toxic.

Binding of humanized antibodies to size exclusion chromatography fractions of synthetic Aß species

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Disruption of LTP has been associated with animal models in a variety of central nervous system disease states.

Effects of ACU3B3 and ACU193 on A

ßO-induced change in LTP

Effects of ACU3B3 and ACU193 on AßO-induced change in LTP

Note that AßOs disrupted normal LTP findings, but that pre-incubation with ACU3B3 prevented that disruption.

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Prior to dosing, Thy1-hAPP/SL mice showed increased activity in the activity chamber compared to wild-type mice.

After treatment with ACU3B3, Thy1-hAPP/SL mice activity fell to a level comparable to wild-type mice, particularly activity in the center of the test arena (Figure 11A).

After treatment with ACU3B3, Thy1-hAPP/SL mice activity fell to a level

comparable to wild-type mice, particularly activity in the center of the test arena (Figure 11A).

Similar effects of ACU3B3 were found with changes in Y-maze behavior (Figure 11B) and passive avoidance (Figure 11C).

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An intrathecal catheter was implanted in the monkeys, and two doses at 20 mg/kg IV were administered.

As shown in Figure 15, the concentrations of ACU193 in CSF should provide adequate target engagement with every four week dosing.

As shown in Figure 15, the concentrations of ACU193 in CSF should provide adequate target engagement with dosing every four weeks.

Comparison of ACU193 levels in rhesus CSF to CSF Levels of AßO in human AD patients

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In Sprague Dawley rats, no adverse findings were noted.

In the 14-week

study in cynomolgus monkeys, doses of 60, 300, or 600 mg/kg/dose ACU193 once every two weeks were administered.

In the 14-week study in cynomolgus monkeys, doses of 60, 300, or 600 mg/kg/dose ACU193 once every two weeks were administered.

Three animals administered the highest 600 mg/kg/dose were sacrificed early for humane reasons on Days 43 or 60 due to ACU193-related, anaphylactoid-type reactions.

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Additionally, ACU3B3 showed no apparent increased risk of microhemorrhage when administered in vivo for three months in aged Tg2576 mice, as compared with 3D6, a plaque binding antibody used as a positive control.

With regard to effector function and possible inflammatory effects generally, ACU193 is an IgG2m4 subclass antibody which lacks inflammatory effector function signaling stimulated by other IgG subclasses.

Thus, the risk for inflammatory effector function using ACU193 is considered to be low.

Investigational New Drug Application

In October 2020, we submitted an investigational new drug, or IND, application for ACU193 to the FDA.

The FDA initially placed the IND on clinical hold until we were able to address the FDA’s concerns regarding potential off-target binding of ACU193 with an additional nonclinical tissue cross reactivity (TCR) study in

human, monkey, and rat samples.

The supplemental TCR study supported the in-vivo GLP safety results.

On April 9, 2021, we received an FDA letter advising us that the clinical hold had been removed and authorizing us to proceed with a first-in-human, Phase 1 clinical trial.

Clinical Development Plan

Phase 1 Clinical Trial in AD

In the second quarter of 2021, we initiated a multi-center, randomized, placebo-controlled, single and multiple ascending dose Phase 1 clinical trial of ACU193, which we named “INTERCEPT-AD,” in 62 patients with early AD.

The early AD patient set is comprised of individuals who have mild dementia or MCI due to AD.

Patients with moderate to severe dementia will not be included.

The main objectives of the trial are to evaluate the safety, tolerability, pharmacokinetics, and target engagement of single and multiple ascending doses of ACU193 administered by IV infusion.

Pharmacodynamics effects including cognitive testing are expected to be performed on an exploratory basis.

The trial is designed to be conducted in two overlapping parts:

Part A (the single ascending dose portion) and Part B (the multiple ascending dose portion).

Design of INTERCEPT-AD

Trial Design Part A – Single Ascending Dose

We expect to enroll 32 participants in Part A of our clinical trial, with the participants randomized in a 6:2 ratio into one of four cohorts to receive a single dose of ACU193 or placebo as follows:

One IV dose of ACU193 (2 mg/kg) or placebo.

One IV dose of ACU193 (10 mg/kg) or placebo.

One IV dose of ACU193 (25 mg/kg) or placebo.

One IV dose of ACU193 (60 mg/kg) or placebo.

The double-blind treatment period for Cohorts 1-4 of Part A will be approximately 20 weeks and will include ten visits (four inpatient and six outpatient).

A sequential dosing scheme will be followed for each cohort in Part A.

Dosing of Cohorts 1-3 will begin at least one week after all participants in the immediately preceding lower-dose cohort have received one administration of study drug and safety data have been reviewed by our internal blinded safety team.

Dosing of Cohort 4 will begin at least one week after all participants in Cohort 3 have received one administration of study drug and these safety data, along with Cohort 2 aggregate pharmacokinetic data, have been reviewed by our internal blinded safety team.

An unblinded, independent Data Monitoring Committee, or DMC, will also monitor the trial and can review safety data on an ad hoc basis if requested by the blinded study team.

Trial Design Part B – Multiple Ascending Dose

We expect to enroll 30 participants in Part B of our clinical trial, with the participants randomized in an 8:2 ratio into one of three cohorts to receive a total of three doses of ACU193 or placebo as follows:

One IV dose of ACU193 (10 mg/kg) or placebo once every four weeks.

One IV dose of ACU193 (60 mg/kg) or placebo once every four weeks.

One IV dose of ACU193 (60 mg/kg) or placebo once every two weeks.

Participants in Cohorts 5 and 6 will be evaluated over approximately 35 weeks, consisting of a seven-week screening period followed by a 28-week, double-blind treatment period.

A follow-up safety check will be performed approximately eight weeks after the final visit of the double-blind treatment period.

Participants in Cohort 7 will be evaluated over approximately 31 weeks, consisting of a seven-week screening period, followed by a 24-week, double-blind treatment period.

A follow-up safety check will be performed approximately eight weeks after the final visit of the double-blind treatment period.

In order to maintain participant safety for Part B of the clinical trial, dosing of Cohort 5 will begin at least one week after all participants in Cohort 2 of Part A have received one administration of ACU193 or placebo and the Cohort 2 safety data have been reviewed by our internal blinded safety team.

For Cohort 6, dosing will begin at least one week after all participants in Cohort 4 of Part A have received one administration of ACU193 or placebo and the Cohort 4 safety data have been reviewed by our internal blinded safety team.

Dosing of Cohort 7 will begin after four or more participants in Cohort 6 have been administered two doses of ACU193 or placebo and the Cohort 6 safety data, along with aggregated pharmacokinetic data from Cohort 4, have been reviewed by our internal blinded safety team.

If a potential safety signal, an unexpected adverse reaction, or higher than expected exposure occurs, our internal blinded safety team will notify the independent, unblinded DMC to review the safety and pharmacokinetic data and advise on dose escalation.

Cohort 7 will allow for additional pharmacokinetic modeling to more accurately determine the half-life of ACU193 if every two-week dosing is necessary.

Our goal for the Phase 1 trial is to establish clinical proof of mechanism of ACU193 in patients with early AD.

The endpoints we will measure as part of this trial include:

Primary Endpoint

safety and immunogenicity, including assessment for ARIA;

Secondary Endpoints and Exploratory Objectives

pharmacokinetics in plasma;

determination of CSF concentrations of ACU193;

evaluation of central target engagement as measured by levels of ACU193 AßO complex in CSF;

evaluation of possible changes in concentration of biomarkers for AD in CSF or blood;

evaluation of possible changes in amyloid plaque load as determined by PET imaging;

evaluation of possible changes in cerebral blood flow as determined by MRI imaging, using Arterial Spin Labeling (ASL) pulse sequence;

evaluation of possible changes in cognitive, functional, and behavioral measures using computerized testing and standard clinical measures for AD.

In October 2021, we announced the initial dosing of the first patient in the INTERCEPT-AD trial and the subsequent successful sentinel safety review of the first two patients.

Due to delays in clinical trial site activation and enrollment that we believe are principally related to effects of the COVID-19 pandemic, we are expanding the anticipated number of trial sites to support our enrollment objectives and anticipated timelines.

Clinical trial site activation and patient recruitment and enrollment is ongoing.

At present, INTERCEPT-AD is in the SAD portion of the trial.

Based on current site activations and enrollment rates, we anticipate reporting our topline data from this trial, including assessments of safety, ARIA-E, pharmacokinetics and target engagement through the full 168 day follow-up period for Cohort 7, in the first half of 2023.

Future Clinical Trials

Subject to establishment of proof of mechanism of ACU193 and the safety and immunogenicity results of INTERCEPT-AD, we intend to advance ACU193 into later stage clinical trials.

We plan to explore a proposed therapeutic dose of ACU193 in a future Phase 2/3 clinical trial based on safety, pharmacokinetics and pharmacodynamics assessments of the various dosing cohorts in INTERCEPT-AD.

The Phase 2/3 trial is being designed as an adaptive trial, such that after a planned interim analysis of clinical and biomarker changes, a decision could be made to increase the enrollment of the trial to be adequately powered as a Phase 3 pivotal trial, or to continue the trial as a Phase 2 clinical trial.

The Phase 2/3 trial will utilize standard cognitive measures that are widely employed in AD trials and most highly sensitive to changes in mild AD patients, including ADAS-COG 13, CDR-sb, ADCS-iADL, iADRS, MMSE, and potentially others including computerized neuropsychological testing.

Additionally, a number of biomarkers may be studied including blood flow as determined by ASL pulse sequence on MRI, plasma or CSF p-tau, amyloid PET scanning, and tau PET scanning.

Selected endpoints will be used to inform the interim decision whether to expand the trial and whether to initiate a second Phase 3 clinical trial.

With regard to effector function and possible inflammatory effects generally, ACU193 is an IgG2 subclass antibody which has limited inflammatory effector function signaling compared to other IgG subclasses.

Combination Potential

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We believe that the key factors affecting the clinical and commercial success of ACU193 will include safety profile, efficacy, cost, method of administration, level of marketing activity, insurance reimbursement and intellectual property protection.

If approved, ACU193 will compete with therapies currently approved for the treatment of AD, which have primarily been developed to treat the symptoms of AD rather than the underlying cause of the disease, such as memantine and cholinesterase inhibitors.

ACU193 may also compete with one or more potentially disease-modifying therapeutics that target Aß or amyloid plaques, the most advanced of which is Biogen Inc.’s Aduhelm (aducanumab), which the FDA approved in June 2021 under the accelerated approval pathway, which allows for earlier approval of drugs that treat serious conditions, and that fill an unmet medical need based on a surrogate endpoint.

Regulatory approval of aducanumab is pending in Europe and Japan.

Eisai Co., Ltd.

(lecenamab), Eli Lilly and Company (donenamab), and Roche Holding AG (gantenerumab), are anticipated to complete Phase 3 studies in 2022 and 2023 with their amyloid plaque targeting monoclonal antibody drugs and may obtain FDA approval under the accelerated approval pathway or full approval based on Phase 3 results.

Other companies known to be developing therapies with Aß, AßO-, and amyloid plaque-related targets include Alzheon, Inc., Alzinova AB, Chugai Pharmaceutical Co.

If approved, ACU193 can be used in combination with therapies currently approved for the treatment of AD which treat the symptoms of AD rather than the underlying cause of the disease, such as memantine and cholinesterase inhibitors.

ACU193 may compete with one or more potentially disease-modifying therapeutics that target Aß or amyloid plaques, the most advanced of which are Biogen Inc.’s Aduhelm (aducanumab), which was given accelerated approval by FDA in June 2021, and Eisai’s Leqembi (lecanemab), which was given accelerated approval by FDA in January 2023.

FDA issued a complete response letter to Eli Lilly and Company in January 2023 for the accelerated approval submission of donanemab.

Eisai filed for full approval of Leqembi in January 2023;

however, Biogen has not filed for full approval of Aduhelm.

Centers for Medicare and Medicaid Services (CMS) have stated they would not reimburse for a drug given an accelerated approval by FDA for Alzheimer’s disease outside of a clinical trial.

Roche Holding AG (gantenerumab) announced negative results from their Phase 3 study in November 2022, and Eli Lilly and Company (donenamab) is anticipated to complete its Phase 3 study in 2023.

Other companies known to be developing therapies with Aß, AßO-, and amyloid plaque-related targets include AltPep Corporation, Alzheon, Inc., Alzinova AB, Chugai Pharmaceutical Co.

Ltd., Cognition Therapeutics, Inc., Grifols, S.A., KalGene Pharmaceuticals, Inc., Neurimmune AG, Novartis AG, ProMIS Neurosciences, Inc., Prothena Biosciences, Inc., Vaxxinity, Inc., Vivoryon Therapeutics N.V.

and Wren Therapeutics, Inc.

Additionally, ACU193, if approved, may also compete with other potential therapies intended to address underlying causes of AD that are being developed by several companies, including AbbVie Inc., AC Immune SA, Alector, Inc., Anavex Life Sciences Corp., Annovis Bio, Inc., Athira Pharma, Inc., Biohaven Pharmaceuticals, Inc., Cassava Sciences, Inc., Cortexyme, Inc., Denali Therapeutics, Inc., Johnson & Johnson (including Janssen, its wholly-owned subsidiary) and Takeda Pharmaceutical Co.

Additionally, ACU193, if approved, may also compete with other potential therapies intended to address underlying causes of AD that are being developed by several companies, including AbbVie Inc., AC Immune SA, Alector, Inc., Anavex Life Sciences Corp., Annovis Bio, Inc., Athira Pharma, Inc., Biohaven Pharmaceuticals, Inc., Cassava Sciences, Inc., Denali Therapeutics, Inc., Johnson & Johnson (including Janssen, its wholly-owned subsidiary) and Takeda Pharmaceutical Co.

Percent Slowing of Cognitive/Functional Decline*

Measured Outcome** solanezumab

(Phase 3) Aduhelm

(Phase 3) lecanemab

(Phase 3) donanemab

ADAS-cog -11 % -27 % -12 % -26 % -39 %

ADCS-ADL -15 % -40 % -18 % -37 % -23 %

CDR-SB -15 % -23 % 2 % -27 % -23 %

MMSE -13 % -15 % 3 % N.A.

iADRS -11 % N.A.

* Percent Slowing= [1- [(endpoint score-baseline score)active/(endpoint score-baseline score)placebo]]*100%*(-1)

Alzheimer’s Disease Assessment Scale – Cognitive Subscale

Alzheimer’s Disease Cooperative Study – Activities of Daily Living

Clinical Dementia Rating – Sum of Boxes

Mini-Mental State Examination

Integrated Alzheimer’s Disease Rating Scale

ENGAGE Post-Protocol Version 4 – patients who received at least 14 doses of 10 mg/kg, High Dose cohort achieved 27% improvement on CDR-SB compared to placebo.

A potential limitation of the amyloid plaque-targeting antibodies under development is an adverse effect known as ARIA.

ARIA has two different forms, ARIA-E, or cerebral edema, formerly called vasogenic edema, and ARIA-H, or cerebral microhemorrhages.

While the mechanism of ARIA is not known with certainty, the prevailing theory is that ARIAs are related to the presence of amyloid plaques around blood vessels in the majority of people with AD, a condition known as cerebral amyloid angiopathy.

It is generally believed that the removal of these amyloid plaques by the antibody can result in small hemorrhages, or ARIA-H.

ARIA-H occurs in individuals with untreated AD and its occurrence is increased in individuals treated with antibodies that target amyloid plaques.

Increased ARIA-H is correlated with worsening cognition.

In contrast to ARIA-H, ARIA-E is hypothesized to result from the leakage of fluid from the blood vessels into the interstitial spaces in the brain, causing an effusion or edema, ARIA-E.

ARIA-E, in particular, is sometimes associated with symptoms that include worsening of cognition, headache, gait disturbance and seizures, which can be severe enough to lead to hospitalization.

ARIA-E usually resolves weeks to months following the cessation of treatment.

In clinical trials for anti-Aß/plaque mAbs, surveillance MRI scans are required to detect asymptomatic ARIA.

Table 2 below illustrates the rates of ARIA observed in Phase 2 or 3 studies for the most advanced mAbs.

Percent of ARIA Events for Anti-Aß/plaque mAbs*

Targeting Aẞ Monomers Targeting Amyloid Plaques Targeting Protofibrils

EXPEDITION 3 (Phase 3) Aduhelm

EMERGE (Phase 3) Aduhelm

ENGAGE (Phase 3) donanemab

(Phase 2) Leqembi

lecanemab (Phase 3)

PC Treated PC Low High PC Low High PC Treated PC Treated

ARIA-E 0.2% 0.1% 2.2% 26.2% 34.4% 3.0% 25.6% 35.7% 0.8% 27.5% 1.7% 12.6%

ApoE e4 carriers 1.9% 29.8% 42.5% 2.4% 28.7% 41.8% 3.6% 44.0% 2.3% 15.8%

ApoE e4 non-carriers 2.9% 18.1% 17.9% 4.3% 17.5% 27.7% 0.3% 5.4%

Any ARIA E or H 10.3% 32.8% 41.2% 9.8% 30.7% 40.3% 8.0% 38.9% 9.5% 21.5%

PC = Placebo, Low = Low Dose;

High = High Dose

* Shows the absence of ARIA after treatment with antibodies targeting Aß monomers (solanezumab) in comparison to the increasing presence of ARIA after treatment at increasing dose levels with antibodies targeting amyloid plaques (aducanumab, BAN2401, and donanemab), indicating that ARIA results from the removal of amyloid plaques around blood vessels and likely does not result from treatment with antibodies that target Aß monomers.

AD Product Candidates and Target Selectivity and ARIA Profile

Target Selectivity+ ARIA

Product Candidate Amyloid plaque Aß

oligomers Lower rate of

ACU193 x untested x ✓

Leqembi lecanemab ✓

Aduhelm aducanumab ✓

solanezumab* x

gantenerumab ✓

crenezumab* ✓

bapineuzumab* ✓

* Phase 3 discontinued for primary AD indication

+ There have been no comprehensive head-to-head clinical trials between any of the product candidates listed above.

Study designs and protocols for each product candidate were different, and results may not be comparable between product candidates.

Additional Treatment Modalities

Collaboration Agreement with Merck

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The agreement generally provided that, during the course of the collaboration, Merck would be responsible for the preclinical and clinical development and commercialization of any products covered by the agreement and, in return, we were eligible to receive potential nonclinical, clinical and regulatory milestone payments and royalties on future product sales.

During the collaboration, Merck developed ACU193, an ADDL antibody, and intellectual property related to ACU193 was filed by Merck.

During the collaboration, Merck developed ACU193, an ADDL

antibody, and intellectual property related to ACU193 was filed by Merck.

In 2011, Merck elected to voluntarily terminate the collaboration agreement.

Pursuant to the surviving provisions of the agreement, effective upon termination of the collaboration, Merck

granted us an exclusive, perpetual, irrevocable, royalty-free, worldwide license, with right to sublicense, under Merck’s interest in the patent rights and know-how necessary for the research, development, manufacturing or commercialization of ADDL antibodies, ADDL antigens or products, including ACU193.

Pursuant to the surviving provisions of the agreement, effective upon termination of the collaboration, Merck granted us an exclusive, perpetual, irrevocable, royalty-free, worldwide license, with right to sublicense, under Merck’s interest in the patent rights and know-how necessary for the research, development, manufacturing or commercialization of ADDL antibodies, ADDL antigens or products, including ACU193.

License Agreement with Lonza

On November 2, 2022, the Company entered into a License Agreement (the “Lonza License Agreement”) with Lonza Sales.

Under the terms of the Lonza License Agreement, Lonza granted the Company a worldwide non-exclusive license to use Lonza’s glutamine synthetase gene expression system to manufacture and commercialize ACU193 (the “Product”).

Pursuant to the Lonza License Agreement, we paid Lonza an upfront fee of 1.0 million Swiss Francs.

The Company is also required to pay certain royalties upon commercialization and annual payments on a country-by-country basis in respect of the manufacturing and sale of the Product, which include (i) a royalty of less than 1.0% on net sales where Lonza manufactures the Product, (ii) an annual royalty payment in Swiss Francs in the low six-digits and a royalty of less than 1.0% on net sales where the Company manufactures the Product and (iii) an annual payment in Swiss Francs in the mid six-digits per sublicense and a royalty on net sales in the low single digits where a third party manufactures the Product.

These payment obligations would expire ten years from the first commercial sales of the Product in such country of sale.

The Lonza License Agreement continues until terminated, and the Company or Lonza may terminate the Lonza License Agreement for uncured material breaches or insolvency of the other party.

The Company can unilaterally terminate the Lonza License Agreement with prior written notice to Lonza, and Lonza can also unilaterally terminate the Lonza License Agreement upon certain actions by the Company.

The Lonza License Agreement also contains customary representations, warranties, indemnification and other obligations of the Company and Lonza.

Intellectual Property

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However, as to the FDA component, the restoration period cannot be longer than five years and the restoration period cannot extend the patent term beyond 14 years from FDA approval for the product covered by that patent.

In addition, only one patent applicable to an approved drug may receive the extension, and the extension applies only to coverage for the approved drug, methods for using it and methods of manufacturing it,

even if the claims cover other products or product candidate.

Where one patent covers multiple products or product candidate, it may only receive an extension for one of the covered products;

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Government Regulation

The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval

monitoring, and post-approval reporting of biologics such as those we are developing.

We, along with our third-party contractors, will be required to navigate the various preclinical, clinical, manufacturing and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates.

The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.

Failure to comply with the applicable regulatory requirements at any time during the product development process or post-approval may subject an applicant to delays in development or approval, as well as administrative and judicial sanctions.

Biologics Regulation

In the United States, biological products are subject to regulation under the Federal Food, Drug, and Cosmetic Act, or FDCA, the Public Health Service Act, or PHSA, and other federal, state, local and foreign statutes and regulations.

The process required by the FDA before biologics may be marketed in the United States generally involves the following:

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• FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the United States.

Preclinical and Clinical Trials

Prior to beginning the first clinical trial with a product candidate in the United States, the product candidate must undergo rigorous preclinical testing.

Preclinical studies include laboratory evaluations of chemistry, formulation and stability, as well as in vitro

and animal studies to assess safety and in some cases to establish the rationale for therapeutic use.

Prior to beginning the first clinical trial with a product candidate, the product candidate must undergo rigorous preclinical testing.

Preclinical studies include laboratory evaluations of chemistry, formulation and stability, as well as in vitro and animal studies to assess safety and in some cases to establish the rationale for therapeutic use.

The conduct of preclinical studies is subject to federal and state regulations and requirements, including GLP requirements for safety and toxicology studies.

In the United States, the results of the preclinical studies, together with manufacturing information and analytical data must be submitted to the FDA as part of an IND.

The results of the preclinical studies, together with manufacturing information and analytical data must be submitted to the FDA as part of an IND.

An IND is a request for authorization from the FDA to administer an investigational new drug to humans.

The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies.

The IND also includes results of animal and in vitro

studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product;

chemistry, manufacturing, and controls information;

and any available human data or literature to support the use of the investigational product.

An IND must become effective before human clinical trials may begin.

The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial.

In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin.

Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.

The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial, including concerns that human research subjects will be exposed to unreasonable health risks.

In such a case, the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin.

The FDA may, at any time during the initial 30-day IND review period, or while clinical trials are ongoing, impose a partial or complete clinical hold based on concerns for patient safety and/or noncompliance with regulatory requirements.

This order issued by the FDA would delay a proposed clinical study or cause suspension of an ongoing study until all outstanding concerns have been adequately addressed, and the FDA has notified the company that investigations may proceed.

Imposition of a clinical hold could cause significant delays or difficulties in completing planned clinical studies in a timely manner.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study.

Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the dosing procedures, subject selection and exclusion criteria, and the parameters and criteria to be used in monitoring safety and effectiveness.

A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments.

A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any protocol and

subsequent protocol amendments.

Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site, and must monitor the study until completed.

While clinical trials are ongoing, the FDA may impose a partial or complete clinical hold based on concerns for patient safety and/or noncompliance with regulatory requirements.

This order issued by the FDA would cause the suspension of an ongoing study, or part of an ongoing study, until all outstanding concerns have been adequately addressed, and the FDA has notified the company that investigations may proceed.

Imposition of a clinical hold could cause significant delays or difficulties in completing planned clinical studies in a timely manner.

In addition, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives.

Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy.

There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.

In the United States, information about applicable clinical trials, including clinical trials results, must be submitted within specific timeframes for publication on the www.clinicaltrials.gov website.

Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA.

Written IND safety reports must be submitted to the FDA and the investigators fifteen days after the trial sponsor determines the information qualifies for reporting for serious and unexpected suspected adverse events, findings from other studies or animal or in vitro testing suggest a significant risk for human participants exposed to the drug or biologic, or for any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.

The sponsor must also notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction as soon as possible but in no case later than seven calendar days after the sponsor’s initial receipt of the information.

In addition, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk, that the trial is unlikely to meet its stated objectives or that the trial is not being conducted in accordance with FDA requirements.

Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk to subjects or on other grounds, such as lack of efficacy.

Information about applicable clinical trials, including clinical trials results, must be submitted within specific timeframes for publication on the www.clinicaltrials.gov website.

IND sponsors must submit annual reports on the progress of investigations under the IND to FDA and submit IND safety reports when certain serious and unexpected adverse reactions and certain other safety issues occur.

For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

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• Phase 3-The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites.

These clinical trials

are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.

These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.

Generally, two adequate and well-controlled Phase 3 clinical trials are required by the FDA for approval of a BLA.

In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product.

In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved.

These trials are used to gain additional data from the treatment of patients in the intended therapeutic indication and are commonly intended to generate additional safety data regarding use of the product in a clinical setting.

These so-called Phase 4 studies may also be made a condition to approval of the BLA.

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Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications.

The BLA must include data available from preclinical and clinical studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls, and proposed labeling, among other things.

Data can come from company-sponsored clinical studies intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by independent investigators.

To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety, purity and potency of the investigational biologic, to the satisfaction of the FDA.

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Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the FDA accepts it for filing.

The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information.

In this event, the BLA must be resubmitted with the additional information.

Once a BLA has been accepted for filing, the FDA’s goal is to review standard applications within ten months after the filing date, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing.

In both standard and priority reviews, the review process may also be extended by FDA requests for additional information or clarification.

The FDA reviews a BLA to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency.

The FDA may also convene an advisory committee to provide clinical insight on application review questions.

An advisory committee is a panel of independent experts, including clinicians and other scientific experts, which reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions.

The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured.

The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP and adequate to assure consistent production of the product within required specifications.

Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.

If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information.

Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP and other requirements and the integrity of the clinical data submitted to the FDA.

After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter, or CRL.

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A REMS is a safety strategy implemented to manage a known or potential serious risk associated with a product and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.

The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications.

Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace.

The FDA may require one or more Phase 4 post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies.

The FDA also may condition approval on, among other things, changes to proposed labeling, the development of adequate controls and specifications, or the completion of post-marketing studies or surveillance programs.

Expedited Development and Review Programs

The FDA offers a number of expedited development and review programs for qualifying product candidates.

These programs include fast track designation, breakthrough therapy designation, priority review, and accelerated approval.

These programs include Fast Track designation, Breakthrough Therapy designation, and priority review.

The Fast Track program is intended to expedite or facilitate the process for reviewing new products that are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition.

Fast Track designation applies to the combination of the product and the specific indication for which it is being studied.

The sponsor of a fast track product has opportunities for more frequent interactions with the applicable FDA review team during product development and, once a BLA is submitted, the product candidate may be eligible for priority review.

A fast track product may also be eligible for rolling review, where the FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA.

A product candidate intended to treat a serious or life-threatening disease or condition may also be eligible for breakthrough therapy designation to expedite its development and review.

A product candidate can receive breakthrough therapy designation if preliminary clinical evidence indicates that the product candidate, alone or in combination with one or more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

The designation includes all of the fast track program features, as well as more intensive

FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product candidate, including involvement of senior managers and experienced review staff in a cross-disciplinary review, where appropriate.

Any marketing application for a drug or biologic submitted to the FDA for approval, including a product candidate with a fast track designation and/or breakthrough therapy designation, may be eligible for other types of FDA programs intended to expedite the FDA review and approval process, such as priority review and accelerated approval.

The sponsor of a Fast Track product has opportunities for more frequent interactions with the applicable FDA review team during product development, in addition to the potential for rolling review of the BLA, meaning that the FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA.

A product candidate intended to treat a serious or life-threatening disease or condition may also be eligible for Breakthrough Therapy designation if preliminary clinical evidence indicates that the product candidate, alone or in combination with one or more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

The designation includes all of the Fast Track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product candidate, including involvement of senior managers and experienced review staff in a cross-disciplinary review, where appropriate.

Any marketing application for a drug or biologic submitted to the FDA for approval, including a product candidate with a Fast Track designation and/or Breakthrough Therapy designation, may be eligible for priority review.

A product candidate is eligible for priority review if it is designed to treat a serious or life-threatening disease or condition, and if approved, would provide a significant improvement in safety or effectiveness compared to available alternatives for such disease or condition.

For original BLAs, priority review designation means the FDA’s goal is to take action on the marketing application within six months of the 60-day filing date (as compared to ten months under standard review).

Additionally, product candidates studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.

Fast Track designation, Breakthrough Therapy designation, and priority review do not change the standards for approval but may expedite the development or approval process.

Even if a product candidate qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

Accelerated approval pathway

The FDA may grant accelerated approval to a product candidate for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based on a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.

As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled post-marketing clinical studies to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit.

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In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.

Fast track designation, breakthrough therapy designation, and priority review, accelerated approval do not change the standards for approval but may expedite the development or approval process.

The Food and Drug Omnibus Reform Act of 2022, or FDORA, signed by President Biden on December 29, 2022 as part of the Consolidated Appropriations Act, 2023 (H.R.

2617) includes numerous reforms to the accelerated approval process for drugs and biologics and enables FDA to require, as appropriate, that a post-approval study be underway prior to granting accelerated approval.

FDORA also expands the expedited withdrawal procedures already available to FDA to allow the agency to use expedited procedures if a sponsor fails to conduct any required post-approval study of the product with due diligence including with respect to “conditions specified by the Secretary [of HHS].” FDORA also adds the failure of a sponsor of a product approved under accelerated approval to conduct with due diligence any required post-approval study with respect to such product or to submit timely reports with respect to such product to the list of prohibited acts in the FDCA.

Orphan Drug Designation and Exclusivity

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 individuals in the United States and when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic.

Orphan drug designation must be requested before submitting a BLA.

After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.

If a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated.

Under the Orphan Drug Act, the FDA may grant orphan drug designation, or ODD, to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 individuals in the United States and when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic.

ODD must be requested before submitting a BLA.

After the FDA grants ODD, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.

If a product that has received ODD subsequently receives the first FDA approval for that drug for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated.

Orphan drug exclusivity does not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition.

Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application user fee.

A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.

In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or, as noted above, if a second applicant demonstrates that its product is clinically superior to the approved product with orphan exclusivity or the manufacturer of the approved product is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

Post-approval Requirements

Biologics are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and complying with advertising and promotion requirements, which include restrictions on promoting products for unapproved uses or patient populations (known as “off-label use”) and limitations on industry-sponsored scientific and educational activities.

Although physicians may prescribe approved products for off-label uses, manufacturers may not market or promote such uses.

The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, including not only by Company employees but also by agents of the Company or those speaking on the Company’s behalf, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

The FDA and other agencies actively enforce the laws and regulations applicable to biologics, including those prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

Promotional materials for approved biologics must be submitted to the FDA in conjunction with their first use or first publication.

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There also are continuing, annual program fees for any marketed products.

Biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements up.

Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented.

FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements.

Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

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• mandated modification of promotional materials and labeling and the issuance of corrective information;

and the imposition of civil or criminal penalties.

• the imposition of civil or criminal penalties.

United States Biosimilars and Exclusivity

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The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars in the United States.

Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies.

Biosimilarity requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency.

Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.

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The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products.

At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.

The BPCIA is complex and continues to be interpreted and implemented by the FDA.

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The laws that will affect our operations include, but are not limited to:

the federal Anti-Kickback Statute, which prohibits, among other things, individuals or entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind in return for, or to induce, either the referral of an individual, or the purchase, lease, order or arrangement for or recommendation of the purchase, lease, order or arrangement for any good, facility, item or service for

which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs.

• the federal Anti-Kickback Statute, which prohibits, among other things, individuals or entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind in return for, or to induce, either the referral of an individual, or the purchase, lease, order or arrangement for or recommendation of the purchase, lease, order or arrangement for any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs.

The term “remuneration” has been broadly interpreted to include anything of value.

Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly;

the federal civil and criminal false claims laws, including, without limitation, the federal False Claims Act, which can be enforced by private citizens through civil whistleblower or qui tam actions, and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from the federal government, including Medicare, Medicaid and other government payors, that are false or fraudulent or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim or to avoid, decrease or conceal an obligation to pay money to the federal government.

• the federal civil and criminal false claims laws, including, without limitation, the federal False Claims Act, or FCA, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, to the federal government, claims for payment or approval that are false or fraudulent or knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.

In addition, 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 federal False Claims Act;

• the federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer or remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable to Medicare or a state health program, unless an exception applies;

• the federal Health Insurance Portability and Accountability Act, or HIPAA, which created additional federal criminal statutes which prohibit, among other things, a person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and their implementing regulations, also imposes obligations, including mandatory contractual terms, on “covered entities,” including certain healthcare providers, health plans, healthcare clearinghouses, and their respective “business associates,” that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity as well as their covered subcontractors, with respect to safeguarding the privacy, security and transmission of individually identifiable health information, as well as analogous state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts;

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and their implementing regulations, also imposes obligations, including mandatory contractual terms, on “covered entities,” including certain healthcare providers, health plans, healthcare clearinghouses, and their respective “business associates,” that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity as well as their covered subcontractors, with respect to safeguarding the privacy, security and transmission of individually identifiable health information, as well as analogous state

and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts;

• the federal transparency laws, including the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, medical devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the State Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare and Medicaid Services, or CMS, information related to:

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and state and local laws that require the registration of pharmaceutical sales representatives.

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of

It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations.

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In the United States and in other countries, patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment.

Sales of any product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs (e.g., Medicare, Medicaid, TRICARE), commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by third-party payors.

Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis.

The principal decisions about reimbursement for new medicines are typically made by CMS, an agency within the U.S.

Department of Health and Human Services, or HHS.

CMS decides whether and to what extent products will be covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial degree.

Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance.

Thus, even if a product candidate is approved, sales of the product will depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs (e.g., Medicare, Medicaid, TRICARE), commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by third-party payors.

Third-party payors determine which products and procedures they will cover and establish reimbursement levels.

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government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products.

Patients who are treated in-office for a medical condition generally rely on third-party payors to reimburse all or part of the costs associated with the procedure, including costs associated with products used during the procedure, and may be unwilling to undergo such procedures in the absence of such coverage and adequate reimbursement.

In addition, for products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs.

Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that a procedure is safe, effective and medically necessary;

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It is also unclear how other such challenges and the healthcare reform measures of the Biden administration will impact the ACA or our business.

Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per year, which began in 2013, and due to subsequent legislative amendments to the statute, will remain in effect through 2031, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic.

Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per year, which began in 2013, and due to subsequent legislative amendments to the statute, will remain in effect through fiscal year 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic.

Under current legislation the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester.

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Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries, proposed and enacted legislation and executive orders issued by the prior presidential administration designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.

At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives.

However, several lawsuits have been brought against HHS challenging various aspects of the rules implemented during the Trump administration.

As a result, the Biden administration and HHS have delayed the implementation or published rules rescinding some of these

Trump-era policies.

In July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs.

In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles.

No legislation or administrative actions have been finalized to implement these principles.

It is also possible that additional governmental action is taken in response to the COVID-19 pandemic.

Individual states in the United States have also become increasingly active in implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

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Of the 40 employees, there were 11 in research and development and six in general and administrative functions.

We also utilized 12 consultants, nine in various roles related to research and development and three in general and administrative functions.

We also utilized consultants in various roles related to research and development and general and administrative functions.

We believe our employee relations are good.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business