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Item 1. Business

2022-02-24 compared with 2021-02-25 · 167 added, 143 removed, 330 unchanged (48% of the section changed)

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In addition to developing our novel drug candidates, we are pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our novel drug candidates.

Our Drug Candidates Currently in Development

In 2017, we acquired Confluence Life Sciences, Inc.

(now known as Aclaris Life Sciences, Inc.), or Confluence.

The acquisition of Confluence added small molecule drug discovery and preclinical development capabilities, including KINect, a proprietary drug discovery platform.

This allowed us to bring early-stage research and development activities in-house that we previously outsourced to third parties.

We leverage these capabilities and KINect to identify potential drug candidates that we may develop independently or in collaboration with third parties.

As part of the Confluence acquisition we also acquired our investigational drug candidates zunsemetinib, an inhibitor of the mitogen-activated protein kinase-activated protein kinase 2, or MK2, signaling pathway, ATI-1777, a topical “soft” Janus kinase, or JAK, inhibitor, and ATI-2138, an inhibitor of interleukin-2-inducible T cell kinase, or ITK.

We also earn revenue from Confluence’s provision of contract research services to third parties.

Our Drug Candidates

Our pipeline of drug candidates that we are currently developing is summarized in the table below.

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Development Phase

Immuno-Inflammatory Diseases

Immuno-Inflammatory

MK2 inhibitor

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(moderate to severe)

additional immuno-inflammatory diseases

Psoriatic arthritis

(moderate to severe)

Hidradenitis suppurativa

(moderate to severe)

“Soft” JAK 1/3 inhibitor

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ITK/TXK/JAK3 inhibitor

inflammatory bowel disease

Undisclosed- Gut Restricted Program

JAK1/JAK3 inhibitor

inflammatory bowel disease

Undisclosed- Gut Restricted Program

ITK/TXK/JAK3 inhibitor

T cell-mediated autoimmune diseases

Gut-Biased Program

JAK inhibitor

Inflammatory bowel disease

* We are currently evaluating additional potential immuno-inflammatory indications which we expect to progress directly into Phase 2.

** This is an investigator-initiated trial sponsored by the University of Kansas Medical Center.

MK2 Inhibitors, JAK Inhibitors and ITK Inhibitors as Potential Treatments for Immuno-Inflammatory Diseases

In 2017, we acquired Confluence Life Sciences, Inc.

(now known as Aclaris Life Sciences, Inc.), or Confluence.

The acquisition of Confluence added small molecule drug discovery and preclinical development capabilities, including KINect, a proprietary drug discovery platform.

This allowed us to bring early-stage research and development activities in-house that we previously outsourced to third parties.

We intend to leverage these capabilities and KINect to identify potential drug candidates that we may develop independently or in collaboration with third parties.

As part of the Confluence acquisition we also acquired our investigational drug candidates, ATI-450, an inhibitor of the mitogen-activated protein kinase-activated protein kinase 2, or MK2, signaling pathway, and ATI-1777, a topical “soft” Janus kinase, or JAK, inhibitor, as well as several other preclinical drug candidates including inhibitors of interleukin-2-

inducible T cell kinase, or ITK.

We also earn revenue from Confluence’s provision of contract research services to third parties.

ATI-450, an Investigational Oral MK2 Inhibitor

We submitted an Investigational New Drug Application, or IND, in April 2019 for ATI-450, an investigational oral, novel, small molecule selective MK2 inhibitor compound, for the treatment of rheumatoid arthritis, which was allowed by the U.S.

MK2 inhibitor

Metastatic breast cancer

Pancreatic cancer

* We plan to progress this indication directly into Phase 2.

Clinical Programs

Zunsemetinib, an Investigational Oral MK2 Inhibitor

We submitted an Investigational New Drug Application, or IND, in April 2019 for zunsemetinib, an investigational oral, novel, small molecule selective MK2 inhibitor compound, for the treatment of rheumatoid arthritis, which was allowed by the U.S.

Food and Drug Administration, or FDA, in May 2019.

MK2 is a key regulator of pro-inflammatory mediators including TNFα, IL1β, IL6, IL8 and other essential pathogenic signals in chronic immuno-inflammatory diseases, as well as in oncology.

As an oral drug candidate, we are developing ATI-450 as a potential alternative to injectable anti-TNF/IL1/IL6 biologics and JAK inhibitors for treating certain immuno-inflammatory diseases.

We initiated a Phase 1 single (at 10mg, 30mg, 50mg and 100mg doses) and multiple ascending (at 10mg, 30mg and 50mg doses) dose clinical trial evaluating ATI-450 in 77 healthy subjects in August 2019 (ATI-450-PKPD-101).

Final data from this trial demonstrated that ATI-450 resulted in marked inhibition of TNFα, IL1β, IL8 and IL6.

We also observed that ATI-450 had dose-proportional pharmacokinetics with a terminal half-life of 9-12 hours in the multiple ascending dose cohort, and had no meaningful food effect or drug-drug interaction with methotrexate.

ATI-450 was generally well-tolerated at all doses tested in the trial.

The most common adverse events (reported by 2 or more subjects who received ATI-450) were dizziness, headache, upper respiratory tract infection, constipation, abdominal pain and nausea.

ATI-450 was also evaluated at 80mg and 120mg doses twice daily in a second Phase 1 clinical trial in healthy subjects (ATI-450-PKPD-102).

Preliminary topline data from this trial showed that no dose-limiting toxicity was observed.

Ex vivo analysis of blood samples from this Phase 1 trial also showed that increased cytokine inhibition was achieved with these higher doses of ATI-450.

MK2 is a key regulator of pro-inflammatory mediators including TNFα, IL1β, IL6, IL8, IL17 and other essential pathogenic signals in chronic immuno-inflammatory diseases, as well as in oncology.

As an oral drug candidate, we are developing zunsemetinib as a potential alternative to injectable anti-TNF/IL1/IL6 biologics and JAK inhibitors for treating certain immuno-inflammatory diseases.

Zunsemetinib has been adopted as the nonproprietary name for ATI-450.

We initiated a Phase 1 single (at 10 mg, 30 mg, 50 mg and 100 mg doses) and multiple ascending (at 10 mg, 30 mg and 50 mg doses) dose clinical trial evaluating zunsemetinib in 77 healthy subjects in August 2019 (ATI-450-PKPD-101).

Final data from this trial demonstrated that zunsemetinib resulted in marked inhibition of TNFα, IL1β, IL8 and IL6.

We also observed that zunsemetinib had dose-proportional pharmacokinetics with a terminal half-life of 9-12 hours in the multiple ascending dose cohort, and had no meaningful food effect or drug-drug interaction with methotrexate.

Zunsemetinib was generally well-tolerated at all doses tested in the trial.

The most common adverse events (reported by 2 or more subjects who received zunsemetinib) were dizziness, headache, upper respiratory tract infection, constipation, abdominal pain and nausea.

Zunsemetinib was also evaluated at 80 mg and 120 mg doses twice daily in a second Phase 1 clinical trial in healthy subjects (ATI-450-PKPD-102).

Final data from this trial showed that no dose-limiting toxicity was observed.

Ex vivo analysis of blood samples from this Phase 1 trial showed that increased cytokine inhibition was achieved with these higher doses of zunsemetinib relative to doses tested in the first Phase 1 trial.

No serious adverse events were reported and all adverse events were mild to moderate.

The most common adverse events (reported by 2 or more subjects who received ATI-450) were headache, dizziness, nausea, parasthesia and, in the post-dosing safety follow-up phase of the trial, dry skin.

The most common adverse events (reported by 2 or more subjects who received zunsemetinib) were headache, dizziness, nausea, parasthesia and, in the post-dosing follow-up period of the trial, dry skin.

These adverse events were all mild in severity.

A final analysis of this trial is underway.

Moderate to Severe Rheumatoid Arthritis

Following the completion of the first Phase 1 clinical trial, in March 2020 we initiated a 12-week, Phase 2a, multicenter, randomized, investigator and patient-blind, sponsor-unblinded, parallel group, placebo-controlled clinical trial to investigate the safety, tolerability, pharmacokinetics and pharmacodynamics of ATI-450 in subjects with moderate to severe rheumatoid arthritis (ATI-450-RA-201).

In the trial, 19 subjects were randomized in a 3:1 ratio (seventeen subjects [15 in the treatment arm and two in the placebo arm] completed treatment) and received either ATI-450 at 50 mg twice daily or placebo, in combination with methotrexate, for 12 weeks.

Preliminary topline data from this trial showed that ATI-450 demonstrated durable clinical activity, as defined by a marked and sustained reduction in DAS28-CRP and improvement of ACR20/50/70 responses over 12 weeks.

ATI-450 was generally well tolerated.

Following the completion of the first Phase 1 clinical trial, in March 2020 we initiated a 12-week, Phase 2a, multicenter, randomized, investigator and patient-blind, sponsor-unblinded, parallel group, placebo-controlled clinical trial to investigate the safety, tolerability, pharmacokinetics and pharmacodynamics of zunsemetinib in subjects with moderate to severe rheumatoid arthritis (ATI-450-RA-201).

In the trial, which consisted of a 12-week treatment period and a 4-week follow-up period, 19 subjects were randomized in a 3:1 ratio and received either zunsemetinib at 50 mg twice daily or placebo, in combination with methotrexate, for 12 weeks.

The final per-protocol analysis, which consisted of the 17 subjects who completed the treatment period (15 in the treatment arm and two in the placebo arm), showed that zunsemetinib demonstrated durable clinical activity, as defined by a marked and sustained reduction in DAS28-CRP and improvement of ACR20/50/70 responses over 12 weeks.

Zunsemetinib was generally well tolerated.

All adverse events were mild to moderate.

The most common adverse events (each reported in 2 subjects) were urinary tract infection, or UTI, elevated lipids and ventricular extrasystoles, all of which were determined to be unrelated to treatment except for one UTI.

Two subjects withdrew from the trial, one in the treatment arm and one in the placebo arm.

The subject in the treatment arm withdrew due to palpitations, which were unrelated to the trial medication, and an elevated creatine phosphokinase, or CPK, which was determined by the site investigator to be treatment-related.

The most common adverse events (each reported in 2 subjects) were urinary tract infection, or UTI, and ventricular extrasystoles, all of which were determined to be unrelated to treatment except for one UTI.

Two subjects withdrew from the trial during the treatment period, one in the treatment arm and one in the placebo arm.

The subject in the treatment arm withdrew due to an elevated creatine phosphokinase, or CPK, level, which was determined by the site investigator to be treatment-related;

this subject also had palpitations and ventricular extrasystoles, which were unrelated to the trial medication.

The subject in the placebo arm withdrew as a result of prohibited medication needed to treat muscle strain.

There was one non-treatment-related serious adverse event (COVID-19) reported in the four-week safety follow-up phase of the trial in a subject who was no longer receiving treatment.

An interim analysis (11 treatment, two placebo) of ex vivo stimulated cytokines from blood samples taken from the treatment arm showed a marked and durable inhibition of TNFα, IL1β, IL6, and IL8 over the 12 week dosing period.

There was also one non-treatment-related serious adverse event (COVID-19) reported in the 4-week follow-up period of the trial in a subject who was no longer receiving treatment;

the subject withdrew during the 4-week follow-up period of the trial.

A final analysis, which consisted of the 17 subjects, of ex vivo stimulated cytokines from blood samples taken from the treatment arm showed a marked and durable inhibition of TNFα, IL1β, IL6, and IL8 over the 12-week treatment period.

Similarly, analysis of endogenous inflammation biomarkers also demonstrated a marked and sustained inhibition of median concentrations of hsCRP, TNFα, IL6, IL8 and MIP1β in the treatment arm over the 12-week period.

We plan to submit for publication a full analysis of the Phase 2a data in a peer-reviewed scientific journal which will include data from other secondary and exploratory endpoints evaluated in the trial, including the four-week safety follow-up data and a full analysis of MRI, pharmacodynamic and pharmacokinetic data.

Based on the results observed in the Phase 2a trial, we intend to progress ATI-450 into a Phase 2b trial in moderate to severe rheumatoid arthritis in the second half of 2021.

Cryopyrin-associated Periodic Syndrome

In November 2020, we initiated a Phase 2a multicenter, open-label, single-arm clinical trial to investigate the safety, tolerability, efficacy and pharmacodynamics of ATI-450 for the maintenance of remission in subjects with cryopyrin-associated periodic syndrome, or CAPS, previously managed with anti-IL1 therapy (ATI-450-CAPS-201).

Due to the COVID-19 pandemic, subject enrollment in this trial was paused.

As a result of the ongoing pandemic and given the positive preliminary topline data from the ATI-450-RA-201 trial, we have decided to focus our efforts and resources on other immuno-inflammatory diseases.

We also supported an investigator-initiated Phase 2a, randomized, double-blind, placebo-controlled clinical trial to investigate the safety and efficacy of ATI-450, when used in addition to standard of care therapy, as a potential treatment for cytokine release syndrome in hospitalized patients with COVID-19.

The primary endpoint in this trial is the proportion of subjects who are free from respiratory failure by day 14.

We provided funding and clinical drug supply to the University of Kansas Medical Center, the sponsor of the trial.

The trial included 20 subjects and is completed.

We expect data to be available in the first half of 2021.

In December 2021, we initiated study activities in a Phase 2b randomized, multicenter, double-blind, parallel group, placebo-controlled, dose ranging trial to investigate the efficacy, safety, tolerability, pharmacokinetics and pharmacodynamics of multiple doses (20 mg and 50 mg twice daily) of zunsemetinib in combination with methotrexate in subjects with moderate to severe rheumatoid arthritis (ATI-450-RA-202).

This trial will consist of a 12-week treatment period and a 30-day follow-up period, and currently seeks to enroll approximately 195 subjects in the United States and in multiple countries in Europe.

The primary endpoint is the proportion of subjects achieving ACR20 at week 12.

We anticipate increasing the size of the patient population to approximately 240 subjects and expect topline data in 2023.

Moderate to Severe Hidradenitis Suppurativa

In December 2021, we initiated study activities in a Phase 2a, randomized, multicenter, double-blind, placebo-controlled trial to investigate the efficacy, safety, tolerability, pharmacokinetics and pharmacodynamics of zunsemetinib (50 mg twice daily) in subjects with moderate to severe hidradenitis suppurativa (ATI-450-HS-201).

This trial will consist of a 12-week treatment period and a 30-day follow-up period, and will seek to enroll approximately 70 subjects in the United States.

The primary endpoint is the change in inflammatory nodule and abscess count at week 12.

We expect topline data in the first half of 2023.

Moderate to Severe Psoriatic Arthritis

We plan to progress zunsemetinib (50 mg twice daily) into a Phase 2a trial in subjects with moderate to severe psoriatic arthritis in the first half of 2022, with topline data expected in the first half of 2023 (ATI-450-PsA-201).

ATI-1777, an Investigational Topical “Soft” JAK 1/3 Inhibitor

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In October 2020, we initiated a Phase 2a, multicenter, randomized, double-blind, vehicle-controlled, parallel-group clinical trial to determine the efficacy, safety, tolerability and pharmacokinetics of ATI-1777 in subjects with moderate to severe atopic dermatitis (ATI-1777-AD-201).

We expect data to be available mid-year 2021.

ATI-2138, an Investigational ITJ Inhibitor

We are also developing ATI-2138, an investigational oral ITK/TXK/JAK3, or ITJ, inhibitor compound, as a potential treatment for psoriasis and/or inflammatory bowel disease, which are both T-cell mediated autoimmune diseases.

In the trial, which consisted of a 4-week treatment period and a 2-week follow-up period during which no treatment was given, 50 subjects with moderate to severe atopic dermatitis were randomized in a 1:1 ratio into one of two arms:

ATI-1777 topical solution 2.0% w/w or vehicle applied twice daily.

In June 2021, we announced that the trial achieved its primary endpoint, which was the percent change from baseline in the modified Eczema Area and Severity Index, or mEASI, score at week 4, with a high degree of statistical significance (p<0.001) (one-sided p-value), which corresponded to a 74.4% reduction in mEASI score from baseline at week 4 in subjects applying ATI-1777 compared to a 41.4% reduction in subjects applying vehicle.

The final data was based on the full analysis set, or FAS, which was comprised of 48 subjects randomized and documented to have received at least one dose of trial medication.

Positive trends in favor of ATI-1777 were observed in key secondary efficacy endpoints, such as improvement in itch, percent of mEASI-50 responders, investigator’s global assessment responder analysis, and reduction in body surface area impacted by disease.

In addition, the FAS analysis also showed positive trends in favor of ATI-1777 in percent of mEASI-75 responders (65.2% for ATI-1777 compared to 24.0% for vehicle) and mEASI-90 responders (30.4% for ATI-1777 compared to 20.0% for vehicle).

These secondary efficacy endpoints were not powered for statistical significance.

Based on an analysis of pharmacokinetic plasma samples in the ATI-1777 arm at multiple timepoints, minimal systemic exposure was observed which supports a “soft” topical JAK inhibitor approach.

ATI-1777 was generally well tolerated.

No serious adverse events were reported.

The most common adverse events (reported in at least 2 subjects in the trial) were increased blood CPK levels and headache in subjects in the ATI-1777 arm and urinary tract infection (one in each of the ATI-1777 and the vehicle arm);

none of these adverse events in the ATI-1777 arm were determined by the clinical trial investigators to be related to ATI-1777.

One treatment-related adverse event, application site pruritus, was reported in one subject in the ATI-1777 arm.

Based on the results observed in the Phase 2a trial, we intend to progress ATI-1777 into a Phase 2b trial in moderate to severe atopic dermatitis in the first half of 2022.

In this trial, we plan to explore multiple concentrations of twice daily treatment with ATI-1777 and a single concentration of once daily treatment with ATI-1777, in patients 12 years and older.

We expect topline data in the first half of 2023.

ATI-2138, an Investigational Oral ITJ Inhibitor

We are developing ATI-2138, an investigational oral ITK/TXK/JAK3, or ITJ, inhibitor compound, as a potential treatment for T cell-mediated autoimmune diseases.

The ITJ compound interrupts T cell signaling through the combined inhibition of ITK/TXK/JAK3 pathways in lymphocytes.

We expect to file an IND for ATI-2138 in the second half of 2021.

Our Other Drug Candidates

We continue to seek third-party partners for our dermatology investigational drug candidate A-101 45% Topical Solution as a potential treatment for common warts (verruca vulgaris).

We submitted an IND for ATI-2138 for the treatment of psoriasis in October 2021, which was allowed by the FDA in November 2021.

In December 2021, we initiated a Phase 1 randomized, observer-blind, placebo-controlled, single ascending dose trial to investigate the safety, tolerability, pharmacokinetics and pharmacodynamics of ATI-2138 in healthy subjects (ATI-2138-PKPD-101).

We expect topline data in 2022.

If the Phase 1 SAD trial is successful, we currently plan to initiate a two-week Phase 1 multiple ascending dose trial of ATI-2138 in subjects with psoriasis in 2022, with topline data expected in the first half of 2023.

We are also currently exploring alternative indications to the planned indication that are relevant to the mechanism of action which may impact the trial design and require the submission of additional INDs to different reviewing divisions of the FDA.

Preclinical Programs

ATI-2231, an Investigational Oral MK2 Inhibitor

We are exploring the use of ATI-2231, an investigational oral MK2 inhibitor compound designed to have a long half-life, as a potential treatment for pancreatic cancer and metastatic breast cancer as well as in preventing bone loss in patients with metastatic breast cancer.

IND-enabling studies are currently underway.

We expect to submit an IND for ATI-2231 by the end of 2022.

If allowed, we expect to progress ATI-2231 into the clinic in 2023.

We are currently evaluating the clinical development program for this asset, which may include a collaboration with a third party.

Discovery Programs

We are developing oral gut-biased JAK inhibitors with limited systemic exposure as potential treatments for inflammatory bowel disease.

In addition, we are engaged in research to identify brain penetrant kinase inhibitor candidates as potential treatments for neurodegenerative diseases.

Manufacturing and Supply

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Our drug candidates, if approved, will compete with existing treatments and new treatments that may become available in the future.

With respect to ATI-450 as a potential treatment for moderate to severe rheumatoid arthritis, there are several different types of therapies in the rheumatoid arthritis market.

Medications for the treatment of rheumatoid arthritis currently fall into two categories:

With respect to zunsemetinib as a potential treatment for immuno-inflammatory diseases such as rheumatoid arthritis, psoriatic arthritis and hidradenitis suppurativa, there are several different types of therapies in the market.

Medications for the treatment of rheumatoid arthritis and psoriatic arthritis currently fall into two categories:

drugs that ease symptoms such as nonsteroidal anti-inflammatory drugs and drugs that slow disease activity.

Drugs that slow disease activity include corticosteroids and disease-modifying anti-rheumatic drugs, or DMARDs.

Disease-modifying drugs include conventional DMARDs such as methotrexate, sulfasalazine, leflunomide, hydroxychloroquine , biologic DMARDs (monoclonal antibodies which inhibit targets such as TNF, IL1, IL6 and costimulatory signaling mechanisms) , and targeted synthetic DMARDs such as JAK inhibitors.

These types of drugs are produced and sold by large pharmaceutical companies, including AbbVie, Amgen, Bristol Myers Squibb, Eli Lilly, Johnson & Johnson, Merck, Pfizer, and Roche, among others.

In addition, we are aware of a number of companies developing and conducting clinical trials for investigational drug candidates, including biosimilars, that, if approved, could compete with ATI-450, if approved, for the treatment of rheumatoid arthritis.

DMARDs include (i) conventional synthetic DMARDs, such as methotrexate, sulfasalazine, leflunomide and hydroxychloroquine , (ii) biologic DMARDs (monoclonal antibodies which inhibit targets such as TNF α , IL1β, IL6, IL17 and costimulatory signaling mechanisms) , and (iii) targeted synthetic DMARDs such as JAK inhibitors.

Hidradenitis suppurativa is currently treated with antibiotics, corticosteroids and surgery, as well as anti-TNF therapy.

Drugs for the treatment of immuno-inflammatory diseases such as rheumatoid arthritis, psoriatic arthritis and hidradenitis suppurativa are produced and sold, or are approved

for marketing, by large pharmaceutical companies, including AbbVie, Amgen, Bristol Myers Squibb, Eli Lilly, Johnson & Johnson, Pfizer, Novartis and Roche.

In addition, we are aware of a number of companies developing and conducting clinical trials for investigational drug candidates, including biosimilars, that, if approved, could compete with zunsemetinib, if approved, for the treatment of immuno-inflammatory diseases.

With respect to ATI-1777 as a potential treatment for moderate to severe atopic dermatitis, there are several different types of therapies in the atopic dermatitis market, such as biologics, oral and topical corticosteroids, injectable and oral methotrexate products, oral and topical calcineurin inhibitors, oral mycophenolate products, other JAK inhibitors, other oral antibiotics and antihistamines and phototherapy.

There are also several prescription, non-prescription and over-the-counter, or OTC, topical products, including PDE4 inhibitors, utilized to treat atopic dermatitis.

These types of drugs are produced and sold by large pharmaceutical companies, including Sanofi and Regeneron Pharmaceuticals, Inc., and Pfizer.

In addition, we are aware of a number of companies including large pharmaceutical companies, such as AbbVie, Eli Lilly, Novartis, Incyte, Pfizer and LEO Pharma A/S developing and conducting clinical trials for investigational drug candidates, that, if approved, could compete with ATI-1777, if approved, for the treatment of atopic dermatitis.

These types of drugs are produced and sold, or are approved for marketing, by large pharmaceutical companies, including AbbVie, Incyte, LEO Pharma A/S, Pfizer, and Sanofi and Regeneron Pharmaceuticals, Inc.

In addition, we are aware of a number of companies including large pharmaceutical companies, such as Eli Lilly, Novartis, LEO Pharma A/S, Pfizer and Dermavant Sciences developing and conducting clinical trials for investigational drug candidates, that, if approved, could compete with ATI-1777, if approved, for the treatment of atopic dermatitis.

The commercial opportunity for our drug candidates, if approved, could be reduced or eliminated if our competitors develop and commercialize drugs that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any drug we may develop.

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Patent and Trademark Office, or USPTO, and its foreign counterparts.

With respect to our MK2 signaling pathway inhibitor development program, we own numerous issued patents and pending applications to novel MK2 pathway inhibitors, including our lead candidate ATI-450, and various methods of use that expire, or would expire, between 2031 and 2041, subject to any applicable patent term adjustment or extension that may be available in a particular country.

For example, we own two U.S.

patents and pending applications in the European Union and other foreign countries directed to ATI-450 and analogs thereof and certain methods of using the same.

With respect to our MK2 signaling pathway inhibitor development program, we own numerous issued patents and pending applications to novel MK2 pathway inhibitors, including our lead candidate zunsemetinib, and various methods of use that expire, or would expire, between 2031 and 2041, subject to any applicable patent term adjustment or extension that may be available in a particular country.

For example, we own two issued U.S.

patents and issued patents and pending applications in the European Union and other foreign countries directed to zunsemetinib and analogs thereof and certain methods of using the same.

patents expire in 2034 and any claims that may issue from the pending applications expire in 2034, subject to any applicable adjustment or extension.

We also own a Patent Cooperation Treaty, or PCT, application directed to deuterated forms of ATI-450 and methods of use, which, if issued, would expire in 2040, subject to any applicable adjustment or extension.

Further, we own numerous provisional applications directed to certain methods of using ATI-

450, methods of manufacturing ATI-450 and crystal forms of ATI-450, which, if issued, would each expire in 2041, subject to any applicable adjustment or extension.

Further, we own numerous Patent Cooperation Treaty, or PCT, applications directed to certain methods of using zunsemetinib, methods of manufacturing zunsemetinib and crystal forms of zunsemetinib, which, if issued, would each expire in 2041, subject to any applicable adjustment or extension.

We also own a PCT application directed to second generation MK2 inhibitors, such as ATI-2231, and methods of use, which, if issued, would expire in 2040, subject to any applicable adjustment or extension.

With respect to our “soft” JAK inhibitor development program, we own one issued U.S.

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and foreign countries to novel “soft” JAK inhibitors and various methods of use that expire, or would expire, between 2038 and 2042, subject to any applicable patent term adjustment or extension that may be available in a particular country.

For example, we own one allowed U.S.

application and pending applications in the European Union and other foreign countries directed to various novel inhibitors of JAK1 and/or JAK3, including ATI-1777, and methods of using the same, which, if issued, would expire in 2038, subject to any applicable adjustment or extension.

We also own two provisional applications directed to topical formulations and crystal forms of ATI-1777, which, if issued, would expire in 2041, subject to any applicable adjustment or extension.

For example, we own one U.S.

patent and pending applications in the U.S., European

Union and other foreign countries directed to various novel inhibitors of JAK1 and/or JAK3, including ATI-1777, and methods of using the same, which, if issued, would expire in 2038, subject to any applicable adjustment or extension.

We also own a PCT application directed to crystal forms of ATI-1777 and provisional applications directed to methods of using ATI-1777 and topical formulations, which, if issued, would expire in 2041 and 2042, respectively, subject to any applicable adjustment or extension.

With respect to our ITK inhibitor development program, we own numerous issued U.S.

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and foreign countries directed to novel inhibitors of ITK and methods of use that expire, or would expire, between 2035 and 2039, subject to any applicable patent term adjustment or extension that may be available in a particular country.

We also own pending U.S., European Union and other foreign country applications directed to ATI-2138 and analogs thereof and methods of using the same, which, if issued, would expire in 2039, subject to any applicable adjustment or extension.

For example, we own one U.S.

patent and pending U.S., European Union and other foreign country applications directed to ATI-2138 and analogs thereof and methods of using the same, which, if issued, would expire in 2039, subject to any applicable adjustment or extension.

Patents extend for varying periods according to the date of patent filing or grant and the legal term of patents in various countries where patent protection is obtained.

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The European Union does have a compensation program similar to patent term extension called supplementary patent certificate that would effectively extend patent protection for up to five years.

We also use other forms of protection, such as trademark, copyright, and trade secret protection, to protect our intellectual property, particularly where we do not believe patent protection is appropriate or obtainable.

We also use other forms of protection, such as trademark, copyright, and/or trade secret protection, to protect our intellectual property, particularly where we do not believe patent protection is appropriate or obtainable.

We aim to take advantage of all of the intellectual property rights that are available to us and believe that this comprehensive approach will provide us with proprietary positions for our drug candidates, where available.

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Pursuant to the terms of the Confluence Agreement, the Merger Sub merged with and into Confluence, with Confluence surviving as our wholly-owned subsidiary, resulting in our acquisition of 100% of the outstanding shares of Confluence.

We paid closing consideration of $10.3 million in cash and issued 349,527 shares of our common stock with a fair value of $9.7 million to the former Confluence equity holders.

In November 2018, a development milestone specified in the Confluence Agreement was achieved, as a result of which we paid the former Confluence equity holders $2.5 million in cash and issued 253,208 shares of our common stock with a fair value of $2.2 million.

Under the Confluence Agreement, we also agreed to pay the former Confluence equity holders aggregate remaining contingent consideration of up to $75.0 million based upon the achievement of specified

regulatory and commercial milestones set forth in the Confluence Agreement.

Under the Confluence Agreement, we agreed to pay the former Confluence equity holders aggregate remaining contingent consideration of up to $75.0 million based upon the achievement of specified regulatory and commercial milestones set forth in the Confluence Agreement.

In addition, we have agreed to pay the former Confluence equity holders future royalty payments calculated as a low single-digit percentage of annual net sales, subject to specified reductions, limitations and other adjustments, until the date that all of the patent rights for that product have expired, as determined on a country-by-country and product-by-product basis or, in specified circumstances, ten years from the first commercial sale of such product.

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NDA Approval Processes

In the United States, the FDA regulates drug and medical device products under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations.

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations.

The FDA’s Center for Drug Evaluation and Research has primary jurisdiction over the premarket development, review and approval of our drug candidates.

Accordingly, we are investigating our drug candidates pursuant to IND applications and expect that any potential third-party partners that we may consummate a transaction with would seek approval through the New Drug Application, or NDA, pathway.

Accordingly, we are investigating our drug candidates pursuant to IND applications and would expect to seek approval through the New Drug Application, or NDA, pathway.

An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the following:

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The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND on clinical hold.

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

In such a case, the IND sponsor and the

FDA must resolve any outstanding concerns before clinical trials can begin.

A clinical hold may occur at any time during the life of an IND, and may affect one or more specific clinical trials or all clinical trials conducted under the IND.

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They must be conducted under protocols detailing the objectives of the trial, dosing procedures, research subject selection and exclusion criteria, and the safety and effectiveness criteria to be evaluated.

Each protocol must be submitted to the FDA as part of the IND, and progress reports detailing the status of the clinical trials must be submitted to the FDA annually.

Sponsors also must timely report to the FDA serious and unexpected adverse reactions, any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure, and any findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug.

An IRB at each institution participating in the clinical trial must review and approve the protocol before the clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each research subject or the subject’s legal representative, monitor the study until completed and otherwise comply with IRB regulations.

Each protocol must be submitted to the FDA as part of the IND, and progress reports detailing the status of the clinical trials must be submitted to the FDA annually, as well as safety reporting.

An IRB for each site participating in the clinical trial must review and approve the protocol before the clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each research subject or the subject’s legal representative, monitor the study until completed and otherwise comply with IRB regulations.

Clinical trials are typically conducted in three sequential phases that may overlap or be combined:

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Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its proposed shelf-life.

The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests and other control mechanisms, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product.

are submitted to the FDA as part of an NDA requesting approval to market the product.

The submission of an NDA is subject to the payment of user fees, but a waiver of such fees may be obtained under specified circumstances.

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After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval.

There are also continuing, annual user fee requirements for products and the establishments at which such products are manufactured, as well as new application fees for certain supplemental applications.

There are also continuing annual user fee requirements for products, as well as new application fees for certain supplemental applications.

In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs.

Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and some state agencies for compliance with GMP regulations and other laws.

The FDA has promulgated specific requirements for drug cGMPs and device cGMPs embodied in the Quality System Regulation.

The FDA has promulgated specific requirements for drug cGMPs.

Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented.

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However, physicians may, in their independent medical judgment, prescribe legally available products for off-label uses.

The FDA does not regulate the behavior of physicians in their choice of treatments but the FDA does restrict manufacturer’s communications on the subject of off-label use of their products.

The FDA does not regulate the behavior of physicians in their choice of treatments but the FDA does restrict sponsor communications on the subject of off-label use.

From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA.

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This three-year exclusivity covers only the conditions associated with the new clinical investigations and prohibits the FDA from approving an ANDA or a 505(b)(2) NDA submitted by another company with overlapping conditions associated with the new clinical investigations for the three-year period.

Clinical investigation

exclusivity does not prohibit the FDA from approving ANDAs for drugs containing the original active agent.

Clinical investigation exclusivity does not prohibit the FDA from approving ANDAs for drugs containing the original active agent.

Five-year and three-year exclusivity will not delay the submission or approval of an NDA for the same drug.

However, an applicant submitting an NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation to products intended to treat a rare disease or condition—generally one that affects fewer than 200,000 individuals in the United States.

Orphan drug designation must be requested before submitting the NDA.

After the FDA grants orphan drug designation, the FDA publicly discloses the drug’s identity and its intended orphan use.

Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

The first active moiety to be approved to treat a disease with FDA’s orphan drug designation is entitled to a seven-year period of marketing exclusivity in the United States for that product, for that indication.

During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same orphan indication, regardless of patent status, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or if the FDA finds that the holder of the orphan 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 chemical/biological entity for the same disease or condition.

An orphan drug designation also does not preclude the same drug from being developed for a different disease or condition.

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

Regulation Outside of the United States

Even if we obtain FDA approval for a drug candidate, we must obtain approval by the comparable regulatory authorities of countries outside of the United States before we can commence clinical trials in such countries, and our potential third-party partners must obtain approval of the regulators of such countries or economic areas, such as the European Union, before they may market any of our drug candidates in those countries or areas.

European Union, before they may market any of our drug candidates in those countries or areas.

The approval process and requirements governing the conduct of clinical trials, product licensing and promotion, pricing and reimbursement vary greatly by geographic region, and the time may be longer or shorter than that required for FDA approval.

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Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can be recognized in another Member State through the Mutual Recognition Procedure.

product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure.

In the EEA, upon receiving marketing authorization, new chemical entities generally receive eight years of data exclusivity and an additional two years of market exclusivity.

If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure.

In the EEA, upon receiving marketing authorization, NCEs generally receive eight years of data exclusivity and an additional two years of market exclusivity.

If granted, data exclusivity prevents regulatory authorities in the EEA from referencing the innovator’s data to assess a generic application.

During the additional two-year period of market exclusivity, a generic marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic product can be marketed until the expiration of the market exclusivity.

However, there is no guarantee that a product will be considered by the EEA’s regulatory authorities to be a new chemical entity, and products may not qualify for data exclusivity.

However, there is no guarantee that a product will be considered by the EEA’s regulatory authorities to be an NCE, and products may not qualify for data exclusivity.

Other Health Care Laws

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The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, formulary managers, and beneficiaries on the other.

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.

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.

Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor.

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In addition, activities relating to the sale and marketing of products are subject to scrutiny under this law.

Penalties for federal civil False Claims Act violations may include up to three times the actual damages sustained by the government, plus mandatory civil penalties for each separate false claim,

the potential for exclusion from participation in federal health care programs, and, although the federal civil False Claims Act is a civil statute, False Claims Act violations may also implicate various federal criminal statutes.

Penalties for federal civil False Claims Act violations may include up to three times the actual damages sustained by the government, plus mandatory civil penalties for each separate false claim, the potential for exclusion from participation in federal health care programs, and, although the federal civil False Claims Act is a civil statute, False Claims Act violations may also implicate various federal criminal statutes.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any health care benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense, 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 health care benefits, items or services.

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In addition, legislation imposing marketing restrictions and transparency requirements on pharmaceutical manufacturers has been enacted at the state and federal levels.

For example, the Affordable Care Act imposed, among other things, annual reporting requirements to the Centers for Medicare & Medicaid Services, or CMS, for covered manufacturers for certain payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.

Beginning in 2022, applicable manufacturers will also be required to report information regarding payments and other transfers of value provided during the previous year to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiologist assistants, and certified nurse-midwives.

Failure to submit timely, accurately and completely the required information for all payments, transfers of value and ownership or investment interests may result in civil monetary penalties for “knowing failures.” Certain states also mandate implementation of compliance programs, impose restrictions on drug manufacturer marketing practices, require registration of certain employees engaged in marketing activities in the location, and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians.

For example, the Affordable Care Act imposed, among other things, annual reporting requirements to the Centers for Medicare & Medicaid Services, or CMS, for covered manufacturers for certain payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other health care professionals (such as physician assistants and nurse practitioners) and teaching hospitals, as well as information regarding ownership and investment interests held by physicians and their immediate family members.

location, and/or require the tracking and reporting of gifts, compensation and other remuneration to health care professionals, including physicians.

We have developed a comprehensive compliance program that establishes internal controls to facilitate adherence to the rules and program requirements to which we are subject.

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Among other things, HITECH makes HIPAA’s security standards directly applicable to “business associates”, namely independent contractors or agents of HIPAA covered entities that create, receive or obtain protected health information in connection with providing a service for or on behalf of a covered entity and their subcontractors that use, disclose, access, or otherwise process protected health information.

HITECH also increased the civil and criminal penalties that may be imposed against covered entities and business associates, and gave state attorneys general new authority to file civil actions

for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.

HITECH also increased the civil and criminal penalties that may be imposed against covered entities and business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.

In addition, certain state laws govern the privacy and security of health information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

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Moreover, the Affordable Care Act provided incentives to programs that increase the federal government’s comparative effectiveness research and implemented payment system reforms including a national pilot program on payment bundling meant to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain health care services.

There remain judicial and Congressional challenges to certain aspects of the Affordable Care Act.

There have been executive branch, judicial and Congressional challenges to certain aspects of the Affordable Care Act.

While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the Affordable Care Act have been signed into law.

The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”.

In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the Affordable Care Act-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminated the health insurer tax.

The Tax Cuts and Jobs Act of 2017, or the 2017 Tax Act, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”.

In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the Affordable Care Act-mandated “Cadillac” tax on high-cost employer-sponsored

health coverage and medical device tax and, effective January 1, 2021, also eliminated the health insurer tax.

Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amended the Affordable Care Act, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”.

On December 14, 2018, a Texas U.S.

District Court Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017.

Additionally, on December 18, 2019, the U.S.

Court of Appeals for the Fifth Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are invalid as well.

Supreme Court is currently reviewing the case, although it is unknown when a decision will be made.

Further, although the U.S.

Supreme Court has not yet ruled on the constitutionality of the Affordable Care Act, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the Affordable Care Act marketplace.

The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the Affordable Care Act.

It is unclear how the Supreme Court ruling, other such litigation, and the health care reform measures of the Biden administration will impact the Affordable Care Act and our business.

On June 17, 2021 the U.S.

Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress.

Thus, the Affordable Care Act will remain in effect in its current form.

Prior to the U.S.

Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the Affordable Care Act marketplace.

The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the Affordable Care Act.

It is possible that the Affordable Care Act will be subject to judicial or Congressional challenges in the future.

It is unclear how such challenges and the health care reform measures of the Biden administration will impact the Affordable Care Act and our business.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.

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The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction of at least $1.2 trillion for fiscal years 2012 through 2021, triggering the legislation’s automatic reduction to several government programs.

This includes aggregate reductions in Medicare payments to providers of 2% per fiscal year, which went into effect beginning on April 1, 2013 and, due to subsequent legislative amendments to the statute, including the BBA, will stay in effect through 2030 with the exception of a temporary suspension from May 1, 2020 through March 31, 2021, unless additional Congressional action is taken.

Additionally, in January 2013, the American Taxpayer Relief Act of 2012 was

signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, cancer treatment centers and imaging centers.

This includes aggregate reductions in Medicare payments to providers of 2% per fiscal year, which went into effect beginning on April 1, 2013 and, due to subsequent legislative amendments to the statute, including the BBA and the Infrastructure Investment and Jobs Act, will stay in effect through 2031 with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.

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.

Additionally, in January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, cancer treatment centers and imaging centers.

Moreover, the Drug Supply Chain Security Act imposes new obligations on manufacturers of pharmaceutical products related to product tracking and tracing.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.

More recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products.

There has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products.

Such scrutiny has resulted in several recent Congressional inquiries and proposed and enacted federal and state legislation 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 products.

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For example, on July 24, 2020 and September 13, 2020, President Trump announced several executive orders related to prescription drug pricing that seek to implement several of the administration’s proposals.

As a result, the FDA released a final rule on September 24, 2020, effective November 30, 2020 providing guidance for states to build and submit importation plans for drugs from Canada.

As a result, the FDA concurrently released a final rule and guidance in September 2020 providing pathways for states to build and submit importation plans for drugs from Canada.

Further, on November 20, 2020, the Department of Health and Human Services, or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.

The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation.

The rule also created a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed pending review by the Biden administration until March 22, 2021.

On November 20, 2020, CMS issued an interim final rule implementing the President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021.

On December 28, 2020, the U.S.

District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule.

It is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives.

At the state level, legislatures have become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological 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.

As a result of litigation challenging the Most Favored Nation model, on December 27, 2021, CMS published a final rule that rescinds the Most Favored Nation model interim final rule.

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 unclear whether these or similar policy initiatives will be implemented in the future.

At the state level, legislatures have become increasingly active in passing

legislation and implementing regulations designed to control pharmaceutical and biological 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.

The Affordable Care Act, as well as other federal and state health care reform measures that have been and may be adopted in the future, could harm our future revenue.

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This alternate regulatory pathway enables the applicant to rely, in part, on the FDA’s findings of safety and efficacy for an existing product, or published literature, in support of its application.

The FDA may then approve the new drug candidate

for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the 505(b)(2) applicant.

The FDA may then approve the new drug candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the 505(b)(2) applicant.

The ANDA or Section 505(b)(2) applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book.

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Many private third-party payors, such as managed care plans, manage access to drug products’ coverage partly to control costs for their plans, and may use drug formularies and medical policies to limit their exposure.

Obtaining and maintaining favorable reimbursement can be a time-consuming

and expensive process, and our potential third-party partners may not be able to negotiate or continue to negotiate reimbursement or pricing terms for our drug candidates, if approved, with third-party payors at levels that are profitable to us, or at all.

Obtaining and maintaining favorable reimbursement can be a time-consuming and expensive process, and our potential third-party partners may not be able to negotiate or continue to negotiate reimbursement or pricing terms for our drug candidates, if approved, with third-party payors at levels that are profitable to us, or at all.

Further coverage policies and third-party reimbursement rates may change at any time.

Even if favorable coverage and reimbursement status is attained for one or more products which receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

In addition to uncertainties surrounding coverage policies, there are periodic changes to reimbursement.

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Such pharmacoeconomic studies can be costly and the results uncertain.

Our business could be harmed if reimbursement of our drug candidates, if approved, is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels.

Our business could be

harmed if reimbursement of our drug candidates, if approved, is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels.

Employees and Human Capital Resources

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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