What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-02-24 compared with 2021-02-25 · 147 added, 172 removed, 796 unchanged (29% of the section changed)

7 unchanged sentences

If we are unable to raise capital when needed, we could be forced to curtail our planned operations.

● Our business is dependent on the successful development of our investigational drug candidate, ATI-450.

● Our business is dependent on the successful development of our investigational drug candidate, zunsemetinib.

● We have a limited history as a clinical-stage biopharmaceutical company developing and partnering our drug candidates, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

14 unchanged sentences

We have financed our operations over the last several years primarily from sales of equity securities and incurring indebtedness in the form of loans from commercial lenders .

We have devoted substantially all of our financial resources and efforts to the development of our drug candidates, including preclinical studies and clinical trials, and from 2018 to October 2019, to the commercialization of our products.

Our net losses may fluctuate significantly from quarter to quarter and year to year.

net losses may fluctuate significantly from quarter to quarter and year to year.

We expect to continue to incur significant expenses and operating losses in the near term as we:

● pursue strategic alternatives, including identifying and seeking to consummate transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates;

● continue the clinical development of ATI-450, our MK2 inhibitor, as a potential treatment for moderate to severe rheumatoid arthritis and potentially other immuno-inflammatory diseases, and ATI-1777, our “soft” JAK inhibitor, as a potential treatment for moderate to severe atopic dermatitis;

● continue to develop our preclinical drug candidates, including ATI-2138, our ITJ inhibitor;

● continue the clinical development of zunsemetinib as a potential treatment for moderate to severe rheumatoid arthritis and other immuno-inflammatory diseases, ATI-1777 as a potential treatment for moderate to severe atopic dermatitis, and ATI-2138 as a potential treatment for T cell-mediated autoimmune diseases;

● continue to develop our preclinical drug candidates, including ATI-2231;

● continue to discover and develop additional drug candidates;

16 unchanged sentences

We expect to incur significant expenses and operating losses for the foreseeable future as we advance our drug candidates from discovery through preclinical and clinical development.

In addition, we may not be able to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates, and our drug candidates, if approved, may not achieve

commercial success.

Furthermore, we incur and expect to continue to incur significant costs associated with operating as a public company, including legal, accounting, investor relations and other expenses.

Furthermore, we incur and expect to continue to incur significant costs associated with operating as

a public company, including legal, accounting, investor relations and other expenses.

We also expect to add additional personnel to support our operational plans and strategic direction .

As of December 31, 2021, we had cash, cash equivalents and marketable securities of $225.7 million.

9 unchanged sentences

● the impact on the timing of our preclinical studies, on the recruitment, enrollment, conduct and timing of our clinical trials, and on our business, due to the COVID-19 pandemic;

● our ability to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates, and earn revenue from such arrangements;

● the revenue earned from our commercial products as a result of licenses to, or partnerships with, third parties.

We will require additional capital to complete the clinical development of ATI-450 and ATI-1777, to develop our preclinical compounds and to support our discovery efforts.

● our ability to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates;

● our ability to earn revenue from licenses to, or partnerships or other arrangements with, third parties.

We will require additional capital to complete the clinical development of zunsemetinib, ATI-1777 and ATI-2138, to develop our preclinical compounds and to support our discovery efforts.

Additional funds may not be available on a timely basis, on commercially acceptable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy.

Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic.

If we are unable to raise sufficient additional capital, we could be forced to curtail our planned operations.

Our business is dependent on the successful development of our drug candidate, ATI-450.

Our pipeline includes ATI-450, our investigational oral, novel, selective MK2 inhibitor compound, which we are developing as a potential treatment for moderate to severe rheumatoid arthritis and potentially other immuno-inflammatory diseases.

The success of our business will significantly depend on our successful development of and/or our ability to pursue strategic alternatives for, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize, ATI-450.

If we are unable to raise sufficient additional capital or generate revenue from transactions with potential third-party partners for the development and/or commercialization of our drug candidates , we could be forced to curtail our planned operations.

Our business is dependent on the successful development of our drug candidate, zunsemetinib.

Our pipeline includes zunsemetinib, our investigational oral, novel, selective MK2 inhibitor compound, which we are developing as a potential treatment for moderate to severe rheumatoid arthritis and other immuno-inflammatory diseases.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies, intellectual property, potential future revenue streams or drug candidates.

Until such time, if ever, as we can earn substantial revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings and license and partnership agreements.

To the extent that we raise additional capital through the sale of equity securities or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder.

To the extent that we raise additional capital through the sale of equity securities or convertible debt securities, our stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of our common stock.

Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

3 unchanged sentences

We have a limited history as a clinical-stage biopharmaceutical company developing and partnering our drug candidates, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

Our operations over the last several years have been largely focused on raising capital, undertaking preclinical studies and conducting clinical trials, and acquiring new drug candidates and related intellectual property.

Our operations over the last several years have been largely focused on undertaking preclinical studies and conducting clinical trials, drug discovery, acquiring new drug candidates and related intellectual property, and raising capital.

We have had limited time to demonstrate our ability to successfully develop, manufacture and identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates.

4 unchanged sentences

Our business has been adversely affected by the effects of the COVID-19 pandemic, which has resulted in travel and other restrictions in order to reduce the spread of the disease, which, among other things, direct businesses and governmental agencies to cease non-essential operations at physical locations, prohibit certain non-essential gatherings, and order cessation of non-essential travel.

In response to these public health directives and orders, we have implemented a virtual operations strategy, including teleworking and other alternative work arrangements for all employees.

In response to these public health directives and orders, we have implemented a virtual operations strategy, including teleworking, staggered work schedules for lab personnel and other alternative work arrangements for employees.

The effects of our alternative work arrangement policies may negatively impact productivity, disrupt our business and delay our preclinical drug development and clinical trials and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.

1 unchanged sentence

Quarantines, executive and similar government orders, and business shutdowns, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain.

Some of our third-party manufacturers which we use for the supply of materials for our drug candidates or other materials necessary to manufacture drug product to conduct preclinical studies and clinical trials are located in countries affected by COVID-19, and should they experience disruptions, such as temporary closures or suspension of services, we would likely experience delays in advancing these studies and trials.

Some of our third-party manufacturers which we use for the supply of materials for our drug candidates or other materials necessary to manufacture drug product to conduct preclinical studies and clinical trials have encountered some delays due to staffing shortages as a result of COVID-19 infections, and should they continue to experience disruptions or experience more significant disruptions, such as temporary closures, suspension of services or staffing shortages, we would likely experience delays in advancing these studies and trials.

In addition, our clinical trials have been and may continue to be affected by the COVID-19 pandemic.

2 unchanged sentences

Similarly, our ability to recruit and retain subjects and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, may adversely impact our clinical trial operations.

For example, due to the COVID-19 pandemic subject enrollment in our ATI-450-CAPS-201 trial was paused as a result of which, among other reasons, we have decided to focus our efforts and resources on other immuno-inflammatory diseases.

The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically.

While the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or predict, the widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity and impact our ability to make scheduled payments pursuant to our Loan and Security Agreement with Silicon Valley Bank, or SVB.

In addition, a recession or

market correction resulting from the further spread of COVID-19 could materially affect our business and the value of our common stock.

The global COVID-19 pandemic continues to rapidly evolve.

The extent to which the COVID-19 pandemic impacts our business, our preclinical and clinical development and our regulatory efforts will depend on future developments that are highly uncertain and cannot be predicted, such as the geographic spread of the disease, the duration of the outbreak, travel restrictions, quarantines, stay-at-home orders, social distancing requirements and business closures, and supply chain and other disruptions in the United States and other countries, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease, including the success of mass vaccination efforts.

The spread of COVID-19 and its variants, which has caused a broad impact globally, may materially affect us economically.

In addition, a recession or market correction, inflation or other negative global economic conditions resulting from the further spread of COVID-19 could materially affect our business and the value of our common stock.

The global COVID-19 pandemic continues to evolve.

The extent to which the COVID-19 pandemic impacts our business, our preclinical and clinical development and our regulatory efforts will depend on future developments that are highly uncertain and cannot be predicted, such as the spread of the disease, the introduction of new variants, the duration of the pandemic, travel restrictions, quarantines, stay-at-home orders, social distancing requirements, business closures, and supply chain and other disruptions in the United States and other countries, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease, including the administration of vaccines.

Accordingly, we do not yet know the full extent of the impacts on our business, our preclinical and clinical development and regulatory activities, healthcare systems or the global economy as a whole.

1 unchanged sentence

In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described herein.

We may not be able to generate sufficient cash to service our indebtedness, including the Loan and Security Agreement with SVB.

In March 2020, we entered into the Loan and Security Agreement with SVB, pursuant to which we borrowed $11.0 million.

Our obligations under the Loan and Security Agreement are secured by substantially all of our assets except for our intellectual property, and restrict us from encumbering our intellectual property without SVB’s prior written consent.

The Loan and Security Agreement contains customary representations, warranties and covenants by us, which covenants, among other things, limit our ability, subject to specified exceptions, to convey, sell, lease, transfer, assign or otherwise dispose of our assets;

engage in any business other than the businesses currently engaged in by us or reasonably related thereto;

liquidate or dissolve;

undergo specified change of control events;

create, incur, assume or be liable for indebtedness;

create, incur, allow or suffer any liens on our property;

pay dividends and make other restricted payments;

make investments;

or enter into any material transactions with our affiliates.

Our obligations under the Loan and Security Agreement are subject to acceleration upon the occurrence of specified events of default, including a material adverse change in our business, operations or financial condition.

We may also enter into other debt agreements in the future which may contain similar or more restrictive terms.

Our ability to make scheduled monthly payments or to refinance our debt obligations depends on numerous factors, including the amount of our cash reserves and our actual and projected financial and operating performance.

These amounts and our performance are subject to certain financial and business factors, as well as prevailing economic and competitive conditions, including the impact of the COVID-19 pandemic, some of which may be beyond our control.

We cannot guarantee that we will maintain a level of cash reserves or cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our existing or future indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness.

We cannot guarantee that we would be able to take any of these actions, or that these actions would permit us to meet our scheduled debt service obligations.

Failure to comply with the covenants and conditions of the Loan and Security Agreement could result in an event of default, which could result in an acceleration of amounts due under the Loan and Security Agreement.

We may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness or to make any accelerated payments, and SVB could seek to enforce security interests in the collateral securing such indebtedness, which would harm our business.

Risks Related to the Development and Potential Commercialization of Our Drug Candidates

1 unchanged sentence

We have invested significant efforts and financial resources in the development of our drug candidates and the identification of potential drug candidates.

Our ability to earn substantial revenue from our drug candidates will depend heavily on our ability to successfully develop and pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize these drug

The success of any drug candidates that we develop, including ATI-450, will depend on several factors, including:

The success of any drug candidates that we develop, including zunsemetinib, will depend on several factors, including:

● successful completion of preclinical studies and our clinical trials;

14 unchanged sentences

Following submission, the NDA for any drug candidate may not be accepted for substantive review, or even if it is accepted for substantive review the FDA or other comparable foreign regulatory authorities may require additional studies or clinical trials, additional data, or additional manufacturing steps, or require other conditions before they will reconsider or approve the application, which could increase costs and cause delays in the marketing approval process and which may require the expenditure of additional resources.

These delays would also impact our ability to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates.

These delays would also impact our ability to

identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates.

In addition, the FDA or other comparable foreign regulatory authorities may not consider sufficient any additional required studies, clinical trials, data or information that we perform and complete or generate, or we may decide to abandon the program.

8 unchanged sentences

A failure of one or more clinical trials can occur at any stage of testing.

The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not

necessarily predict final results.

The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results.

Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their drug candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their drugs.

58 unchanged sentences

● our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates would be harmed.

For example, we are supporting an investigator-initiated trial of ATI-450 in hospitalized patients with COVID-19.

Although the COVID-19 trial is not sponsored by us, the use of ATI-450 in a hospitalized and severely ill patient population may be associated with adverse events and risks that could jeopardize our development of ATI-450 in other populations and indications, including our trials in subjects with moderate to severe rheumatoid arthritis.

Any of these events could prevent us from pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize the particular drug candidate and could significantly harm our business, results of operations and prospects.

Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more subject data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose interim, topline or preliminary data from our clinical trials, such as the preliminary topline results from our Phase 2a trial of ATI-450 in subjects with moderate to severe rheumatoid arthritis, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a full analysis of all data related to the particular trial.

We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data.

From time to time, we may publicly disclose interim, topline or preliminary data from our clinical trials, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a full analysis of all data related to the particular trial.

We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully

and carefully evaluate all data.

In addition, we may report preliminary analyses of only certain endpoints rather than all endpoints.

7 unchanged sentences

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the potential of the particular program, the likelihood of marketing approval or commercialization of the particular drug candidate, any approved product, and our company in general.

information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular program, drug candidate or our business.

In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is derived from information that is typically extensive, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular program, drug candidate or our business.

If the interim, topline or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

4 unchanged sentences

This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our drug candidates and jeopardize our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates.

We currently conduct and may in the future conduct clinical trials for our drug candidates outside the United States.

The FDA, EMA or comparable foreign regulatory authorities may not accept data from such trials, and doing so subjects us to the risk that clinical development of our drug candidates may be adversely affected by changes in local and regional political and economic conditions.

We currently conduct and may in the future conduct clinical trials for our drug candidates outside the United States.

The acceptance of trial data from clinical trials conducted outside the United States or another jurisdiction by the FDA or comparable foreign regulatory authorities may be subject to certain conditions or may not be accepted at all.

Such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted.

There can be no assurance that the FDA, EMA or any comparable foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable jurisdiction.

If the FDA, EMA or any comparable regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in our drug candidates not receiving approval or clearance for commercialization in the applicable jurisdiction.

In particular, we may enroll patients in our Phase 2b trial of zunsemetinib in subjects with moderate to severe rheumatoid arthritis in multiple countries in Europe, including Ukraine.

Any escalation of political tensions, economic

instability, military activity or civil hostilities in Ukraine could disrupt our ability to conduct such trial, or delay or adversely affect the timeliness of such trial.

This could result in the need for alternative trial sites, which could be costly and time-consuming and delay the clinical development of zunsemetinib.

We may not be successful in our efforts to increase our pipeline of drug candidates, including by in-licensing or acquiring additional drug candidates.

A key element of our strategy is to build and expand our pipeline of drug candidates.

To build our pipeline, we may seek to in-license or acquire additional drug candidates.

To build our pipeline, we may seek to in-license or acquire additional drug candidates, in addition to our in-house capabilities.

We may not be able to identify or develop drug candidates that are safe, tolerable and effective.

2 unchanged sentences

Because we have limited financial and management resources, we focus on development programs and drug candidates that we identify for specific indications.

As such, we are currently primarily focused on the development of ATI-450 as a potential treatment for moderate to severe rheumatoid arthritis and potentially other immuno-inflammatory diseases and ATI-1777 as a potential treatment for moderate to severe atopic dermatitis.

As such, we are currently primarily focused on the development of zunsemetinib as a potential treatment for moderate to severe rheumatoid arthritis and other immuno-inflammatory diseases, ATI-1777 as a potential treatment for moderate to severe atopic dermatitis, ATI-2138 as a potential treatment for T cell-mediated autoimmune diseases and ATI-2231 as a potential treatment for oncology.

As a result, we may forego or delay pursuit of opportunities with other drug candidates or for other indications that later prove to have greater commercial potential.

4 unchanged sentences

For any of our drug candidates that receive marketing approval, our potential third-party partners may fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community.

If such third-party partners fail to obtain an adequate level of acceptance for our drug candidates, we may not earn significant revenue

and we may not become profitable.

If such third-party partners fail to obtain an adequate level of acceptance for our drug candidates, we may not earn significant revenue and we may not become profitable.

The degree of market acceptance of any drug candidate, if approved, will depend on a number of factors, including:

11 unchanged sentences

We will face competition with respect to any drug candidates that we may seek to develop or through our potential third-party partners, commercialize, in the future, from many different sources, including major pharmaceutical, biotechnology and specialty pharmaceutical companies, academic institutions and governmental agencies and public and private research institutions.

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 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 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 a drug that we may develop.

2 unchanged sentences

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors.

Smaller or early-stage companies

may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or that may be necessary for, our development programs.

10 unchanged sentences

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 products 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.

14 unchanged sentences

We face an inherent risk of product liability exposure related to the testing of our drug candidates in human clinical trials and an even greater risk relating to any of our commercial products that we have previously sold or are being sold by third-party partners.

If we cannot successfully defend ourselves against claims that our commercial products that

we have previously sold or are being sold by third-party partners, or drug candidates, caused injuries, we will incur substantial liabilities.

If we cannot successfully defend ourselves against claims that our commercial products that we have previously sold or are being sold by third-party partners, or drug candidates, caused injuries, we will incur substantial liabilities.

Regardless of merit or eventual outcome, product liability claims may result in:

29 unchanged sentences

If we or any of our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving marketing applications.

We cannot assure you that upon inspection by a given regulatory

authority, such regulatory authority will determine that any of our clinical trials complies with GCP regulations.

We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials complies with GCP regulations.

In addition, our clinical trials must be conducted with drug product produced under cGMP regulations.

26 unchanged sentences

We may incur added costs and delays in identifying and qualifying any such replacement.

currently have arrangements in place for redundant supply or a second source for the active pharmaceutical ingredients and/or drug product for our drug candidates.

We do not currently have arrangements in place for redundant supply or a second source for the active pharmaceutical ingredients and/or drug product for our drug candidates.

We expect to continue to depend on third-party contract manufacturers for the foreseeable future.

68 unchanged sentences

Our issued U.S.

patents covering our lead inhibitor of the MK2 signaling pathway, ATI-450, expire in 2034 and other issued patents covering different MK2 signaling pathway inhibitors expire in 2031 and 2032.

We currently do not have any patents issued directed to our lead “soft” JAK inhibitor, ATI-1777, but any claims that may issue would expire in 2038.

Our issued patent covering other novel “soft” JAK inhibitors expires in 2038.

We currently do not have any patents issued directed to our lead ITK inhibitor, ATI-2138, but any claims that may issue would expire in 2039.

Our issued patents covering other

novel inhibitors of ITK expire between 2035 and 2038.

Given the amount of time required for the development, testing and regulatory review of new drug candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.

patents covering zunsemetinib expire in 2034.

We currently do not have any patents issued directed to ATI-2231, but any claims that may issue would expire in 2040.

Our issued U.S.

patent covering ATI-1777 expires in 2038.

Our issued U.S.

patent directed to ATI-2138 expires in 2039.

commercialized.

As a result, our patent portfolio may not provide us or our potential third-party partners with sufficient rights to exclude others from commercializing drugs similar or identical to ours.

21 unchanged sentences

Filing, prosecuting and defending patents on our drug candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States.

For example, our lead inhibitor of the MK2 signaling pathway, ATI-450, is currently covered by patents and applications in the United States, European Union and other foreign markets.

We currently do not have any patents issued directed to our lead “soft” JAK inhibitor, ATI-1777, or our lead ITK inhibitor, ATI-2138, rather we have pending applications in the United States, European Union and other foreign markets directed to each of ATI-1777 and ATI-2138.

For example, zunsemetinib is currently covered by patents and applications in the United States, European Union and other foreign markets.

While we have issued U.S.

patents directed to ATI-1777 and ATI-2138, we do not currently have any patents for such drug candidates in the European Union or other foreign markets;

rather, we have pending applications in the European Union and other foreign markets directed to each of ATI-1777 and ATI-2138.

Currently, we do not have any issued patents directed to ATI-2231, but we have a pending PCT application.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.

The legal systems of some countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents generally.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent

applications at risk of not issuing and could provoke third parties to assert claims against us.

We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful.

5 unchanged sentences

A third party may hold intellectual property, including patent rights, that are important or necessary to the development and/or commercialization of our drug candidates.

It may be necessary for our potential third-party partners to use the patented or proprietary technology of third parties to further develop and/or commercialize our drug candidates.

If our potential third-party partners are not able to obtain a license from these third parties on commercially reasonable terms, our business could be harmed, possibly materially, and even if they are able to, it may result in the reduction of revenue we earn from such partner as a result of payment obligations such partner has to the licensor.

It may be necessary for us or our potential third-party partners to use the patented or proprietary technology of third parties to further develop and/or commercialize our drug candidates.

If we or our potential third-party partners are not able to obtain a license from these third parties on commercially reasonable terms, our business could be harmed, possibly materially, and even if we or they are able to, it may result in the reduction of revenue we earn from such partner as a result of payment obligations to the licensor.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

15 unchanged sentences

Many of our employees and our licensors’ employees were previously employed at other biotechnology or pharmaceutical companies.

claims that these employees, our licensors or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer.

Although we and our licensors try to ensure that our employees and our licensors’ employees do not use the proprietary information or know-how of others in their work for us, we or our licensors may be subject to claims that these employees, our licensors or we have used or disclosed intellectual property, including trade secrets or

other proprietary information, of any such employee’s former employer.

Litigation may be necessary to defend against these claims.

23 unchanged sentences

If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

The validity, scope and enforceability of any of our patents that cover any of our commercial products or any of our drug candidates can be challenged by competitors.

The likelihood that a third party will challenge the patents covering a commercial product is increased because it is a marketed product.

The challenge may come in the form of a patent office proceeding, such as an inter partes review,

challenging the validity of the patents or a district court proceeding, such as a paragraph IV litigation arising out of the filing of an ANDA.

If a third party files an ANDA or 505(b)(2) application for a generic of a commercial product, and relies in whole or in part on studies conducted by or for us, the third party will be required to certify to the FDA that either:

(1) there is no patent information listed in the FDA’s Orange Book with respect to our NDA for the applicable approved drug;

(2) the patents listed in the Orange Book have expired;

(3) the listed patents have not expired, but will expire on a particular date and approval is sought after patent expiration;

or (4) the listed patents are invalid or will not be infringed by the manufacture, use or sale of the third party's generic drug.

A certification that the new drug will not infringe the Orange Book-listed patents for the applicable approved drug, or that such patents are invalid, is called a paragraph IV certification.

If the third party submits a paragraph IV certification to the FDA, a notice of the paragraph IV certification must also be sent to us once the third party’s ANDA is accepted for filing by the FDA.

We may then initiate a lawsuit to defend the patents identified in the notice.

The filing of a patent infringement lawsuit within 45 days of receipt of the notice automatically prevents the FDA from approving the third party’s ANDA until the earliest of 30 months or the date on which the patent expires, the lawsuit is settled, or the court reaches a decision in the infringement lawsuit in favor of the third party.

If we do not file a patent infringement lawsuit within the required 45-day period, the third party’s ANDA will not be subject to the 30-month stay of FDA approval.

Litigation or other proceedings to enforce or defend intellectual property rights are often very complex in nature, may be very expensive and time-consuming, may divert our management's attention from our core business, and may result in unfavorable results that could limit our ability to prevent third parties from competing with our commercial products.

The validity, scope and enforceability of any of our patents that cover any of our drug candidates can be challenged by competitors.

If any of our drug candidates advance through development or are approved by the FDA, one or more third parties may challenge the current patents, or patents that may issue in the future, within our portfolio covering these drug candidates.

The challenge may come in the form of a patent office proceeding, such as an inter partes review challenging

the validity of the patents, or a district court proceeding such as a paragraph IV litigation arising out of the filing of an ANDA.

Litigation or other proceedings to enforce or defend intellectual property rights are often very complex in nature, may be expensive and time-consuming, may divert our management's attention from our core business, and may result in unfavorable results that could limit our ability to prevent third parties from competing with our drug candidates, if approved.

Any such challenge could result in the invalidation of, or render unenforceable, some or all of the relevant patent claims or a finding of non-infringement , which would harm our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates, and earn revenue from such arrangements.

3 unchanged sentences

Our issued U.S.

patents covering ATI-450, our lead inhibitor of the MK2 signaling pathway, expire in 2034, and other issued patents covering different MK2 signaling pathway inhibitors expire in 2031 and 2032.

We currently do not have any patents issued directed to our lead “soft” JAK inhibitor, ATI-1777, but any claims that may issue would expire in 2038.

Our issued patent covering other novel “soft” JAK inhibitors expires 2038.

We currently do not have any patents issued directed to our lead ITK inhibitor, ATI-2138, but any claims that may issue would expire in 2039.

Our issued patents covering other novel inhibitors of ITK expire between 2035 and 2038.

patents covering zunsemetinib expire in 2034.

We currently do not have any patents issued directed to ATI-2231, but any claims that may issue would expire in 2040.

Our issued U.S.

patent covering ATI-1777 expires in 2038.

Our issued U.S.

patent directed to ATI-2138 expires in 2039.

Given the amount of time required for the development, testing and regulatory review of new drug candidates, patents protecting our drug candidates might expire before or shortly after such candidates begin to be commercialized.

6 unchanged sentences

However, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request.

We may not be granted an extension because of, for example, failing to apply within

applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements.

We may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements.

Moreover, the applicable time period or the scope of patent protection afforded could be less than we request.

8 unchanged sentences

Outside of the United States we cannot be certain that any country’s patent or trademark office will not implement new rules that could seriously affect how we draft, file, prosecute and maintain patents, trademarks and patent and trademark applications.

We cannot be certain that the patent or trademark offices of countries outside the United States will not implement new rules that increase costs for drafting, filing, prosecuting and maintaining patents, trademarks and patent and trademark applications or that any such new rules will not restrict our ability to file for patent protection.

For example, we may elect not to seek patent protection in some jurisdictions or for some drug candidates in order to save costs.

9 unchanged sentences

● our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in major commercial markets;

● we may not develop additional proprietary technologies that are patentable.

● we may develop additional proprietary technologies that are not patentable.

Risks Related to Regulatory Approval of Our Drug Candidates and Other Legal Compliance Matters

8 unchanged sentences

The process of obtaining marketing approvals, both in the United States and abroad, is expensive and may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the drug candidates involved.

Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted drug application, may cause delays in the approval or rejection of an application.

Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical or other studies.

40 unchanged sentences

Physicians, on the other hand, may prescribe products for off-label uses.

Although the FDA and other regulatory agencies do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications from companies or their sales force with respect to off-

label uses of products for which marketing clearance has not been issued.

However, companies may share truthful and not misleading information that is otherwise consistent with the product’s FDA approved labeling.

16 unchanged sentences

Similarly, failure to comply with the European Union’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

These and other risks associated with the failure by our potential third-party partners to comply with regulatory requirements may compromise our ability to earn revenue from arrangements with such third-party partners for our drug candidates.

These and other risks associated with the failure by our

potential third-party partners to comply with regulatory requirements may compromise our ability to earn revenue from arrangements with such third-party partners for our drug candidates.

Our potential third-party partners’ relationships with third-party payors, health care professionals and customers in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, health information privacy and security and other health care laws and regulations, and any failure to comply with such laws and regulations could have a material adverse effect on our ability to earn revenue from arrangements with such third-party partners for our drug candidates.

6 unchanged sentences

Further, several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal health care covered business, the Anti-Kickback Statute has been violated.

The intent standard was further amended by the Affordable Care Act, to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a

Moreover, 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 False Claims Act;

3 unchanged sentences

● HIPAA, as amended by HITECH, and their respective implementing regulations, which impose obligations on covered health care providers, health plans, and health care clearinghouses, as well as their business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity and their subcontractors that use, disclose, access, or otherwise process protected health information, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

● the federal Open Payments program, created under Section 6002 of the Affordable Care Act (commonly known as the Physician Payments Sunshine Act) and its implementing regulations, which requires specified manufacturers of drugs, devices, biologics or medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to CMS information related to payments or other “transfers of value” made to physicians, which is defined to include doctors, dentists, optometrists, podiatrists and chiropractors and teaching hospitals, as well as applicable manufacturers to report annually to CMS ownership and investment interests held by physicians and their immediate family members, and, beginning in 2022, will require applicable manufacturers to report information related to payments and other transfers of value provided in the previous year to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants and certified nurse midwives.

All such reported information is publicly available;

report annually to CMS information regarding ownership and investment interests held by physicians and their immediate family members;

● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving health care items or services reimbursed by non-governmental third-party payors, including private insurers;

20 unchanged sentences

● expansion of health care fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, which include, among other things, new government investigative powers and enhanced penalties for non-compliance;

● a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

● a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

● extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

1 unchanged sentence

● expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

● the new requirements under the federal Open Payments program and its implementing regulations;

● a new requirement to annually report drug samples that manufacturers and distributors provide to physicians;

● a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

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

● requirements under the federal Open Payments program and its implementing regulations;

● a requirement to annually report drug samples that manufacturers and distributors provide to physicians;

● the Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

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, or the 2017 Tax Act, includes a provision that repealed, 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”.

The 2017 Tax Act includes a provision that repealed, 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”.

Additionally, 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 2017 Tax Act.

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.

Further, 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 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.

These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year that became effective 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.

These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year that became effective 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.

The American Taxpayer Relief Act of 2012, which was signed into law in January 2013, among other things, further reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Any similar new laws may result in additional reductions in Medicare and other health care funding, which could have a material adverse effect on our ability to earn revenue from arrangements with our potential third-party partners for our drug candidates.

Any similar new laws may result in additional reductions in Medicare

and other health care funding, which could have a material adverse effect on our ability to earn revenue from arrangements with our potential third-party partners for our drug candidates.

We expect that the Affordable Care Act, as well as other health care reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that our potential third-party partners receive for any approved drug candidate.

7 unchanged sentences

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, 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 creates 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 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.

As a result of litigation challenging the Most Favored Nation model, on December 27, 2021, CMS published a final rule that rescinded 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 drug access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

6 unchanged sentences

In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a drug.

To obtain coverage and reimbursement or pricing approval in some countries, our potential third-party partners may be required to conduct a clinical trial that compares the cost-effectiveness of our drug candidate to other available procedures.

To obtain coverage and reimbursement or pricing approval in some countries, our potential third-party partners may be required to conduct a clinical trial that compares the

cost-effectiveness of our drug candidate to other available procedures.

If reimbursement of our drug candidates is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our potential third-party partners may not able to generate revenue, which in turn may adversely affect our ability to earn revenue from arrangements with such third-party partners for our drug candidates.

15 unchanged sentences

import and export controls and economic sanctions laws and regulations, and we are required to import and export our drug candidates, technology and services in compliance with those laws and regulations, including the U.S.

Export Administration Regulations, the International Traffic in Arms Regulations, and economic embargo and trade sanction programs administered by the Treasury Department’s Office of Foreign Assets Control.

Export Administration Regulations, U.S.

Customs regulations, the International Traffic in Arms Regulations, and economic embargo and trade sanction programs administered by the U.S.

Treasury Department’s Office of Foreign Assets Control.

economic sanctions and export control laws and regulations prohibit the shipment of certain products and services to countries, governments and persons targeted by U.S.

20 unchanged sentences

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on the management, development, clinical, financial, legal and business development expertise of Dr.

Neal Walker, our Chief Executive Officer, Dr.

David Gordon, our Chief Medical Officer, Frank Ruffo, our Chief Financial Officer, and Kamil Ali-Jackson, our Chief Legal Officer, as well as the other members of our scientific and clinical teams.

Although we have entered into employment agreements with certain of our executive officers, each of

them may currently terminate their employment with us or resign at any time.

We are highly dependent on the management, development, clinical, financial, and business development expertise of Dr.

Neal Walker, our Chief Executive Officer, Frank Ruffo, our Chief Financial Officer, Dr.

Joseph Monahan, our Chief Scientific Officer, and James Loerop, our Chief Business Officer, as well as the other members of our scientific and clinical teams.

Although we have entered into employment agreements with our executive officers, each of them may currently terminate their employment with us or resign at any time.

We do not maintain “key person” insurance for any of our key executives other than for Dr.

9 unchanged sentences

We are exposed to the risk that our employees, independent contractors, consultants, third-party partners, principal investigators, CROs and vendors may engage in fraudulent conduct or other illegal activity.

Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates FDA regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA, manufacturing standards, federal and state health care laws and regulations, and laws that require the true, complete and accurate reporting of financial information or data.

and accurate reporting of financial information or data.

In particular, sales, marketing and business arrangements by our potential third-party partners in the health care industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices.

9 unchanged sentences

The market price for our common stock may be influenced by many factors, including:

● the commencement, enrollment or results of any clinical trials we may conduct, or changes in the development status of our drug candidates;

● the commencement, enrollment and/or results of any preclinical studies and clinical trials we may conduct, or changes in the development status of our drug candidates;

● any delay in our regulatory filings for any of our drug candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information;

19 unchanged sentences

● other events or factors, many of which are beyond our control.

In the past, stockholders have initiated class action lawsuits against pharmaceutical companies following periods of volatility in the market prices of these companies’ stock.

For example, two purported class action complaints were filed against us and certain of our executive officers alleging violations of certain federal securities laws and two stockholder derivative actions were filed against certain of our executive officers and directors alleging breaches of fiduciary duties.

We and the other defendants dispute the plaintiffs’ claims and intend to defend these matters vigorously.

In the past, stockholders have initiated class action lawsuits against us and other pharmaceutical companies following periods of volatility in the market prices of these companies’ stock.

We have entered into indemnification agreements with our executive officers and directors which provide, among other things, that we will indemnify such officer or director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as our director, officer or other agent, and otherwise to the fullest extent permitted under Delaware law and our bylaws.

These cases, and additional litigation, if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources from our business.

Such additional litigation, if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources from our business.

Sales of a substantial number of shares of our common stock into the market could cause the market price of our common stock to drop significantly, even if our business is doing well.

20 unchanged sentences

These provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.

We are a “smaller reporting company” and, as a result of the reduced disclosure and governance requirements applicable to smaller reporting companies, our common stock may be less attractive to investors.

We are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K, and we intend to take advantage of some of the exemptions from reporting requirements that are applicable to other public companies that are not smaller reporting companies, including:

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

● reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements.

We may take advantage of these reporting exemptions until we are no longer a smaller reporting company.

We will remain a smaller reporting company until the last day of any fiscal year for so long as either (1) the market value of our shares of common stock held by non-affiliates does not equal or exceed $250.0 million as of the prior June 30th, or (2) our annual revenues did not equal or exceed $100.0 million during such completed fiscal year and the market value of our shares of common stock held by non-affiliates did not equal or exceed $700.0 million as of the prior June 30th.

We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions.

If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.

18 unchanged sentences

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited.

We have completed an analysis under Section 382 for NOLs generated from July 13, 2012 through July 20, 2020.

We have completed an analysis under Section 382 for NOLs generated from July 13, 2012 through December 31, 2021.

Although we have experienced Section 382 ownership changes since 2012, we have concluded that we should have sufficient ability to utilize NOLs accumulated during the periods tested.

We have not yet determined if a Section 382 ownership change has occurred after July 20, 2020.

We have not yet determined if a Section 382 ownership change has occurred after December 31, 2021.

In addition, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.

19 unchanged sentences

Our business and operations would suffer in the event of computer system failures, cyber-attacks or a deficiency in our cyber-security.

Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization.

Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, supply chain attacks, ransomware attacks, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization.

The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

17 unchanged sentences

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance.

For example, proposals have been made in Congress (which have not yet been enacted) that would make a number of changes to the federal income tax law applicable to corporations.

Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.

4 unchanged sentences

We incur significant costs and demands upon management as a result of being a public company.

As a public company listed in the United States, we incur, and will continue to incur, particularly after we cease to be a “smaller reporting company,” significant legal, accounting and other costs.

As a public company listed in the United States, we incur, and will continue to incur, particularly now that we no longer qualify as a “smaller reporting company,” significant legal, accounting and other costs.

These costs could negatively affect our financial results.

4 unchanged sentences

Failure to comply with these rules might also make it more difficult for us to obtain some types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.

The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of

directors or as members of senior management.

Unresolved Staff Comments

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 1A. Risk Factors