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Item 1. Business

2024-02-27 compared with 2023-02-23 · 142 added, 147 removed, 348 unchanged (45% of the section changed)

We are a clinical-stage biopharmaceutical company focused on developing novel drug candidates for immuno-inflammatory diseases.

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.

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, 1/3 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 proprietary KINect drug discovery platform combined with our preclinical development capabilities allows us to identify and advance potential drug candidates that we may develop independently or in collaboration with third parties.

In addition to identifying and 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.

We also provide contract research services to third parties enabled by our early-stage research and development expertise.

In January 2024, we announced that we are undertaking a strategic review of our business.

We are dedicated to developing a pipeline of novel drug candidates to address the needs of patients with immuno-inflammatory diseases who lack satisfactory treatment options .

Our approach to achieve this goal includes the following key elements:

● Create new medicines through kinome innovation.

We are exploring the kinome, a subset of the human genome that consists of a collection of 518 protein kinases, one of the largest of all human gene families, responsible for signal transduction controlling cellular responses.

Classified into eight major groups based on their structural similarity to each other, kinases are key regulators of cell function in many cell processes.

By transferring phosphates to other molecules, kinases can induce a cellular response to environmental cues.

Dysregulation and/or activating/blocking mutations in kinases can disrupt normal cell signaling and lead to diseases ranging from autoimmune diseases to diabetes and cancer, making them important targets for drug development.

There are over 70 kinase inhibitors approved by the U.S.

Food and Drug Administration, or FDA, on the market;

however, these drugs only target a small fraction of the kinome, with many clinically relevant kinase targets lacking validated inhibitors.

In 2021, the kinase inhibitors market was valued at over $57 billion.

We’re focused on novel approaches toward the design and development of kinase inhibitors that target key enzymes involved in chronic inflammation, autoimmune disease, and the regulation of cancer growth, survival and metastasis.

● Identify drug candidates through our KINect drug discovery platform.

Our proprietary KINect platform enables us to identify potential drug candidates through a unique combination of our proprietary chemical library of kinase inhibitors, our novel approach to inhibitor modalities, our expertise in structure-based drug design, or SBDD, and our custom kinase assays.

● Scientific discovery led by world-class kinase expertise.

We have assembled an accomplished team of kinome experts skilled at developing novel kinase targeted medicines.

Our talented and diverse team of scientists and professionals have extensive experience in cell and molecular biology, biochemistry, enzymology, biomarker development, immunology, in vivo efficacy models, SBDD and medicinal chemistry.

● Broaden our drug development pipeline internally and externally.

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, in addition to developing assets in-house.

● Pursue strategic alternatives for our drug candidates.

We intend 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.

Our Drug Candidates

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

Our pipeline of drug candidates is summarized in the table below.

These investigational drugs were developed internally utilizing our proprietary KINect drug discovery platform.

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Immuno-Inflammatory

MK2 inhibitor

Rheumatoid arthritis

(moderate to severe)

Hidradenitis suppurativa

(moderate to severe)

Psoriatic arthritis

(moderate to severe)

“Soft” JAK 1/3 inhibitor

Atopic dermatitis

(moderate to severe)

Phase 2b Complete

ITK/JAK3 inhibitor

T cell-mediated autoimmune diseases

Gut-Biased Program

JAK inhibitor

Inflammatory bowel disease

Phase 1 Complete

MK2 inhibitor

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Pancreatic cancer

Clinical Programs

Zunsemetinib, an Investigational Oral MK2 Inhibitor

We are developing zunsemetinib, an investigational oral MK2 inhibitor, as a potential treatment for rheumatoid arthritis, hidradenitis suppurativa and psoriatic arthritis.

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/IL17 biologics and JAK inhibitors for treating certain immuno-inflammatory diseases.

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

Moderate to Severe Rheumatoid Arthritis

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 American College of Rheumatology 20%/50%/70% (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, 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 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.

In December 2021, we initiated 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 consists of a 12-week treatment period and a 30-day follow-up period, and seeks to enroll approximately 240 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 expect topline data in the second half of 2023.

Moderate to Severe Hidradenitis Suppurativa

In December 2021, we initiated 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 consists of a 12-week treatment period and a 30-day follow-up period.

The trial has completed enrollment with 95 subjects randomized in the United States.

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

We expect topline data in March of 2023.

Moderate to Severe Psoriatic Arthritis

In June 2022, we initiated 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 psoriatic arthritis (ATI-450-PsA-201).

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

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

We expect topline data by the end of 2023.

* We plan to support Washington University in St.

Louis through investigator-initiated trials for these indications.

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

We are developing ATI-1777, an investigational topical “soft” JAK 1/3 inhibitor, as a potential treatment for moderate to severe atopic dermatitis.

ATI-1777 is an investigational topical “soft” Janus kinase, or JAK, 1/3 inhibitor for the potential treatment of atopic dermatitis and potentially other dermatologic conditions.

“Soft” JAK inhibitors are designed to be topically applied and active in the skin, but rapidly metabolized and inactivated when they enter the bloodstream, which may result in low systemic exposure.

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).

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 UTI (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.

In May 2022, we initiated a Phase 2b, multicenter, randomized, double-blind, vehicle-controlled, parallel-group trial to determine the efficacy, safety, tolerability and pharmacokinetics of ATI-1777 in subjects with moderate to severe atopic dermatitis (ATI-1777-AD-202).

In this trial, we are exploring 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.

This trial consists of a 4-week treatment period and a 2-week follow-up period, and seeks to enroll approximately 240 subjects in the United States.

The primary endpoint is the percentage change from baseline in EASI score at week 4.

We expect topline data mid-2023.

In January 2024, we announced positive top-line results from our Phase 2b study of ATI-1777 in patients with mild to severe atopic dermatitis (ATI-1777-AD-202).

ATI-1777-AD-202 was a Phase 2b, multicenter, randomized, double-blind, vehicle-controlled, parallel-group clinical trial to evaluate the efficacy, safety, tolerability and pharmacokinetics, or PK, of multiple concentrations (0.5%, 1% and 2%) of twice daily, or BID, treatment with ATI-1777 and a single concentration (2%) of once daily, or QD, treatment with ATI-1777.

The trial randomized 250 patients with mild, moderate or severe atopic dermatitis, including adults and children as young as 12 years old, across 30 clinical trial sites in the United States.

The study met the primary efficacy endpoint, the percent change from baseline in the Eczema Area and Severity Index, or EASI, score at week 4, with statistical significance for patients treated with ATI-1777 2% BID compared to patients treated with vehicle (69.7% versus 58.7% in the pooled vehicle group, p=0.035).

While not statistically powered, ATI-1777 2% BID and 2% QD also showed improvement in the proportion of patients who reached an IGA-TS response (or the Investigator Global Assessment Treatment Success, the U.S.

FDA regulatory endpoint) at week 4 (ATI-1777 2% BID:

37.2% compared to 27.1% in vehicle, p=0.141;

ATI-1777 2% QD:

36.6% compared to 26.3% in vehicle, p=0.137).

In addition, a PK analysis showed minimal levels of exposure to ATI-1777.

The mean steady state trough drug levels at week 4 were 0.319 ng/mL, representing 0.7% of IC50 for JAK 1/3 inhibition in whole blood.

In total, 97% of ATI-1777 plasma samples from dosed patients had concentrations below 1/10th of the IC50, and six samples (from five ATI-1777-treated patients) of 570 samples analyzed had concentrations above 1/4 of the IC50.

No meaningful safety findings were observed and ATI-1777 was well tolerated.

We intend to seek a development and commercialization partner for this program.

ATI-2138, an Investigational Oral Covalent ITK/JAK3 Inhibitor

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

ATI-2138 is an investigational oral covalent inhibitor of interleukin-2-inducible T cell kinase, or ITK, and JAK3 for the potential treatment of T cell-mediated autoimmune diseases.

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

We have selected ulcerative colitis as the intended first clinical development target for ATI-2138.

We are also exploring additional indications that are relevant to the mechanism of action.

In October 2021, we submitted an Investigational New Drug application, or IND, for ATI-2138 for the treatment of psoriasis.

The IND was allowed by the U.S.

Food and Drug Administration, or FDA, in November 2021.

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

In this trial, 64 male and female healthy volunteer subjects were randomized in a 3:1 ratio into seven doses in eight cohorts.

Each cohort consisted of eight randomized subjects, with six receiving ATI-2138 and two receiving placebo.

Single dose levels were 1 mg, 3 mg, 5 mg, 15 mg, 25 mg, 50 mg and 80 mg.

Data from this trial showed that ATI-2138 was generally well tolerated at all doses tested in the trial.

No serious adverse events or severe adverse events were reported.

The most common adverse events in subjects treated with ATI-2138, headache (four subjects) and lightheadedness (two subjects), were mild and transient.

ATI-2138 demonstrated linear pharmacokinetic data and absorption with a favorable pharmacokinetic profile up to the 80 mg single dose.

The terminal half-life ranged from 1.5 to 2.5 hours.

In addition, no significant food effect at the 15 mg dose (fasted versus fed) was observed, and similar pharmacokinetic data was observed with the capsule versus tablet formulation at the 25 mg dose.

We also observed dose-dependent inhibition of both ITK and JAK3 exploratory pharmacodynamic biomarkers, and near complete inhibition of the dual ITK and JAK3-stimulated interferon production at the 15 mg through 80 mg doses.

In October 2022, we submitted a new IND for ATI-2138 for the treatment of ulcerative colitis, which was allowed in November 2022.

In December 2022, we initiated a Phase 1 placebo-controlled, randomized, multiple ascending dose (MAD) trial to investigate the safety, tolerability, pharmacokinetics and pharmacodynamics of ATI-2138 in healthy volunteers (ATI-2138-PKDP-102).

This trial seeks to enroll approximately 60 healthy volunteers in the United States.

We expect topline data in the second half of 2023.

Preclinical Programs

ATI-2231, an Investigational Oral MK2 Inhibitor

We are exploring the use of ATI-2231, an investigational oral MK2 inhibitor 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.

We expect clinical development activities to be initiated in 2023, which we expect to advance as a collaboration with an academic 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.

In September 2023, we announced positive results from our Phase 1 multiple ascending dose, or MAD, trial of ATI-2138 (ATI-2138-PKPD-102).

ATI-2138-PKPD-201 was a two-week Phase 1 placebo-controlled, randomized, MAD trial to investigate the safety, tolerability, PK, and pharmacodynamics of ATI-2138 in healthy volunteers.

The study enrolled 60 healthy subjects across 6 dosing cohorts ranging from 10 to 80 mg of total daily doses, with eight active and two placebo controlled per arm.

Data from the trial demonstrated that ATI-2138 was generally well tolerated at all doses tested in the trial and had dose proportional PK.

Additionally, ATI-2138 demonstrated a dose-dependent inhibition of both ITK and JAK3 exploratory pharmacodynamic biomarkers, with near maximal inhibition achieved at the 30 mg total daily dose.

No serious adverse events were reported.

We are assessing the most effective development pathway, including the lead indication, for ATI-2138.

Zunsemetinib, an Investigational Oral MK2 Inhibitor

Zunsemetinib, or ATI-450, is an investigational oral, novel, small molecule selective inhibitor of the mitogen-activated protein kinase-activated protein kinase 2, or MK2, signaling pathway for the potential treatment of metastatic breast cancer, or MBC, and pancreatic ductal adenocarcinoma, or PDAC.

Phosphorylated MK2 is upregulated in primary tumors and metastatic bone lesions from MBC patients.

MK2 is responsible for the production of a subset of critical pro-tumorigenic factors secreted by the stromal microenvironment to support tumor growth and metastasis.

Additionally, MK2 drives both metastatic and chemotherapy induced bone loss in MBC patients through, at least in part, its role in RANKL biology and osteoclast production and activation.

In preclinical studies, zunsemetinib has been demonstrated to impact murine models of MBC through inhibition of tumor growth and metastasis along with bone preservation.

Phosphorylated MK2 is highly expressed in PDAC tissue and expression levels are directly associated with poor outcomes in patients with PDAC.

The current first and second line standard of care for PDAC patients is FOLFIRINOX combination chemotherapy.

Irinotecan and its metabolite, SN-38, are the main drivers of cancer cell apoptosis associated with FOLFIRINOX.

The effectiveness of FOLFIRINOX is limited by pro-survival resistance mechanisms that are driven through SN-38 activation of the MK2 pathway and phosphorylation of two direct MK2 substrates, HSP-27 and Beclin-1.

In both patient derived xenografts and in the autochthonous genetic KPPC model of PDAC in mice, zunsemetinib has demonstrated that it blocks phosphorylation and activation of HSP-27, induces tumor cell killing and enhances the efficacy of FIRINOX (a version of FOLFIRINOX used in murine models).

We plan to support Washington University in St.

Louis in its investigator-initiated Phase 1b/2 trials of zunsemetinib in patients with MBC and PDAC.

Discovery Programs and KINect Drug Discovery Platform

We conduct small molecule drug discovery and preclinical development research through KINect, our proprietary drug discovery platform, which we acquired as part of our acquisition of Confluence Life Sciences, Inc.

(now known as Aclaris Life Sciences, Inc.), or Confluence, in 2017.

Our KINect platform enables us to identify potential drug candidates through a unique combination of our proprietary chemical library of kinase inhibitors, our novel approaches to inhibitor modalities, our expertise in SBDD, and our custom kinase assays.

Our focus has been on difficult to drug kinase targets that exhibit some level of clinical, genetic and/or pharmacological disease validation.

Our approach involves the following mechanisms:

(1) reversible and irreversible covalent inhibitors, (2) molecular glue/complex targeted inhibitors and (3) targeted protein degraders.

These novel approaches are currently being utilized to prosecute additional validated, difficult to drug kinase targets with the goal of demonstrating potential platform utility.

Reversible and Irreversible Covalent Inhibitors:

Central to the KINect platform is our novel chemical library of several hundred compounds specifically designed to target non-catalytic cysteine residues near the adenosine triphosphate, or ATP, binding site of more than 300 kinases.

Furthermore, using state-of-the-art drug modeling software, we are able to elaborate the structure of viable drug-like compounds culled from our library and extensive in silico libraries to optimize reversible binding to the target kinase and allow them to selectively form a covalent bond with the cysteine residue near the ATP site on the specific kinase target.

This approach delivers inhibitors exhibiting enhanced potency, selectivity and biochemical efficiency thereby allowing pharmacological access to ‘hard to drug’ kinases.

We then assess the function of the newly created compounds with physiologically relevant custom assays that effectively translate to human diseases.

Molecular Glue/Complex Targeted Inhibitors:

In cells, protein kinases function in the context of multicomponent signalosome complexes.

Targeting kinase complexes with small molecule drugs designed to either stabilize (molecular glue) and/or generate inactive complexes provides several potential advantages over those designed against a single protein target including:

(1) utilizing a more physiological translatable complex as the target, (2) providing novel protein interfaces devoid of competing endogenous ligands to target, and (3) identifying new chemical matter and modalities for difficult to drug kinase targets.

As such, we have identified target complexes of interest and have initiated discovery programs against these targets.

Targeted Protein Degraders:

We believe targeted protein degraders represent a powerful approach to develop drugs against biologically important but difficult to drug proteins including kinases.

This approach harnesses cellular protein clearing machinery to selectively remove proteins from the cell in contrast to inhibiting their function.

This approach is particularly useful for kinases that have both catalytic and scaffolding functions for which inhibitors will only partially impact biology.

We are exploring selective degraders of kinase targets with multiple biological functions in addition to the catalytic activity.

This integrated drug discovery engine allows us to rapidly progress potential drug candidates from idea to Investigational New Drug, or IND.

We believe this platform can generate inhibitors with fit-for purpose mechanisms ranging from reversible, to reversible-covalent to irreversible-covalent kinase and kinase complex inhibitors along with targeted protein degraders.

We are actively progressing several discovery programs focused on delivering the next wave of drug candidates from our KINect platform.

Our discovery efforts center on targeting kinases that play pivotal roles in various inflammatory, autoimmune, and oncology pathways.

We intend to evaluate both internal and external development options, including strategic partnerships, for these assets.

Discontinued Programs

We were previously developing zunsemetinib as a potential treatment for various immuno-inflammatory diseases, including hidradenitis suppurativa, psoriatic arthritis, and rheumatoid arthritis.

In March 2023, we announced that our Phase 2a study of zunsemetinib in patients with hidradenitis suppurativa did not meet its primary or second efficacy endpoints, and in November 2023, we announced that our Phase 2b study of zunsemetinib in patients with rheumatoid arthritis did not meet its primary or second efficacy endpoints.

Following the results of these trials, in 2023 we discontinued further development of our MK2 inhibitor programs in immuno-inflammatory diseases, including halting enrollment in our Phase 2a study of zunsemetinib in patients with psoriatic arthritis.

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 zunsemetinib as a potential treatment for immuno-inflammatory diseases such as rheumatoid arthritis, hidradenitis suppurativa and psoriatic arthritis, 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.

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, hidradenitis suppurativa and psoriatic arthritis, 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, UCB, Regeneron Pharmaceuticals, 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.

With respect to ATI-1777 as a potential treatment for atopic dermatitis, there are several different types of therapies in the atopic dermatitis market, such as biologics, oral and topical corticosteroids, 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, or are approved for marketing, by large pharmaceutical companies, including AbbVie, Incyte, LEO Pharma A/S, Pfizer, and Sanofi and Regeneron Pharmaceuticals.

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.

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 Regeneron Pharmaceuticals and Sanofi.

In addition, we are aware of a number of companies including large pharmaceutical companies, such as Amgen, Dermavant Sciences, Eli Lilly, LEO Pharma A/S and Pfizer, developing and conducting clinical trials for investigational drug candidates that could compete with ATI-1777, in each case 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 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.

Further, we own numerous pending patent applications in the U.S., European Union and other foreign countries 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 pending patent applications in the U.S., European Union and other foreign countries directed to 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.

patent and numerous pending applications in the U.S.

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 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 PCT applications directed to crystal forms of ATI-1777 and 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 “soft” JAK inhibitor development program, we own numerous issued patents and pending applications in the United States 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 issued patents in the United States and other foreign countries, as well as pending applications in the United States and 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 pending applications in the United States and foreign countries directed to crystal forms of ATI-1777 and 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.

patents and pending applications in the U.S.

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.

patents and pending applications in the United States 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.

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.

We also own a pending PCT application directed to methods of using ATI-2138, which if issued, would expire in 2043, subject to any applicable adjustment or extension.

With respect to our MK2 signaling pathway inhibitor development program, we own numerous issued patents and pending applications to novel MK2 pathway inhibitors, including 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 own pending patent applications in the United States, European Union and other foreign countries directed to methods of treating various cancers, such as breast cancer and pancreatic cancer, by orally administering zunsemetinib, which, if issued, would each expire in 2041, subject to any applicable adjustment or extension.

Further, we own one U.S.

patent and numerous pending patent applications in the United States, European Union and other foreign countries directed to certain 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 exclusively license from Washington University pending applications in the United States and the European Union directed to methods of treating pancreatic cancer with MK2 inhibitors, including zunsemetinib, which, if issued, would expire in 2041, 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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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.

As part of the Confluence acquisition we acquired our investigational drug candidates zunsemetinib, ATI-1777 and ATI-2138.

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.

In addition to the payments described above, if we sell, license or transfer any of the intellectual property

acquired from Confluence pursuant to the Confluence Agreement to a third party, we will be obligated to pay the former Confluence equity holders a portion of any consideration received from such sale, license or transfer in specified circumstances.

In addition to the payments described above, if we sell, license or transfer any of the intellectual property acquired from Confluence pursuant to the Confluence Agreement to a third party, we will be obligated to pay the former Confluence equity holders a portion of any consideration received from such sale, license or transfer in specified circumstances.

Government Regulation and Product Approval

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Some preclinical studies may continue even after the IND is submitted.

In addition to including the results of the preclinical studies, the IND will also include a protocol detailing, among other things, the objectives of

the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the first phase lends itself to an efficacy determination.

In addition to including the results of the preclinical studies, the IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the first phase lends itself to an efficacy determination.

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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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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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 Bipartisan Budget Act of 2018, or the BBA, and the Infrastructure Investment and Jobs Act, will stay in effect through 2032 unless additional Congressional action is taken.

Under current legislation the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% 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.

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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, the Department of Health and Human Services, or 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 In addition, the IRA, among other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation.

These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges.

In addition, the IRA, among other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation.

These provisions take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges.

It is unclear how the IRA will be implemented in the future, but it is likely to have a significant impact on the pharmaceutical industry.

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It is unclear whether this executive order or similar policy initiatives will be implemented in the future.

On December 7, 2023, the Biden administration announced an initiative to control the price of prescription drugs through the use of march-in rights under the Bayh-Dole Act.

On December 8, 2023, the National Institute of Standards and Technology published for comment a Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights which for the first time includes the price of a product as one factor an agency can use when deciding to exercise march-in rights.

While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework.

The effect of reducing prices and reimbursement for certain of our drug candidates, if approved, could significantly impact our business and consolidated results of operations.

In addition, the IRA may meaningfully influence our and pharmaceutical industry business strategies.

In addition, the IRA may meaningfully influence our pharmaceutical industry business strategies.

In particular, it may reduce the attractiveness of investment in small molecule and biologic innovation.

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.

For example, on January 5, 2024, the FDA approved Florida’s proposal to import certain drugs from Canada for specific state healthcare programs.

It is unclear if and how this program will be implemented and whether it will be subject challenges in the United States or

Other states have also submitted proposals that are pending review by the FDA.

Any such approved importation plans, if implemented, may result in lower drug prices for products covered by those programs.

The Affordable Care Act, the IRA, 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.

Additional legislative actions may be taken in the future which may change current regulations, guidance and interpretations.

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The time can be shortened if the FDA determines that the applicant did not pursue approval with due diligence.

Patent extension cannot extend the

remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended.

Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended.

Similar provisions are available in the European Union and other foreign jurisdictions to extend the term of a patent that covers an approved drug.

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Our drug candidates, if approved, may not be considered cost effective, and government and third-party private health insurance coverage and reimbursement may not be available to patients or sufficient to allow our potential third-party partners to sell our drug candidates, if approved, on a competitive and profitable basis.

Our results of operations could be adversely affected by the Affordable Care Act and by other health care reforms that may be enacted or adopted in the future.

Our results of operations could be adversely affected by the Affordable Care Act, the IRA and by other health care reforms that may be enacted or adopted in the future.

In addition, increasing emphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products.

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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

As of December 31, 2023, we had 91 total employees, of which 86 were full-time employees.

On December 19, 2023, we announced a plan to reduce our workforce, which we anticipate to be substantially complete by June 2024.

All of our employees are located in the United States.

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Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.

The principal purposes of our equity incentive plans

are to attract, retain and reward personnel through the granting of stock-based compensation awards in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

The principal purposes of our equity incentive plans are to attract, retain and reward personnel through the granting of stock-based compensation awards in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

Corporate Information

11 unchanged sentences

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