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Item 1. Business

2021-03-01 compared with 2020-03-16 · 472 added, 390 removed, 290 unchanged (75% of the section changed)

We are a messen ger RNA medicines company focused on significant opportunities within liver and respiratory rare diseases, and the development of infectious disease vaccines utilizing our Self-Transcribing and Replicating RNA (“STARR”) technology.

In addition to our inter nal messenger RNA (“mRNA”) platform, our proprietary lipid nanoparticle delivery system, LUNAR, has the potential to enable multiple nucleic acid medicines.

Our company was founded in 2013 as Arcturus Therapeutics, Inc., and we have maintained our principal executive offices in San Diego, California since that time.

In November 2017, Alcobra Ltd., an Israeli limited company, merged with our company, changed its name to Arcturus Therapeutics Ltd.

(“Arcturus Israel”) , and commenced trading on Nasdaq under t he symbol “ARCT.” On June 17, 2019, we redomiciled to the United States (the “Redomiciliation”) and changed our name to Arcturus Therapeutics Holdings Inc., as described more fully below.

We are a global clinical-stage messenger RNA medicines company focused on the development of infectious disease vaccines and significant opportunities within liver and respiratory rare diseases.

In addition to our messenger RNA (“mRNA”) platform, our proprietary lipid nanoparticle (“LNP”) delivery system, LUNAR, has the potential to enable multiple nucleic acid medicines, and our proprietary Self-Transcribing and Replicating RNA (“STARR”) technology has the potential to provide longer-lasting RNA and sustained protein expression.

We are leveraging our proprietary platform relating to LUNAR and our nucleic acid technologies to develop and advance a pipeline of mRNA-based vaccines and therapeutics for infectious diseases and rare genetic disorders with significant unmet medical needs.

Our key proprietary technology has the potential to address the major hurdles in RNA development, namely the effective and safe delivery of RNA therapeutics to disease-relevant target tissues.

We believe the versatility of our platform to target multiple tissues, its compatibility with various nucleic acid therapeutics, and our expertise in developing scalable manufacturing processes puts us in a good position to deliver on the next generation of nucleic medicines.

We have deep expertise in the discovery and development of RNA medicines, including key experience in the production of RNA drug substance and nanoparticle-formulated drug product.

We have a pipeline of seven drug candidates in late-stage discovery and early-stage development, two of which are wholly-owned and five of which involve partnered programs.

We have developed and continue to develop LUNAR, a novel lipid-mediated delivery technology platform, which draws from a growing library of over 200 lipids that were designed at Arcturus and many of which are claimed in issued patents.

Other lipids in this growing library are undergoing extensive research to test for desirable properties, and we continue to seek patent protection for newly designed lipids.

Our lipid library is intended to enable safer and more efficient delivery than lipids commonly used in the industry.

We have developed the STARR technology platform which combines self-replicating RNA with LUNAR into a single solution for partners.

Our wholly-owned, LUNAR and nucleic acid technologies are covered by a patent portfolio of 182 patents and patent applications, issued in the United States, China, Europe, Japan and other countries.

We believe that we can use our proprietary technologies to develop RNA medicines in multiple therapeutic approaches:

(1) mRNA, DNA, and replicon protein replacement for ther apeutics and protein delivery for vaccines;

(2) siRNA , microRNA , and antisense oligonucleotides – knockdown of genes overexpressed in disease;

and (3) CRISPR, TALEN, zinc finger proteins, megaTALs and meganucleases – gene editing of errant genes.

Redomiciliation

In May 2019, shareholders of Arcturus Israel approved the Redomiciliation.

In connection therewith, in February 2019, Arcturus Israel entered into a share exchange agreement (the “Exchange Agreement”) with Arcturus Therapeutics Holdings Inc., a newly established Delaware corporation.

In June 2019, pursuant to the terms of the Exchange Agreement, all issued ordinary shares and options to purchase ordinary shares of Arcturus Israel were exchanged on a one-for-one basis for newly issued shares of common stock and options to purchase common stock, respectively, of the Company, resulting in Arcturus Israel becoming a subsidiary of the Company.

In June 2019, Arcturus Israel’s ordinary shares were delisted from trading on Nasdaq and the Company’s shares commenced trading on Nasdaq under the symbol “ARCT.” Arcturus Israel is now a wholly-owned subsidiary of the Company, which is the successor to Arcturus Israel.

Proceedings to liquidate Arcturus Israel are now pending in Israeli court.

Recent Developments

On March 4, 2020, we were awarded a grant (the “Grant”) from the Singapore Economic Development Board to support the co-development of a potential COVID-19 vaccine with the Duke-NUS Medical School.

The grant provides for up to S$14.0 million (approximately US$10 million using the March 2, 2020 exchange rate) in grants to support the development of the vaccine.

A portion of the Grant will be paid by the Economic Development Board in advance and the remainder of the Grant will be paid to us upon the achievement of certain milestones related to the progress of the development of the vaccine, as set forth in the award agreement.

We have agreed to pay Duke -NUS Medical School a royalty based on annual net sales of the vaccine in markets or jurisdictions outside of Singapore.

In the first quarter of 2020, we submitted an Investigational New Drug (“IND”) application for our LUNAR-OTC development program.

RNA Medicines, Markets and Arcturus’ Technology

Rare Genetic Diseases

There is a significant unmet medical need in the field of rare genetic diseases.

The World Health Organization estimates that approximately 10,000 diseases are caused by an error or mutation in a single gene, and over 95% of known rare genetic diseases lack a U.S.

Food and Drug Administration (“FDA”), approved drug treatment.

Moreover, these diseases affect approximately one in a hundred people at birth, and approximately 350 million people worldwide live with a rare genetic disease.

Many of these diseases cause moderate to severe symptoms, significantly decreasing quality of life and life expectancy.

We believe the versatility of our platform to target multiple tissues, its compatibility with various nucleic acid therapeutics, and our expertise in developing scalable manufacturing processes puts us in a leading position to deliver on the next generation of nucleic acid medicines.

We are a clinical stage company with the commencement of clinical trials in two of our programs and further expanded our pipeline with the initiation of our COVID-19 and flu vaccine programs.

We continued to progress our existing pipeline and collaborations, and have, with our manufacturing partners, manufactured current good manufacturing practice (“cGMP”) batches yielding significant quantities of clinical trial materials for ARCT-810 (LUNAR-OTC) and ARCT-021 (LUNAR-COV19 Vaccine), which includes lyophilized vaccine.

We intend to advance ARCT-021(LUNAR-COV19 Vaccine) into Phase 3 and to request Emergency Use Authorization (“EUA”), commence a Phase 2 multiple-dose study of ARCT-810 in OTC-deficient patients in mid-2021, file an Investigational New Drug (“IND”) or Clinical Trial Application (“CTA”) for a first in human study in Q4 2021 for ARCT-032 (LUNAR-CF), and evaluate in preclinical studies the efficacy and safety of a seasonal influenza vaccine.

We are focused on expanding our portfolio of internally-owned and partnered programs to advance our clinical and preclinical candidates in a timely and cost-effective manner.

The Company was founded in 2013 as Arcturus Therapeutics, Inc., and we have maintained our principal executive offices in San Diego, California since that time.

In November 2017, Alcobra Ltd., an Israeli limited company, merged with our company, changed its name to Arcturus Therapeutics Ltd.

(“Arcturus Israel”), and commenced trading on Nasdaq under the symbol “ARCT.” On June 17, 2019, we redomiciled to the United States (the “Redomiciliation”) and changed our name to Arcturus Therapeutics Holdings Inc.

Recent Business Development Activities

In March 2020, we partnered with Duke-NUS Medical School to develop a COVID-19 vaccine for the Singapore Economic Development Board (“EDB”) based on the Company’s STARR Technology and designated the vaccine candidate LUNAR-COV19 (ARCT-021).

Duke-NUS Medical School is a graduate entry medical school in Singapore, established in 2005 through a partnership between Duke University School of Medicine and the National University of Singapore (“NUS”).

On March 4, 2020, we were awarded a grant of S$14.0 million (approximately US$10.0 million using the exchange rate at the time the grant contract was entered into) from the EDB to support the co-development of ARCT-021 with Duke-NUS Medical School.

In exchange for the grant, we agreed to supply ARCT-021 to the EDB for use within Singapore and we retained the right to sell and market ARCT-021 outside of Singapore.

We have agreed to pay Duke-NUS Medical School a low single digit royalty based on annual net sales of the vaccine in markets or jurisdictions outside of Singapore.

On August 17, 2020, we entered into a definitive Supply Agreement (the “Supply Agreement”) with the Israeli Ministry of Health (“MOH”) which provides for the supply of ARCT-021 to the MOH.

The MOH has elected to reserve delivery by us of doses of ARCT-021 for an initial 500,000 vaccinations (the “Initial Reserve Doses”).

The Supply Agreement also provides the MOH with the right to elect, in its discretion, to purchase additional doses of ARCT-021 upon notice to us prior to specified dates at specified purchase prices.

On October 14, 2020, we received a non-refundable first reserve payment of $12.5 million from the MOH.

This payment serves as partial

payment for the Initial Reserve Doses.

The Supply Agreement is described more fully below in the section titled “Other Material Agreements.”

On October 2, 2020, we were awarded a grant from the EDB to support the further development of our LUNAR-COV19 vaccine candidate.

The grant provides for up to S$9.3 million (approximately US$6.7 million) to support the development of the vaccine candidate.

The grant is payable in two installments upon the achievement of certain milestones related to the progress of the development of the vaccine candidate.

The Company received the first installment of approximately $3.6 million in the fourth quarter of 2020.

In November 2020, we announced a manufacturing support agreement with the EDB that includes a limited recourse loan of up to S$62.1 million, which was subsequently borrowed in full during January 2021 in an amount equivalent to $46.6 million.

The manufacturing support agreement is described more fully below in the section titled “Other Material Agreements.”

In February 2021, we entered into an exclusive license agreement with Alexion Pharmaceuticals, Inc.

(“Alexion”) pursuant to which Alexion granted to us an exclusive, worldwide license to exploit certain specified Alexion patents.

The exclusive license agreement is described more fully below in the section titled “Other Material Agreements.”

Nucleic Acid Medicines and an Introduction to Arcturus’ Platform Technologies

Nucleic Acid Medicines

Nucleic acid medicines have the potential to treat diseases caused by genetic mutations, including diseases that cannot be treated by conventional drugs, such as small molecules and biologics.

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Within a cell, DNA carries the blueprint, in the form of genes, from which all proteins necessary for life are encoded.

Each gene has the code, carried by a nucleic acid molecule called mRNA , informing the cell’s machinery the pattern of building blocks for making one or more proteins needed for normal biological function.

Each gene’s code is transcribed into a nucleic acid molecule called mRNA, which informs the cell’s own machinery how to organize amino acid building blocks to make one or more proteins needed for normal biological function.

Nucleic acid therapeutics represent a significant advancement in targeted medicines and several of this class of therapeutics are being developed by public and private companies.

These therapies have three general objectives:

to reduce the a mount of a target protein in a patient by binding to and destroying the associated target mRNA (antisense and small interfering RNA (“siRNA”));

to reduce the amount of a target protein in a patient by binding to and destroying the associated target mRNA (antisense and small interfering RNA (“siRNA”));

to increase the amount of a functioning target protein by introducing a functional gene or mRNA that encodes for a protein that replaces a malfunctioning protein (mRNA therapy, CRISPR, gene therapy, replicon);

to introduce proteins from viruses or malfunctioning proteins in certain cancers to train the immune system to recognize and clear these proteins (nucleic acid vaccines).

siRNA therapies, which use double-stranded RNA compounds that activate machinery in the cell to destroy a target RNA in the body, are useful in treating diseases caused by viral infections, malfunctioning proteins or an excess of certain p roteins that contribute to the severity of symptoms of a disease.

siRNA compounds are designed to bind selectively to one mRNA and trigger machinery in the body to cause the cell to destroy the disease-causing mRNA.

This mechanism, called RNA interference, can be used to prevent mutated genes from being translated into defective proteins that cause disease, and can stop viruses from replicating inside the body.

Naked RNA and some DNA molecules are quickly degraded by enzymes in the bloodstream and can cause a strong immune response.

Therefore, nucleic acid medicines (mRNA , DNA and siRNA) developed for systemic use must use a vector or other targeting mechanism to deliver the nucleic acid medicine to target cells.

Viral delivery vectors and lipid-mediated delivery systems are the two main delivery systems used in a large number of nucleic acid-based therapeutics in development.

Viral delivery vectors are very effective at delivering DNA to alter the genetic make-up of the patient’s cells.

However, they can cau se liver damage and activate an immune response in human patients.

Viral vectors may also cause accidental mutations in host DNA.

Patients treated with viral vectors can also develop antibodies against these vectors that make the treatment less effective o ver time.

Lipid-mediated delivery systems are the most common non-viral vectors because they are biocompatible and do not cause insertional mutagenesis.

They can also be manipulated to target specific cells in the body.

In 2018, the first siRNA therapy u sing a lipid-mediated delivery system, Onpattro (patisiran), was approved by the FDA for the treatment of polyneuropathy associated with hereditary transthyretin amyloidosis.

Infectious Diseases

According to the National Foundation for Infectious Diseases, over 50,000 people die each year due to vaccine-preventable diseases in the United States alone.

Viral infections can spread rapidly and become epidemic, as demonstrated by the outbreak of the H1N1 virus (Swine Flu), and most recently by the outbreak of the novel coronavirus (“Coronavirus ”) reported to have originated in Wuhan, China.

The Coronavirus has resulted in thousands of deaths and tens of thousands of cases have been diagnosed worldwide.

Outbreaks of new infectious diseases create demand for a new and novel approaches to producing vaccines in a more cost effective and quicker manner.

We believe that our STARR technology has potential to address this need.

On March 4, 2020, we entered into a strategic partnership with the Singapore Economic Development Board and Duke-NUS Medical School to develop a potential vaccine for COVID-19.

We continue to innovate to achieve a competitive advantage in LUNAR delivery of DNA-based and STARR-based vaccines.

LUNAR lipid nanoparticles can be combined with STARR and have been shown to functionally deliver a replicon in rodents.

Lead STARR constructs are currently being generated in order to evaluate their ability to generate an immune response to coronavirus (COVID-19).

We aim to leverag e our proprietary and licensed intellectual property relating to LUNAR and our nucleic acid technologies to develop a pipeline of mRNA therapeutics for rare genetic disorders and infectious diseases with significant unmet medical needs.

In addition to our collaborations noted above, we are focused on balancing our portfolio with internally-owned and partnered programs to advance our preclinical candidates in a timely and cost-effective manner.

Our flagship program, LUNAR-OTC, is on track to enter first-in-human studies during 2020.

Our business strategy has four main areas of focus:

Drive existing collaborations to achieve first-in-human data for our LUNAR lipid-mediated delivery platform.

The value and promise of our proprietary LUNAR lipid-mediated delive ry platform have been recognized by our current partners and have garnered continuing partner interest.

This value is expected to increase substantially if preclinical data from our LUNAR formulated mRNA medicines is reproduced in our first human clinical studies.

We continue to push our first mRNA therapeutic, LUNAR-OTC , toward the clinic.

Our LUNAR-CF program is supported by our important collaboration with the Cystic Fibrosis Foundation, Inc.

Leverage our LUNAR lipid-mediated delivery platform to develop therapeutics for a broad range of additional rare liver and lung diseases.

We have demonstrated in preclinical models the utility of the LUNAR lipid-mediated delivery platform in two important liver cell types, stellate and hepatocyte, as well as bronchial cells in lungs.

Our internal research teams and collaboration partners are currently focused on discovering our next wave of innovative mRNA medicines and other nucleic acid modalities, respectively, for patients with debilitating rare diseases.

Advance the new collaboration with the Singapore government and Duke-NUS Medical School utilizing our STARR and LUNAR technologies to develop LUNAR-COV19, a potential vaccine to address the Coronavirus outbreak .

Develop a competitive advantage over other nucleic acid medicine companies by continuing to innovate in our core areas of research, including mRNA design and siRNA design, STARR technology, LUNAR lipid formulations and formulation production.

Our team has a wealth of research and development experi ence in the areas of siRNA and mRNA medicine design.

We continue to research new and better ways to develop and produce these important potential nucleic acid medicines.

In addition, our team has an advanced understanding of lipid-nanoparticle formulations, and is continually improving scalability and reproducibility of our LUNAR formulated nucleic acid drug candidates, which we believe will translate to better therapies for patients.

Our Competitive Strengths

We believe that our proprietary LUNAR lipid-med iated delivery and nucleic acid technologies (mRNA , DNA, siRNA, and STARR), extensive intellectual property portfolio and experienced research and development team will enable us to (i) advance our drug candidates and existing partnerships, and (ii) gain additional partners for our technology platform, thereby expanding future development and commercialization opportunities.

We believe that our competitive strengths include the following, among other areas:

LUNAR lipid-mediated delivery technology is potentially applicable to all nucleic acid medicines being developed today that require a formulation.

Preclinical studies have shown that LUNAR delivery technology is compatible with different types of nucleic acids therapeutics, including mRNA , STARR, siRNA , microRNA , antisense oligonucleotides and other oligonucleotide therapeutic approaches.

We can combine our LUNAR technology with mRNAs that encode for a wide array of therapeutic proteins, including transmembrane proteins (such as transporters, GPCRs, and receptors), secreted proteins (such as hormones and antibodies), engineered nucleases (CRISPR and TALEN), engineered antigen receptors (CAR-T) and intracellular proteins (chaperones, enzymes, intrabodies).

We also have preclinical data demonstrating proof-of-concept for LUNAR delivery of DNA-based and STARR-based vaccines and therapeutics.

We believe that the potentially broad applicability of our LUNAR delivery technology is a distinct value driver.

In preclinical studies, LUNAR lipid-mediated delivery technology has been applied to different tissues and cell types via multiple routes of administration.

Most nucleic acid drugs that are marketed or in development are primarily active in liver cells called hepatocytes.

Preclinical studies have shown that LUNAR can deliver nucleic acid therapies to the liver to hepatocytes and hepatic stellate cells via intravenous injection.

If we are able to demonstrate in clinical studies our ability to deliver nucleic acid medicines to both of these cell types, this could provide us with a distinct advantage over other technologies that preferentially deliver to hepatocytes only, as stellate cells are key contributors to liver disease progression, including fibrosis and liver cancer.

In preclinical studies, we have also demonstrated functional delivery of LUNAR-formulated mRNA to lung cells through nebulized inhalation.

This is the foundation of our LUNAR-CF program and may pave the way for additional therapies to treat rare lung disorders.

Additionally, we have observed in preclinical studies that LUNAR-formulated compounds can be modulated to deliver nucleic acid compounds to muscle cells via intramuscular injection, lung cells via intravenous administration and eye cells via subretinal and intravitrial routes of administration.

Ability to repeat dose.

Multiple preclinical studies in rodents and non-human primates have shown no reduction in efficacy upon repeat dosing of LUNAR formulated RNA medicines (siRNA or mRNA).

We believe this indicates that LUNAR-delivered nucleic acids may not elicit antibody or cell-mediated immunity that can reduce potency upon repeat dosing.

Scalability of our technology.

Through our research and development activities, we have defined processes that allow for scalability of the production of nucleic acid therapeutics and the formulation of nucleic acid lipid delivery systems.

Biodegradability of Lipids.

Through an iterative process of rational design and in vivo evaluation, we have identified various structural motifs that favor fast esterase- catalyzed degradation and ha ve leveraged our knowledge to generate a library of proprietary biodegradable lipids .

The STARR technology platform combines self-replicating RNA with LUNAR, a proprietary nanoparticle delivery system, into a potential single solution for partners .

We believe that when STARR technology is delivered into the cell it has the potential to generate a protective immune response or drive therapeutic protein expression to prevent against or treat a variety of diseases.

A self-replicating RNA-based therapeutic vaccine has the potential to trigger rapid and immediate antigen expression within host cells and a stronger T-cell response.

This combination potentially provides longer-lasting RNA, and hence more exposure of the immune system to the antigen, thus lowering dose requirements as compared to traditional RNA-based vaccines.

Experienced team.

Our team has extensive experience in the discovery and development of nucleic acid medicines and vaccines, as well as experience and kno w-how in lipid-mediated delivery technology.

In early 2020, we added a new Chief Development Officer, Dr.

Steven Hughes, who will manage our future global clinical development.

Hughes brings over twenty years of clinical development experience in the fields of rare diseases, cardiovascular disease, and oncology.

In early 2020 we expect to transition to becoming a clinical stage pharmaceutical company with our flagship ARCT-810 program, and Dr.

Hughes will play a key role at this stage of our evolution.

Our intellectual property portfolio.

Our LUNAR and nucleic acid technologies are wholly-owned by us and covered by our patent portfolio of over 180 patents and patent applications in the United States, China, Europe, Japan and other countries.

Our intellectual property portfolio serves as a barrier-to-entry for competitors.

Unlike most other preclinical stage companies, our intellectual property portfolio is wholly-owned and not licensed-in, which should result in more favorable economic terms as we research, develop and commercialize our product candidates.

Ability to develop high barrier-to-entry products with rapid development of subsequent products with lower costs and risks.

The properties of our proprietary technologies, outlined above, allow us to develop high barrier-to-entry nucleic acid medicines.

We expect that the versatility of our LUNAR, UNA, and STARR platforms as well as our growing expertise in the design and manufacture of RNA will allow us to develop subsequent product candidates relatively quickly with less risk and lower costs.

We are using our proprietary technology to develop nucleic acid medicines to treat diseases with unmet medical needs, accelerated clinical paths and clear commercial opportunities.

Our preclinical pipeline currently has seven active preclinical drug discov ery and development programs.

This includes wholly-owned programs as well as collaboration partnerships described below.

The LUNAR-OTC development program is developing mRNA compounds to treat ornithine transcarbamylase (“OTC”) deficiency.

We have achieved preclinical proof-of-concept for LUNAR-OTC in a mouse model of the disease and have completed our first toxicology studies that will allow us to initiate clinical studies.

The toxicology studies will support our initial application of our IND application, which was submitted during the first quarter of 2020.

The LUNAR-CF program is developing mRNA compounds to replace dysfunctional cystic fibrosis transmembrane conductance regulator (“CFTR ”) protein in cystic fibrosis (“CF”) patients.

This program is supported by the CFF .

We have demonstrated proof of concept for LUNAR delivery into rodent epithelial airways, as well as functional restoration in the nasal epithelia of a CFTR -knock out mouse model.

We currently intend to file an IND supported by the LUNAR-CF program in 2021.

LUNAR-CV and LUNAR-MD are internal research programs focused on target validation of multiple pipeline LUNAR-mRNA program candidates.

This program will guide the future selection of metabolic and/or cardiovascular development programs.

We currently have collaboration partnerships with Ultragenyx Pharmaceutical, Inc.

(“ Ultragenyx ”);

Millennium Pharmaceuticals, Inc.

(“ Takeda ”), a wholly-owned subsidiary of Takeda Pharmaceutical Company Limited;

Janssen Pharmaceuticals, Inc.

(“ Janssen ”), an affiliate of Johnson & Johnson;

CureVac AG (“ CureVac ”);

the Singapore Economic Development Board and Duke-NUS Medical School , and other collaboration partners.

We are partnering with Ultragenyx to develop up to twelve mRNA therapeutic candidates for cert ain rare disease targets.

LUNAR-GSD3 is the first program under this partnership that has been publicly disclosed, and focuses on Glycogen Storage Disease Type 3, a disease caused by genetic mutations in the glycogen debranching enzyme, AGL, which leads to glycogen accumulation in liver and muscle.

We are partnering with Takeda to develop a nucleic acid-based therapeutic candidate for the treatment of nonalcoholic steatohepatitis (“NASH”).

We are partnering with Janssen to develop nucleic acid-based therape utic candidates for the treatment of hepatitis B virus infection (“HBV”).

We are partnering with the Singapore Economic Development Board and Duke-NUS Medical School to develop LUNAR-COV19, a potential vaccine to address the Coronavirus outbreak.

We are also partnering with other collaboration partners, in addition to those described above.

Our LUNAR Platform Technology

Brief Introduction to our LUNAR® and STARR™ Technology Platforms

A key challenge for nucleic acid medicines is the safe and effective delivery of the nucleic acid molecule.

We have developed a novel lipid-mediated delivery system called LUNAR.

LUNAR is a multi-component drug delivery system that incorporates a mixture of novel biodegradable lipids.

Lipids are molecules that contain hydrocarbons and make up the building blocks of the structure and function of living cells.

Examples of lipids include fats, oils, waxes, certain vitamins (such as A, D, E and K), hormones and most of the cell membrane that is not made up of protein.

LUNAR is designed to address technical challenges facing the delivery of nucleic acid medicines into cells.

We continue to expand our library of proprietary lipids, with over 200 to date.

Our preclinical studies have shown that formulations can be customized for the indication and target cell type of interest, and we have also demonstrated that our formulation process is scalable and reproducible.

Our LUNAR platform is described in more detail below.

Our STARR technology platform combines self-replicating RNA with our lipid-mediated delivery system, LUNAR, into a single solution to produce proteins inside the human body.

The STARR technology has the potential to generate a protective immune response or drive therapeutic protein expression to potentially prevent against or

treat a variety of diseases.

S elf-replicating RNA-based prophylactic vaccine s developed with STARR have the potential to trigger rapid and prolonged antigen expression within host cells resulting in protective immunity against infectious pathogens.

We believe t his combination of LUNAR and STARR technology may provide lower dose requirements due to superior immune response, sustained protein expression compared to non-self-replicating RNA-based vaccines and potentially enabl e us to produce vaccines more quickly and simpl y.

Our STARR platform is described in more detail below.

Our Development Programs

Arcturus’ Internal Programs Pipeline

Vaccines to Prevent Infectious Disease

According to the National Foundation for Infectious Diseases in a typical year, over 50,000 people die each year due to vaccine-preventable diseases in the United States alone.

According to the Centers for Disease Control and Prevention, influenza and pneumonia cases alone approach this number of deaths each year.

With the SARS-CoV-2 pandemic, more than 500,000 US citizens have died of COVID alone.

Outbreaks of new infectious diseases, and the rise of variants to existing viruses, create demand for new and novel approaches to producing vaccines in a more cost effective and quicker manner.

The current pandemic has highlighted the efficacy, safety, and rapidity in which nucleic acid medicines can be used to vaccinate vulnerable populations.

We are a leader in self-amplifying mRNA vaccine development.

In 2020, we progressed the rapid development of a self-amplifying mRNA vaccine to the Coronavirus that showed favorable safety and immunogenicity in Phase 1/2 trials after a single dose and have begun dosing in a Phase 2 trial.

Other pharmaceutical companies are clinically investigating self-amplifying mRNA SARS-CoV-2 vaccines as well, including GSK (Phase 1), and Pfizer (Phase 1).

We have also expanded our vaccine program to include seasonal influenza with a goal of beginning safety and immunogenicity trials in humans during the 2021/2022 influenza season.

Out internal programs include our LUNAR-COV19 and LUNAR-FLU vaccine programs as further described below.

The recent coronavirus pandemic has proven that mRNA vaccines can be highly efficacious and nimble, allowing for adjustments in antigenic sequences in record time.

ARCT-021 (LUNAR-COV19 Vaccine)

Coronaviruses are a family of viruses that can lead to respiratory illness, including Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV).

Coronaviruses are transmitted between animals and people and can evolve into strains not previously identified in humans.

On January 7, 2020, a novel coronavirus was identified as the cause of pneumonia cases in Wuhan City, Hubei Province of China.

On February 11, 2020, the World Health Organization announced the official name for the disease caused by SARS-CoV-2 virus (2019 novel coronavirus outbreak) as coronavirus disease 2019, commonly abbreviated as COVID-19.

The spread of COVID-19 has resulted in more than two million disease-related deaths across the globe.

S wift alert by health authorities and broad measures to contain the virus have not been entirely successful .

The development of effective vaccines and swift implementation of vaccination s will be key in stopping the spread of the COVID-19 pandemic .

Recent EUAs for COVID-19 vaccines from other companies have been backed by data from clinical trials supporting vaccine efficacy.

D urability of COVID-19 vaccines, including capability to prevent disease covered by SARS-CoV-2 variants, is an important consideration .

We expect both humoral and cellular immunogenicity to play a key role in providing durable and broad protection against COVID-19 and its variants.

Our COVID-19 vaccine candidate, ARCT-021, developed in conjunction with Duke-NUS Medical School, is based on our STARR technology platform.

The vaccine is designed to promote immune responses to the spike protein of the SARS-CoV-2 virus, which is the critical part of the virus that allows infection to occur.

We have commenced dosing with the ARCT-021 candidate in three clinical trials:

one first-in-human Phase 1/2 study (ARCT-021-01), one open label extension study to the same study (ARCT-021-02), and a Phase 2 study (ARCT-021-04).

The first of these studies (ARCT-021-01) was a randomized, blinded, placebo-controlled study exploring single and two-dose regimens of ARCT-021 (dose range:

1 to 10 µg ARCT-021 single dose, 3 to 5 µg ARCT-021 two dose) in younger and older healthy adults.

This study enrolled participants in a series of cohorts based on participant age, intended ARCT-021 dose for study, and based on one or two-dose administrations.

The study has completed enrollment of 106 participants, and some of these participants have transitioned to the ARCT-021-02 study, which is actively enrolling and is expected to complete in 2022.

An interim analysis was perfomed based on unaudited data from the single dose cohorts and the 5µg two-dose older and younger adult cohorts.

At the time of the analysis all included participants had completed at least 28 days after their last dose of study vaccine.

The interim analysis data from the ARCT-021-01 study were submitted to the Singaporean Health Science Authority (“HSA”) and the US FDA prior to approval to initiate enrollment in the Phase 2 study (ARCT-021-04).

Key findings from the ARCT-021-01 interim analysis include:

primarily mild-to-moderate adverse events following vaccination in younger and older adults, no vaccine-related serious adverse events, dose-related increases in binding antibody responses after single dose administration in younger and older adults at all doses evaluated, demonstration of neutralizing antibody responses after single dose administration in younger and older adults that fell within the range of titers from COVID-19 convalescent antibody responses measured on the same assay (PRNT50), and Th1- biased T cell activation following single dose administration in younger and older adults.

The Phase 2 study (ARCT-021-04) is a randomized, placebo-controlled study designed to evaluate the safety and immunogenicity of three different dosing schedules in a broader population of healthy younger and older adults.

The doses and schedules for additional exploration include:

5 µg ARCT-021, two dose regimen and 7.5 µg ARCT-021, as one- and two-dose regimens.

We have dosed over 500 participants across the United States and Singapore.

The next planned clinical study is the Phase 3, placebo-controlled efficacy study of ARCT-021 (ARCT-021-05).

We are presently preparing to advance with a 5 µg single dose regimen, to be confirmed based on pending Phase 2 data.

We expect that this study will initiate enrollment in Q2 2021 and will be executed in several countries with significant SARS-CoV-2 outbreaks.

Based on study recruitment and occurrence of COVID-19 cases in enrolled participants, we expect data establishing vaccine efficacy to prevent COVID-19 to be available in the latter part of 2021 and expect to analyze and submit an application seeking an EUA in one or more jurisdictions based on this data.

We plan for the study to continue execution into 2022, at which point we expect to use the data to seek full licensure of the ARCT-021 study.

Preclinical Challenge Studies

ARCT-021 Significantly Effective in Challenge Models

ARCT-021 was shown to be significantly effective in a virus challenge study in the human ACE2 transgenic mouse model.

The single dose provided complete protection from SARS-CoV-2 infection and death, compared to control mice which experienced 100% mortality.

Transgenic mice expressing a human ACE2 receptor received a single vaccination of either 2 µg or 10 µg of ARCT-021 RNA.

Mice were challenged with a lethal dose of SARS-CoV-2 clinical isolate 28 days after vaccination.

100% of vaccinated by at both doses survived for at least 14 days after challenge whereas unvaccinated mice died by day 7.

The vaccinated mice showed absolutely no clinical signs up to day 14 post challenge which was the study termination date.

In September 2020, a rhesus macaque immunogenicity and a SARS-CoV-2 virus challenge study sponsored by the National Institutes of Health (“ NIH ”) and the National Institute of Allergy and Infectious Diseases was initiated.

Non-human primates were immunized with either a single injection of 20 µg or 40 µg RNA dose, or two injections of a 5 µg or 20 µg RNA dose administered 28 days apart, and challenged with SARS-CoV-2 virus 42 days post single vaccination and 14 days post boost vaccination.

A single vaccination of 20 µg RNA dose yielded a >1,000 fold reduction in virus in the lungs.

Two injections of 5 µg reduced virus infection by >5,000 fold and virus was unde te ctable in non-human primates after two injection s of 20 µg RNA.

The amount of virus in the lungs from bronchioalveolar lavage vs.

RNA dose is shown in the figure below.

The results showed that a single administration of ARCT-021 was significantly effective in the primate model (macaque);

vaccinated macaques show substantial (3.30 log lower) reduction in median lung viral titers.

T Lymphocyte Mediated Immunity Is the Major Contributor to Protective Immunity Against Virus Challenge in Transgenic Mouse Model

Human ACE2 receptor transgenic mice were vaccinated with a single 1 µg dose and challenged with sublethal virus load 21 days post vaccination.

In one treatment group, B lymphocytes, responsible for producing virus neutralizing antibodies, were depleted three days prior to vaccination.

In a second group, T lymphocytes, responsible for killing cells infected with virus, were depleted three days prior to virus challenge.

In a third group, B cells were depleted 3 days prior to vaccination and T cells were depleted three days prior to virus challenge.

The above figure show s that no virus was detected in the lungs of mice depeted of B cells, marked as 100%, whereas mice depleted of T cells had an equivalent amount of virus as mice with depleted B cells and T cells, demonstrating that ARCT-021 induced cell mediated immunity plays a major role in conveying protective immunity against SARS-CoV-2 infection.

Studies have shown T cells to be more durable (approximately six times longer-lasting) than antibodies (Bert, et al.

Nature , 2020).

In another study performed by Public Health England, T cell counts of thousands of frontline workers were monitored for four months.

High T cell activities significantly correlated ( p =0.0006) with protection from COVID-19 infection even when no antibodies against SARS-CoV-2 could be detected.

mRNA platforms have the advantage of being able to more nimbly adapt to new viral strains.

We are closely evaluating COVID-19 variants, especially those strains that appear to evade the neutralizing antibodies to the original Wuhan strain such as the South African variant (B.1.351).

A study in non-human primates conducted by Dan Barouch (et al) of Harvard Medical School found that T-cell responses are important for COVID-19 vaccines, and in particular for strains that evade the neutralizing antibodies to the original Wuhan strain.

As shown above, ARCT-021 has shown robust cellular immunity, and we will gain a better understanding of ARCT-021’s coverage of COVID-19 variants as we continue to collect clinical data.

Influenza is estimated to cause one billion infections globally every year and hundreds of thousands of deaths, especially in the elderly and individuals with underlying medical conditions.

In many regions, influenza is seasonal, with infections peaking during November through April in the Northern Hemisphere and May through September in the Southern Hemisphere.

Year-round surveillance by the World Health Organization in collaboration with various national health agencies informs WHO recommendations on the strains of influenza most likely to spread during the upcoming influenza season.

National health agencies (such as the U.S.

Food and Drug Administration (“FDA”)) then make the final decision of which strains should be covered by vaccines licensed in their country.

Our LUNAR-FLU program has the objective of producing a safe and effective seasonal vaccine candidate with significant advantages over the traditional egg-based inactivated quadrivalent vaccine.

Inaccurate predictions of circulating influenza strains as well as mutations due to adaptation in egg-grown vaccines can substantially reduce efficacy on a year-to-year basis.

We believe the ability of mRNA platforms to nimbly adapt to new viral strains should help improve efficacy.

Also, mRNA vaccines do not face the challenge from mutations common to egg-grown vaccines.

LUNAR-FLU candidates will be evaluated preclinically in 2021 to support the goal of IND/CTA submission in the first half of 2022.

Rare Disease Medicines in Development

The Orphan Drug Act defines a rare disease as a disease or condition affecting fewer than 200,000 individuals in the United States.

According to the NIH, there are approximately 7,000 such diseases, that together affect nearly 30 million people in the United States.

The European Union defines a rare disease as having a prevalence of fewer than 5 in 10,000 people.

Collectively, these disorders affect between six and seven percent of the population in the developed world.

There is a pressing need for new medicines for rare diseases as few of the 7,000 rare diseases have approved treatments.

Biopharmaceutical industry researchers are making great progress in the fight against rare diseases as innovative science has opened new opportunities.

There have been incredible advances in the development of medicines to treat patients with rare diseases as researchers uncover the molecular and genomic drivers of many conditions.

More than 770 medicines have been approved by the FDA since the enactment of the Orphan Drug Act in 1983 and more than 800 medicines are currently in clinical development.

Despite recent progress, there is still much more work to be done.

Developing medicines to treat rare diseases presents scientific and operational challenges .

We believe our technology provides an excellent platform to address genetically inherited rare diseases, and we are focusing o n development of medicines to treat people with rare respiratory and liver diseases who currently have limited or no treatment options.

ARCT-810 (LUNAR-OTC)

The LUNAR-OTC development program addresses ornithine transcarbamylase (“OTC”) deficiency, a rare, genetic disease caused by mutations in the OTC gene that lead to dysfunctional or deficient OTC levels.

OTC deficiency causes the body to accumulate ammonia, which is neurotoxic and harmful to the liver.

OTC deficiency is the most common of the urea cycle disorders, a group of inherited metabolic disorders that make it difficult for affected patients to remove toxic waste products as proteins are broken down.

OTC deficiency is a life-threatening genetic disease.

OTC is a critical enzyme in the urea cycle, which takes place in liver cells, and converts ammonia to urea.

This conversion does not occur properly in patients with OTC deficiency and ammonia accumulates in their blood, acting as a neurotoxin and liver toxin.

High ammonia levels in the blood can cause severe symptoms including vomiting, headaches, coma and death.

OTC deficiency is an inherited disease that can cause developmental problems, seizures and death in newborn babies.

It is an X-linked disorder, and consequently more common in males.

Patients with less severe symptoms may present later in life, as adults.

Currently no cure exists for OTC deficiency, apart from liver transplant;

however, this treatment comes with significant risk of complications such as organ rejection, and transplant recipients must take immunosuppressant drugs for the rest of their lives.

Current standard of care for OTC patients is a low-protein diet, dietary supplements and ammonia scavengers to try and prevent accumulation of ammonia.

Life-threatening episodes of high ammonia levels can occur, requiring treatment with dialysis or hemofiltration.

These treatments do not address the underlying cause of disease and there remains a high unmet need for an effective treatment.

Our LUNAR-OTC development candidate, ARCT-810, uses our LUNAR platform to deliver normal OTC mRNA into liver cells, where OTC is produced and functions, to produce normal functioning OTC with possible disease-modifying effects.

Our LUNAR-OTC approach has the potential to treat the underlying defect that causes the debilitating symptoms of OTC deficiency, rather than mitigating symptoms by sequestering ammonia.

LUNAR-OTC has received orphan drug designation from the FDA for treatment of OTC deficiency.

Worldwide development and commercialization rights to ARCT-810 are entirely held by Arcturus.

Preclinical data in OTC deficiency murine models has demonstrated that dosing of LUNAR-OTC results in robust OTC protein expression and activity, thereby improving ureagenesis, reducing plasma ammonia and increasing survival.

We submitted an IND application to the FDA for a Phase 1b study in patients with OTC deficiency, and an additional CTA for a Phase 1 study in healthy volunteers was approved by the New Zealand Medicines and Medical Devices Safety Authority.

In April 2020, we announced that we were deemed allowed to proceed with the studies.

In November 2020, the last dose cohort completed the Phase 1, double-blind, placebo-controlled, single-dose, dose-escalation study of ARCT-810 in healthy volunteers.

In this study, ARCT-810 demonstrated favorable safety, tolerability and PK profiles.

A Phase 1b study in OTC-deficient patients in the United States opened for enrollment, with dosing initiated in the first subject in December 2020.

The trial will enroll approximately 12 patients and is designed to assess safety, tolerability and pharmacokinetics, as well as various exploratory biomarkers of drug activity.

The trial currently consists of nine sites in the United States.

We have received approval from Health Canada to conduct the trial in Canada and are working with sites in Canada in preparation for enrollment.

We intend to commence a Phase 2 multiple-dose study of ARCT-810 in OTC-deficient patients in mid-2021.

ARCT-032 (LUNAR-CF)

The LUNAR-CF program addresses cystic fibrosis lung disease, a progressive lung disease caused by mutations in the cystic fibrosis transmembrane conductance regulator (“CFTR”) gene.

In December 2020, we announced the selection and advancement of ARCT-032 as a development candidate for treatment of cystic fibrosis.

ARCT-032 uses our LUNAR platform to deliver codon-optimized CFTR mRNA into airway epithelial cells.

This allows airway cells to produce functional CFTR protein using their native translational machinery and protein trafficking pathways.

This approach has the potential to treat the underlying defect that causes CF lung disease,

regardless of what mutation type a patient has.

The Cystic Fibrosis Foundation ( “ CFF ” ) has recognized the potential of the LUNAR- CF program and has partnered with us to develop this important therapy.

ARCT-032 represents the first LUNAR-based mRNA therapeutic that will be delivered by the inhaled route, offering direct delivery to the affected airways with the potential to restore functional CFTR.

We received encouraging pre-IND feedback on our proposed non-clinical and clinical development program in January 2021.

We anticipate filing a CTA for a first in human study in Q4 2021 .

According to the NIH, cystic fibrosis is the most common rare disease in the world, with an estimated 30,000 diagnosed cases in the United States and 85,000 worldwide.

Approximately 1,000 people are newly-diagnosed with cystic fibrosis each year.

Cystic fibrosis is caused by one of 2,000 known mutations in the CFTR gene, which have been grouped into several different classes based on the mechanism of how they cause reduction in the production and/or function of the CFTR protein.

The CFTR protein is a cAMP-activated transmembrane protein that controls chloride and bicarbonate flow and is critical for lung homeostasis.

When CFTR is not present in the membrane or does not function properly, there is a deficit in the release of chloride and bicarbonate anions into the airways, and an associated increase of sodium uptake by the cells, thus dehydrating the airway surfaces and causing accumulation of a thick mucus layer.

This mucus causes clogging of the airways, a negative impact on breathing quality, and decreases the clearance of pathogens which accumulate in the airways, causing chronic infections, exaggerated inflammation, structural airway damage, and other serious complications not only related to the lung but to other organs such as pancreas and liver.

The median lifespan of CF patients in the United States is <40 years, and the cause of death is usually lung-related.

The daily standard-of-care for CF lung disease includes palliative treatments meant to treat existing lung disease and prevent the progression of the disease.

These treatments include aerosolized mucolytics, antibiotics, and airway clearance techniques that are time-consuming and represent a significant treatment burden for people with CF.

Many CF patients ultimately suffer from a critical decline in lung function and require lung transplants.

The FDA has approved several CFTR modulator therapies (Kalydeco, Orkambi, Symdeko, and Trikafta) that assist the mutant CFTR protein to reach the cell membrane and/or increase functional ion channel activity.

The CFTR modulators, while effective in some patients, are mutation-specific and therefore are not effective in all people with CF.

Other treatments are required to target Class I mutations (no CFTR produced;

approximately 10% of CF cases worldwide), and people who are intolerant or have poor response to CFTR modulator therapies.

We are focusing our LUNAR-CF program on these groups of patients, as they currently have the highest unmet need for CF therapies.

We presented data that demonstrated the significant potential for LUNAR-CF as a disease-modifying treatment at The American Society for Gene and Cell Therapy Conference in May 2020, and the North American Cystic Fibrosis Conference in October 2020.

The data presented demonstrated that (i) aerosolized LUNAR-mRNA formulation properties are optimal for lung therapeutics, (ii) codon optimized mRNAs produce a functional protein that can generate chloride channel activity in FRT cells, and can also restore chloride channel activity (measured by nasal potential difference) in a Class I CFTR-knockout mouse model, and (iii) aerosolized LUNAR can efficiently deliver mRNA to epithelial airways across species, including rodents and non-rodents (ferrets, non-human primates).

Taken together, these data demonstrate the proof of principle to validate LUNAR-CF, as we continue investigating various aspects of LUNAR-CF in several disease models of CF.

LUNAR construct with mRNA of CRE protein efficiently transduce s epithelial airways in a non-rodent model (Ferret)

In ferret, a 0.6 mg/ml dose of a LUNAR construct loaded with mRNA of the CRE protein was delivered to the airways of the ROSA26TG model.

Upon CRE-recombination, a robust conversion of the TdTomato (red) into EGFP (green) was observed by immunohistochemistry analysis of the ferret lungs.

Panels A and B show large and small airways, respectively.

Boxed area in EGFP (green) images show high magnification of the highly efficient delivery into ferret airways.

DAPI is shown as counterstaining.

Aerosolized LUNAR construct with Tdtomato mRNA efficiently delivers to epithelial airways in Non-human Primates (NPHs)

In NHP, a 1 mg/ml dose of a LUNAR construct loaded with TdTomato mRNA was aerosolized using a face mask exposure system.

A robust expression of TdTomato protein was observed by immunohistochemistry analysis of the NHP lungs.

The panel shows detailed TdTomato staining in bronchial epithelial cells across different lung levels.

Platform Technology Overview

Current Technologies and Limitations

mRNA therapeutics offer an attractive promise that other RNA medicines cannot provide – to increase the production of a protein in the body that is either defective or expressed at low levels to improve symptoms of a genetic disease without interacting with th e patient’s genetic code.

However, mRNA therapies have yet to be successful in delivering an approved therapy to patients because of the technical hurdles facing this therapeutic approach.

These hurdles include:

The promise of mRNA therapies is only beginning to be realized with the approval of the first two mRNA vaccine therapies in 2020.

Developers of mRNA therapies should strive to improve ways to address the following hurdles:

delivery of an intact mRNA, which is much larger than other RNA drugs (e.g., small interfering RNA, siRNA) to the target organ and cell type needed for a therapeutic effect;

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tolerability issues associated with therapeutic RNAs.

An additional hurdle is that mRNA can be immunogenic.

The first generation lipid nanoparticle technology used to deliver mRNA therapeutics are also limited by their propensity to cause immune responses.

The first-generation lipid nanoparticle technology used to deliver mRNA therapeutics is also limited by their propensity to cause immune responses.

This decreases the tolerability of the medicine.

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Our experienced team continues to innovate in the area of producing LUNAR lipid formulated nucleic acid product candidates in a scalable and highly reproducible manner, reducing the costs of goods for the therapies in our pipeline.

In addition to our LUNAR lipid-mediated delivery technology, we believe we have created innovative, proprietary advancements in producing mRNA medicines, including improvements t hat increase purity, scalability, efficiency in production times, and adaptability to different mRNA modification strategies.

In addition to our LUNAR lipid-mediated delivery technology, we believe we have created innovative, proprietary advancements in producing mRNA medicines, including improvements that increase purity, scalability, efficiency in production times, and adaptability to different mRNA modification strategies.

We strive to use these proprietary innovations to benefit each mRNA medicine in our pipeline.

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Key Attributes of Our LUNAR Lipid-Mediated Delivery Technology

We have designed our LUNAR lipid-mediated delivery platform to address major cha llenges with nucleic acid medicine delivery, including transfection efficiency, adverse immune reactions and liver damage.

We have designed our LUNAR lipid-mediated delivery platform to address major challenges with nucleic acid medicine delivery, including transfection efficiency, adverse immune reactions and liver damage.

See below for a graphic representation of our LUNAR formulation, where blue spheres represent polyethylene glycol lipids and the orange, darker orange, and yellow spheres represent the proprietary “ATX” lipid excipient and other structural components (phospholipid and cholesterol).

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At acidic pH, ATX lipids are positively charged, facilitating interaction with the negatively charged nucleic acid, thereby enabling LUNAR particle formation.

At physiological pH (e.g., pH 7.4), LUNAR formulations are neutrally charged, reducing the toxicity often seen with permanently positively-charged lipid-mediated delivery technology, used by competitors.

At physiological pH (e.g., pH 7.4), LUNAR formulations are neutrally charged, reducing the toxicity often seen with permanently positively-charged lipid-mediated delivery technology.

Upon uptake into a cell by endocytosis (a process that forms a cellular structure called an endosome around the LUNAR formulated nucleic acid therapeutic), the amino head group again becomes positively charged, disrupting the endosome and the LUNAR particle, and releasing the nucleic acid therapeutic into the cell.

LUNAR-mediated delivery of a nucleic acid therapeutic into cells

The disruption of the LUNAR particle also releases the components of the formulation into the cell, where the ATX lipid is degraded by enzymes in the cell allowing for the lipids to be cleared from the cell.

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This degradation prevents ATX lipids from accumulating inside the cell and causing toxicity.

Biodegradable, highly optimized for each cell type

LUNAR-platform development

The Company’s development of its LUNAR platform is focused on continuous innovation and advancement in the following areas:

Design and incorporate novel ATX lipids and formulations to enrich our library of proprietary ATX lipids for target cell/tissue specificity, improved tolerability and translatability to larger species;

Develop and improvise manufacturing processes for LUNAR formulations to ensure RNA encapsulation across compositions and scales;

Develop stabilization strategies (e.g.

lyophilized presentation) for LUNAR formulation to mitigate frozen storage;

Continually assess and improvise LUNAR screening funnel to enable rigorous selection of ATX lipids for various programs .

Through the above efforts, our versatile LUNAR platform continues to drive internal and partner programs.

LUNAR compatibility with nucleic acids of various size

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We have demonstrated high encapsulating efficiency when formulating a wide range of nucleic acid sizes, 20 to 12,000 nucleotides in length (figure below, left), and particle size was within the acceptable range to maximize targeting and efficacy (figure below, right).

LUNAR Biodegradability

Although all ATX lipids are designed with biodegradable ester bonds in their backbone, one of the key platform learnings is the understanding of the relationship between positioning of these ester bonds and their clearance profile in vivo .

In vitro and in vivo screening assays are utilized in our LUNAR screening cascade to enable ranking of ATX lipids based on their esterase susceptibility.

These new assays have enabled a more rigorous selection of ATX lipids.

New ATX lipids with optimal biodegradability and potency continue to be identified and further characterized for potential application to upcoming therapeutic and vaccines programs.

LUNAR Scalability and Reproducibility

We have demonstrated scalability and reproducibility of LUNAR.

Multiple non-GMP and GMP batches of mRNA drug substance have been successfully produced from 0.5 to 12.5gram scales with equivalent yield and purity as shown in the figure below.

Multiple non-GMP and GMP batches of mRNA drug substance have been successfully produced from 0.5 to 30 gram scales with equivalent yield and purity.

Additionally, we have demonstrated scalability of our LUNAR-mRNA platform from milligram to multigram scales.

LUNAR-nRNA batches have been successfully produced at scales from 0.1 to 10grams while retaining key physicochemical attributes of particles.

Examples of two such physicochemical properties, particle size and percent encapsulated mRNA across scales is shown in figure below.

LUNAR Reproducibility

LUNAR In Vivo Proof-of-Concept Data

LUNAR formulations can be designed to target different cell types in the liver

We have optimized LUNAR to deliver potential nucleic acid therapeutics preferentially to different cell types in the liver after intravenous (IV) delivery.

When mice were treated with a single intravenous dose of two different LUNAR-siRNA formulations, significant target mRNA knockdown was observed in hepatocytes 72 hours post-treatment (figure below, left).

Shown in green, the composition of a different LUNAR-siRNA formulation was modified to also achieve significant target mRNA knockdown in stellate cells, an important cell type for certain liver indications, such as NASH.

The hepatocyte-targeting LUNAR (LUNAR 1, red bars) was also used to formulate a green fluorescent protein (GFP) mRNA and mice were treated with a single IV dose (figure below, right).

Twenty-four hours later, GFP protein was seen throughout the liver, particularly in hepatocytes.

Repeat Dose Efficacy in Non-human Primates

To demonstrate efficacy of LUNAR-mRNA in a repeat-dose setting, we treated non-human primates once weekly for four weeks with LUNAR-formulated erythropoetin (EPO) mRNA (figure below).

EPO protein expression levels were determined six hours following each treatment, and elevated serum EPO levels were maintained following each treatment.

LUNAR Biodegradability

Biodegradability Translates to In Vivo Safety Profile

A key for RNA medicines is the safety profile.

We have demonstrated that LUNAR delivery technology is well-tolerated in non-human primates at the following doses, which are proposed for human use:

8 weekly doses up to 10 mg/kg of LUNAR formulated non-coding siRNA

3 bi-weekly doses of LUNAR formulated mRNA at fold-multiples of the target therapeutic dose

Antigen-specific responses following IM delivery of LUNAR-mRNA in influenza vaccination mouse model

We have demonstrated in proof-of concept studies in mice the utility of LUNAR-formulated mRNA in oncology and infectious disease vaccine applications.

Mice were treated at Day 0 (prime) and Day 21 (boost) via intramuscular delivery with 0.5 mg/kg LUNAR-encapsulated hemagglutinin mRNA (2 formulations;

LUNAR 1 and LUNAR 2).

At Day 35, serum titers were determined in a hemagglutination inhibition assay (figure below, left) and antigen-specific cytokine production was evaluated from CD8+ T-cells (figure below, right).

With both formulations tested, titers between 10 3 -10 4 were achieved and a significant increase in % of TNFα and IFNα expressing cells was observed.

LUNAR-mRNA batches have been successfully produced at scales from 0.1 to 15 grams while retaining key physicochemical attributes of particles.

Lyophilization Process Advantages Over Conventional Frozen Liquid

We have engaged in focused efforts to develop lyophilized LUNAR formulations, in order to mitigate challenges associated with cold chain logistics of a -70°C frozen product.

A lyophilized product allows for simpler handling, such as no dry ice at point of care and lower risk of degradation from uncontrolled temperature fluctuations.

The results of these efforts have yielded a lyophilized version of ARCT-021 that maintains key quality attributes of the frozen liquid equivalent.

We are collecting stability data at -20°C, 2-8°C, and room temperature.

Targeting Capabilities

As proof of concept for augmenting LUNAR targeting capabilities for specific tissues and even cell types within those tissues, we are developing LUNAR formulations containing a propriety hepatocyte targeting agent.

Traditional lipid nanoparticle mediated delivery to hepatocytes occurs via uptake via the low-density lipoprotein receptor (“LDLR”).

To evaluate this targeting agent, we ran studies in a mouse model that is LDLR deficient.

Only the LUNAR formulations with this targeting agent were able to deliver mRNA to the hepatocytes, as compared to LUNAR formulations that did not contain the targeting agent.

Based on this promising data, we are expanding these platform development efforts.

Our Proprietary mRNA and Protein Design Technology

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In addition to these platform technologies, we have developed a proprietary tool to aid our team in the efficient design and development of new mRNA drug candidates.

Our mRNA Design Suite is a cloud-based software suite with a collection of proprietary bioinformatic algorithms aimed at achieving highly improved potency of a drug substance through optimization of mRNA sequences.

Our mRNA Design Suite is a cloud-based software suite with a collection of proprietary bioinformatic algorithms aimed at achieving highly improved potency

of a drug substance through optimization of mRNA sequences.

The algorithms were developed in house through the integration of experimentally validated optimization processes.

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Additionally, mRNA Design Suite seamlessly interacts with our plasmid/mRNA production database to accelerate the process from mRNA design to gene synthesis, cloning, and mRNA production.

Our STARR mRNA Technology

STARR is designed to increase the amount and duration of protein antigen expression compared to conventional mRNA.

This is achieved by constructing an RNA that encodes for a replicon and a pathogenic protein antigen.

The replicon segment encodes for genes derived from an alpha-virus, specifically Venezuela Equine Encephalitis Virus, that is responsible for amplifying the production of the pathogenic protein antigen mRNA.

These are non-structural viral proteins, meaning they are not included in any virus particle and are completely incapable of producing any virus.

However, upon translation they produce multiple copies of the pathogenic protein antigen which increases production of the protein.

In addition, during the course of protein antigen mRNA replication, a short-lived double-stranded RNA intermediate is produced which activates the innate immune system.

This activation transitions to an adaptive immune response resulting in the specific programming of the immune system, both neutralizing antibody production and T lymphocyte activation, which are important in preventing pathogen infection.

The activation of the innate immune system by the double-stranded RNA intermediate serves as a self-adjuvanting feature, thus eliminating the need for the addition of an adjuvant to the vaccine.

An example of generating a protected immune response is shown in the graphic below.

The self-replicating RNA-based therapeutic vaccine triggers rapid and prolonged antigen expression within host cells resulting in protective immunity against infectious pathogens.

We believe the combination of LUNAR and STARR technology could provide lower dose requirements due to superior immune response and sustained protein expression as compared to non-self-replicating RNA-based vaccines.

We believe this may enable us to simplify and increase the speed of vaccine production.

Our Unlocked Nucleic Acid (UNA) Oligomer Chemistry

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Once inside the cell, they become part of the RNA-induced silencing complex (“RISC”) and are split into two single siRNA strands.

One of these strands stays with RISC and binds to any mRNA with a complementary sequ ence.

One of these strands stays with RISC and binds to any mRNA with a complementary sequence.

If the wrong siRNA strand stays with RISC, it can bind to different mRNAs than the target mRNA and therefore inhibit translation of other proteins.

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Our goal is to expand our nucleic acid technology portfolio and strengthen our ability to develop safer and more effective nucleic acid therapeutic candidates.

Internal Development Programs

We are developing mRNA therapeutic candidates to treat rare diseases with unmet medical needs through the following two internal development programs.

LUNAR- OTC (ARCT-810)

The LUNAR-OTC development program addresses OTC deficiency, a rare, genetic disease caused by mutations in the OTC gene that leads to dysfunctional or deficient OTC levels.

OTC deficiency causes the body to accumulate ammonia levels which are neurotoxic and harmful to the liver.

Currently, there are only treatments to remove excess ammonia and no disease-modifying treatments of the underlying genetic disorder are available.

Our LUNAR-OTC development program uses ou r LUNAR platform to deliver normal OTC mRNA into hepatocytes, where OTC is produced and functions, to produce normal functioning OTC with potentially disease-modifying effects for patients.

Our LUNAR-OTC approach has the potential to treat the underlying defect that causes the debilitating symptoms of OTC deficiency, rather than mitigating symptoms by sequestering ammonia.

LUNAR-OTC has received orphan drug designation from the FDA for treatment of OTC deficiency.

Overview of OTC Deficiency

OTC deficiency is caused by mutations in the OTC gene which lead to a non-functional or deficient OTC enzyme.

OTC deficiency is a life-threatening genetic disease.

OTC is a critical enzyme in the urea cycle, which takes place in liver cells, and converts ammonia to urea.

This conversion does not occur properly in patien ts with OTC deficiency and ammonia accumulates in their blood, acting as a neurotoxin and liver toxin.

This can cause severe symptoms including vomiting, headaches, coma and death.

OTC deficiency is an inherited disease that can cause developmental problem s, seizures and death in newborn babies.

It is an X-linked disorder, and consequently more common in males.

Patients with less severe symptoms may present later in life, as adults.

There is currently no cure for OTC deficiency, apart from liver transplant.

However, this treatment comes with significant risk of complications such as organ rejection, and transplant recipients must take immunosuppressant drugs for the rest of their lives.

Current standard of care for OTC patients is a low-protein diet and ammonia scavengers to try and prevent patients from accumulating ammonia.

These treatments do not address the underlying cause of disease.

LUNAR-OTC Proof-of-Concept

The in vivo efficacy and proof-of concept of an early prototype of LUNAR-OTC mRNA was evaluated in the OTC spf ash mouse model of OTC deficiency.

These hypomorphic mice possess a mutation in the OTC gene that results in 5-10% residual OTC activity allowing these animals to survive unless their urea cycle is challenged by an exogenous source of nitrogen such as ammonium chloride (NH 4 Cl) or chronic exposure to a high protein diet (“HPD”) of 53% protein.

In a survival study, OTC spf ash mice were treated with a prototype LUNAR-OTC mRNA, and then exposed to a HPD.

Animals received five weekly administrations of LUNAR-OTC mRNA and were monitored for HPD-induced mortality.

Effects of a Prototype LUNAR-mRNA Treatments on Survival in an HPD Model in OTC spf ash mice

Our LUNAR-OTC development program utilizes our current innovations in protein sequence optimization, mRNA coding region optimization and our propri etary untranslated regions that increase the efficiency of our mRNA therapeutic to translate into protein, the half-life of the OTC protein and also its localization into the mitochondria (a cellular structure) where the OTC protein resides and functions.

The LUNAR-CF program addresses cystic fibrosis, a progressive lung disease caused by mutations in the CFTR gene.

We use our LUNAR platform to deliver optimized CFTR mRNA into airway epithelial cells.

This allows airway cells to produce functional CFTR protein using their native translational machinery and protein trafficking pathways.

This approach has the potential to treat the underlying defect that causes CF, regardless of what mutation type a patient has.

The CFF has recognized the potential of the LUNAR-CF program and has partnered with us to develop this important therapy.

Overview of CF

According to the National Institutes of Health, CF is the most common rare disease in the world, with an estimated 30,000 diagnosed cases in the United State s and 70,000 worldwide.

Approximately 1,000 people are newly-diagnosed with CF each year.

CF is caused by one of 2,000 known mutations in the CFTR gene, which scientists have grouped into several different classes based on the problems they cause in the pr oduction of the CFTR protein.

The CFTR protein is a cAMP-activated transmembrane protein that controls chloride and bicarbonate flow and is critical for lung homeostasis.

When CFTR is not present in the membrane or does not function properly, there is a d eficit in the release of chloride/bicarbonate into the airways, which generates an increase of sodium uptake by the cells, dehydrating the airways and causing accumulation of a thicker mucus layer.

This thicker mucus layer has a strong impact on breathing quality and will decrease the clearance of air pathogens accumulated in the mucus, causing chronic infections, chronic coughing, severe inflammation, tissue scarring, and other serious complications not only related to the lung but to other epithelial orga ns such as pancreas and liver.

The median lifespan of CF patients in the United States is <40 years, and the cause of death is usually lung-related.

The daily standard-of-care for CF patients includes palliative treatments (such as antibiotics and mucolyt ics) to assist in clearing and reducing infection/inflammation of the airways, as well as the use of chest vests to mechanically move mucus.

Many CF patients ultimately suffer from decreased lung function and require lung transplants.

There are currently no FDA-approved drugs that can treat all CF patients.

The FDA has approved several CFTR modulator therapies (Kalydeco , Orkambi, Symdeko, and Trikafta ) that assist the mutant CFTR protein to reach the cell membrane and/or increase functional ion channel activity.

The CFTR modulators, while effective in some patients, are mutation-specific and do not treat the underlying genetic cause of CF.

Therefore, none of these modulator therap ies are able to treat Class I mutations (which account for approximately 10% of CF cases worldwide), non-sense mutations, or non/low responders to CFTR modulator therapies.

We are focusing our LUNAR-CF program on this group of patients, as it currently has the highest unmet need for CF therapies.

LUNAR-CF Proof-of-Concept

In preclinical studies in rodents, we have observed selective delivery of LUNAR-mRNA into ciliated epithelial cells in airways, the main cellular population affected in CF (A and B).

In F igure A, immunostaining of TdTomato (dark staining) protein is evident in mouse airways treated intratracheally with LUNAR-mRNA .

This data demonstrates delivery into large and small epithelial airways.

Figure B shows TdTomato (red) expression co-localized (yellowish) with a specific marker for ciliated epithelial cells (green, FoxJ1) indicating selective delivery of LUNAR-mRNA into the CF-defected cell population.

Dapi (blue) is used as a counterstaining for nuclei.

LUNAR-mRNA targets rodent epithelial airways

Selective delivery of LUNAR-mRNA into rodent ciliated epithelial cells

Cystic fibrosis bronchial epithelial (“CFBE”) cells were transfected with codon optimized human CFTR (“hCFTR”) mRNA leads and compared to the natural hCFTR sequence.

The levels of protein expression observed from the codon optimized hCFTR sequences was significantly higher when compared to the natural sequence (figure C below, left).

When our lead candidate hCFTR mRNA was transfected into FRT epithelial cells (a cell type used to measure conductance in CF research), a three-fold increase in transepithelial conductance was observed over the natural sequence (figure C below, right), indicating that the hCFTR protein produced from the mRNA is functional.

Improved hCFTR mRNAs with higher protein levels and enhanced activity in vivo

To evaluate the efficiency of delivery of LUNAR-mRNA to human lungs, w e have developed a n ex-vivo slice culture technique to treat human lungs with a LUNAR- mRNA encoding green fluorescent protein ( LUNAR-eGFP mRNA ).

Effective delivery of the mRNA was demonstrated in these slice cultures of non-CF (Figure D ) .

Slice culture of human lungs treated with LUNAR-mRNA

Our LUNAR-mRNA did not activate human peripheral blood mononuclear cells (PMCSs) in vitro .

Very little to no immunostimulation of inflammatory cytokines, IFNα , IL-6, and TNFa , were observed when human peripheral blood mononuclear cells were exposed to a LUNAR-mRNA formulations in vitro .

(Figure F, left panel).

For a disease such as CF , where there is a thick mucus barrier, it is essential that a delivery platform like LUNAR shields and protects the mRNA from degradation in the mucus.

When LUNAR-mRNA formulation s were incubated with mucus derived from CF patients, no degradation of mRNA was observed after twenty-four hours, while all the non-LUNAR encapsulated mRNA was degraded, supporting that LUNAR shields and protects the mRNA in a mucus environment (Figure E right panel).

This is a critical characteristic for any effective CF therapy based on RNA-therapeutics.

LUNAR-mRNA properties in biological matrix

Restoration of functional hCFTR activity has been demonstrated in the CF knock out mouse model.

Functional activity was determined by measuring the nasal potential difference in the nasal epithelium of this mouse model following intranasal instillation of LUNAR-hCFTR mRNA (Figure F).

PBS and a LUNAR encapsulated negative contr ol mRNA (encoding luciferase) are non-active, indicating that the current measure is hCFTR specific.

LUNAR-hCFTR mRNA is functionally active in vivo in mouse model

We have developed optimal delivery conditions for an aerosolized lipid nanoparticle-based drug and have demonstrated that the physicochemical properties of the LUNAR formulations are maintained following aersolization.

The LUNAR profiling shows the generation of a consistent and highly breathable droplet size (2-3 microns) optimal for lung delivery (Figure G).

A breathable droplet size was achieved with aerosolized LUNAR formulations

In addition to confirming that the physicochemical properties of the aerosolized LUNAR-mRNA are maintained, protein expression of LUNAR-eGFP mRNA formulations was evaluated pre-and post nebulization in vitro.

Pre-and post nebulized fractions of LUNAR-eGFP mRNA were transduced in vitro using CFBE cells;

and, at six hours post-transduction, encoding green fluorescent protein (“eGFP”) expression was observed using a fluorescent microscope.

There was no material difference i n the levels of eGFP expression from pre/post-nebulization fractions, demonstrating in vitro that the nebulization process affe cts neither the activity of the mRNA nor the integrity and stability of the LUNAR nanoparticle (Figure H).

mRNA activity is preserved in aerosolized LUNAR-mRNA

STARR Proof-of-Concept

On November 7, 2019, we announced that we are expanding our platform to include STARR for human and vaccine applications.

The STARR technology platform combines self-replicating RNA with LUNAR, a proprietary nanoparticle delivery system, into a single solution to produce proteins inside the human body.

The versatility of the STARR technology comes from its ability upon delivery into the cell to generate a protective immune response or drive therapeutic protein expression to potentially prevent against or treat a variety of diseases.

An example of generating a protected immune response is shown in the graphic below.

The self-replicating RNA-based therapeutic vaccine triggers rapid and prolonged antigen expression within host cells resulting in protective immunity against infectious pathogens.

This has the potential to enable us to simplify and increase the speed of vaccine production.

Collaboration Agreements

Supply and Manufacturing

We have built out robust manufacturing capabilities designed to meet global supply needs for clinical trials and future commercialization, with a network of established contract manufacturing organizations (“CMOs”) for producing critical raw materials, drug substance, and finished and packaged drug product.

We have developed, and continue to dedicate resources to advance, our sophisticated manufacturing know-how, including with respect to formulation of lipid nanoparticles, which improves manufacturing efficiency and capacity.

We are strategically exploring options to build our internal manufacturing capabilities for drug substance and finished drug product.

To date, we have manufactured and supplied gram quantities of drug substance, scaled up finished drug products through our CMOs for preclinical and clinical studies.

For the near future, we expect to continue to rely on third-party CMOs for the supply of drug substance and finished drug product for our current product candidates, including to support the launch of our first commercial products.

Our CMOs are compliant with cGMPs and other rules and regulations prescribed by foreign regulatory authorities.

We believe we have established sufficient manufacturing capacity through our CMOs to meet our current internal research, development and potential commercial needs, as well as our obligations under existing agreements with our partners.

Additionally, we continue to evaluate relationships with additional suppliers to increase overall capacity and diversify our supply chain.

Collaboration Arrangements

In addition to our internal development programs, we have a number of development partnerships structured where we work to discover mRNA or siRNA therapeutic candidates formulated for our LUNAR lipid-mediated delivery system.

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we are partnering with Janssen to develop nucleic acid-based therapeutic candidates for the treatment of HBV, and potentially for other infectious or respiratory diseases;

we are partnering with Takeda to develop nucleic acid-based therapeutic candidates, primarily for the treatment of NASH, as well as other gastrointestinal disorders;

we are partnering with Takeda to develop nucleic acid-based therapeutic candidates, primarily for the treatment of nonalcoholic steatohepatitis (“NASH”), as well as other gastrointestinal disorders;

we are partnering with Ultragenyx to develop mRNA therapeutic candidates for rare disease targets;

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Under the Janssen Agreement, Janssen and the Company will carry out their respective research obligations pursuant to agreed-upon joint research plans, and we may not engage in HBV-related research independent of the Janssen Agreement.

The Janssen Agreement provides that Janssen will develop the candidates licensed pursuant to the agreement, obtain certain regulatory approvals, and commercialize products containing the devel opment candidates.

Under the Janssen Agreement, both parties granted each other certain non-exclusive, royalty-free licenses to conduct the research covered by the agreement.

Under the Janssen Agreement, Janssen paid us an upfront fee of $7.7 million.

On a development candidate-by-development candidate basis, Janssen will pay us certain development milestone payments of up to $56.5 million for each of the first two products to treat HBV and in each indication for which Janssen exercises its option to licens e certain therapeutics from us.

In addition, on a research program -by-research program basis, Janssen will pay us between $20 million and $40 million in multiple sales milestone payments if they achieve certain annual net sales milestones in the first cale ndar year in which such milestones are achieved.

In addition, on a research program-by-research program basis, Janssen will pay us between $20 million and $40 million in multiple sales milestone payments if they achieve certain annual net sales milestones in the first calendar year in which such milestones are achieved.

Janssen will also pay between $1 million and $5 million in option exercise fees, with the precise amount depending on when Janssen exercises its license option.

In addition, Janssen will pay royalties on annual net sales of licensed products up to a mid-single digit percentage, subject to (i) reduction on a country-by-country and licensed-product-by-licensed-product basis and (ii) certain events, such as expiration of program patents.

The Janssen Agreement wi ll terminate when no further royalty payments on any licensed products are payable.

The Janssen Agreement will terminate when no further royalty payments on any licensed products are payable.

Janssen may terminate the Janssen Agreement at any time on a licensed product-by-licensed product and country-by-country basis, or in its entirety, in each case upon 60 days’ written notice.

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On October 26, 2015, we entered into a Research Collaboration and License Agreement with Ultragenyx, which was later amended on October 17, 2017 and April 20, 2018 (as amended, the “Ultragenyx Agreement”).

Ultragenyx initially selected two development targets, including Glycogen Storage Disease Type III, and the parties initially agreed to a list of eight additional reserved rare disease targets which Ultragenyx has an exclusive option to select for collaborative deve lopment.

The Ultragenyx Agreement provides for an exclusivity period, during which Ultragenyx may substitute a reserved target for a selected target, in which case such reserved target will be deemed an additional target and will preclude an additional res erved target in place of the newly reserved target.

select for collaborative development.

The Ultragenyx Agreement provides for an exclusivity period, during which Ultragenyx may substitute a reserved target for a selected target, in which case such reserved target will be deemed an additional target and will preclude an additional reserved target in place of the newly reserved target.

Further, during the exclusivity period, Ultragenyx may replace a reserved target with a proposed new target, subject to certain conditions, including whether we have the ability to partner with respect to such new target.

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These restrictions terminate upon expiration of the reserved target exclusivity period for each target, which may be extended on a reserved target-by-reserved target basis upon payment of an exclusivity extension fee.

Following the reserved target exclusivity period and on a reserved target-by-reserved target basis, Ultragenyx has an exclusive right of first negotiation to obtain an exclusive license to expl oit RNA products with respect to such reserved target.

Following the reserved target exclusivity period and on a reserved target-by-reserved target basis, Ultragenyx has an exclusive right of first negotiation to obtain an exclusive license to exploit RNA products with respect to such reserved target.

If we have not entered into an agreement with Ultragenyx by the time its exclusive right of first negotiation expires, its rights with respect to such reserved target terminate and we may grant a license or enter into an arrangement with a third-party with respect to such reserved target.

Under the Ultragenyx Agreement, we have granted Ultragenyx a co-exclusive, royalty-free, sublicensable license of our technology for conducting collaborative developme nt of development targets, compounds and products.

The license remains in effect for a specified option period based upon achievement of milestones with respect to development targets and reserved targets, and development of compounds and products with res pect to such development targets and reserved targets.

If Ultragenyx exercises its option with respect to a development target and we enter into a license with them, it will receive an exclusive, royalty bearing, sublicensable (subject to certain limitatio ns) license to our technology to exploit compounds and products with respect to such development target.

For development targets and reserved targets that revert to us (“Discontinued Targets”), Ultragenyx will grant us an exclusive, worldwide, perpetual l icense to all technology developed pursuant to the Ultragenyx Agreement with respect to such Discontinued Targets.

The license remains in effect for a specified option period based upon achievement of milestones with respect to development targets and reserved targets, and development of compounds and products with respect to such development targets and reserved targets.

If Ultragenyx exercises its option with respect to a development target and we enter into a license with them, it will receive an exclusive, royalty bearing, sublicensable (subject to certain limitations) license to our technology to exploit compounds and products with respect to such development target.

For development targets and reserved targets that revert to us (“Discontinued Targets”), Ultragenyx will grant us an exclusive, worldwide, perpetual license to all technology developed pursuant to the Ultragenyx Agreement with respect to such Discontinued Targets.

We will pay Ultragenyx royalties on net sales related to Discontinued Targets on a country-by-country basis until the expiration of the last valid claim, product-specific patents or patent rights covering such Discontinued Targets that we have licensed from Ultragenyx.

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In connection with the execution of the Ultragenyx Agreement, Ultragenyx paid us an upfront fee of $10 million.

We are entitled to certain additional payments (i) for costs we incur in connection with our activities under agreed-upo n collaborative development plans, and (ii) if Ultragenyx exercises its option to select additional reserved rare disease targets for collaborative development.

We are entitled to certain additional payments (i) for costs we incur in connection with our activities under agreed-upon collaborative development plans, and (ii) if Ultragenyx exercises its option to select additional reserved rare disease targets for collaborative development.

For each development target for which Ultragenyx exercises this option, it will pay us a one-time option exercise fee, which will vary depending on the total number of development targets for which it has exercised such option.

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During the applicable royalty term, Ultragenyx will also pay royalties as a percentage of net sales (not to exceed 10%) on a product-by-product and country-by-country basis.

The Ultragenyx Agreement provides that each party owns any intellectual property that it develops independently, and that any intellectual property developed jointly on behalf of both parties will be owned jointly, provided that (i) Ultragenyx will own all collaboration technology that specifically relates to (i) the composition or formulation of a particular compound or product, or (ii) any method of using, making or administering a particular compound or product, and (ii) we will own all improvements to LUNAR lipid-mediated delivery technology and/or UNA oligomer chemistry.

Unless terminated earlier, the Ultragenyx Agreement expires upon the expiration of the last-to-expire royal ty term for any product, on a development target-by-development target basis.

formulation of a particular compound or product, or (ii) any method of using, making or administering a particular compound or product, and (ii) we will own all improvements to LUNAR lipid-mediated delivery technology and/or UNA oligomer chemistry.

Unless terminated earlier, the Ultragenyx Agreement expires upon the expiration of the last-to-expire royalty term for any product, on a development target-by-development target basis.

Upon expiration with respect to a particular development target, our license of technology to Ultragenyx to exploit products with respect to the relevant development target will become fully paid-up, irrevocable and exclusive.

On a target-by-target basis, Ultragenyx has the right to terminate for convenience upon 60 days’ written notice.

On June 18, 2019, we expanded our collaboration with Ultragenyx and entered into a third amend ment (the “Third Amendment ”) to the Ultragenyx Agreement.

On June 18, 2019, we expanded our collaboration with Ultragenyx and entered into a third amendment (the “Third Amendment”) to the Ultragenyx Agreement.

Pursuant to the Third Amendment, the total number of targets was increased from 10 to 12, and we granted Ultragenyx exclusivity to development targets for four years at no additional cost.

In connec tion with the Third Amendment , Ultragenyx purchased 2.4 million shares of our common stock for $24.0 million and made a one-time upfront payment of $6.0 million.

In connection with the Third Amendment, Ultragenyx purchased 2.4 million shares of our common stock for $24.0 million and made a one-time upfront payment of $6.0 million.

Ultragenyx also received a two-year option to purchase an additional 600,000 shares of our common stock at a price of $16.00 per share.

Additionally, until the later of (i) the first anniversary of the closing date or (ii) the date on which Ultragenyx beneficially owns less than 8.0% of the total voting power of the Company , at each annual shareholder s’ meeting or any shareholders’ meeting at which board members are to be elected, we must nominate one director designated by Ultragenyx (the “ Ultragenyx Designee ”).

Additionally, until the later of (i) the first anniversary of the closing date or (ii) the date on which Ultragenyx beneficially owns less than 8.0% of the total voting power of the Company, at each annual shareholders’ meeting or any shareholders’ meeting at which board members are to be elected, we must nominate one director designated by Ultragenyx (the “Ultragenyx Designee”).

Additionally, the Ultragenyx Designee is required to be appointed to all board committees (subject to applicable Nasdaq rules).

Ultragenyx also has the right to have its designee attend board meetings as a non-voting observer.

Karah Parschauer , the Executive Vice President and Corporate Counsel of Ultragenyx , joined the board in June 2019 as th e Ultragenyx Designee .

Takeda Agreement

On December 6, 2016, we entered into a Research Agreement (as amended, the “Takeda Agreement”) with Takeda .

Under the Takeda Agreement, we conducted a joint research program (the “Research Program ”) with Takeda to di scover siRNA medicines for the treatment of NASH.

The program involved development of siRNA compounds formulated in LUNAR lipid-mediated delivery technology for in vivo studies.

Pursuant to the Takeda Agreement, Takeda had a non-exclusive, worldwide sublic ensable license to our technology until December 20, 2018 (the “Research Term ”) for the purpose of conducting the Research Program.

We also agreed not to engage in any research or development activities involving LUNAR and UNA oligomers for any NASH target s involved in the Research Program for two years after the Research Term.

On March 8, 2019, we entered into a subsequent Research Agreement with Takeda , which was subsequently amended on June 3, 2019 (as amended, the “New Takeda Agreement”).

Under the Ne w Takeda Agreement, Takeda received a non-exclusive, worldwide, sublicensable license to certain of our technology, including mRNA compounds formulated for LUNAR lipid-mediated delivery technology, for the purpose of conducting a joint research program on additional targets in in vitro and in vivo models of liver diseases (including NASH).

Both Arcturus and Takeda have agreed not to participate in other research, internally or with a third party, on therapeutic mRNA molecules designed to express the selecte d targets.

We also granted Takeda an exclusive option to negotiate a license to the product candidates determined to be of potential relevance as a result of the joint research program.

The option lasts for a certain period of time following the delivery o f the results of the research program .

Funds remaining from the Takeda Agreement will be transfered to cover our activities under the New Takeda Agreement.

If any remaining funds are unspent or uncommitted for expenditure upon completion of the current research program, then we will retain such funds.

Karah Parschauer, the Executive Vice President and Corporate Counsel of Ultragenyx, joined the board in June 2019 as the Ultragenyx Designee.

On June 18, 2019, we entered into an Equity Purchase Agreement with Ultragenyx.

Pursuant to this agreement, we granted Ultragenyx a two-year option to purchase up to 600,000 additional shares of our common stock at a price of $16.00 per share.

On May 20, 2020, Ultragenyx completed the exercise of this option to purchase an additional 600,000 shares of common stock in accordance with the terms of the agreement.

The issuance of the additional 600,000 shares closed on May 20, 2020.

CureVac Agreement

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In consideration for the rights granted under the Development and Option Agreement, we received an upfront fee from CureVac.

In connection with the Development and Option Agreement, we granted CureVac a worldwide, non-exclusive, sublicensable license to use the Arcturus LMD Technology for the purpose of conducting research and preclinical development activities, subject to certa in limitations.

In addition, CureVac granted to us a worldwide, non-exclusive license to its mRNA technology to the extent necessary for us to execute the activities contemplated by the Development and Option Agreement.

Subject to certain restrictions, the Company and CureVac each have an undivided one-half interest in the patents and know-how developed jointly during the course of the Development and Option Agreement.

The amended and restatement of the Development and Option Agreement provided for (i) an i ncrease in the number of targets available to CureVac and (ii) agreed-upon license forms to be executed upon selection of targets by CureVac.

The amended and restatement of the Development and Option Agreement provided for (i) an increase in the number of targets available to CureVac and (ii) agreed-upon license forms to be executed upon selection of targets by CureVac.

Subject to certain limitations, CureVac may designate certain targets as reserved targets.

To the extent a reserve d target is only available on a non-exclusive basis, CureVac may elect to enter into a non-exclusive license agreement on a pre-negotiated form to be executed upon identification of the relevant target.

To the extent a reserved target is only available on a non-exclusive basis, CureVac may elect to enter into a non-exclusive license agreement on a pre-negotiated form to be executed upon identification of the relevant target.

CureVac is required to pay us a fee for any license (exclusive or non-exclusive), the amount of which depends on whether the target involves a rare or non-rare disease.

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Pursuant to the form of license agreement, if CureVac achieves all development and commercialization milestones with respect to the licensed product developed for an identified target, it is required to (i) pay certain development and regulatory approval milestones, the amount of which depends on whether the target involves a rare or non-rare disease, and (ii) royalties in a low-single digit percentage on the net sales of each product subject to a license agreement on a country-by-country and product-by-product basis.

Such royalties are subject to reduction for third-party payments with respect to licensed products or if there is no valid claim under the licensed patents, but may not fall below a specified percentage if the licensed produc t during the royalty term is not covered by a licensed patent.

Further, if within 24 months after the license agreement effective date, CureVac grants a sublicense to a third party for the development and commercialization of the licensed products, then CureVac will pay us a single-digit percentage of the total sublicense income that it receives to the extent that such income exceeds (i) the fee paid by CureVac under the Development and Option Agreement to identify a target for such license agreement and (i i) the milestone payments paid by CureVac under such license agreement.

Such royalties are subject to reduction for third-party payments with respect to licensed products or if there is no valid claim under the licensed patents, but may not fall below a specified percentage if the licensed product during the royalty term is not covered by a licensed patent.

Further, if within 24 months after the license agreement effective date, CureVac grants a sublicense to a third party for the development and commercialization of the licensed products, then CureVac will pay us a single-digit percentage of the total sublicense income that it receives to the extent that such income exceeds (i) the fee paid by CureVac under the Development and Option Agreement to identify a target for such license agreement and (ii) the milestone payments paid by CureVac under such license agreement.

The fees, milestones and royalty payments for a non-exclusive license are 50% of the corresponding payments for an exclusive license.

The Development and Option Agreement had an initi al term of eight years, unless earlier terminated or extended in accordance with its terms.

The Development and Option Agreement had an initial term of eight years, unless earlier terminated or extended in accordance with its terms.

Within 60 days prior to the expiration of the initial term, CureVac has the option to extend the initial term of the agreement on an annual basis for up to a total of three successive years upon payment of an annual non-refundable extension fee.

CureVac has the right to terminate the agreement in full or on a program-by-program basis (i) upon a material breach by us that is not cured within a certain period, (ii) upo n a change in control of Arcturus , or (iii) without cause upon 60 days’ notice to us.

CureVac has the right to terminate the agreement in full or on a program-by-program basis (i) upon a material breach by us that is not cured within a certain period, (ii) upon a change in control of Arcturus, or (iii) without cause upon 60 days’ notice to us.

We have the right to terminate the agreement upon material breach by CureVac that is not cured within a certain period.

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On February 11, 2019, we announced the termination of our obligations to CureVac for the preclinical development of ARCT-810, effective August 4, 2019, and the re-assumption of our worldwide rights thereto.

On July 24, 2019, the Company and CureVac entered into an amendment to the Development and Option Agreement, pursuant to which we agreed to (i) shorte n the time period during which CureVac may select potential targets to be licensed from the Company from eight years to four years, and (ii) reduce the overall number of maximum targets to be reserved and licensed to 10 targets.

Additionally, we canceled o ur related Co-Development and Co-Commercialization agreement for developing and commercializing ARCT-810.

On July 24, 2019, the Company and CureVac entered into an amendment to the Development and Option Agreement, pursuant to which we agreed to (i) shorten the time period during which CureVac may select potential targets to be licensed from the Company from eight years to four years, and (ii) reduce the overall number of maximum targets to be reserved and licensed to 10 targets.

Additionally, we canceled our related Co-Development and Co-Commercialization agreement for developing and commercializing ARCT-810.

Other Collaboration Agreements

On December 6, 2016, we entered into a Research Agreement (as amended, the “Takeda Agreement”) with Takeda.

Under the Takeda Agreement, we conducted a joint research program (the “Research Program”) with Takeda to discover siRNA medicines for the treatment of NASH.

The program involved development of siRNA compounds formulated in LUNAR lipid-mediated delivery technology for in vivo studies.

Pursuant to the Takeda Agreement, Takeda had a non-exclusive, worldwide sublicensable license to our technology until December 20, 2018 (the “Research Term”) for the purpose of conducting the Research Program.

We also agreed not to engage in any research or development activities involving LUNAR and UNA oligomers for any NASH targets involved in the Research Program for two years after the Research Term.

On March 8, 2019, we entered into a subsequent Research Agreement with Takeda, which was subsequently amended on June 3, 2019 (as amended, the “New Takeda Agreement”).

Under the New Takeda Agreement, Takeda received a non-exclusive, worldwide, sublicensable license to certain of our technology, including mRNA compounds formulated for LUNAR lipid-mediated delivery technology, for the purpose of conducting a joint research program on additional targets in in vitro and in vivo models of liver diseases (including NASH).

Both Arcturus and Takeda have agreed not to participate in other research, internally or with a third party, on therapeutic mRNA molecules designed to express the selected targets.

We also granted Takeda an exclusive option to negotiate a license to the product candidates determined to be of potential relevance as a result of the joint research program.

The option lasts for a certain period of time following the delivery of the results of the research program.

Funds remaining from the Takeda Agreement will be transferred to cover our activities under the New Takeda Agreement.

If any remaining funds are unspent or uncommitted for expenditure upon completion of the current research program, then we will retain such funds.

We have a Research Collaboration and License Agreement with Providence Therapeutics Inc.

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The Providence Agreement provides for collaborative efforts to identify and optimize microRNA modulators or mimetics for the treatment of neoplastic diseases.

In April 2017, the Providence Agreement was amended to include mRNA for the treatment of neoplastic disease.

In April 2017, the Providence

Agreement was amended to include mRNA for the treatment of neoplastic disease.

In July 2018, the Providence Agreement was amended and restated to cover brain neoplasms, breast neoplasms and ovarian neoplasms.

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(“Synthetic Genomics”), pursuant to which we granted Synthetic Genomics a nonexclusive, worldwide license to use our LUNAR lipid-mediated delivery to research, develop, manufacture and commercialize vaccines, but expressly excluding diagnosis, prophylaxis and treatment of respiratory disease viruses other than influenza.

During 2019 Synthetic Genomics exercised its right to sublicence the LUNAR technology suject to the license to certain third parties.

O ther M aterial A greements

During 2019 Synthetic Genomics exercised its right to sublicence the LUNAR technology subject to the license to certain third parties.

Other Material Agreements

Protiva Agreement

On August 9, 2013, we ent ered into a Patent Assignment and License Agreement with Marina Biotech, Inc.

(“Marina ”), pursuant to which Marina assigned to us certain intellectual property, including patents, inventions and information related to UNA oligonucleotide therapeutics, as w ell as Marina’s rights and obligations under a License Agreement (the “Protiva Agreement ”) with Protiva Biotherapeutics Inc.

On August 9, 2013, we entered into a Patent Assignment and License Agreement with Marina Biotech, Inc.

(“Marina”), pursuant to which Marina assigned to us certain intellectual property, including patents, inventions and information related to UNA oligonucleotide therapeutics, as well as Marina’s rights and obligations under a License Agreement (the “Protiva Agreement”) with Protiva Biotherapeutics Inc.

(“Protiva”), a wholly-owned subsidiary of Arbutus Biopharma Corporation.

The intellectual property licensed from Marina is a signif icant component of our UNA oligomer chemistry platform.

The intellectual property licensed from Marina is a significant component of our UNA oligomer chemistry platform.

As partial consideration for the assignment from Marina, we granted Marina a royalty-free, fully-paid, irrevocable, worldwide, non-exclusive license to use the inventions, ideas and information embodied in the assigned patents to develop, make, use and sell chemical compounds intended for human and animal therapeutic uses (including certain rights to sublicense in connection with continuing research, development and/or commercialization).

We also paid an upfront fee to Marina and agreed to maintain the assigned patents in certain countries.

Under the assigned Protiva Agreement , we granted Protiva a non-exclusive, irrevocable, perpetual, worldwide license with certain rights to sublicense (in connection with continuing research, development and/or commercialization) to exploit our patents, know-how and inventions relating to our technology for purp oses of the development of human therapeutics.

Under the assigned Protiva Agreement, we granted Protiva a non-exclusive, irrevocable, perpetual, worldwide license with certain rights to sublicense (in connection with continuing research, development and/or commercialization) to exploit our patents, know-how and inventions relating to our technology for purposes of the development of human therapeutics.

Upon achievement of certain development milestones with respect to each Protiva product directed to a specific gene target, Protiva will pay us milestone payments with an aggregate value of up to $3.25 million for each such product and target.

If Protiva instead sublicenses the commercialization rights for a Protiva product, then it will pay us a percentage of sublicense revenues it receives from sublicensees, the amount of which payment depends on the developm ent stage of such Protiva product at the time of sublicense.

If Protiva instead sublicenses the commercialization rights for a Protiva product, then it will pay us a percentage of sublicense revenues it receives from sublicensees, the amount of which payment depends on the development stage of such Protiva product at the time of sublicense.

In addition, Protiva will pay us royalties on net sales of Protiva products during the royalty term.

The royalties depend on the type of product and are on a country-by-country basis.

For license d Protiva products, royalties will be paid in a low single digit percentage on net sales for such product, subject to reduction on net sales in the event there is no patent coverage or generic products are introduced with respect to such product.

For licensed Protiva products, royalties will be paid in a low single digit percentage on net sales for such product, subject to reduction on net sales in the event there is no patent coverage or generic products are introduced with respect to such product.

A royalty reduction will apply if Protiva is required to license third party intellectual property to commercialize such product, subject to a cap on such reductions.

The Protiva Agreement for a particular Protiva product in a particular country will expire on a co untry-by-country basis upon the earlier of (i) the expiration of the royalty term for such product in such country, or (ii) the end of the calendar quarter in which sales in such country of generic products exceed sales of Protiva products in such country by a certain amount.

The Protiva Agreement for a particular Protiva product in a particular country will expire on a country-by-country basis upon the earlier of (i) the expiration of the royalty term for such product in such country, or (ii) the end of the calendar quarter in which sales in such country of generic products exceed sales of Protiva products in such country by a certain amount.

Unless earlier terminated by its terms, the Protiva Agreement will expire in its entirety upon expiration of the last royalty term for any of our patents with respect to which Protiva has a license under the agreement.

Protiva may term inate the Protiva Agreement for convenience in its entirety, or for a particular country or countries, upon ninety days’ prior written notice to us.

Protiva may terminate the Protiva Agreement for convenience in its entirety, or for a particular country or countries, upon ninety days’ prior written notice to us.

Alexion License Agreement

On February 17, 2021, we entered into an exclusive license agreement with Alexion Pharmaceuticals, Inc.

(“Alexion”) pursuant to which Alexion granted to Arcturus Therapeutics, Inc.

an exclusive, worldwide license to exploit certain specified Alexion patents.

In accordance with the terms of the license agreement, and in exchange for the license, we issued 74,713 shares of our common stock to Alexion on February 19, 2021, which number of shares was based on a price of $66.92 per share.

The price was determined based on the volume weighted average closing price of the Company’s common stock on The NASDAQ Global Market for the thirty trading days ending on February 17, 2021.

Cystic Fibrosis Foundation Agreement

On May 16, 2017, pursuant to a Development Program Letter Agreement (t he “CFF Agreement ”), CFF awarded us approximately $3.1 million to fund a development program to identify lead CFTR mRNA sequences and LUNAR formulations, demonstrate tolerability of LUNAR CFTR mRNA, and demonstrate translatability of aerosolized LUNAR (the “CFF Agreement”).

On May 16, 2017, pursuant to a Development Program Letter Agreement (the “CFF Agreement”), CFF awarded us approximately $3.1 million to fund a development program to identify lead CFTR mRNA sequences and LUNAR formulations, demonstrate tolerability of LUNAR CFTR mRNA, and demonstrate translatability of aerosolized LUNAR (the “CFF Agreement”).

The award will be received according to a milestone schedule and unused funds will be retained by CFF.

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Pursuant to CFF’s interruption license right under the CFF Agreement, if we fail to use commercially reasonable efforts to develop a product for a certain time period before the first commercial sale of such product, CFF may, upon written notice and our failure to effectively deny or cure such interruption (as set forth in the CFF Agreement), exercise certain rights pursuant to procedures set forth in the CFF Agreement.

CFF’s rights include, in certain cases, payments from us to CFF, or the grant of an exclusive (even as to us), worldwide license to CFF under our d evelopment program technology solely to the extent necessary to manufacture, have manufactured, license, use, sell, offer to sell, and support the product in the field of treatment of cystic fibrosis and other pulmonary diseases.

CFF’s rights include, in certain cases, payments from us to CFF, or the grant of an exclusive (even as to us), worldwide license to CFF under our development program technology solely to the extent necessary to manufacture, have manufactured, license, use, sell, offer to sell, and support the product in the field of treatment of cystic fibrosis and other pulmonary diseases.

All inventions, data, know-how, information, results, analyses and other intellectual property rights resulting from the development program will be owned by us, and subject to certain exceptions, CFF has assigned and transferred to us all of its right, title, and interest in and to all inventions and other intellectual property resulting from the development program.

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On August 1, 2019, the Company and CFF amended the CFF Agreement.

Pursuant to the amendment, (i) CFF will increase the amount it will award to advance LUNAR-CF to $15.0 million from approximately $3.2 million, (ii) the Company will provide $5.0 million in matching funds for remaining budgete d costs, (iii) the related disbursement schedule from CFF to us will be modified such that (a) $4.0 million was disbursed upon execution of the amendment, (b) $2.0 million will be disbursed within 30 days of the first day of each of January, April, July and October 2020 upon us invoicing CFF to meet project goals, and (c) the last payment of $3.0 million less the prior award previously paid out (approximately $2.3 million) will be disbursed upon us invoicing CFF to meet good manufacturing practices and subm itting an IND application.

Pursuant to the amendment, (i) CFF will increase the amount it will award to advance LUNAR-CF to $15.0 million from approximately $3.2 million, (ii) the Company will provide $5.0 million in matching funds for remaining budgeted costs, (iii) the related disbursement schedule from CFF to us will be modified such that (a) $4.0 million was disbursed upon execution of the amendment, (b) $2.0 million will be disbursed within 30 days of the first day of each of January, April, July and October 2020 upon us invoicing CFF to meet project goals, and (c) the last payment of $3.0 million less the prior award previously paid out (approximately $2.3 million) will be disbursed upon us invoicing CFF to meet good manufacturing practices and submitting an IND application.

The funds received from CFF will be recognized as contra research and development expense in proportion to the percentage covered by CFF of the overall budget.

Singapore Economic Development Board

On March 4, 2020, we were awarded a grant from the EDB to support the co-development of ARCT-021 with Duke-NUS Medical School.

In exchange for the grant, we agreed to supply ARCT-021 to the EDB for use within Singapore and we retained the right to sell and market ARCT-021 outside of Singapore.

We have agreed to pay Duke-NUS Medical School a low single digit royalty based on annual net sales of the vaccine in markets or jurisdictions outside of Singapore.

On October 2, 2020, we were awarded a grant from the EDB to support the further development of our LUNAR-COV19 vaccine candidate.

The Grant provides for up to S$9.3 million (approximately US$6.7 million) to support the development of the vaccine candidate.

The Grant is payable in two installments upon the achievement of certain milestones related to the progress of the development of the vaccine candidate.

We received the first installment of approximately $3.6 million in the fourth quarter of 2020.

On November 7, 2020, we entered into a Manufacturing Support Agreement (the “Support Agreement”) with the EDB pursuant to which they agreed to make a term loan of up to S$62.1 million (subject to adjustment based on exchange rates) to the Company, subject to the satisfaction of customary deliveries, to support the development of

the LUNAR-COV19 vaccine candidate (the “Singapore Loan”).

We elected to borrow the full amount available under the Support Agreement of S$6 2 .1 million , or $46.

6 million as a result of applicable exchange rates , on January 29, 2021.

Subject to certain exceptions, the Singapore Loan is a limited recourse loan that is intended to be repaid solely through a royalty payment on sales of the LUNAR-COV19 vaccine candidate, with a portion of the proceeds on all such vaccine sales being applied on a quarterly basis to prepay outstanding principal and interest under the Singapore Loan.

However, all unpaid principal and interest under the Singapore Loan will be due and payable five years after draw date, if net sales of the LUNAR-COV19 vaccine exceed a certain minimum threshold during this five year period or the Company obtains clearance to sell the vaccine in specified jurisdictions.

Unpaid principal and interest under the Singapore Loan will also become due and payable upon an event of default under the Support Agreement.

If any portion of the Singapore Loan is required to be forgiven pursuant to the terms of the Support Agreement, the EDB has the right to take ownership of certain raw materials and equipment that were purchased by the Company with proceeds of the Singapore Loan (the “Specified Assets”) and entered into a security agreement for the benefit of the EDB to provide that repayment of the Singapore Loan and related obligations are secured by a lien on the Specified Assets.

Israel Supply Agreement

On August 17, 2020, our wholly owned subsidiary entered into a definitive Supply Agreement (the “Supply Agreement”) with the Israeli MOH which provides for the supply of LUNAR-COV19 to the MOH.

The MOH has elected to reserve delivery by us of doses of LUNAR-COV19 for an initial 500,000 vaccinations (the “Initial Reserve Doses”).

The Supply Agreement also provides the MOH with the right to elect, in its discretion, to purchase additional doses of LUNAR-COV19 upon notice to us prior to specified dates at specified purchase prices.

On October 14, 2020, we received a non-refundable first reserve payment of $12.5 million from the MOH.

This first reserve payment is associated with a specified clinical trial milestone and was provided after a data review process during which the MOH had access to material preclinical and clinical data for our LUNAR-COV19 vaccine candidate.

Intellectual Property

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The claims of these patents and pending applications include compositions of matter, methods of use, manufacturing process and drug product formulations.

These claims cover the use of our core platform technologies including the use of LUNAR and lipid components to deliver nucleic acid, the use of UNA oligomers for therapeutics and reagents, the use of LNA oligomers for therapeutics, specific nucleic acid modalities for treating disease, as well as our proprietary technology regarding the design, manufacture, and purification of nucleic acids for use in therapy.

Claims also cover the composition of matter and use of our therapeutic candidates to treat target diseases including HBV and NASH.

These claims cover the use of our core platform technologies including the use of LUNAR and lipid components to deliver nucleic acids, the use of UNA oligomers for therapeutics and reagents, the use of LNA oligomers for therapeutics, specific nucleic acid modalities for treating disease, as well as our proprietary technology regarding the design, manufacture, and purification of nucleic acids for use in therapy.

Claims also cover the composition of matter, formulation, and use of our therapeutic candidates to prevent and/or treat target diseases including OTC deficiency, CF, HBV, and COVID-19.

Our issued patents are expected to expire between 2028 and 2038, without taking into account any possible patent term extensions.

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patents, 9 U.S.

pending patent applications, 1 international patent application (“PCT”), 6 foreign granted patents, and 39 foreign pending patent applications covering the composition of matter, manufacture of lipid nanoparticles, and use of our LUNAR technology for nucleic acid delivery and drug delivery.

pending patent applications, 2 international patent application (“PCT”), 11 foreign granted patents, and 38 foreign pending patent applications covering the composition of matter, manufacture of lipid nanoparticles (including lyophilization), and use of our LUNAR technology for nucleic acid delivery and drug delivery.

UNA, mRNA and LNA – As of March 1, 2021, we own 147 U.S.

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pending patent applications, 3 PCT applications, 57 foreign patents and 32 foreign pending patent applications covering methods and uses of LNA, UNA oligomer and mRNA therapeutics, and compositions of UNA oligomers or mRNA to treat specific target diseases.

ARCT 810 Patents – As of March 10, 2020, we own 1 pending U.S.

patent application and 1 PCT application specifically directed to the ARCT 810 drug substance, a specially designed mRNA encoding an OTC enzyme.

We own 1 pending U.S.

patent application directed to the ARCT-810 drug product candidate and methods of treating OTC deficiency.

In addition, several of the mRNA and LUNAR platform patents and patent applications recite claims that cover key components of the ARCT 810 drug substance and drug product candidate.

We anticipate that patents covering ARCT 810 will last until 2041, not including any patent term extensions.

STARR – In 2019, we began to develop our STARR platform which combines our proprietary LUNAR delivery systems with technologies that enable self-transcribing and self-replicating RNA.

As noted above, our robust LUNAR portfolio of over 60 patents and patent applications, provides protection for delivery vehicles that can enable specific and effective delivery of STARR drug substances.

In particular, we own 1 pending U.S.

In particular, we own one pending U.S.

patent application directed to the manufacture of compositions that can comprise STARR RNA in a lipid delivery vehicle.

In addition, we have begun to develop our STARR patent portfolio, and as of March 10, 2020, we own 1 pending U.S.

In addition, we have begun to develop our STARR patent portfolio, and as of March 1, 2021, we own one pending U.S.

patent application directed to specially designed RNA constructs, specific nucleotide and amino acid sequences, and lipid formulations comprising the same under the STARR technology.

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Similar provisions may be available in foreign jurisdictions including Europe.

We intend to apply for patent term extensions where possi ble.

We intend to apply for patent term extensions where possible.

Trade Secrets

We also rely on trade secrets to protect our product candidates.

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operate our business without infringing the patents and proprietary rights of third parties, both in the United States and internationally.

Certain Risks to Intellectual Property

We also protect our proprietary technology and processes, in part, by confidentiality and invention assignment agreements with our employees, consultants, scientific advisors and other contractors.

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To the extent that our employees, consultants, scientific advisors or other contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

We believe that our scientific knowledge and expertise in nucleic acid-based therapies provide us with competitive advantages over the various companies and other entities that are attempting to develop similar treatments.

However, we face competition at the technology platform and therapeutic indication levels from both large and small biopharmaceutical companies, academic institutions, governmental agencies and public and private research institutions.

Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.

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 necessary for, our programs.

Our success will be based in part upon our ability to identify, develop and manage a portfolio of product candidates that are safer and more effective than competing products in the treatment of our targeted patients.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, are more convenient or are less expensive than any products we may develop.

We are aware of several other companies that are working to develop nucleic acid medicines, including gene therapy, gene editing, mRNA, siRNA, and antisense therapeutics.

Many of these companies, such as the newly formed Genevant, are also developing nucleic acid delivery platforms which compete with LUNAR technology.

Companies currently developing mRNA therapeutics for prophylactic vaccines, cancer vaccines, or mRNA replacement therapy for rare genetic diseases include Moderna Therapeutics, Translate Bio, Ethris GmbH, CureVac GmbH, BioNTech, and eTheRNA.

Translate Bio is developing mRNA replacement therapies for cystic fibrosis which are in early clinical development, and which directly compete with our LUNAR-CF program.

Ethris is in preclinical development of ETH-CFTR, a mRNA replacement therapy for cystic fibrosis.

A number of companies are developing viral vector or DNA-based approaches to gene delivery for rare liver diseases, including Ultragenyx Pharmaceutical, REGENXBIO, Inc., uniQure, Vivet Therapeutics, LogicBio Therapeutics, Touchlight Genetics

Ltd., Generation Bio, and A udentes Therapeutics.

Ultragenyx is developing a gene therapy product for OTC deficiency which is in early clinical trials.

Companies developing siRNA therapeutics include Arbutus Biopharma, Arrowhead Pharmaceuticals, Inc, Quark Pharmaceuticals, Inc., Silence Therapeutics plc, Nitto Denko, Dicerna Pharmaceuticals, Inc., and Alnylam Pharmaceuticals, Inc.

Antisense therapeutics are also in development by Ionis Pharmaceuticals, Roche Pharma, WAVE Life Sciences, Celgene Corporation, Akcea Therapeutics, Inc., Antisense Therapeutics, Ltd., ProQR, and Sarepta Therapeutics, Inc.

Both Ionis Pharmaceuticals and ProQR are developing antisense therapies for cystic fibrosis which compete with our LUNAR-CF program.

In addition, to the companies mentioned above, several companies are developing non-nucleic acid therapies for OTC deficiency which are competitors to our LUNAR-OTC development program.

For example, Synlogic ’ s SYNB1020 product is treating urea cycle disorders, including OTC deficiency, by introducing engineered probiotic bacteria to the gut.

Promethera ’ s Heparesc product involves infusion of their HepaStem, liver-derived stem cells into urea cycle disorder patients to restore normal enzyme function.

For cystic fibrosis, many companies are pursuing small molecule therapies designed to increase CFTR function, targeted to different patient populations, which could compete with our LUNAR-CF program.

These include Vertex Pharmaceuticals, Proteostasis Therapeutics, Inc., Novartis and Galapagos.

The competitive landscape continues to expand and we expect that additional companies will initiate programs focused on the development of nucleic acid therapeutic products using the approaches described above as well as potentially new approaches that may result in the more rapid development of nucleic acid therapeutics or more effective technologies for nucleic acid drug development or delivery.

Manufacturing and Supply

To date, we have manufactured only limited quantities of drug substance for use in research activities.

We have contracted with several third-party contract manufacturing organizations (“CMOs”) for the supply of drug substance and finished product to meet our testing needs for preclinical toxicology and clinical testing.

We expect to continue to rely on third-party CMOs for the supply of drug substance and drug product for our product candidates for at least the next several years, including to support the launch of our first commercial products.

Product Approval and Government Regulation

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Drug Development Process

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

Drugs are also subject to other federal, state and local statutes and regulations.

In the United States, the development, manufacturing, and marketing of human drugs and vaccines are subject to extensive regulation.

The FDA regulates drugs under the Federal Food, Drug and Cosmetic Act (“FDCA”) and implementing regulations, and biological products, including vaccines, under provisions of the FDCA and the Public Health Service Act.

Drugs and vaccines are also subject to other federal, state and local statutes and regulations.

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

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Any agency or judicial enforcement action could have a material adverse effect on us.

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

completion of nonclinical laboratory tests, animal studies and formulation studies according to good laboratory practices (“GLP”) or other applicable regulations;

The process required by the FDA before a drug or biological product may be marketed in the United States generally involves the following:

completion of nonclinical laboratory tests, animal studies and formulation and stability studies according to good laboratory practices (“GLP”) or other applicable regulations;

submission to the FDA of an application for an IND, which must become effective before human clinical trials may begin;

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The FDA may also impose clinical holds on a drug candidate at any time before or during clinical trials due to safety concerns or non-compliance.

Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate such trial.

Accordingly, we

cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate such trial.

Clinical trials involve the administration of the drug candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s direct control.

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In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients;

The drug is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage a nd dosing schedule.

Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical trial sites.

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

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

Generally, a well-controlled Phase 3 clinical trial is required by the FDA for approval of an NDA or BLA.

Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval.

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The FDA does not always meet its PDUFA goal dates.

The review process and the PDUFA goal date may be extended by three months or longer if the FDA requests or the NDA or BLA sponsor

otherwise provides additional information or clarification regarding informati on already provided in the submission before the PDUFA goal date.

The review process and the PDUFA goal date may be extended by three months or longer if the FDA requests or the NDA or BLA sponsor otherwise provides additional information or clarification regarding information already provided in the submission before the PDUFA goal date.

After the NDA or BLA submission is accepted for filing, the FDA reviews the NDA or BLA to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, strength, quality and purity.

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

The FDA requires vaccine manufacturers to submit data supporting the demonstration of consistency between manufacturing batches, or lots.

The FDA works together with vaccine manufacturers to develop a lot release protocol, the tests conducted on each lot of vaccine post-approval.

Additionally, before approving an NDA or BLA, the FDA will typically inspect the sponsor and one or more clinical sites to assure that the clinical trials were conducted in compliance with IND study requirements.

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Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling.

In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase 4 clinical trials, which are designed to further assess a drug safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized.

In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase 4

clinical trials, which are designed to further assess a product’s safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized.

The Commissioner of the FDA, under delegated authority from the Secretary of the U.S.

Department of Health and Human Services (“DHHS”) may, under certain circumstances, issue an EUA that would permit the use of an unapproved drug product or unapproved use of an approved drug product.

Before an EUA may be issued, the Secretary must declare an emergency based on one of the following grounds:

a determination by the Secretary of the Department of Homeland Security that there is a domestic emergency, or a significant potential for a domestic emergency, involving a heightened risk of attack with a specified biological, chemical, radiological, or nuclear agent or agents;

a determination by the Secretary of the Department of Defense that there is a military emergency, or a significant potential for a military emergency, involving a heightened risk to U.S.

military forces of attack with a specified biological, chemical, radiological, or nuclear agent or agents;

a determination by the Secretary of the DHHS that a public health emergency that affects, or has the significant potential to affect, national security and that involves a specified biological, chemical, radiological, or nuclear agent or agents, or a specified disease or condition that may be attributable to such agent or agent.

In order to be the subject of an EUA, the FDA Commissioner must conclude that, based on the totality of scientific evidence available, it is reasonable to believe that the product may be effective in diagnosing, treating or preventing a disease attributable to the agents described above, that the product’s potential benefits outweigh its potential risks and that there is no adequate approved alternative to the product.

Although an EUA cannot be issued until after an emergency has been declared by the Secretary of DHHS, the FDA strongly encourages an entity with a possible candidate product, particularly one at an advanced stage of development, to contact the FDA center responsible for the candidate product before a determination of actual or potential emergency.

Such an entity may submit a request for consideration that includes data to demonstrate that, based on the totality of scientific evidence available, it is reasonable to believe that the product may be effective in diagnosing, treating, or preventing the serious or life-threatening disease or condition.

This is called a pre-EUA submission and its purpose is to allow FDA review considering that during an emergency, the time available for the submission and review of an EUA request may be severely limited.

Post-approval requirements

Any drug products for which we or our strategic alliance partners receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, promoting drugs for uses or in patient populations that are not described in the drug ’ s approved labeling (known as “ off-label use ” ), industry-sponsored scientific and educational activities, and promotional activities involving the internet.

Any drug or biological products for which we or our strategic alliance partners receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities, and promotional activities involving the internet.

Failure to comply with FDA requirements can have negative consequences, including adverse publicity, enforcement letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties.

Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses.

Manufacturers of our products are required to comply with applicable FDA manufacturing requirements contained in the FDA ’ s cGMP regulations.

cGMP regulations require among other things, quality control and quality assurance as well as the correspond ing maintenance of records and documentation.

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

Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP complianc e.

Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved NDA or BLA , including withdrawal of the product from the market.

In addition, changes to the manufacturing process genera lly require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

Manufacturers of our product candidates are required to comply with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations.

cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation.

Following approval, the FDA continues to monitor vaccine quality through real-time monitoring of lots by requiring manufacturers to submit certain information for each vaccine lot.

Vaccine manufacturers may only distribute a lot following release by the FDA.

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

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

Discovery of problems with a product after approval may result in

restrictions on a product, manufacturer, or holder of an approved NDA or BLA, including withdrawal of the product from the market.

In addition, changes to the manufacturing process generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

Regulation in Europe and Other Regions

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In all cases, again, the clinical trials are conducted in accordance with GCPs and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

As of December 31, 2019, we had 88 employees, all of which were full-time or full-time equivalents.

Our Business in General

We are aware of several other companies that are working to develop nucleic acid medicines, including gene therapy, gene editing, mRNA, siRNA, and antisense therapeutics.

Many of these companies, such as the newly formed Genevant, are also developing nucleic acid delivery platforms which compete with LUNAR technology.

Below we have included what we believe to be the competitive landscape for certain of the medicines that we currently have in development.

ARCT-021 (LUNAR-COV19 Vaccine)

We consider the following medicines as competitors or future competitors to ARCT-021.

Drug Description

Administration/Dosing

Number of Doses

Comirnaty (BNT162b2)

Pfizer, BioNTech, Fosun Pharma

mRNA-based Vaccine

Phase 3 and EUA

mRNA-based Vaccine

Phase 3 and EUA

Covishield (AZD1222)

Non-replicating Chimpanzee Adenovirus vaccine

Phase 3 and EUA

JNJ-78436735 or Ad26.COV2.S

Non-replicating Adenoviral vector-Ad26

Sputnik V (Gam-COVID-Vac)

Russian (Gamaleya National Research Centre for Epidemiology and Microbiology)

Heterologous non-replicating adeno viral vectors Ad26 prime/Ad5 boost

Phase 3 and EU

Inactivated vaccine (formalin with alum adjuvant)

Approved in China, Phase 3, EUA

Recombinant nanoparticle technology

(1) Comirnaty (Pfizer, BioNTech, Fosun Pharma) is a two-dose regimen at 30 µg per dose.

mRNA-1273 (Moderna) is a two-dose regimen at 100 µg per dose.

In our current Phase 2 trial for ARCT-021, we are exploring the following doses and regimens:

5 µg ARCT-021, two dose regimen and 7.5 µg ARCT-021, as one- and two-dose regimens.

Despite the receipt of emergency use approval (EUA) by several of our competitors for their COVID-19 vaccine, we believe there are significant commercial opportunities globally.

ARCT-810 (LUNAR-OTC)

We consider the following medicines as competitors or future competitors to ARCT-810.

Drug Description

Administration/Dosing

Ultragenyx Pharmaceuticals

OTC gene in AAV8 vector

IV, single dose

ARCT-032 (LUNAR-CF)

We consider the following medicines as competitors or future competitors to ARCT-032.

Drug Description

Administration/Dosing

Translate Bio

CFTR-encoded mRNA

Weekly or daily inhalation

Eloxx Pharmaceuticals

Readthrough agent for premature stop codons

Phase 2, G542X mutation

As of December 31, 2020, we had 118 employees, all of which were full-time.

None of our employees are represented by a labor union or covered by a collective bargaining agreement.

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These reports are posted on our website as soon as reasonably practicable after they are electronically filed with the SEC.

The public may read and copy any materials that we file with the SEC

electronically through the SEC website (www.sec.gov).

The information contained on the SEC’s website is not incorporated by reference into this Annual Report on Form 10-K and should not b e considered to be part thereof.

The public may read and copy any materials that we file with the SEC electronically through the SEC website (www.sec.gov).

The information contained on the SEC’s website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be part thereof.

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