Arcturus Therapeutics Holdings Inc. 10-K

Item 1. Business Overview We are a late-stage global clinical 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-amplifying mRNA technology (Self-Transcribing and Replicating RNA, or STARR™, technology) has the potential to provide longer-lasting RNA and sustained protein expression at lower dose levels. We are leveraging our proprietary LUNAR platform 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. We continue to expand this platform by adding new innovative delivery solutions that allow us to expand our discovery efforts. Our proprietary LUNAR technology is intended to address the major hurdles in RNA drug 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 can allow us to deliver on the next generation of nucleic acid medicines. We were a preclinical company until June 2020, when we initiated our first Phase 1 study for our mRNA-based therapeutic candidate for ornithine transcarbamylase (“OTC”). With the launch of our COVID-19 vaccine program in March of 2020 and the subsequent initiation by our collaborator in September 2021 of the Phase 3 arm of the Phase 1/2/3 study for our COVID-19 vaccine in Vietnam, we progressed to a late-stage clinical company. In addition, we continued to progress our therapeutic pipeline and collaborations, and to expand and improve our platform technologies. We continue to focus our development efforts on our distinct, proprietary self-amplifying mRNA technology, which is a significant component of most of our product candidates, including our lead COVID 19 vaccine candidates. During 2021, we entered into a significant collaboration with Vinbiocare Biotechnology Joint Stock Company (Vinbiocare), a member company of the Vingroup Joint Stock Company (Vingroup) group of companies, whereby we provide technical expertise and support services to Vinbiocare to assist in the build out of a manufacturing facility in Vietnam. Together with Vinbiocare, we advanced ARCT-154, our investigational next generation, self-amplifying mRNA-based vaccine for COVID-19, into a Phase 1/2/3 study in Vietnam, which is being funded and sponsored by Vinbiocare. To date, over 18,000 subjects have been dosed in the Phase 1/2/3 study. With Vinbiocare, we have completed submission to the Ministry of Health in Vietnam with respect to an application for an Emergency Use Authorization for ARCT-154 (LUNAR-COV19). We are also continuing to engage with major health authorities to identify pathways to have our products approved for the COVID-19 booster market. We expect to receive in the near term significant data from studies of our COVID-19 vaccine and regulatory guidance which will determine our course of action with respect to the development and commercialization of our vaccine candidate. Commercialization of ARCT-154 will require significant additional funds. We are considering additional partnering opportunities to assist in these efforts. We cannot be certain that we will identify a partner or enter into an acceptable arrangement. We will continue to evaluate our business opportunities in a surgical manner to maximize our ability to develop approved products while making most efficient use of our available resources. In addition to progressing our self-amplifying mRNA-based vaccine candidates for COVID-19, we continued to advance our pipeline and collaborations, and to expand and improve our platform technologies. As part of our vaccine franchise we are evaluating in preclinical studies the efficacy and safety of a seasonal influenza vaccine (our LUNAR-FLU mRNA vaccine candidate) and plan to select a STARR candidate in 2022. Our rare disease programs have also continued to advance. In our ornithine transcarbamylase (OTC) deficiency program, with the overall gradual return to near-normal for clinical trials in the COVID-19 era, sites are finding more opportunities to screen potential participants for the Phase 1b study of ARCT-810 (LUNAR-OTC) and health authorities in the UK, Spain and Belgium have approved a Phase 2 multiple-dose study of ARCT-810 in OTC-deficient patients. We anticipate completion of dosing of the first cohort of the Phase 1b study by the first half of 2022. We anticipate screening to commence in our Phase 2 study in the second quarter of 2022 and to receive interim data in the second half of 2022. For the cystic fibrosis program, results from a series of nonclinical and preclinical studies have led us to an optimized formulation and nebulizer system that is being advanced into the 4 clinic. We expect to file an application for a First-in-Human study for ARCT-032 (LUNAR-CF), our mRNA therapeutic candidate for cystic fibrosis, in the third quarter of 2022. We also continue to make significant progress with our manufacturing processes and operations. We 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, ARCT-154, and ARCT-165 (our LUNAR-COV19 vaccine candidates). We continue to make progress towards completion of a manufacturing facility in Hanoi, Vietnam, with our collaboration partner Vinbiocare, capable of producing 200 million doses per year, and technology transfer for commercial manufacturing is in process. 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. 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. Some of these medicines function by providing the means for producing a deficient yet vital protein in vivo. Within a cell, DNA carries the blueprint, in the form of genes, from which all proteins necessary for life are encoded. 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. The general objectives of these therapies include: • 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 restore a functional protein by correcting its encoding mRNA sequence; • 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”)); and • 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). Brief Introduction to our LUNAR® and STARR™ Technology Platforms LUNAR® 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 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 250 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. STARR™ Our STARR technology is our proprietary self-amplifying mRNA (or saRNA) technology platform. When combined with a delivery system, such as our lipid-mediated delivery system LUNAR, the STARR technology has the potential to generate a protective immune response or drive therapeutic protein expression to prevent against or treat a variety of diseases. Self-amplifying RNA-based prophylactic vaccines developed with STARR may trigger 5 rapid and prolonged antigen expression within host cells affording patients protective immunity against infectious pathogens. We believe the combination of LUNAR and STARR technology may result in lower dose requirements (accompanied by fewer side effects) due to superior immune response and sustained protein expression compared to non-self-amplifying RNA-based vaccines and will likely enable us to produce greater volumes of vaccine doses more quickly. With the full enrollment of the pivotal Phase 1/2/3 study in Vietnam of ARCT-154, our next generation, self-amplifying mRNA-based vaccine for COVID-19, we are a global leader in the clinical development of self-amplifying RNA-based vaccines. Our STARR platform is described in more detail below. Arcturus’ Target ID and Discovery Paradigm Our Development Programs Arcturus’ Internal Programs Pipeline Vaccines to Prevent Infectious Disease 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. 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 900,000 individuals in the US have died of COVID. 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. In 2020, we initiated the development of our first self-amplifying mRNA vaccine candidate, ARCT-021, to protect against COVID-19. We commenced a Phase 1/2 trial in 2020 and two Phase 2 trials in 2021, and we have completed dosing of ARCT-021 in the trials. In 2021, we began development of two next generation vaccine candidates designed to elicit an improved neutralizing antibody response to circulating strains of SARS-CoV-2. We have completed enrollment for the trial of one of these vaccines, ARCT-154, in a Phase 1/2/3 trial in Vietnam. We have also expanded our vaccine program to include seasonal influenza and plan to submit an application in 2023 to initiate a Phase 1 human clinical trial. Our internal vaccine programs include our LUNAR-COV19 and LUNAR-FLU 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. COVID-19 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 6 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. After the first cases of COVID-19 were identified, SARS-CoV-2 spread rapidly to all parts of the globe resulting in surges of infections as protective health measures have waxed and waned in a region-specific manner. The result of uncontrolled viral spread from approximately 400 million cases worldwide has led to the selection and spread of viral variants that are more contagious, pathogenic, or both. The WHO has announced a naming system for variants of the coronavirus that uses letters of the Greek alphabet. Under the new scheme, the B.1.1.7 variant first identified in the UK, commonly referred to as the Kent variant, is labelled “Alpha”. The B.1.351 variant identified in South Africa is “Beta”, the P.1 variant that originated in Brazil is “Gamma”, the B.1.617.2 variant first detected in India is “Delta”, and B.1.1.529 also first identified in South Africa is “Omicron”. These Greek letter labels will only be given to “variants of concern” and “variants of interest” as defined by the WHO. The current variants of concern (VOCs), specifically Delta and Omicron, have rapidly displaced previous circulating strains, spread more efficiently than previous strains, and are associated with increased risk of breakthrough infection among the vaccinated. Despite the expeditious EUA and rollout of vaccines in many counties, vaccine efficacy rates vary widely to currently circulating VOCs and relatively low percentages of people worldwide have received a booster dose important for protection against the currently dominant variant, Omicron. Although current vaccines have been shown to protect against severe morbidity and mortality caused by current VOCs, breakthrough infections have been documented, nearly all from VOCs. As immunity wanes and booster doses become necessary, there is a critical need to enhance protection against VOCs to reduce the infection and disease burden for both the public and the health care systems across the globe. As such, Arcturus has developed the next generation of mRNA vaccines, which have demonstrated encouraging antibody data, including neutralizing antibodies against several variants of concern, including Omicron, boosting pre-existing immunity to SARS-CoV-2. Our initial COVID-19 vaccine candidate, ARCT-021, developed in conjunction with Duke-NUS Medical School, is based on our STARR technology platform and has demonstrated antibody and cell-mediated immunogenicity and an excellent safety profile and through Phase 2 clinical trials. This vaccine was designed to promote immune responses to the spike protein of the SARS-CoV-2 virus, the critical part of the virus that allows infection to occur. In 2021, ARCT-021 was selected by a global entity for inclusion in a multinational Phase 3 vaccine trial. However, that trial has taken longer than anticipated to proceed with ARCT-021 and might not ever proceed with ARCT-021. Our clinical studies involving ARCT-021 have concluded dosing and we do not have current plans to sponsor additional development studies of ARCT-021 unless and until the global entity determines to proceed with ARCT-021 in the multinational Phase 3 vaccine trial. Our two next generation vaccine candidates currently under development, ARCT-154 and ARCT-165, are based on the same platform as ARCT-021. We have modified the coding region to stabilize the spike protein and increase immune recognition to the receptor binding domain to improve neutralizing antibody titers and cross-protection to VOCs. ARCT-154 is currently undergoing a fully enrolled pivotal Phase 1/2/3 study in Vietnam, sponsored and funded by Arcturus’ collaborator Vinbiocare. This vaccine is being evaluated as a primary vaccine administered in two 5-µg doses spaced 28 days apart. Evaluations include immunogenicity, efficacy and safety endpoints. A subset of participants is also receiving a third (booster) dose of ARCT-154. We have completed submission of regulatory documents for an emergency use authorization application in Vietnam. As the global market moves closer to booster administrations, Arcturus’ current next-generation vaccine candidates to COVID-19 are in trials as a booster dose of 5 µg dose, which is 6 to 10 times lower than currently-approved mRNA vaccine boosters. The purpose of a booster dose is two-fold: 1) to increase the durability of protective immunity to currently circulating strains of SARS-CoV-2 and 2) to protect against emerging VOCs that could cause breakthrough infections with currently authorized vaccines. Two current clinical studies are exploring these next generation COVID-19 vaccines as a booster vaccination series. One of our Phase 2 studies of ARCT-021 (ARCT-021-04) has been modified to include booster vaccination with either our original or next generation COVID-19 vaccines six months after the second dose of the primary vaccine series with ARCT-021. ARCT-021-dosed participants were randomized 1:1:1:1 to receive 5 µg of one of 7 three Arcturus COVID-19 vaccine candidates or placebo. Participants originally receiving placebo were re-enrolled and randomized to one of three dosage groups receiving ARCT-021 as the primary vaccine series. A second study, ARCT-165-01, evaluates ARCT-154 and ARCT-165 as boosters five months after a Comirnaty® primary vaccination series in a total of 24 subjects <60 years of age. We announced initial results from this study: increases in geometric mean neutralizing antibody concentrations of up to 30x pre-dose levels were sustained at 28 days post-boost, the last time point at which measurements were made in this ongoing study as of the announcement. Pseudovirus (D614G variant) Microneutralization (MNT) Assay Results Virus neutralization concentrations (arbitrary units per milliliter, AU/mL) for participants at Day 1 (prior to boosting), and Days 15 and 29 after boosting with ARCT-154 (left; n = first 8 out of 12 participants dosed) and ARCT-165 (right; n = first 9 out of 12 participants dosed). Within each panel, the left graphic shows values from individuals, and the right graphic shows the geometric means of neutralization concentrations with 95% confidence intervals. The multiples are geometric mean-fold rises (GMFR) of neutralization concentrations on Day 15 over Day 1 values. Geometric mean for Day 29 is not shown here, as data from only 4 participants are available for this time point. In addition, responses against a wide panel of VOC and “variants of interest” (as defined by WHO) were measured using an experimental surrogate virus neutralization assay. We found robust responses after a single booster dose across all variants tested. The different spike variants encoded by ARCT-154 and ARCT-165 may allow for broad coverage of current and emerging variants of concern and interest. 8 Surrogate Neutralization Assay to Variants of Concern and Interest Top panels show geometric mean concentrations and 95% confidence intervals on Day 1 (prior to boosting), Day 15 and day 29 post-boost administration with ARCT-154 (left; n = 12 participants dosed). Line graphs on right show that responses are maintained through at least Day 29 for two variants, beta and delta. The bottom panels show the results for individual participants for the Beta and Delta variants on Day 1 (prior to boosting), and Days 15 and 29 post-boost administration with ARCT-165. Line graph on the right shows responses for each participant through Day 29. Abbreviations: VOC, variant of concern; VOI, variant of interest; ULOQ, upper limit of quantification; LLOQ, lower limit of quantification. 9 In a collaboration with Penny Moore, an expert in virology and immunology from the University of the Witwatersrand in Johannesburg, South Africa, we have assessed neutralizing antibody responses to Omicron, the latest WHO VOC that has displaced previous SARS-CoV-2 variants globally, using a lentiviral pseudovirus assay. We observed 54 and 47 fold increases in neutralizing titers after a single boost with ARCT-154 or ARCT-165, respectively. Pseudovirus (Omicron variant, research use) MNT assay results. Antibody titers corresponding to 50% viral inhibition (ID50) in trial participants at Day 1 (prior to boosting) and Day 29 after boosting with ARCT-154 (left; n = 12/12) and ARCT-165 (right; n = 12/12). The bar graphs show the geometric means of neutralization titers, with 95% confidence intervals. Importantly, as this assay was performed at a different laboratory than our D614G assay and the readouts of this lentivurus based assay are different (ID50 vs AU/mL), the results from these two assays cannot be directly compared. The multiples are fold rises of neutralizing antibody titers on Day 29 over Day 1 values. ID¬50: half-maximal inhibitory dose; LLOQ: lower limit of quantitation. LUNAR-FLU 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. In addition, mRNA vaccines should not face the challenge from mutations common to egg-grown vaccines. LUNAR-FLU is being designed to take advantage of our expertise in both LUNAR® lipid delivery systems, and mRNA technology to optimize the balance of acceptable reactogenicity and enhanced expression and immunogenicity of influenza antigens with the aspiration of creating a highly effective influenza vaccine for use in general and high risk populations. Preliminary Data for Influenza Murine Studies: An early version of our STARR platform encoding the hemagglutinin (HA) from a highly pathogenic strain of pandemic influenza (H5N1 A/Vietnam/1203/2004) formulated with several LUNAR lipids was 10 evaluated in mice. (HA is a glycoprotein that causes red blood cells to agglutinate or clump.) Mice primed, then boosted three weeks later, with this vaccine resulted in hemagglutinin inhibition (HAI) titers >40 two weeks after boost for two of our formulations. Large Animal Efficacy and Immunogenicity Studies: Experiments with a self-amplifying RNA (saRNA) encoding HA from H1N1 (A/California/07/2009) showed protection against challenge in pigs at even the 1µg dose. This protection was comparable to that elicited from an inactivated vaccine. Pigs primed, then boosted 28 days later, with our vaccine showed reduced lung lesions compared to protective responses from commercial vaccines (top). This same dose used in a small non-human primate study resulted in HAI >40 and the induction of robust polyfunctional CD8+ T cell responses (bottom). Mice vaccinated with a previous version of STARR saRNA (in collaboration with SGI) resulted in HAI end titers >40 with several formulations of Arcturus’s LNPs. Doses used are at 200-2000 times below the tolerable dose in mice. Top: Efficacy studies performed in pigs challenged with H1N1 resulted in lung lesion scores comparable to those from a commercial inactivated vaccine. Bottom: NHPs vaccinated with saRNA encoding HA were resulted in protective HAI end titers (left) and robust polyfunctional T cell responses (middle, right) 11 Figure TA2: Top: Efficacy studies performed in pigs challenged with H1N1 resulted in lung lesion scores comparable to those from a commercial inactivated vaccine. Bottom: NHPs vaccinated with samRNA encoding HA were resulted in protective HAI end titers (left) and robust polyfunctional T cell responses (middle, right) Current studies use a next generation drug substance and formulation to elicit optimal influenza-specific immune responses and increase tolerability. The figure below shows that a monovalent LUNAR-FLU elicits robust HAI titers over time after a single intramuscular injection in mice. Additionally, a quadrivalent influenza vaccine also elicits robust HA-specific antibodies to all four strains present in the vaccine. Preclinical work is currently under way to optimize tolerability and immunogenicity to all four seasonal strains recommended by health authorities. Left graph shows an increase of HAI titers after immunization of mice with monovalent LUNAR-FLU vaccine indicating robust titers maintained for at least three months post vaccination. Right graph shows robust increase in HA-binding IgG antibodies to all four seasonal influenza strains encoded by a quadrivalent LUNAR-FLU. HAI end titers over time are currently being assessed for this experiment. We plan to continue preclinical evaluations of LUNAR-FLU candidates in 2022 and to select a STARR candidate in 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 National Institutes of Health (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 6% and 7% of the population in the developed world. There is a pressing need for new medicines for rare diseases as few of the 7,000 known 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. 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 to overcome the scientific and operational challenges that arise. 12 We believe our technology provides an excellent platform to address genetically inherited rare diseases. Specifically, we are focusing on developing 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, life-threatening, genetic disease caused by mutations in the OTC gene that lead to dysfunctional or deficient OTC. OTC deficiency is the most common of the urea cycle disorders, a group of inherited metabolic disorders that are associated with reduced ability to eliminate ammonia from the body. Ammonia is a toxic waste product produced from the breakdown of protein. OTC is a critical enzyme in the urea cycle, which takes place in liver cells and converts toxic ammonia to urea which is eliminated in the urine. In patients with OTC deficiency, ammonia accumulates in the blood and is toxic to the brain and liver. Symptoms of high ammonia levels include vomiting, headaches, coma and death. OTC deficiency can cause developmental problems, seizures and death in newborn babies. As an X-linked disorder, OTC deficiency tends to be more severe in males, though female carriers are often affected. 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 deficiency is a low-protein diet, dietary supplements, and ammonia scavengers to try to 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 which then 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 held entirely by Arcturus. Preclinical data in OTC-deficient murine models have demonstrated that dosing of LUNAR-OTC results in robust OTC protein expression and activity, thereby improving ureagenesis, reducing plasma ammonia, and increasing survival. The Phase 1, double-blind, placebo-controlled, single-dose, dose-escalation study of ARCT-810 in healthy volunteers, completed in November 2020, demonstrated favorable safety, tolerability and PK profiles. A Phase 1b study in stable OTC-deficient patients is being conducted in the United States and Canada, and has commenced dosing. The trial plans to enroll approximately 12 patients and is designed to assess safety, tolerability and pharmacokinetics, as well as various exploratory biomarkers of drug activity. The COVID-19 pandemic has imposed numerous widespread challenges for the conduct of non-COVID clinical trials, including this study. These barriers include prolonged site closures, loss of key study personnel, prioritization of clinical care over research, and reluctance of patients to attend clinic visits. The pandemic has adversely affected startup activities for some sites and enrollment capabilities for others. Having worked closely with the investigators, the CRO and patient groups through this difficult period, we are now seeing a significant increase in patient identification and screening, such that completion of dosing of the first cohort is anticipated by the first half of 2022. Onboarding of new sites in addition to the current seven active sites in the United States is also expected to accelerate enrollment. A Phase 2 multiple-dose study of ARCT-810 in OTC-deficient patients is approved to proceed by the regulatory authorities in the UK, Belgium and Spain and clinical trial authorization applications are currently being prepared for other European countries. We anticipate that screening patients will begin in this study in the second quarter of 2022 and that we will have interim data from a subset of participants in the second half of 2022. 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 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 a codon-optimized human CFTR mRNA into airway epithelial cells. This 13 allows airway cells to produce functional human CFTR protein using their native translational machinery and protein trafficking pathways which could result in the treatment of the underlying defect that causes CF lung disease, regardless of patient’s specific mutation. The Cystic Fibrosis Foundation (“CFF”) has partnered with us to develop this 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 possibility of restoring functional CFTR. 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 more than 2,000 known mutations in the CFTR gene. These mutations have been grouped into several different classes based on the mechanism by which they cause reduction in the production and/or function of the CFTR protein. When CFTR is absent or defective, the airway surfaces become dehydrated and coated with a layer of thick mucus that clogs the airways, causing difficulty breathing and often resulting in chronic infections, exaggerated inflammation, structural airway damage, and other serious complications in lungs as well as in the pancreas and live. The median lifespan of CF patients in the United States is approximately 50 years, and the cause of death is usually lung-related. Current therapies for CF lung disease are, in effect, daily 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 certain classes of mutant CFTR protein to reach the cell membrane and/or increase functional ion channel activity. The CFTR modulators, while effective in many patients, are mutation-specific and therefore are not effective in all persons 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 ARCT-032 on these groups of patients, as they currently have the highest unmet needs for CF therapies. An extensive portfolio of nonclinical and preclinical studies have been performed to support the advancement of ARCT-032 towards the clinic. We presented comprehensive data that showcased the potential for ARCT-032 as a disease-modifying treatment at the North American Cystic Fibrosis Conferences in November 2021. The data presented demonstrated that (i) ARCT-032 remains stable after nebulization and retains functional activity, (ii) LUNAR protects mRNA in sputum isolated from CF patients, (iii) aerosolized LUNAR-mRNA delivers mRNA to airway epithelium across species, including rodents and non-rodents (ferrets, non-human primates), (iv) LUNAR-mRNA transduced several epithelial cell types (secretory, ionocytes, basal, ciliated) in ferret and human bronchial epithelial cells, and (v) ARCT-032 transduction demonstrated concentration-dependent expression of mature CFTR and restored chloride transport in CF human bronchial epithelial cells. In addition, we previously demonstrated restoration of CFTR activity in vivo (measured by nasal potential difference) in a CF mouse model with a Class I mutation. Cumulatively, these robust data demonstrate the proof of concept to validate ARCT-032 as a potential therapy to target the root cause of CF lung disease. We continue to work closely with the CFF, which recently agreed to support studies with ARCT-032 in a CF ferret model to evaluate epithelial targeting and functional outcomes. These studies will be conducted in collaboration with investigators at the University of Iowa and the University of Alabama at Birmingham. We have also done several studies with the nebulizer system to optimize performance, which is important to ultimately reduce the burden on patients. 14 ARCT-032 generated high levels of mature (C-band) CFTR in CF human bronchial epithelial cells Ferret bronchial epithelial cells derived from a G551D CF ferret model were transfected in vitro with ARCT-032 (LUNARhCFTR). A dose dependent increase in chloride current was observed at the highest doses tested, comparable to the positive control VX770. The negative controls (LUNAR buffer and LUNAR-TdTomato) did not have any impact on chloride changes. Human bronchial epithelial cells from a CF patient homozygous for F508del mutation were transfected in vitro with ARCT-032, resulting in dose-related increase in mature CFTR protein as seen in this Western blot as measured 72 hours after transfection. The increase in protein levels is specific to ARCT-032 treated samples and not present in the LUNAR buffer control. LUNAR-CF restored CFTR activity in HBE cells carrying the F508del mutation 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. The figure below demonstrates that ARCT-032 applied to human bronchial epithelial cells resulted in restored chloride transport. 15 Human bronchial epithelial cells from a CF patient homozygous for F508del mutation were transfected in vitro with ARCT-032. Chloride activity was significantly restored in a dose-like dependent manner at all doses tested (*, p<0.05). Significant progress on the LUNAR-CF program was made in 2021, with identification of the development candidate that is now being evaluated in GLP toxicology studies. We anticipate filing a CTA for a first in human study in Q3 2022. LUNAR Platform Program – Genome editing Genome editing therapies are based on the ability to modify a specific DNA sequence in the human genome. All genome editing molecular tools can be programmed to target a DNA sequence of interest. Although the diversity of programmable gene editing tools is increasing, all of them are based on a DNA binding component (either a protein or, as in the case of CRISPR-clustered regularly interspaced short palindromic repeats, an RNA sequence) plus a DNA modifier component (a protein that can either make double strand breaks on the DNA (nuclease), single strand breaks (nickase), or make chemical modification in the DNA (base editors)). One of the main roadblocks to applying genome editing as a therapy to treat human disease is the delivery of the genome editing tool components into the cells either ex-vivo or in vivo, applying them directly into the human body and targeting the right organ. The LUNAR-Genome editing program aims to leverage the ability of our LUNAR-mRNA technology to deliver any type of genome editing tools into target cells. Some of the genome editing tools are based on protein components working in pairs (TALEN-Transcriptional Activator-Like Effector Nuclease, ZFN-Zinc Finger Nuclease) or as a single protein (meganuclease), while other tools could have a combination of RNA and protein component (CRISPR). We have tested and found that we can deliver mRNAs coding for genome-editing proteins (TALEN) encapsulated in our LUNAR formulations, and also CRISPR technology, with the guide RNA together with the nuclease as an mRNA. Those mRNAs are translated into the proteins of interest that edit the targeted DNA sequence. To test the efficacy of the different genome editing strategies as a proof of concept, we utilized target genes that encode proteins that are well known and can be detected in the plasma, which facilitated the readout of the experiments. For evaluation of the LUNAR TALEN mRNA strategy, we designed a TALEN pair targeting the mouse Pcsk9 gene which is involved in lipid metabolism. The Pcsk9 gene is expressed only in the mouse liver, and the PCSK9 protein is then secreted into the blood circulation PCSK9 protein binds and downregulates the LDL 16 receptors present in the hepatocytes cell membrane. Reduction of PSK9 protein levels, increases LDLR levels and its availability to take and reduce LDL-Cholesterol from the blood (Figure 1. Top drawing). A single intravenous dose of LUNAR-TALEN PCSK9 mRNA into wildtype mice lead to the production of the TALEN proteins in the mouse liver and to deletions in the targeted PCSK9 genomic DNA. Deletions in the PCSK9 genome sequence inactivated the PCSK9 gene and, consequently, there was a reduction of PCSK9 protein levels in the mouse plasma of the treated mice (Figure 1. Bottom Left). Examination of the PCSK9 targeted DNA sequence extracted from different organs did not show any DNA modifications except for the liver, which is explained by the liver specificity of this LUNAR formulation (Figure 1.Bottom Right). Figure1. Top: PCSK9 involvement in LDL-Cholesterol metabolism. PCSK inhibits LDL-Receptor activity and increases LDL-Cholesterol in circulation. Elimination of PCSK9 protein after editing the Pcsk9 target gene incrLeft: LUNAR-PCSK9 TALEN mRNA dosing of mice at time Day 0 irreversibly reduces levels of PCSK9 in circulation. Right: Genome editing evaluation by sequencing shows INDEL (insertion/deletions) only in DNA extracted from the liver but not from other tissues. To test the ability to deliver CRISPR technology into the liver, we use a single guide RNA known to target the mouse Ttr gene. The transthyretin (TTR) protein is expressed only in the liver and is secreted into the blood circulation. In humans, mutations in the TTR gene can cause transthyretin amyloidosis. Mutations on the Ttr gene can alter the structure of the transthyretin protein impairing its normal function and leading to abnormal deposits of the TTR protein in different organs and tissues of the body, mainly in the nervous system and the heart. Reduction of the TTR production could stop the progression of the disease (Fig. 2 Top). LUNAR formulations containing a mouse TTR-specific single guide RNA (sgRNA) together with the Cas9 nuclease mRNA were injected intravenously into wildtype mice. After a single dose, there was a reduction in the amount of TTR protein detected in the mouse serum (Fig.2, Bottom left). This reduction of TTR protein correlated with the deletions detected in the 17 targeted TTR genomic DNA extracted from the liver of the LUNAR TTR-CRISPR mRNA treated mice (Fig.2, Bottom right) . Figure 2. Top; TTR protein containing mutations aggregates and deposits forming amyloid fibers in different organs causing cardiomyopathies or neuropathies. Left: TTT levels in the serum was reduced in mice treated LUNAR-CRISPR Cas9 and sgRNA TTR mRNA but not in mice treated with LUNAR Cas9 mRNA. B. Genome editing evaluation by sequencing shows INDEL (insertion/deletions) only in the livers of the group of mice treated with LUNAR CRISPR Cas9 sgRNA TTR. We are expanding our capabilities in the genome editing field by exploring the efficacy of LUNAR formulations carrying different genome editing tools in different organs in genomic DNA regions that could be of interest for potential therapies. LUNAR Platform Program – Cancer vaccine (Immuno-oncology) Our LUNAR Cancer Vaccine Program aims to develop an immunotherapy against a tumor via activated T-cells. The vaccine would encode an antigen that would be specifically presented by (or associated with) a tumor, such that the vaccination would elicit T cell responses that recognize and attack the tumor. We have applied our learnings from our more-advanced LUNAR-COVID-19 program to establish both STARR (self-amplifying) and conventional mRNA platforms for immuno-oncology therapy. In a preclinical study, our proof of concept (POC) vaccine encoding AH1 antigen has demonstrated clear effectiveness in a syngeneic mouse model of a colorectal CT26 cell line. With intramuscular administration of the STARR vaccine (two doses of 10 ug), treatment with a checkpoint inhibitor (CPI), anti-PD1/PDL1, led to a drastic reduction of tumor growth in comparison to the CPI treatment by itself (Panel A). Moreover, the same level of efficacy was achieved with a single administration of a 0.2-ug dose of the STARR vaccine. With various LUNAR® formulations, conventional mRNA vaccine expressing the AH1 antigen also demonstrated a robust T cell response (Panel B) and reduction of tumor growth with anti-PD1/PDL1 treatment in the syngeneic mouse model. We believe that these POC results from the two platforms premise the application to various cancer with flexibility in dosing regimens. 18 Our current effort focuses on the selection of neoantigens and other tumor-specific antigens encoded in the cancer vaccines. These antigens can be shared among patients, and therefore have more target patient populations. Additional advancements of LUNAR Cancer Vaccine program include the improvement of antigen cassette designs, STARR RNA elements, and immune modulator molecules, all of which significantly enhanced T cell responses. Figure. Antitumor activity and T cell response by Arcturus cancer vaccines. A. STARR vaccine expressing a tumor antigen led to a significant reduction of the tumor growth rate of a colorectal cancer cell line, CT26. B. T responses elicited by conventional mRNA cancer vaccine by various LUNAR® formulations. Platform Technology Overview Our LUNAR lipid-mediated delivery technology includes a diverse, growing library of over 250 proprietary lipids that we are rationally designing to be versatile, while maximizing efficacy and improving tolerability of a diverse selection of nucleic acids, refining the LPNs to target specific cell types, and determining the most favorable routes of administration. A key feature of our LUNAR lipids is their biodegradability, decreasing the undesired effects caused by lipid accumulation that are associated with tolerability issues present in other lipid-mediated RNA medicine delivery platforms. Our team continues to advance 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 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. We continue to invest in our LUNAR lipid-mediated delivery of mRNA (encoding CRISPR, TALEN, zinc finger proteins, and meganucleases), siRNA, DNA, microRNA, and antisense oligonucleotide technology platforms to improve their efficacy and safety profile, further expanding their applications. This investment has led to key innovations ensuring that our LUNAR formulated drug product candidates have optimal characteristics for therapeutic use, which we believe sets us apart from other nucleic acid therapeutics and lipid-mediated delivery platforms. As such, we consider ourselves a leader in the research and development of systemically administered mRNA therapeutics. Key Attributes of Our LUNAR Lipid-Mediated Delivery Technology 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. LUNAR formulations are a multi-component, lipid-mediated drug delivery system that utilizes our proprietary lipids, called ATX lipids. Each of our ATX lipids contains an amino head group and a biodegradable lipid backbone. The amino head group is a key chemical component of the ATX lipid, making it pH-sensitive and providing it distinct advantages as a component of our LUNAR formulation. At acidic pH, ATX lipids are positively charged, 19 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. 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. 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. We designed the ATX lipid to be rapidly biodegradable by engineering chemical structural components, called esters, into the ATX backbone that are sensitive to cellular enzymes, called esterases. This degradation prevents ATX lipids from accumulating inside the cell and causing toxicity. Biodegradable, highly optimized for each cell type LUNAR-platform development The development of our 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 formulations to mitigate frozen storage; and • 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. Targeting Capabilities As mentioned above, we have generated a growing library of more than 250 proprietary ATX lipids. ATX lipids are rationally designed to fit their respective applications and vary depending on the target cell type and route of administration. We perform extensive formulation screening for each nucleic acid therapeutic candidate to determine the optimal ATX lipid and LUNAR composition for the particular nucleic acid therapeutic candidate, the desired route of administration, and target cell type. Lung 20 Aerosol capabilities have been developed for the Cystic Fibrosis program using Arcturus’ proprietary lipid nanoparticle delivery platform, LUNAR®. Characterization and optimization of the aerosolized LUNAR® formulations in targeting airway epithelium have been achieved in rodent (mice, rat) and nonrodent models (ferret, NHP) as depicted in the image using a reporter mRNA encapsulated in LUNAR®. The validation attained for the inhaled LUNAR® platform in the Cystic Fibrosis program will serve as a “plug and play” approach to support other respiratory approaches where targeting airway epithelium is needed. LUNAR® delivery to airways epithelium demonstrated in vivo across species (rodents, ferrets, NHPs) Liver As proof of concept for augmenting LUNAR liver-targeting capabilities, we are developing LUNAR formulations containing a propriety hepatocyte_targeting agent. Traditional lipid nanoparticle-mediated delivery to hepatocytes occurs via uptake by the low-density lipoprotein receptor (LDLR). We evaluated this targeting agent in an LDLR-deficient mouse model and found that only the LUNAR formulations with this targeting agent were able to deliver mRNA to the hepatocytes compared to LUNAR formulations that did not contain the targeting agent. Based on these promising data, we are expanding these platform development efforts. LUNAR Safety (i.v. administration) ARCT-810 Nonclinical Safety Profile 21 Arcturus has instituted a robust ATX lipid screening paradigm to ensure that we identify formulations with suitable properties for the intended drug’s target product profile, whether is it a protein replacement therapy, a gene editing treatment, or a vaccine. Drug product safety is a key feature in that profile. An example of the outcome of these efforts is the safety profile that was obtained with ARCT-810, intended as a life-long treatment for OTC. To support chronic administration of LUNAR-OTC (ARCT-810) in patients, nonclinical safety studies were conducted in nonhuman primates (NHPs). The findings of this study demonstrated that the nonclinical safety profile for ARCT-810 did not change from short-term dosing (3 bi-weekly infusions) to chronic administration (bi-weekly infusions for 9-months). ARCT-810 was well tolerated with no adverse findings at the highest dose administered, i.e., 1 mg/kg in the 9-month study. 28 Day study 9 month (Chronic) study No Observed Adverse Effect Level (NOAEL) 1 mg/kg 1 mg/kg Complement activation Transient non-adverse elevations Transient non-adverse elevations, no change with chronic dosing Cytokine activation Transient non-adverse elevations Transient non-adverse elevations, no change with chronic dosing Liver enzyme function Transient non-adverse elevations Transient non-adverse elevations, no change with chronic dosing With these promising results, and the advancement of ARCT-810 further into clinical development, additional nonclinical studies were performed to evaluate the safety profile to support dosing in pregnant patients. Pregnant mice were treated with ARCT-810 on gestation days 6 and 13 (a critical time for fetal development). No maternal toxicity or negative effects on the development for the fetus were observed. Both the maternal and fetal development NOAEL in this study was the highest dose tested, 5 mg/kg. The completed non-clinical safety studies support the continued clinical development of ARCT-810. Our Proprietary mRNA and Protein Design Technology The mRNA programs in our pipeline are benefited by our in-house expertise in protein and mRNA design, which helps us address many of the known challenges that face the viability of mRNA therapeutics today. We have identified several design elements of mRNA compounds that provide improved translation (the process of making protein based on the instructions/codes in the mRNA) of our mRNA therapeutics, including untranslated regions derived from species that have not previously been combined with human mRNA sequences. This platform technology is applicable to many different human mRNA sequences that we are currently approaching in our discovery efforts. We are able to engineer human protein sequences to increase the half-life of the proteins produced by our mRNA therapies and can more efficiently direct specific types of proteins to certain cellular structures of interest. These innovations are broadly applicable to several programs that are part of our mRNA discovery efforts. 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. The algorithms were developed in house through the integration of experimentally validated optimization processes. Through multi-layered in silico QC pipelines, mRNA Design Suite promptly generates high-quality and error-free sequences accompanied by various statistics. 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 Our vaccine platform is based on (1) our distinct and proprietary self-amplifying RNA (saRNA)platform (STARR) and (2) the LUNAR lipids that deliver the saRNA to cells. Our STARR platform includes proprietary algorithms that inform the design and optimization of saRNA to enhance expression of the applicable antigen while minimizing structures that might inhibit expression. The replicase, an RNA-dependent RNA polymerase, is encoded upstream of the antigen of interest and functions to amplify transcripts and increase the duration of antigen 22 expression compared to non-self-amplifying (conventional) mRNA. The enhanced expression leads to higher immunogenicity at lower doses than conventional mRNA vaccines in preclinical studies (Figure x). 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-amplifying RNA-based vaccines. We believe this may enable us to simplify and increase the speed of vaccine production. Supply and Manufacturing Our supply and manufacturing strategy is focused on addressing the following considerations: a) multiple clinical pipeline candidates, b) commercial scale COVID vaccine products, c) regional and global product demand. We have built a robust global manufacturing footprint with our partners, including Aldevron®, Catalent®, Recipharm, Polymun, Vingroup and ARCALIS. With such collaborations we have established an Integrated Global Supply Chain Network with our primary and secondary sourcing contract manufacturing organizations (CMOs) based in the USA, EU and Asia for producing critical raw materials, drug substance, and finished and packaged drug product. We expect our current manufacturing capabilities and completed, ongoing and planned global technology transfers to enable, by the end of 2022, a forecasted capacity of 200M doses per year of finished product for EUA, stockpiling and commercialization of COVID vaccine. To date, we have manufactured and supplied gram quantities of drug substance, and scaled-up and validated our finished drug products (COVID Vaccine) through our CMOs for clinical studies, EUA, stockpiling and commercial readiness. We have developed, and continue to dedicate, resources to advance our sophisticated manufacturing know-how, including formulation of lipid nanoparticles, which improves manufacturing efficiency and capacity. Additionally, we are strategically exploring options to build our internal USA-based manufacturing capabilities for drug substance and finished drug product. 23 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. Revenue and Collaboration Arrangements and Other Material Agreements In addition to our internal programs, we have a number of strategic alliances where we collaborate with other parties on discovery, development, manufacturing or other efforts based on our LUNAR lipid-mediated delivery system and our proprietary mRNA and protein design technologies. Among other collaboration arrangements, • we are partnering with Vinbiocare, a Vingroup company, regarding a collaboration to establish a manufacturing facility in Vietnam for the manufacture of our COVID-19 vaccines, for sale and use in Vietnam; • we are partnering with Janssen to develop nucleic acid-based therapeutic candidates for the treatment of Hepatitis B Virus (HBV); • we are partnering with Ultragenyx to develop mRNA therapeutic candidates for rare disease targets; • we are partnering with CureVac to develop mRNA therapeutic and vaccine candidates for various indications; • we have received funding from the CFF to support our LUNAR-CF development program; and • we are partnering with the Singapore Economic Development Board and Duke-NUS Medical School to develop a vaccine for the Coronavirus outbreak. Vinbiocare Beginning on July 29, 2021, we entered into a series of agreements with Vinbiocare, a member of Vingroup Joint Stock Company (collectively the “Vinbiocare Agreement”) , whereby we will provide technical expertise and support services to Vinbiocare to assist in the build out of a manufacturing facility in Vietnam for the manufacture 24 of our investigational COVID-19 vaccines, for sale and use within Vietnam. The Technology License and Technical Support Agreement and Framework Drug Substance Supply Agreement became effective on July 30, 2021. License Agreement Within the Vinbiocare Agreement, we entered into a Technology License and Technical Support Agreement (the “License Agreement”). Pursuant to the terms of the License Agreement, Vinbiocare is, in consultation with us, building a manufacturing facility in Vietnam (the “Facility”), and we are providing to Vinbiocare access to proprietary technologies and processes for the manufacture of our investigational COVID-19 vaccines. We have granted to Vinbiocare an exclusive license to manufacture the vaccines in Vietnam at the Facility solely for distribution in Vietnam. The license and technology transfer applies to the manufacture of the final drug product of the vaccines, but not to the manufacture of mRNA drug substance or to the manufacture of our proprietary lipids used in our LUNAR ® delivery platform. Vinbiocare paid us a non-refundable upfront payment and is responsible for costs associated with the technology transfer. Vinbiocare is also required to pay us a royalty on each dose of the vaccines produced at the Facility. Other than the mRNA drug substance and our proprietary lipids, which will be sold by us to Vinbiocare, Vinbiocare is responsible for procuring all other raw materials and other inputs for the final vaccine drug product. Vinbiocare will be responsible for commercialization activities for the vaccines manufactured at the Facility for distribution within Vietnam. Under the terms of the License Agreement, Vinbiocare is paying for our ongoing Phase 3 trial of ARCT-154 being conducted in Vietnam. Unless earlier terminated, the License Agreement will expire on December 31, 2032. We have the right to terminate the License Agreement upon certain events, including if the Supply Agreement terminates, if Vinbiocare does not, on or prior to December 31, 2023, make a commercial dose of the vaccine in Vietnam following regulatory approval, and if we determine to cease manufacturing, development, or commercialization of the vaccines globally. Vinbiocare may terminate the License Agreement for convenience. Either party may terminate the License Agreement for uncured material breach of the other party. Vinbiocare’s obligations under the License Agreement have been guaranteed by its parent company. Supply Agreement Within the Vinbiocare Agreement, we entered into a Framework Drug Substance Supply Agreement (the “Supply Agreement”), and pursuant to the terms of the Supply Agreement, we will supply, and Vinbiocare will pay for, mRNA drug substance for the manufacture of the vaccines under the License Agreement. The Supply Agreement will terminate contemporaneously with the License Agreement. In addition, each party may terminate the Supply Agreement for uncured material breach of the other party. Vinbiocare’s obligations under the Supply Agreement have been guaranteed by its parent company. Janssen On October 18, 2017, we entered into a Research Collaboration and License Agreement with Janssen (the “Janssen Agreement”) to collaborate on developing candidates for treating HBV with RNA therapeutics. Under the Janssen Agreement, Janssen and Arcturus 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 development 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 and on a development candidate-by-development candidate basis, Janssen will pay us certain development milestone payments for each of the first two products to treat HBV as well as in each indication for which Janssen exercises its option to license certain therapeutics from us. In addition, on a research program-by-research program basis, Janssen will pay us 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 option exercise fees within a certain range, 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. In Q4 2021, Janssen 25 formally acknowledged that we had achieved the first milestone of showing “In Vivo Efficacy and Safety” of a nucleic acid therapeutic under investigation, and Janssen paid the corresponding m ilestone p ayment to us . 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. Ultragenyx On October 26, 2015, we entered into a Research Collaboration and License Agreement with Ultragenyx, which was later amended in 2017, 2018 and during the second quarter of 2019 (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 development. Under the Ultragenyx Agreement, we have granted Ultragenyx exclusivity (i) with respect to development targets, to the development and commercialization of products containing nucleic acid technology, and (ii) with respect to reserved targets, the development and commercialization of any product containing nucleic acid products or utilizing LUNAR lipid-mediated delivery technology. Under the Ultragenyx Agreement, we have granted Ultragenyx a co-exclusive, royalty-free, sublicensable license of our technology for conducting collaborative development of development targets, compounds and products. In connection with the execution of the Ultragenyx Agreement, Ultragenyx paid us an upfront fee and 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 targets for collaborative development. For each development target for which Ultragenyx exercises this option, they 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. Ultragenyx will also pay us certain milestone payments with respect to clinical/regulatory development and commercialization, and will pay royalties as a percentage of net sales on a product-by-product and country-by-country basis. 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 connection with the Third Amendment, Ultragenyx purchased shares of our common stock and made a one-time upfront payment. Ultragenyx also received a two-year option to purchase additional shares of our common stock which they exercised in May of 2020. On December 1, 2021, Ultragenyx announced that the first patient had been dosed in its Phase 1/2 study of UX053, an investigational messenger RNA therapy in development under the collaboration for the treatment of Glycogen Storage Disease Type III, and thus the first milestone under the collaboration agreement had been met. CureVac On January 1, 2018, we entered into a Development and Option Agreement with CureVac, which was amended on May 3, 2018 and later restated on September 28, 2018 (as amended and restated, the “Development and Option Agreement”). Under the terms of the Development and Option Agreement, CureVac and Arcturus agreed to conduct joint preclinical development programs and we granted CureVac a license to develop and commercialize certain products incorporating certain of our technology (the “Arcturus LMD Technology”) and CureVac technology. The products subject to the Development and Option Agreement relate to certain targets to be identified during the eight year term of the agreement. In consideration for the rights granted under the Development and Option Agreement, we received an upfront fee from CureVac. Prior to expiration of the initial term of eight years (which was subsequently amended, as discussed below), the Development and Option Agreement also includes an option to extend the term on an annual basis for up to three years, subject to payment by CureVac to Arcturus of a non-refundable annual extension fee. The Development and Option Agreement includes potential milestone payments from CureVac for selected targets. Additionally, CureVac will pay royalties as a percentage of net sales on a product-by-product and country-by-country basis during the applicable royalty term in the low single-digit range. 26 On July 26, 2019, we entered into an amendment (“CureVac Amendment”) to the Development and Option Agreement, pursuant to which the parties have agreed to shorten the time period during which CureVac may select potential targets to be licensed from eight years to four years, and to reduce the overall number of maximum targets that may be reserved and licensed. Cystic Fibrosis Foundation Agreement On May 16, 2017, pursuant to a Development Program Letter Agreement (the “CFF Agreement”), CFF agreed to award us funding for 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 includes a grant of rights to CFF know-how to assist us to research, develop, commercialize, make or otherwise exploit a product. If the award results in a successful commercialized product, we will pay CFF (i) royalties on sales of the product up to a maximum of a single-digit multiple of the total award amount actually paid to us by CFF, and (ii) thereafter, a single-digit percentage of annual net sales. Further, in the event of a license, sale or other transfer of the product or our development program technology (including a change of control transaction), we will pay CFF a percentage of such license, sale of transfer payments actually received by us or our shareholders (subject to a royalty cap). On August 1, 2019, we amended the CFF Agreement. Pursuant to the amendment, (i) CFF will increase the amount it will award to advance LUNAR-CF, (ii) we will provide a certain amount of matching funds for remaining budgeted costs, (iii) the related disbursement schedule from CFF to us will be modified such that (a) a disbursement was made upon execution of the amendment, (b) an agreed upon amount will be disbursed to us within 30 days of the first day of each of January, April, July and October 2020, and (c) the last payment will be disbursed upon us invoicing CFF to meet good manufacturing practices and submitting an IND application. In January 2022, the parties signed an amendment for CFF to fund the development of a CF ferret model for application in the development of ARCT-032, our LUNAR-CF candidate. 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 an additional grant from the EDB to support the further development of ARCT-021. 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 to us, subject to the satisfaction of customary deliveries, to further support the development of the LUNAR-COV19 vaccine candidate. On January 29, 2021, we elected to borrow the full amount available under the Support Agreement. 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 we obtain 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. Other Collaboration Arrangements On December 6, 2016, we entered into a research agreement with Millennium Pharmaceuticals, Inc., a wholly owned subsidiary of Takeda Pharmaceutical Company Limited (“Takeda”) . Under the agreement, we conducted a joint 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. On March 8, 2019, we entered into a subsequent research agreement with Takeda, which was subsequently amended on June 3, 2019. Under this amended 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. 27 On August 20, 2021, we received notice from Providence Therapeutics, Inc. to terminate the Amended and Restated Joint Venture, Research Collaboration and License Agreement, dated as of July 15, 2018. No termination penalties were incurred by Providence or Arcturus in connection therewith. Other Material Agreements 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 shares of our common stock to Alexion. The per share price was determined based on the volume weighted average closing price of our common stock on The NASDAQ Global Market for the thirty trading days ending on February 17, 2021. 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 an initial 500,000 doses of LUNAR-COV19 vaccinations. On October 14, 2020, we received a non-refundable first reserve payment 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 Our business success depends in part on our ability to obtain and maintain intellectual property protection for our proprietary technologies, inventions and know-how, and on our ability to operate without infringing on the proprietary rights of others. We strive to protect our intellectual property through a combination of patents, trademarks, trade secrets, licensing agreements and confidentiality agreements with employees, advisors, consultants and contractors. We rely on continuing technological innovation to strengthen our proprietary position in the field of nucleic acid medicines. Therefore, we plan to continue to file patent applications in jurisdictions around the world as we discover and develop novel nucleic acid technology platforms and novel nucleic acid therapeutic candidates. We cannot guarantee that future applications will be issued. Our Patent Portfolio As of February 22, 2022, we own over 253 patents and pending patent applications including 38 U.S. patents, 33 pending U.S. patent applications, 12 pending international applications under Patent Cooperation Treaty (“PCT”), 82 foreign patents and 88 pending foreign patent applications. 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 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 2042, without taking into account any possible patent term extensions. Our patent portfolio includes the following patents and pending patent applications for LUNAR, UNA and the use of LNA in certain RNA medicines: • LUNAR – As of February 28, 2022, we own 18 U.S. patents, 8 U.S. pending patent applications, 1 international patent application (“PCT”), 18 foreign granted patents, and 33 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 February 28, 2022, we own 19 U.S. patents, 10 U.S. pending patent applications, 3 PCT applications, 63 foreign patents and 26 foreign pending patent applications 28 covering methods and uses of LNA, UNA oligomer and mRNA therapeutics, and compositions of UNA oligomers or mRNA to treat specific target diseases. • 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-amplifying 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 two pending U.S. nonprovisional patent applications and one pending PCT 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 February 28, 2022, we own one pending U.S. provisional patent application, one pending U.S. nonprovisional application, and one pending PCT application directed to specially designed RNA constructs, specific nucleotide and amino acid sequences, and lipid formulations comprising the same under the STARR technology. We anticipate that further patents will be filed as we continue to innovate with respect to our STARR platform and that current applications covering these developments in our STARR platform, if granted, will last until 2041, not including any patent term extensions. Patent Terms The term of individual patents depends on the countries in which they are obtained. The patent term is 20 years from the earliest effective date of filing a non-provisional patent application in most of the countries in which we file. Under the Drug Price Competition and Patent Term Restoration Act (also known as the Hatch-Waxman Act), U.S. patent holders can apply for a patent term extension to compensate for the patent term lost during the FDA regulatory review process. Patent extension is only available for patents covering FDA-approved drugs. The extension can be up to five years beyond the original expiration date of the patent and cannot extend a patent term for longer than 14 years from the date of product approval. Only one patent extension is granted per approved drug. Similar provisions may be available in foreign jurisdictions including Europe. We intend to apply for patent term extensions where possible. Trade Secrets We also rely on trade secrets to protect our product candidates. Our commercial success also depends in part on our non-infringement of the patents or proprietary rights of third parties. For a more comprehensive discussion of the risks related to our intellectual property, please see Item 1A “Risk Factors” – “Risks Related to Our Intellectual Property.” The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. Our success depends in part on our ability to: • preserve trade secrets; • prevent third parties from infringing upon our proprietary rights; and • 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. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. 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. Product Approval and Government Regulation 29 Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of products such as those we are developing. Any product candidate that we develop must be authorized or approved by the FDA before it may be legally marketed in the United States and by the appropriate foreign regulatory agency before it may be legally marketed in foreign countries. U.S. Drug Development Process 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 (“PHSA”). 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. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial civil or criminal sanctions. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, debarment, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. 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; • performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as current good clinical practices (“GCPs”) to establish the safety and efficacy of the proposed drug for its intended use; • submission to the FDA of a new drug application (“NDA”) or biologics license application (“BLA”) for a new drug or biologics; • satisfactory completion of FDA inspections of the manufacturing facility or facilities where the drug is produced to ensure compliance with the FDA’s current good manufacturing practice standards (“cGMP”), to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; • potential FDA audit of the nonclinical and clinical trial sites that generated the data in support of the NDA or BLA; and • FDA review and approval of the NDA or BLA. The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantial resources and approvals are inherently uncertain. Before testing any compounds with potential therapeutic value in humans, the drug candidate enters the preclinical study stage. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and pharmacological activity of the drug candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including GLP. The sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA imposes a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. 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. 30 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. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety. Each protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted in accordance with the FDA’s regulations comprising the good clinical practices requirements. Further, each clinical trial must be reviewed and approved by an independent institutional review board (“IRB”) at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and provides oversight for the clinical trial until completed. Human clinical trials are typically conducted in three sequential phases that may overlap or be combined: • Phase 1. The drug is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. 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; • Phase 2. 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 and dosing schedule; and • Phase 3. 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, 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. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA and written IND safety reports must be promptly submitted to the FDA and the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests a significant risk for human subjects. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. Concurrently with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final drug. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life. U.S. review and approval processes The results of product development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA or BLA requesting approval to market the product. The 31 submission of an NDA or BLA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances. In addition, under the Pediatric Research Equity Act (“PREA”), an NDA or BLA or supplement to an NDA or BLA must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted. The FDA reviews all NDAs or BLAs submitted to determine if they are substantially complete before it accepts them for filing. If the FDA determines that an NDA or BLA is incomplete or is found to be non-navigable, the filing may be refused and must be re-submitted for consideration. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA or BLA. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act (“PDUFA”), the FDA has 10 months from acceptance of filing in which to complete its initial review of a standard NDA or BLA and respond to the applicant, and six months from acceptance of filing for a priority NDA or BLA. 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 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. The FDA may refer applications for novel drug or biological products or drug or biological products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the drug approval process, the FDA also will determine whether a risk evaluation and mitigation strategy (“REMS”) is necessary to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA or BLA must submit a proposed REMS; the FDA will not approve the NDA or BLA without a REMS, if required. Before approving an NDA or BLA, the FDA will inspect the facilities at which the product is manufactured. 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. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable it will outline the deficiencies in the submission and often will request additional testing or information. The NDA or BLA review and approval process is lengthy and difficult and the FDA may refuse to approve an NDA or BLA if the applicable regulatory criteria are not satisfied or may require additional clinical data or other data and information. Even if such data and information are submitted, the FDA may ultimately decide that the NDA or BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. The FDA will issue a complete response letter if the agency decides not to approve the NDA or BLA. The complete response letter usually describes all of the specific deficiencies in the NDA or BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either submit new information, addressing all of the deficiencies identified in the letter, or withdraw the application. If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the 32 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 product’s safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized. Emergency Use Authorization (“EUA”) 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 authorization in the form of an EUA that would permit, for the duration of the declaration by the DHHS described below or until revocation of the EUA, the distribution and use of a drug or biological product that is not approved or licensed. Before an EUA may be issued, the Secretary must make a declaration that circumstances exist to justify the authorization 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 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 or other agent or agents that may cause, or are otherwise associated with, an imminently life-threatening and specific risk to U.S. military forces; • a determination by the Secretary of the DHHS that there is a public health emergency, or significant potential for such, that affects, or has the significant potential to affect, national security or the health and security of U.S. citizens living abroad, and that involves a biological, chemical, radiological, or nuclear agent or agents, or a disease or condition that may be attributable to such agent or agent; or • the identification of a material threat pursuant to Section 319F-2 of the Public Health Service Act, authorizing the creation of the Strategic National Stockpile and security countermeasure procurements, sufficient to affect the national security or the health and security of United States citizens living abroad. 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. The FDA has issued EUAs to companies for products intended for the prevention and treatment of COVID-19. The FDA expects EUA holders to work toward submission of an NDA, BLA, or other applicable approval. In addition to the United States, other countries such as UK and Vietnam have a similar mechanism to facilitate the availability and use of medical countermeasures, including vaccines, during public health emergencies. Post-approval requirements 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 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 33 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 require notice to or prior approval from the FDA 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 In addition to regulations in the United States, we and our strategic alliance partners are subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our products. Whether or not we or our collaborators obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. Once the CTA is approved in accordance with a country’s requirements, clinical trial development may proceed. The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, 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. To obtain regulatory approval of an investigational drug or biological product under European Union regulatory systems, we or our strategic alliance partners must submit a marketing authorization application. The application in the United States is similar to that required in the European Union, with the exception of, among other things, country-specific document requirements. For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. 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. Competition Our Business in General 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. 34 Below we have included what we believe to be the competitive landscape for certain of the medicines that we currently have in development. Vaccine Franchise LUNAR-COV19 Vaccines (ARCT-021, ARCT-154, ARCT-165) Our vaccine franchise is based on our self-amplifying and self-replicating STARR® technology platform and our lipid nanoparticle delivery platform called LUNAR ® . This franchise has advanced into late stage clinical development including ARCT-154 in Phase 3 clinical development and ARCT-165 and ARCT-021 in phase 2 clinical development. We consider the following companies with approved or late stage clinical development vaccines as some of our competitors or future competitors to Arcturus’ COVID-19 vaccine franchise: Pfizer, BioNTech, Moderna, Janssen, AstraZeneca, Novavax, Sinovac and the Russian Gamaleya National Research Centre for Epidemiology and Microbiology. Dozens of other companies are also developing COVID-19 vaccines. These companies generally use conventional mRNA (not self-amplifying) and egg-based vaccine technology as the basis for their COVID-19 vaccines, and we are not aware of any saRNA COVID-19 pipeline that has advanced in clinical studies as far as ours. LUNAR-FLU Vaccine We consider the following companies as some of the competitors or future competitors to LUNAR-Flu: Pfizer, BioNTech, Moderna, Sanofi, and Seqirus. The flu industry is shifting to using mRNA based platforms in addition to traditional (egg-based) technologies. Liver Franchise ARCT-810 (LUNAR-OTC) Our liver franchise has advanced into mid-stage clinical development with ARCT-810 in phase 2 clincial development. Potential competitors include, but are not limited to, Ultragenyx which is advancing a gene therapy program for OTC in clinical development. Lung Franchise: ARCT-032 (LUNAR-CF) The lead candidate of our lung franchise is ARCT-032, which is an mRNA therapeutic candidate for cystic fibrosis based on our proprietary drug substance mRNA technology platform and our LUNAR lipid nanoparticle delivery platform. We are aware of product candidates of the following companies that we consider as competitors or future competitors to ARCT-032: Translate Bio, Eloxx Pharmaceuticals, Recode, 4DMT and Splisense. Employees As of December 31, 2021, we had 177 employees, all of which were full-time. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good. Available Information Our Internet address is www.arcturusrx.com. Our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements, and all amendments thereto, are available free of charge on our Internet website. 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 be considered to be part thereof.